NCB Capital Markets Limited is one of the major players in the investment banking sector in Jamaica. The current economic climate threatens the viability of this industry and only the most efficient and strategic will survive as the region in general and the nation in particular rides out this economic storm. There are however, numerous opportunities that are presented within the pangs of the crisis. The leadership of NCB . ought to be aware of this and position for full advantage.

1. Capital Markets
I
EXECUTIVE SUMMARY
NCB Capital Markets Limited is one of the major players in the investment
banking sector in Jamaica. The current economic climate threatens the viability of this
industry and only the most efficient and strategic will survive as the region in general and
the nation in particular rides out this economic storm. There are however, numerous
opportunities that are presented within the pangs of the crisis. The leadership of NCB
Capital Markets Ltd. ought to be aware of this and position for full advantage.
This research paper provides insights into the NCB Capital Markets Ltd. as it
relates to its strategies, strengths and weaknesses. The paper continues through an
examination of the effectiveness of the company’s current strategies and whether these
strategies, if unchanged can ensure the company’s continuity. Our findings have
highlighted the absence of a properly defined, articulated and executed strategy to guide
the organizations progress. This creates numerous challenges such as performance
measurement. As the saying goes, if you aim at nothing you will hit with amazing
accuracy.
The paper concludes with our recommendations of strategies and tactics to be
implemented by NCB Capital Markets Ltd. to gain and maintain a competitive advantage
in the wealth management industry. These recommendations are based on best industry
trends and engage four major categories, people, processes, products and Marketing
which revolves around a customer focused philosophy linked together through a vastly
improved technological infrastructure. The proud tradition and heritage of the group must
be fused with the dynamism of today’s business paradigm.
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2. Capital Markets
II
ACKNOWLEDGEMENT
Our sincerest of thanks to the Management and members of staff at NCB Capital Markets
Limited for accommodating our inquiries and providing us with interviews and access to
important data about the company. We also thank our project supervisor who worked
tirelessly with us to complete this paper.
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3. Capital Markets
III
INTRODUCTION
Historically, Capital Markets have been fundamental to a country’s economy and
development and are defined as “the mechanism that allows the exchange of money
between companies and investors, companies and banks, and investors and banks, where
each party seeks to raise capital or put capital to work” (p.1). Hayes (n.d.). Many
companies and governments use this medium to raise long-term funds through the
primary market and secondary markets for their viability.
There would be no benefit to be had from a futuristic exercise that ignores the
lessons of the past. As we consider the future development of capital markets a key
question that needs to be answered is how to prepare for the challenges and events that
the financial industry will face to remain competitive. In the past decade with the advent
of globalization, the future and potential for success in the financial markets must have
seemed immeasurable, but with the benefit of hindsight, we now know the exorbitant
problems and the enormous impact that it has had on governments globally.
Capital Markets in Jamaica are no different and they too have not been spared the
negative impacts that have plagued the industry, however, there may be some prospects
that exist for companies to improve their brand or reputation. This can be achieved by
taking a practical approach in responding to the risks and opportunities which can have
significant financial implications that affects the performance of their investment
portfolios.
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4. Capital Markets
Nature and Purpose of Study
This research was undertaken to examine and assess the current situation of NCB
Capital Markets Ltd. and make recommendations for its likely future success if changes
are not made to its current strategy, based on current economic conditions. It is hoped
that the recommendations coming out of this study can be used by management to assist
with the enhancement of the organization’s performance.
Problem Definition
NCB Capital Markets Ltd. is the third largest securities company operating in Jamaica,
measured in terms of total assets. The industry is faced with a global economic crisis and
its survival is dependent on well structured and executed strategies. The research seeks
to firstly (a) answer the question as it relates to the likelihood of ongoing success for the
company given its current strategies, (b) determine whether the firm should change its
strategies; and if so, in what general directions.
Problem Statements
1. The ability of NCB Capital Markets to grow revenue based on its current
strategies.
2. The likelihood of the company remaining afloat given current market conditions.
Thesis Statement
A study of NCB Capital Markets strategies for sustained competitive advantage, in the
Jamaican economy.
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5. Capital Markets
LITERATURE REVIEW
Introduction
An enormous amount of written works exist on wealth management and its
importance to the financial industry. Based on an examination of this literature, it can be
seen that firms within this industry need to be properly managed, hence the relevance of
corporate governance. This chapter looks at Capital Markets and its importance then
moves on to examine strategy development with a view to obtaining sustainable
competitive advantage.
Capital Markets
The Jamaican economy has not been spared the effects of the global crisis rocking
the financial industry and the global economy in general. Capital Markets have played an
important role in the development of many countries economy for many years. Professor
Hayes (n.d.) of Harvard Business School defined capital markets as “the mechanism that
allows the exchange of money between companies and investors, companies and banks,
and investors and banks as each party seeks to raise capital or put capital to work” (p.1).
Hayes (n.d.) further stated that, the capital market is where companies and governments
can raise long term funds for periods longer than a year, letting companies offer
ownership or promise repayment to investors in exchange for capital. They can take a
loan from a bank that lends its depositors’ money to borrowers in exchange for the
promise of future repayment and interest. The capital markets consist of the primary
market where new stocks and bonds issues are sold to investors and the secondary market
where existing securities are sold and bought from one investor to another.
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6. Capital Markets
Financial markets around the world have been sent into a tailspin with the
collapse of banks, investment market giants and the overall deterioration of most
economies globally. The big question on most persons mind is whether or not things will
change for the better any time soon or will it continue to deteriorate in 2009. In a recent
article highlighting a panel discussion on the future shape of investment banking, one of
the panelists, D'Estais (2009), stated that the dramatic turmoil of the last 18 months has
left global capital markets effectively broken.
Rationality is irrelevant and markets are trading on fear, preparing every day for
the next crisis. With a global recession, the biggest concern for 2009 is how companies
will finance themselves in the capital markets. Of importance also is an analysis of the
organization’s resources. This requires an exploration of the skills and resources available
within the organization which, when properly utilized, can create a competitive
advantage for the organization.
When analysts weigh in on the current crisis facing the global economy, it is clear
that they maintain a bleak outlook of the financial market, at least for the short term. The
Stock Market in particular is taking a beating globally and this is not expected to change
in the near future. For now, investors are stuck in an uncertain environment, where
everything they scrutinize to make decisions, from earnings to economic measures to
technical indicators, is deteriorating before their eyes. Stocks at these price levels could
represent long-term bargains, but at a time like this, few investors are bold enough to
challenge the bear (Steverman, 2009).
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7. Capital Markets
Competitive Advantage and Strategy Development
According to Lynch (2006), a sustainable strategy is more likely if the strategy
delivers sustainable competitive advantages over actual or potential competitors. If a
company is to succeed then there must be a fit in strategy among the various departments
within the company. Each department’s strategy should feed into the overall corporate
strategy of the company. Lynch (2006) defined strategy as the pattern or plan that
integrates an organization’s major goals or policies and action sequences into a cohesive
whole.
Within the context of the global financial crisis, gaining a competitive advantage
and being able to sustain it poses a drastic challenge for many companies in the
investment banking industry. Competitive advantage can be described as the significant
advantages that an organization has over its competitors. Such advantages allow the
organization to add more value than its competitors in the same market (Lynch, 2006). In
developing strategies it is necessary to set objectives in the context of the environment
and competitive resources of the organization (Lynch, 2006).
An analysis of the environment as it relates to what is taking place or likely to
happen outside the organization and how this will affect the organization is essential.
Competitive Advantage according to Dessler (2008) is defined as “any factors that allow
a company to differentiate its product or service from its competitors to increase market
share” (p. 82).
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8. Capital Markets
Companies use several generic competitive strategies to achieve competitive advantage
and as noted by Dessler (2008), these strategies include:
1. Cost leadership where the company aims to become the low-cost leader in the
industry.
