Williams

The sun has set on independent wealth man-agers, the small nimble outfits of brash money and stock market investment advisors who held significant sway during the high interest rate heydays of the 1990s and even until recently, according to Chris Williams, head of the NCB Capital Markets (NCBCM).

Williams, who has been managing director of National Commercial Bank's (NCB) wealth management outfit since it was launched five years ago, himself jumped ship in 2004 from one such investment house, the former Dehring Bunting and Golding, which was bought last year by the Scotia Bank Group and merged with its investment and wealth man-agement operations to create Scotia DBG Investments Limited.

The invest-ment banker, who says he was intro-duced to the field in 1993 by former merchant banker and businessman, OK Melhado, believes NCB, which just reported $7.3 billion in profits for the nine months to June on top of $8.7 billion net profit last year, and major rival, Scotia Bank, cannot now be beaten at the wealth management business.

"At the end of the day DB&G had to sell. Despite the creativity and everything, if you don't have it complementary with the brand and the capital and the distribution, you are not going to be able to compete. And that's why I think eventually they sold, which I thought was an excellent decision."

Training ground

He acknowledged that DB&G, with its creative edge in investment banking, was good training ground.

"DB&G was a once in a lifetime experience. I was glad to be a part of it."

Asked if the door was now closed to new independent players, Williams opined that those entities cannot compete against the strong name recognition and extensive branch networks of the big banks.

"In the wealth management area the competition is not so much product-driven, it's the distribution channels," said Williams.

"All of us essentially carry the same products, the only to gain competitive advantage is through strong brand recognition and that cost a lot of money and time."

NCB is said to have spent 250 million over the past five years building its capital markets presence on the Jamaican financial landscape.

"The only reason people were able to get in is because these two entities (NCB and Scotia Bank) didn't take the wealth management area very seriously. Now they are serious about it and are very competitive."

NCB Capital Markets grew out of the 2002 merger of NCB Investments with Edward Gayle and Company, one of Jamaica's pioneering stock brokerage houses started in 1968.

While the new entity, by Williams' own admission and its financials since 2004, got off to a flying start, growing profit to $1.4 billion in its first year from $400 million in 2003, its performance has been checked lately by the effect of the global financial meltdown.

Last year NCB Capital Markets lost $1.2 billion in securities it pledged for margin facility with international investment house, Lehman Brothers, which collapsed in September.

The blow dragged down NCBCM's net profit for the year ending in September by a near 51 per cent to $776 million.

But NCB officials are now saying NCBCM is on the upswing recording net profits of just under $1-billion for the nine months to June this year against near $1.4 billion in the same period last year.

Hard lessons

Williams says both he and the company he heads have learned some hard lessons from the blow it suffered in the Lehman Brothers collapse.

NCBCM has slashed operating costs and leveraged the internal competencies of the 170 year-old NCB to put a tighter rein on securities management, centralise treasury operations and improve asset management. As a result of the structural changes, NCBCM now focuses more of its time and resources on the sales and customer service functions.

The recent recruitment of Steven Gooden as vice-president for investments has completed the staff strengthening, Williams said.

"We are making progress," the NCBCM managing director said of the recovery at a recent press conference by parent, NCB.

"The entire back-office operation has been strengthened so that there is no more mistakes in terms of investment decisions (as) seen from the very little provision for operational exposure," he pointed out last week.

As the investment house looks to ramp up business and profitability, Williams laments that many investors are still short term in view. Despite the global economic downturn, he said, there has been no noticeable decline in the stock of wealth and people appear to be saving more.

Asked about inherent risks from the heavy skewing of NCBCM's investment portfolio towards repurchase agreements (repos), Williams says the company and parent group possessed the capital to support such a model even as NCBCM was looking at greater diversification through new products.

good returns

With no new private placements lined up, the capital markets player continues to reap good returns from interest income.

But Williams, also deputy chairman of the Jamaica Stock Exchange, is keen to point potential investors towards the stock market.

"The capital market is tremendously under-utilised in Jamaica (yet) you have companies that are investing significantly in expansion and launching new products."

Williams, who as a board director of the JSE, is guiding the establishment of the Junior Stock Exchange, the regional Caribbean Exchange Network and the planned implementation of a training institute by the JSE, says the stock market remains among the best long-term options for investors to make money by buying into existing companies or raising cash for expanding their existing businesses.

huntley.medley@gleanerjm.com