2. Differentiation where the company seeks to be unique in its industry along
dimensions that are widely valued by clients/customers/buyers.
3. Focus where the company carves out a market niche and compete by providing a
product or service customers can get in no other way.
A brilliant strategy, blockbuster product, or breakthrough technology can put you
on the competitive map, but only solid execution can keep you there (Neilson, Martin &
Powers, 2008). Neilson et.al (2008) further stated that research shows that enterprises fail
at execution because they go straight to structural reorganization and neglect the most
powerful drivers of effectiveness; decision rights and information flow. Of equal
importance is having a fit in strategy among the various departments within the company.
Each department’s strategy should feed into the overall corporate strategy of the
company.
Although it may seem unlikely, there are executives who cannot articulate the
objectives, scope and advantage of their business in a simple statement (Collis &
Rukstad, 2008). Collis & Rukstad (2008) further revealed that in their experience, very
few executives could answer honestly in the affirmative to the questions: “Can you
summarize your company’s strategy in 35 words or less? If so, would your colleagues put
it the same way?”(p. 1).
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9. Capital Markets
Companies that don’t have a simple and clear statement of strategy are likely to fall into
the unfortunate category of those that have failed to execute their strategy.
The Importance of Corporate Governance
Corporate Governance refers to the influence and power of the stakeholders to
control the strategic direction of the organization in general and more specifically, the
chief executive and other senior officers of the organization (Lynch, 2006). Handley-
Schachler, Juleff & Paton (2007) noted that the distinctive characteristics of financial
services companies imply the need for distinctive corporate governance arrangements for
the financial services sector.
Recent corporate collapses and malpractices within the sector suggest that there
have been sufficient system weaknesses to enable episodes of financial company
malfeasance (Handley-Schachler et. al, 2007). These events point to the need to sharpen
both risk management and internal control procedures and external oversight.
Throughout the world various legal and regulatory changes have been proposed or
implemented in an attempt to improve corporate governance (Durden and Pech, 2006).
Legal commentators in particular have advocated a greater role for legislation and
government sanctioned regulatory bodies in the operation of corporate governance
(Durden, et al, 2006). According to Guasch and Hahn, (1999), as stated by Durden, et al,
(2006), the overall goal of business and economic regulation, including corporate
governance, is to improve market efficiency. Therefore some level of corporate
governance regulation is a necessary component of a well functioning economy.
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10. Capital Markets
The review of literature while confirming the global crisis, confirms the
interrelationship to capital markets, strategy development and corporate governance if a
sustainable advantage is to be created.
10

11. Capital Markets
IV
METHODOLOGY
Data Collection
The leadership of the organization was quite enthusiastic about participating in
this research as they were interested in reviewing the findings of the study. A series of
methods were used to collect the data used in compiling this research paper. Interviews
were conducted with various members of staff ranging from General Manager to Client
Relationship Officers. The company’s historic data contained in Annual Reports and
other strategic documents were reviewed and analysed. This was complimented by the
review and analysis of competitors Annual Reports as well.
11

12. Capital Markets
V
INDUSTRY ANALYSIS
Introduction
In making an assessment of the macro external environment in which NCB
Capital Markets operates, a Political, Economic, Socio-cultural and Technological
(PEST) analysis was conducted to ascertain the importance and the general influences
that the environment, has on the organisation.
Political Stability/Political Parties and System of Government
The Jamaican political environment is stable with a democratic system of
government comprising of two well-established political parties, the ruling party Jamaica
Labour Party (JLP) and the opposition People’s National Party (PNP). Both parties are
generally supportive of business and foreign investments. The present administration
under Prime Minister Bruce Golding of the JLP has reversed some economic policies of
the previous administration like entering into borrowing arrangements with multilateral
agencies. This is with the view of refinancing higher cost debt instruments. This could
have consequences on businesses ability to raise funds on the international market as the
country may be seen as being more risky (Grinfeld, 2009).
On the other hand, with the government able to access cheaper funds and possibly
refinancing higher cost debt, the interest rates locally will decline. Another change in
economic policy is the fixing of the exchange rate which could possibly lead to the
development of currency black market. The present administration also welcomes foreign
investments and emphasizes the need to attract more foreign investment to help boost the
country’s economy.
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13. Capital Markets
The Prime Minister in December 2008 also announced a $1 billion stimulus
package including low-interest rates and tax cuts to support Small and Medium
Enterprises (SMEs) and the tourism sector during this present global economic crisis. The
high cost of borrowing has led local businesses to claim that foreign investors have an
unfair advantage in bidding for privatized state assets; it is unlikely to translate into
discrimination against foreign interest rates and as the government sees the need for
foreign partners, especially for infrastructure and tourism-related projects (Grinfeld,
2009).
Government Legislation and Regulation
The new government has been placed under a lot pressure by the working population
and the general public to review certain laws as regards the labour force and financial
sector of the economy. The following are some important areas of legislation that the
population expects the government to focus on.
1. Wage legislation - Increase in minimum wage could result in individuals at the lower
scale of the income ladder being able to afford banking/investment products and
services.
2. Industrial safety regulations - Increasing emphasis on workers safety.
3. Regulation - The financial sector have also been put under the eyes of the
government and its regulatory agencies because of the proliferation and increase of
banks and alternate financial and investment houses in the country.
The regulators, in particular the Financial Services Commission have been on an
education drive to inform the general public about the dangers involved in placing their
funds in unregulated institutions.
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14. Capital Markets
ECONOMIC ANALYSIS
The global economic crisis which started in the last quarter of 2008 has had
significant effects on financial markets around the world. This has led to failed banks,
freezing of the credit market and a sub-prime mortgage crisis/financial crisis. Since the
beginning of this disaster, global economic conditions have deteriorated rapidly. The
local macro economy which had already been weakened by high inflation, slowed
further. Global bond prices also fell sharply and the local currency depreciated at the
fastest rate since 2003 (Economic Intelligence Unit, 2009).
High hopes are placed on the policymakers of the major world economies, to successfully
end the crisis in the global financial system and avoid a protracted recession. Given the
conditions prevalent in the global economy, the local economy continues to face
numerous challenges from the external environment such as weakening of the local
currency, increased risks of fiscal slippage in financial year of 2009/2010, a contraction
in output, rising unemployment and continued weakness in the stocks and bonds markets
(Economic Intelligence Unit, 2009).
In examining the macro economic factors, the following observations were made
in relation to output, foreign exchange, inflation rate and investment:
Output
Global growth has slowed considerably as the financial crisis continues to affect
consumer spending, employment and output. With the major trading partners already in
recession, economic activity has begun to decline. This has had a negative impact on the
mining sector as prices of bauxite and alumina exports have declined on the international
markets.
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15. Capital Markets
Despite ongoing supply cuts and production delays, the pricing environment is
expected to remain weak as demand is projected to continue falling. Tourism and
remittance flows have reduced, thereby further affecting local consumer spending. The
manufacturing sector remains weak in light of the slowdown as well as construction
activity and agriculture. Of importance also, are the ongoing cuts in government capital
expenditure which will further weaken the real GDP. As a result economic growth will be
flat with declines in the first half of the year, but there is the potential for improvements
as the year runs out and the global economy expects to begin a slow recovery (Economic
Intelligence Unit, 2009).
Foreign Exchange Market
The foreign exchange market experienced extreme turbulence in the last quarter
of 2008. With the heightening of the global credit crunch, local financial institutions lost
international credit lines and local brokerage houses were forced to meet margins calls
from overseas brokers. There was subsequent increase in demand for US dollar which in
return placed significant pressure on the Jamaican dollar.
As a result, the Jamaican dollar lost 14% against the US dollar in 2008 with most of the
depreciation taking place in the September to December period (11.66%). The rapid
depreciation in 2008 is similar to what occurred in 2003 when the local dollar lost 19% of
its value relative to the US dollar. This time around, however, domestic as well as
international factors were the main catalysts behind the sharp depreciation (PSOJ, 2008).
15

16. Capital Markets
Inflation Rate
In 2008, consumers saw their real incomes decreasing as commodity prices and
oil prices skyrocketed and inflation hit a record high. The inflation rate peaked at 26.6%
for the twelve months to August 2008. However, as oil prices declined, inflation
moderated to 19.7% in November 2008. Inflation rate should improve this year well
below last year’s levels with the recent fall in energy prices and weak consumer demand
as a result of the global economy crisis (PSOJ, 2008).
Investment
Increased risk aversion on the international markets stemming from the ongoing
financial crisis prompted investors to shift funds from emerging market debt securities
towards safer instruments such as US Treasury Bills. All Government of Jamaica Bond
issues experienced steep declines in 2008 (PSOJ, 2008).
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17. Capital Markets
TECHNOLOGICAL ANALYSIS
Technology Developments
Recently, technological expansions have changed the face of the industry and
consequently, an increase in electronic financial solutions. Technology's innovation
impact on product offering has caused several changes to the face of products offered in
addition to the means of making these offers to customers.
Cost Structure Impact
Technology can support various advantages and disadvantages in terms of costing
such as reducing human productivity and process costs. These benefits contrast against
the significant acquisition and maintenance costs.
Companies willing to undertake this investment must realise that technology must
also be assigned imperatives within the overall strategy framework to engender any
advantage not easily replicable.
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18. Capital Markets
SOCIO-CULTURAL ANALYSIS
Ethical/Moral Issues
The crime rate has been at consistently pandemic levels in recent years and has
impacted negatively, the levels of foreign direct investments flowing into the Island. This
has been a reason for capital flight as many Jamaicans migrate to countries like Canada
where the crime rate explicitly murder, is much lower.
The current global crisis threatens to exacerbate this situation against the
background of job losses which has climbed significantly since the start of the year.
Gareth Manning (2008), Jamaica Gleaner staff reporter, wrote in an article that
“approximately 2,077 jobs have been cut since January 2008, according to the labour
ministry records and seven thousand more are at the knife's edge.”
A recent article Myers (2009) stated that Milton Samuda, president of the Jamaica
Chamber of Commerce cited figures showing an alarming growth in crime in Jamaica in
recent years, while also noting that criminals were increasingly widening their activities
geographically. For economic growth to take place in Jamaica, crime and violence
containment as well as reduction will have to be an imperative, Myers (2009) continued.
Seasonality and Weather Issues
The official hurricane season runs from June to November annually and Jamaica
being a tropical island, experiences quite frequently severe disruptions and losses to
businesses due to the effects of disasters. As a result, business has had to make the
necessary provisions to mitigate against the negative effects that could arise from these
events over which they have no control.
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19. Capital Markets
Lifestyle Trends
The recent global economic crisis has severely affected consumer behaviour in
relation to spending patterns. Many people both globally and regionally, have been forced
to cutback significantly on spending and tend to save more, no doubt as a result of the
uncertainties that lie ahead. This has been borne out by an article published in The
Economist, (April, 2009).
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20. Capital Markets
THE FINANCIAL INDUSTRY ANALYSIS
The Jamaican financial system is monitored by the Central Bank, Bank of
Jamaica (BOJ) that promotes and maintains the financial systems stability. The BOJ is
charged with the responsibility of supervising Deposit Taking Institutions (DTIs) like
commercial banks, money services businesses such as, remittance companies and foreign
exchange traders.
Non-deposit taking financial institutions such as insurance companies, securities dealer,
unit trust, private pension funds and mutual funds fall under the purview of the Financial
Services Commission (FSC).
The financial system in Jamaica though not as sophisticated as the United States
or the Euro zone consists of a spectrum of institutions that provide the financial
intermediation between excess spending units and deficit spending units; the distinction
between commercial banks, investment banks and corporate brokerage houses has
become blurred whereas traditional Commercial Banks have created various divisions
allowing them to delve into securities dealing, insurance, mortgages and investment
banking.
Despite deteriorating conditions in the global financial market and fears of local
contagion from “toxic” international investment products, the local financial market
remains relatively stable. Around the world stock markets have fallen, several large
financial institutions such as Bear Sterns and Lehman Brothers have collapsed, and
governments such as the United States have had to come up with rescue packages for
their financial institutions (MSNBC, 2008).
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21. Capital Markets
One such incident is the US$85 billion given to the American International Group (AIG)
to prevent it from filing chapter 11 (corporate bankruptcy) as reported in September 2008
on MSNBC, uncertainty and instability in the international financial market, coupled with
doubts in these rescue packages and its long-term effect on stability of the local financial
market raises some cause for concern.
The Financial Services Industry is an important aspect of the Jamaican economy.
The 2008, third quarter economic activity results, published by the Statistical Institute of
Jamaica, reflected growth of 1.7 per cent in the Financial Services Sector relative to the
similar period in 2007 and having a strong regulatory body provide necessary oversight
to protect the interest of investors thereby raising investor confidence.
Inflation
The second half of 2008 saw headline inflation trending downwards as demand
fell with the exception of July which had 2.84% inflation. This was due mainly to the
lagging effect of the increases in international commodities prices; however the
downward trend in oil prices elicited a pass through effect on inflation resulting in a less
than 1% rate of inflation since September 2008 continuing to February 2009 as seen in
Figure 1. Business and consumer confidence decreased in the fourth quarter of 2008
whereas spending plans were shelved and negative expectations hindered economic
activity (PSOJ, 2008).
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22. Capital Markets
Changes in inflation affected short-term interest rates of the money market as
adjustments were made for higher domestic inflation rates.
Figure 1: Inflation Trends 2008/2009
In February 2009, inflation was on the rise to the tune of 0.81%, with the root
causes attributed to a 4% increase in the price of housing, water, electricity, gas and other
fuel items. The next major factor was maintenance and repair of dwelling with a 5.7%
hike.
The 2009 inflation calendar year to date (YTD) is 0.5% when compared to 4% for
the corresponding period in 2008. Inflation 2008/9 trailing twelve months (TTM) is
12.8% versus 14.43% for 2007/8, in addition the fiscal 2008/9 inflation YTD February
was 11.5% in contrast to the corresponding fiscal period in 2007/8 of 18.2%.
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23. Capital Markets
Foreign Exchange
The US dollar remained stable throughout the first three quarters of 2008 only
changing by + .02% daily from January to September 2008. In October 2008 the US
dollar jumped to a 1 percentage daily change; a similar change ensued in November and
December which saw a 1.2 percentage change in the US denominated spot rate.
The local currency in December depreciated by J$2.71 or 3.5%, and was sold at $80.47.
The Jamaican dollar depreciated by J$9.85 or 14 percentage points Year to date (YTD)
January to December 2008 (see figure 2). This was triggered initially by margin calls by
US investment banks on local brokerage houses who had used the declining Jamaican
government bonds to back loans. The persistent slide was fuelled by speculation from
market players that the Government would be unable to defend the dollar.
The Pound Sterling and the Canadian Dollar also began to deviate from a fairly
stable movement of + 1% change and + 1.5% daily change respectively by the end of the
third quarter. Unlike the benchmark “Green Back”, the pound’s year to date performance
for January to December 2008 was depreciated by J$23.49 or -16.7% and the Canadian
dollar by J$5.85 or -8.2% during the same period as shown in Figure 2 of Appendices.
23

24. Exchange Rate Trend
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Capital Markets
Figure 3. Exchange Rate Trend
The escalating demand for the US dollar caused the BOJ to raise interest rates on
Certificate of Deposits (CD), the scarce US dollar evoked a major depreciation in the
local currency. BOJ in an attempt to mop up liquidity by limiting the amount of cash
institutions have to lend has increased the liquid asset ratio from 23% to 25% and the
cash reserve requirement increased by 2% to 11%. Other contractionary monetary policy
initiatives were:
1. A special loan facility in foreign currency for securities dealers and DTIs to repay
overseas margin calls.
2. Increasing interest rates across all tenors’ open market operations instruments.
3. Offering a special 15-day Certificate of Deposit (CD) to Primary Dealers and
Commercial Banks.
4. Intervention sales of US$432.1 million in the foreign exchange market.
24

25. Domestic Interest Rate Movement
0
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T-Bill Weighted Average
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Average Saving Rates
Average Lending Rates
Capital Markets
The six month T-Bill as at December 31, 2008 had an average yield of 24.45%
which is 519 basis points or 5.19% increase over November’s 23.24%.The six month T-
Bill YTD grew by 10.93% of which over 90% of this change was realized in the fourth
quarter of 2008 as evidenced by Figure 3. This huge movement in T-Bill rates was caused
by the high interest policy measure implemented by BOJ which may result in a
“crowding out effect”.
The average lending rate has made marginal changes throughout the calendar year
ending November 2008 at a 23.17% lending rate which is .59% higher than the previous
month; December made no change with the lending rate remaining at 23.17% as
illustrated in Table 1 in Appendices. The average savings rate has been constant at 5.5%
for the five month period July to November 2008, with December’s rate moving
downward by 21 basis points to 5.33%. Figure 4 gives a graphical view of the domestic
interest rate movement for the period January 2008 to March 2009.
Figure 4. Domestic Interest Rates
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26. Capital Markets
Analysis of the Assets and Liabilities of Deposit Taking Institutions (DTIs)
The DTIs within the financial sector comprising of Commercial Banks, FIA
Licensees (Merchant Banks) and Building Societies submitted to the BOJ their assets and
liabilities for the fourth quarter of 2008, as a result the central bank published the annual
unaudited prudential indicators for the sector on March 13, 2009 referred to Table 2 of
Appendices.
Pan Caribbean Merchant bank was the second largest FIA behind Capital and
Credit Merchant Bank; it was awarded a commercial bank license on June 23, 2008 and
is now Pan Caribbean Bank (PCB) consequently their merchant bank license was
surrendered and the FIA players are now three which has contracted their combined
assets by 22.5%.
Rate of Asset Growth
Total assets including contingent accounts (customer liabilities for acceptances,
guarantees and letters of credit) was $729 billion for the period ending December 2008;
the entire financial sector grew by 8.1% even though the FIA licensees (Merchant Banks)
suffered a massive decrease in growth of -28.2 % due to the exit of Pan Caribbean.
Commercial Banks and Building Societies assets on the other hand grew at a declining
rate compared to the last two corresponding periods, there growth was 10.4% and 12.9%
respectively.
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27. Capital Markets
Rate of Deposit Growth
Total growth of deposits in the sector plummeted to 4.5% when compared to the
last two periods of December 2007 and 2006 that had growth of 14% and 14.9%
respectively. The FIA licensees spearheaded the lethargic growth of deposits with a
negative growth of 15.4%. Deposits were $441 Billion in 2008, $422 billion in 2007 and
$370 billion in 2006.
Rate of Loans Growth (Gross)
The adverse effect on FIA growth by the departure of Pan Caribbean looms as
their rate of loan grown is negative 23.9% which has sprinted away from a 27.5 growth
rate in the prior year ending December 2007. The financial sector’s rate of loans grew by
24.2% to $328 billion; this represents a 450 basis points slip from 2007’s loan rate
growth. Therefore the sector loans grew at a declining rate with commercial banks and
building societies contributing 26.2% and 29.1% respectively.
Rate of Capital Base Growth
Capital base growth rate for the sector grew at an increasing rate to 13.3% over
the corresponding period in 2007 moving from $61 billion to $70 billion despite the FIA
licensees’ negative growth of 23.1%. The number of commercial banks increased to
seven with the inclusion of Pan Caribbean Bank which may have caused the capital base
of commercial banks to grow at an increasing rate of 18.5% moving from 12% in 2007.
Building societies capital base grew by 11.4%.
27

28. Capital Markets
Non-performing Loans (NPL)
Non-performing Loans (NPLs) grew by 57.6% moving from a 14.2% growth rate
in the corresponding period in 2007. Commercial Banks and Building Societies were the
major contributors to this massive growth with 65.1% and 55.5% respectively. FIA
licensees’ contribution was a much smaller 9.8% but the aggregate growth of NPL for the
sector may have been the result of the impact of the alternative investment schemes and
the pass through effect of the global financial crisis on businesses and consumer in the
last quarter of 2008.
Capital Adequacy Ratio (CAR)
A measure of a financial institution’s capital expressed as a percentage of a bank's
risk weighted credit exposures. The Web site of Investopedia (2009) stated that there are
“two types of capital, tier one capital which can absorb losses without a bank being
required to cease trading, while tier two capital, absorb losses in the event of a winding-
up and so provides a lesser degree of protection to depositors.
The industry standard for CAR is 10%, all three types of DTIs have exceeded this
standard with commercial Banks having 13.9%, FIAs with 20% and Building Societies at
19.8%. The aggregate CAR of 15.2% for the industry grew at a declining rate compared
to the prior year’s 16%, however the financial system’s CAR shows some level of
financial soundness as their capital can absorb losses, liabilities or risky exposures.
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29. Capital Markets
Credit Unions
The BOJ commenced its supervision of credit unions in 2006 with total
membership of 874,471 spread across 48 credit unions. The credit union movement
financial performance as at December 2008 reported membership experiencing a year on
year growth of 4.70% to increase to 953,783 despite declining to 46 credit unions, two
less than the prior year (Jamaica Co-operative Credit Union League, 2009).
Approximately 60% of the adult population are members of a Credit Union; the
last five years saw membership increasing on average by 5% per annum. Total assets
were $50.614 billion increasing by 14.45% accompanied by a 19.61% increase in
deposits and a 14.89% growth in savings valued at $19.231 billion and $39.505 billion
respectively. Credit unions had a loan to savings ratio of 81.7% in 2008 comparing to
90.1% in 2007 (Jamaica Co-operative Credit Union League, 2009). Figure 5 in the
Appendices shows a graphical view of Credit Union membership.
Analysis of the Assets and Liabilities of Non-Deposit Taking Institutions
During an interview with Palmer of the FSC (personal communication, April 2,
2009) the following key indicators for non deposit taking institutions as at December 31,
2008 were identified.
Funds Under Management (FUM)
The 30 securities firm accounted for $635.31 billion which is 80.91% of the
$785.2 billion managed fund for the securities industry. The other sectors accounted for
the remaining 19.09% with insurance companies receiving the lion’s share of the
remaining FUM with 13.68% (see Figure 6). It is important to note that managed funds
include pension funds.
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30. Capital Markets
Figure 6. Funds Under Management by Sector
The industry FUM rose at an increasing rate from the last quarter 2007 and
continued until September 2008 (see Figure 8); in the midst of the global financial fallout
and the ripple effect of the toxic asset, the final quarter of 2008 saw FUM on the decline.
Nonetheless, the FSC set a benchmark of 50% or less for intermediation ratio that
assesses the efficient use of managed funds to deficit units.
A third of the securities firms failed this early warning test, all the other sectors
supervised were at or below the FSC benchmark. The entire industry had a ratio of 22.9%
for the last quarter of 2008; the corresponding period last year was 24.6%.
Capital Adequacy and Total Assets
Capital remained constant at approximately $100 billion for the industry the last
quarter of 2008 declined slightly to $95.5 billion (see figure 8). The CAR for the industry
was 40.5% which is way above the benchmark of 14% set by the FSC. Seven securities
firms however, did not have a CAR greater than the benchmark.
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31. Capital Markets
Total Assets saw all quarters increasing but the last two quarters increased at a
declining rate whereas the first quarter of 2008 total assets grew by 4.48% and the final
two quarters grew by 2.67% and 1.25% respectively. The capital to assets ratio for the
industry was 12.4% that doubled the benchmark that was set by the regulator, 10
securities firms did not have ratios greater than 6%.
Key Indicators Trends for the Securities Industry
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
Dec-07Apr-08Aug-08Dec-08 Quarters
$' Millions
TOTAL ASSETS
CAPITAL
FUM
TOTAL REPO LIABILITIES
REPO LIABILITIES WITH
NON-FINANCIAL
CLIENTS ONLY
Figure 7. Key Indicators Trends for the Securities Industry
The Stock Market
The main Jamaica Stock Exchange (JSE) stock index experienced a -28.41% or
27,816 points decline during the calendar year 2008. The year 2008 commenced with
107,514.98 points and bounced between 105,000 and 115,000 points until the end of the
third quarter. This movement within the first three quarters of 2008 only yielded a -4.86%
change in the JSE main index.
31

32. Main JSE Index Jan. 08 -Apr. 09
70000
75000
80000
85000
90000
95000
100000
105000
110000
115000
120000
125000
130000
1/2/2008
3/2/2008
5/2/2008
7/2/2008
9/2/2008
11/2/2008
1/2/2009
3/2/2009
Date
IndexPoints
JSE Main Index
Capital Markets
The index began to plummet in late September which continued into December
ending with 80,152.03 points and a market capitalization of $597.28 billion; in the last
quarter the index suffered a -23.55% reduction reflecting the effect of the global financial
crisis on the domestic capital markets. The index however rallied in January by 7,054.87
points or 8.8%.The increase in January moved the index to 87,206.90 points which may
be attributable to the “January Effect”, the index continued to trend downwards in
February and March 2009 (Jamaica Stock Exchange, 2009).
Figure 8. Main JSE Index
Despite Jamaica’s fairly sound financial sector that has passed both regulators
early warning stress tests, the sector still remains susceptible to economic shocks in the
exchange rate, unfavourable prevailing conditions in the global economy and the ripple
effect of the fiscal policies highlighted in the recently concluded budget 2009/2010.
According to the International Monetary Fund high levels of scepticism among
banks pertaining to which financial institutions will be affected by the build up of bad
debts have resulted in reduced levels of credit made available through these institutions
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33. Capital Markets
(PSOJ, 2009). This has propagated less financial intermediation and reduced business and
consumer confidence.
The Business Monitor International monthly regional report published for May
2009 has indicated that Jamaica is not prepared to face the current economic headwinds
due to the heavy reliance on tourism and remittances for foreign exchange, the
internationally exposed domestic banking sector and the huge debt burden (Latin
America Monitor, May 2009).
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34. Capital Markets
VI
COMPETITOR ANALYSIS
Introduction
The major securities firm that operates in the wealth management industry are
NCB Capital Markets Ltd, Scotia DBG, Capital and Credit Financial Group, JMMB Ltd,
Pan Caribbean and Mayberry Investments Limited. The competitor analysis seeks to
outline and compare the objectives, resources, performance, products and services as well
as present strategies of competitors, see Table 2 in Appendices for a more detailed
analysis.
NCB Capital Markets Ltd.
Their objectives are to remain stable and sure, with performance that reflects high
ethical standards, dependability and commitment to understanding and satisfying client
needs. One of the major achievements in performance has been that they are the most
cost effective firm in wealth management industry. They also have the largest distribution
network and are the second most profitable wealth management firm for the last financial
quarter ending December, 2008.
The current strategies employed by the company outlined in the 2008 Annual
Report, (2009) are:
1. Through operational efficiency by distributing its products and services through the
bank, one of its subsidiaries.
2. To increase its funds under management.
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35. Capital Markets
3. Through competitive positioning.
Scotia DBG
The main objectives of Scotia DBG, is to make offerings more accessible to
customers through increased awareness of investment products and services; further
expand its network of financial advisors. They also aim to explore regulatory initiatives
to migrate customers away from traditional Repurchased Agreements products into
mutual fund type instruments in order to attain significant additional growth for already
established funds. Scotia DBG is considered to be a financially sound wealth
management firm with a very strong asset base. They products and services offered by
them are:
1. Money Market Investment Products
2. Unit Trust and Mutual Funds
3. Stockbrokerage and Equity Trading Services
4. Pension and Asset Management
5. Cambio Services
6. Deposit, Loans and Lease Financing
Scotia DBG’s current strategies are to strive for excellence in providing
outstanding sales and service. This is done by refining the client service model,
strengthening sales management training and coaching. On the operational platform they
replaced the Information Technology platform and improve policies and procedures
while leveraging core operational platforms. As it relates to products, they streamlined
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36. Capital Markets
existing product offering to meet the needs of their targeted client by leveraging existing
offerings and eliminating those that were redundant.
In the area of marketing and communication, they have developed strategies that
support a high level of communication between Scotia DBG and the wider Scotia Bank
Group, and support aggressive growth in the local markets. On the human resource front,
their approach is to recruit top talent and develop people and teams by providing robust
employee development, reward and recognition and competitive programs (Scotia DBG
2008 Annual Report, 2009).
Jamaica Money Market Brokers Limited (JMMB)
JMMB’s strategies are committed to ensuring that they offer very attractive
products to clients in an efficient way while maintaining exceptional client care
standards. This strategy pivots around their “Vision of Love” corporate philosophy
engendered by the late founder, Joan Duncan. Their performance and achievements have
been strong growth in assets and funds under management. They are a sturdy and
profitable firm with a strong client base and market share which places deep emphasis on
corporate governance. In addition to the products offered by Scotia DBG they offer
Savings/Deposit taking accounts Global Investments. The company’s present strategies
and future prospects are to actively explore tactics that results in continued income
growth, and in particular fee income. Another tactic is to continuing building on the
pillars of growth by increasing corporate and consumer markets products, strengthening
their new line of business in credit services and effecting plans for Greenfield expansion.
JMMB intends to increase its focus in areas that offer more opportunities in the current
environment in cost management and consequently, increased efficiency as well as
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37. Capital Markets
offering attractive rates of return to clients thereby maximizing opportunities (JMMB
2008 Annual Reports, 2009).
Capital and Credit Financial Group
The main objectives of Capital and Credit Financial Group are cost containment
in addition to the expansion of its products and services not only in Jamaica but also in
the Caribbean. Their performance and achievements are predicated on its strong capital
base and ratios, as well as prudent risk management initiatives. The range of services
offered are similar to those offered by NCB Capital Markets, Scotia DBG and JMMB.
Current strategies and initiatives engaged in are an aggressive expansion of loan
portfolio through introduction resulting in greater revenue and new high-yield, value-
added products. As stated in its Annual Report, (2008) on its Web site, there is also an
international treasury strategy to include other sovereign and high-yield treasuries and the
expansion of its retail credit units by way of alliances with a number of product
providers.
Pan Caribbean Financial Services
Pan Caribbean Financial Services objectives are to grow its business through
added mergers and acquisitions, new products and expansion throughout the Caribbean.
Their performance and achievements are based on their strong growth in assets and funds
under management which has contributed to a strong stable and profitable firm. There are
no unique products and services that are offered by the company when compared to
others already mentioned. Present strategies and initiatives are to grow the business and
increase income by increasing its client base, (Pan Caribbean Financial Services Ltd,
2007).
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38. Capital Markets
Mayberry Investment Limited
Mayberry Investment’s objective is to provide the public with a wide variety of
investment products that yield good returns. Their performance and achievements are
financial stability from a reputable institution. They are prudent in delivering good
investment options for clients and have strong funds under management portfolio. In
addition to products offered by competitors discussed, offshore US Funds Management is
also offered. The present strategies and initiatives are to grow business and income
(Mayberry Investment Ltd., 2007).
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39. Capital Markets
FINANCIAL PERFORMANCE OF SECURITIES FIRMS
NCB Capital Market is currently the third largest securities company operating in
Jamaica, measured in terms of total assets. For the quarter ended December 31, 2008, the
company’s total asset stood at $65,637 million, reflecting an increase of 15.18% over the
corresponding period ended December 31, 2007. However, the company’s asset base
declined by 0.8% when compared to the financial period ending September 30, 2008. The
reduction in the company’s asset base over this three months period was mainly due to a
24.9% decrease in Reverse Repurchase Agreements.
The first, third and fourth quarter reports ending December 31, 2008/January
2009 as outlined in Figure 9 below, indicated that JMMB was the largest securities
company operating in Jamaica, measured in terms of total assets, followed by Scotia
DBG and NCB Capital Markets. A significant percentage of the asset base of NCB
Capital Markets and its competitors comprised of investment securities and repurchase
agreements. The total of all investment securities and repurchase agreements of NCB
Capital Markets as a percentage of total assets was 96%. This is a higher percentage than
all the other five competitors which range between 63 and 89 percent.
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40. Capital Markets
0
50
100
150
NCB Capital Scotia DBG JMMB Pan
Caribbean
Capital &
Credit
Mayberry
Total Assets ($billion)
Figure 9. Total Assets of Securities Firms
NCB Capital Market was the second most profitable securities company for the
three months period ended December 31, 2008. The company’s net profit of $483.2
million was $66.5 million or 16% more when compared to the three months period ended
December 31, 2007. JMMB was the most profitable securities company with reported
profit of $635.6 million which was $152.4 million more than NCB Capital markets.
Despite this gap in profit performance between NCB Capital Markets and JMMB, NCB
Capital Markets return on total assets was 0.14% more than JMMB. Figure 10
highlighted the profit performances of the six largest Securities Firms for the quarter
ended December 31, 2008.
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41. Capital Markets
NC B C apital S cotia DBG JMMB P an
C aribbean
Capital &
Credit
Mayberry
-400
-200
0
200
400
600
800
NC B C apital S cotia DBG JMMB P an
C aribbean
Capital &
Credit
Mayberry
Net Profit ($million)
Figure 10. Net Profit of Securities Companies
The return on total asset of NCB Capital Market was 0.74% or 0.01% less than
Pan Caribbean Financial Services Limited who reported the highest return of 0.75%.
This means that NCB Capital Markets was able to earned more income on each dollar of
assets owned than its main competitors.
Despite earning the second highest profit during the quarter ending December 31,
2008, NCB Capital Markets earnings per share was lower than some of its major
competitors. Scotia DBG reported the highest earnings per share, during the quarter, of
$0.91 which was $0.51 more than NCB Capital Markets with earnings per share of $0.40.
The other competitors with earnings per share greater than NCB Capital Markets were
Jamaica Money Markets Brokers Limited and Pan Caribbean Financial Services Limited
as depicted in Figure 12 in Appendices.
NCB Capital Markets is the most cost effective securities company during the
quarter ended December 31, 2008. The company’s efficiency ratio was 23.9%. The
41

42. Capital Markets
efficiency ratios of the other competitors range between 36.2% and 89.1% as outlined in
Table 3 and Figure 11 in Appendices.
This would suggest that NCB Capital Markets has better control over its operating costs.
The company’s aggressive cost control measures were evidence in its published profit
and loss account for the quarter ended December 31, 2008 where operating expenses
were reduced to $131.2 million or $44.3 million when compared to the previous year of
$175.5 million.
Based on the comparative financial analysis done among the six largest Securities
Firms, NCB Capital Markets has reported competitive financial results over the years
when compared to its competitors. Areas of notable competitive financial performances
are profits margins, asset base, return on equity and earnings growth. The products
within the securities industry are homogeneous; therefore the Company’s financial
performances are commendable. NCB Capital Markets is expected to continue its
competitive financial performance well into the future based on historic trends.
The current global financial crisis, however, will challenge the creative minds of the
company’s management to create and adopt new strategies in order to achieve sustained
competitive advantage.
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43. Capital Markets
VII
COMPANY ANALYSIS
Background
NCB Capital Markets Limited is the wealth and asset management arm of the
National Commercial Bank Jamaica Ltd (The Bank), offering investment options and
advice for institutions and individuals for the last (39) years. The company which is one
of largest stock brokerage firms in Jamaica is a Stock Broker & Primary Dealer and a
member of the Jamaica Stock Exchange.
Born out of a merger in 2002 with Edward Gayle and Company and NCB
Investments Ltd., the company became a wholly owned subsidiary of the NCB Group,
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44. Capital Markets
which was later re-branded as NCB Capital Markets Limited in December 2003. The
company offers a range of equity, money market, bond and mutual fund products, as well
as Corporate Finance and Portfolio Management services for individual and institutional
investors as outlined in Table 4 below.
Table 4. Investment Solutions Offered by NCB Capital Markets
INVESTMENT SOLUTIONS
Individual Investors Corporate & Institutional Investors
Bonds Equity Capital Markets
Money Market Securities Debt Capital Markets
Mutual Funds Mergers & Acquisitions
Stocks
Wealth Protector
As at March 31, 2009, the Senior Management Team comprised of the persons
stated in Table 5 below:
Table 5. Senior Management Team
SENIOR MANAGEMENT TEAM
Managing Director
Vice President, Finance & Risk
Vice President, Investments
Vice President, Corporate Client Services
Assistant Vice President, Private & Retail Client Services
The vision of NCB Capital Markets is stated as “We envision ourselves as an
industry leader renowned in the Caribbean for its wealth management services,
innovation and financial success, attained through well-trained and committed
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45. Capital Markets
employees, outstanding service delivery and corporate citizenship,” The company’s
values are quite simple but effective and is stated in its value statement as “We value:
integrity, excellence, accountability.” Lynch, (2006) defines vision as a challenging and
imaginative picture of the future role and objectives of an organisation, significantly
going beyond its current environment and competitive position. Vision is therefore a
backdrop for the development of the purpose and strategy of the organisation. Lynch
(2006) went on to state that vision has little meaning unless it can be successfully
communicated to those working in the organisation, since these are the people that will
have to realise it.
Regulation and Risk Exposures
NCB Capital Market is regulated by the Financial Services Commission (FSC)
and is governed by the Securities Act 2001. The act is accompanied by five regulations
that the organization is required to adhere to, namely:
1. Licensing & Registration
2. Disclosure of Interest
3. Conduct of Business
4. Take over & Mergers
5. Mutual Funds
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46. Capital Markets
The company faces major exposures such as regulatory, liquidity, counterparty
credit, interest rate, market and operational risks. These risks are clearly defined in Table
6 in Appendices. These are also guidelines and monitoring tools used to monitor
institutions to examine ratios that must be maintained as set by the Financial Services
Commission on a monthly and quarterly basis. Institutions maintaining ratios inline with
the benchmark set is extremely vital as failure to do so could result in the licence being
revoked.
This is a highly leveraged business as clients’ funds are invested in Repurchased
Agreements where the institution take a percentage of the spread from what is offered to
clients and what is received from government bonds they invest in. They rely mainly on
rollovers to maintain liquidity of 25% that must be maintained. Funds are usually
invested in short-term 30 days, 60 days, 90 days, 180 days and 365 days products (A.
Palmer, personal communication, March 3, 2009).
This is done on the assumption that clients will invest for the long-term and will not all
need their investments at once. In the event that the company needs to introduce a
product to the market other that the generic ones that are now regulated by the FSC, the
company must first acquire the regulator’s permission.
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47. Capital Markets
CORPORATE GOVERNANCE AND LEADERSHIP
Corporate Governance plays a very important role in the survival of any business.
Adhering to ethical behaviour, abiding by the rules and practices governing the industry
in which the business operates should be high on the priority list of the company’s
Directors and Executives at all times (NCB Capital Markets, 2009). Having the
confidence and trust of your stakeholders is paramount as without this the company may
as well close its doors.
NCB Capital Markets, a subsidiary of one of the most respected financial services
providers in Jamaica, is hard pressed to conduct its business in a manner that is fit and
proper. Not only is it evident that they are ‘Serious About Wealth’ but also about
47

48. Capital Markets
Corporate Governance. NCB Capital Markets (2009) stated on its Web site that a
Corporate Governance and Conduct Review Committee charged with the responsibilities
and purposes stated in its Charter are currently in place (Lennon-Cole, 2008). The
Committee monitors the make-up and configuration of the Board and also has the duty of
seeking, screening and recommending qualified candidates to be nominated for election
to the Board of Directors annually as appropriate.
The Committee evaluates the Board’s structure and practices then propose new
policies to the entire Board. The functionality of the Board, its committees and members
as well as the company’s management is periodically deliberated.
The succession planning in relation to the Managing Director and other key management
officers are re-evaluated and recommendations regarding corporate governance matters
and practices are made to the Board by the Committee.
The Committee also provides oversight in the area of compliance and ethical
business practices and legal requirements; review the adequacy of the Charter at a
minimum, annually and make the pertinent recommendations for improvements.
Transactions relating to conflict of interest required by statute are reviewed.
The main aim of the Corporate Governance Committee as stated on NCB Capital
Market’s (2009) Web site is to:
1. Lay a solid foundation for management oversight.
2. Structure the Board to add value, promote ethical and responsible decision-making.
3. Safeguard integrity in financial reporting and make timely and balanced disclosure.
4. Respect the rights of shareholders
5. Recognise and manage risk and encourage enhanced performance.
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49. Capital Markets
6. Remunerate fairly and responsibly
7. Recognise the legitimate interests of stakeholders
8. Ensure the quality and independence of the external and internal audit processes.
Leadership
According to Lynch (2006), “leadership is the art or process influencing people so
that they will strive willing and enthusiastically towards the achievement of the
organization’s purpose and therefore will have a significant influence on the company’s
performance and success in the long-run” (p. 355).
The leadership of the company is considered to be run by an able and competent
management team and has proven to be quite effective based on the fact that the
performance objectives of the company has been consistently achieved over a sustained
period of time.
Management practices a directive leadership style which according to Howell and
Costley (2006), “directive leadership involves defining roles and clarifying to followers
what expectations are required to achieve specific performance goals” (p. 96). Our
examination revealed that management constantly advises the line staff of the current
strategies that the company employs and involve them in the tactics that are implemented
to achieve the desired outcome. What is significant however, that based on out
observation, it appears that these developments flow only one way and customer facing
staff has very little input in developing these strategies.
The CEO himself wears a tie and business suit only on very formal occasions like Board
and Annual General Meetings. The overall tone of the organization is very relaxed and
dialogue between senior managers and subordinates is on a first name basis such as
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50. Capital Markets
“Chris Willie” referring to the CEO. He sends out monthly messages to his employees
called ‘Willie’s Views’ which is an intended combination of humour, financial advice,
personal insights and motivational diatribe. This creates a level of communication that is
unusual in the context of the Jamaican workplace. The lines of responsibility and
authority seem very well demarcated without the usual egotistical boosts such as
obsession with titles or corner office mentalities.
The staff complement is a little over 100 staff members with the majority being in the
main office at the “Atrium” which possibly explains the informal atmosphere.
CORPORATE CULTURE
As an organization cultural nuances play an important part in respect attitude
towards change, management and rules. A proper cultural analysis therefore must be
offered prominent role in any attempt to truly understand how a particular organization
functions. Organizational culture is described as “A set of common understandings
around which action is organized and finding expression in language whose nuances are
peculiar to the group” (Becker and Geer, 1960 p.1). Corporate culture serves as a social
and behavioural anchor for employees through which they can feel a sense of identity,
understand the organization and reinforce its values.
This definition allows us to frame NCB Capital Markets culture within the larger
construct of the NCB Group of which it is a subsidiary.
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51. Capital Markets
In assessing the corporate culture of the organization we will look at a number of
elements including:
1. Corporate structure - whether it is flat, tall or complex.
2. Management and leadership style - what is the vision, mission and goals and are they
clearly articulated? Are they congruent with actual practices, are policies and
procedures excessive.
3. Hiring practices - how do compensation and benefits compared to the rest of
organization’s age of workforce and physically challenged employees.
4. Company environment - What is the office layout, décor and lighting like and
whether or not there are any risks of occupational health hazards.
In visiting NCB Capital Markets offices, we were able to discern an obvious
departure from the typical banking overtones of being stiff, stuffy and bureaucratic. The
first thing that hit the visual senses was the slogan emblazoned on the walls “Yes we
Can” which also hanging from the ceiling in small droplets. We were informed that this
was their internal slogan developed for the 2008/2009 calendar year moving from the
previous one “Raising the Bar’. The slogan is developed annually by the company’s
Chief Executive Officer, Christopher Williams as a motivational lever for the staff
personal and professional objectives.
Staffers are paid regular monthly salary and a percentage of profit is shared
amongst them every quarter once profits are made. However, if none is made, obviously
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52. Capital Markets
none is paid as was the case for the past two quarters, ended December 2008 and March
2009. There are a number of benefits that staff members receive monthly as well.
The layout of the main office in Kingston is very much in keeping with their slogan
“Serious about Wealth” with the floor composed of fine Italian tiles. The lighting is
extremely generous, owing to the glass façade of the Atrium building. The colour scheme
is contemporary yet corporate with vibrant pastel tones underlying artistic murals on the
east wall.
The Customer Relationship Officers are positioned in a two by two rectangular
formation in the middle of the office and are separated by half cubicles, which allows for
privacy when dealing with clients and minimal clutter. The Wealth Advisors’ offices are
located along the north wall of the building with a view of the corporate centre of
Kingston.
The general layout allows for ease of movement and the glass used in separating divisions
seems to be the preferred means evident even in the back office where foreign exchange
trading takes place. No doubt, considerable thought went into every aspect of the layout
utilizing the latest theories in ergonomic design.
NCB Capital Markets staff members do not wear a standard uniform unlike the
usual tradition of rest of the banking industry and the dress code for the organization
ranges between business casual to business formal and appears to be set by personal
preferences as opposed to strict guidelines.
Corporate Structure
The organizational structure itself is very flat and reporting relationships clear.
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53. Capital Markets
This speaks to a greater culture of efficiency and cost management passed on from the
parent company. The organization’s management is quite youthful on average below 42
years and is led by a charismatic young CEO who is quite affable, knowledgeable and
highly regarded by his peers. The company has a reputation for recruiting the best and
brightest talents in the financial industry and this is evident in their acquisition over the
past three years of talent from their main rivals Scotia DBG ranging from Vice Presidents
to Managers. This serves a perpetual continuum as the NCB Capital Markets employees
themselves are constantly recruited externally having the reputation of possessing higher
levels of competency within the industry.
Motivation and Cultural Symbols
Motivation is exceedingly important in a high pressure organization such as NCB
Capital Markets and there are obvious symbols that seem to cement the overall corporate
culture. “Symbols integral to organizational life and are not simply by-products of
organization but instead are elements that structure members’ active construction of self-
knowledge and behaviour” (Rafaeli, A. & Worline, M, 1999).
A unique feature on NCB Capital Markets that separates it from the Group is the
lack of representation of an employee union, a situation which the employees had voted
for when presented with the option. In interviews many employees view the decision as
an error in judgement and believe that they have “lived to regret” such a decision.
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54. Capital Markets
There are unique perks and symbols used to motivate NCB Capital Markets
employees such as:
1. Each employee receives branded bottled water daily emblazoned with the “yes we
can slogan”.
2. There is a complimentary coffee and tea pantry for the use of each employee.
3. Once a year there is the “Capolympics” retreat held at a different hotel each year
where teams of employees are formed to compete in different teambuilding exercises
such as “biggest loser”- weight loss competition, sports costume and cheerleading
competitions.
4. Regular karaoke treats and concerts.
5. Gifts including like branded umbrellas and key rings.
The organizational commitment to maintaining and stimulating its unique cultural
proclivities is enshrined in the office of the “Cultural Officer”. This person’s job
description is centred on creating and executing novel ways of motivating employees
through bonding and group exercises. Arguably the most important cultural feature of the
organization is that all levels of management participates in all activities; it is seemingly
natural for senior managers to participate in the “worst dressed fashion competition” with
the office bearer/ messenger as her partner. These exercises help to mitigate
communication barriers that may arise between subordinates and those in leadership, the
result of which is an environment that on the surface promotes the free flow of ideas and
opinions.
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55. Capital Markets
Information gleaned from interviews with staff members we have deduced that
there is a common thread running beneath the façade of a well oiled and youthful
organisation. That is, most employees have a cynical outlook of their tenure at NCB
Capital Markets Ltd. and an almost fatalistic sub-culture resonates through the
organization in that job termination, like the sword of Damocles perpetually hangs over
their heads. Despite the presence and efforts of the Cultural Officer, job security is the
single most important lever of motivation to today’s employee. We believe therefore that
over the long term, these sub-cultural undercurrents present an untenable situation having
identified the human resource as one of the last bastions of sustainable competitive
advantage. This was evident in the case of Edward Jones, a fortune five hundred
investment company that is consistently ranked no 1 or two as the best place to work in
all its markets including the United Kingdom, United States and Canada as stated on
Fortune’s Website (2009).
CURRENT STRATEGIES
The current strategy of the NCB Capital Markets Limited has two dimensions, the
general and overarching one of cost containment through prudent operational practices
and the other, continually increasing funds under management. We opine that this
strategy is a general one because all organizations particularly fund managers must have
this strategic imperative. So what then is the strategy of NCB Capital Markets that will
offer competitive advantage?
We began our quest by reviewing the vision statement which although is concise,
and well articulated is a misrepresented statement of the organisation’s objectives and the
business definition. So how then will they achieve this? We asked senior members of the
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56. Capital Markets
management leadership to articulate the strategy of the company. Everyone we spoke
with either fumbled or laughed embarrassingly, but no two responses were the same.
NCB Capital Market’s strategy, according to the Managing Director, is employing
operational efficiency, cost containment and balance sheet strength”. Cost containment is
achieved through economies of scope gained through group resources (Williams,
personal communication, 2009).
We have determined therefore that if there is a strategy beyond that mentioned
earlier, it is not known among the small collective leaders of the organisation, much less
the subordinates. The NCB Group has a very detailed 30 pages strategy document with
two themes/elements, a balanced scorecard with four unique perspectives which are then
drilled down into 22 objectives being; three being financial, three customer, eight internal
and eight people.
Whereas there is not a separate strategic plan for the institution, there are guidelines for
NCB Capital Markets Limited in the 30 pages dissertation for the NCB Group. However,
it lacks simplicity and therefore this paper offers some recommendations geared towards
improving the strategic ambitions of the organization.
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57. Capital Markets
FINANCIAL ANALYSIS OF NCB CAPITAL MARKETS
NCB Capital Markets Ltd. is a publicly listed company on the Jamaica Stock
Exchange. The company’s stock is traded under the Symbol "NCBCM11.75". NCB
Capital Markets became a public company on September 22, 2006 by offering to the
public 100 million preference shares at a price of $3.00 per units. The offer was
oversubscribed by 16%. The terms of the offer included cumulative dividend of 11.75%
per annum with a potential bonus of 0.15%, should the Company achieve a Return on
Equity of 20% per annum or greater.
The listing of NCB Capital Markets preference stock units on the Jamaica Stock
Exchange allows stockholder the benefit of earning tax-free dividends and the
opportunity to freely trade the stocks. The listing also increases NCB Capital Markets Ltd
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58. Capital Markets
capital base and presents investors with an alternative investment instrument with a
predictable yield and the option to trade the stock with the potential of stock appreciation.
In addition to the initial offer of 100 million units of preference stock offered to the
public in 2006, NCB Capital Markets offered an additional 250,768,080 units in 2007.
The total number of preference stock outstanding as at September 30, 2008 was
350,768,081 units. Over a one year period (May 2008 to April 2009), NCB Capital
Markets stock price traded at a high of $2.99 to a low of $2.51.
The graph below illustrates the price movement of NCB Capital Markets preference share
on the Jamaica Stock Exchange over the period May 1, 2008 to April 24, 2009 (Jamaica
Stock Exchange, 2009).
Figure 13. Annual Stock Price Movement
As indicated in Figure 13 above, NCB Capital Markets preference stock closed
trading on May 1, 2008 at a high of $2.99 and closed trading on April 24, 2009 at a low
of $2.51. The stock price was affected by numerous events during this period that might
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59. Capital Markets
have affected the price of the stock. Events that could affect NCB Capital Markets
preference stock range from disappointing profits, loss of confidence by investors
resulting from the world financial crisis, the loss provision of 1.2 billion dollars by the
Company for securities held with Lehman Brothers and the hike in interest rates by the
BOJ which provided investors with higher returns on investment instruments.
National Commercial Bank Jamaica Limited (NCB) is the parent company of
NCB Capital Markets with a 100% stake, owning ordinary stock units of 1,207,614,899
as at September 30, 2008. This suggests that the NCB relies on the performance of NCB
Capital Markets for the Group positive results. The ten largest stockholders of NCB
Capital Markets preference stock units are institutional investors.
The number of preference stock units control by these institutions was 140,245,252 as at
September 30, 2008. NCB Capital Markets preference stocks traded at $2.85 on
September 30, 2008 (Jamaica Stock Exchange, 2009).
For the financial year ending September 30, 2008, NCB Capital Markets reported
$2,669 million in operating income, operating expenses of $1,985 million and net profit
of $775 million. The Company had a $1.2 billion dollar loss provision which negatively
impacted the net profit reported for the period. This loss provision was for securities
pledged with the Lehman Brothers Group; a US based financial institution that files for
bankruptcy in September 2008. This impairment loss provision was a one-off item and
will not affect future results unless the amount is recovered from Lehman Brothers. NCB
Capital Markets is poise to earn improve profits in 2009 over reported profits in 2008.
The Company improved its position in the first quarter period ended December 31, 2008,
having reported net profit of $483 million which was $66 million more than what was
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60. Capital Markets
reported for the corresponding period ended December 31, 2007. This positive trend in
net profit resulted from the implementation of tighter cost control measures which saw
the company’s operating cost reduced from $175 million for the quarter end December
31, 2007 to $131 million for the corresponding period ended December 31, 2008.
The Company’s net profit for the quarter ended December 31, 2008 was boosted by a
taxation credit of $64 million. The graphs (Figure 14 and 15) below illustrate the yearly
and quarterly earnings of NCB Capital Markets from the year 2006 to 2008 (NCB Annual
Report, 2008).
Figure 14. Annual Net Profit
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61. Capital Markets
Figure 15. Net Profit Per Quarter
NCB Capital Markets has consistently been providing value to its shareholders as
one can infer from the published financial reports for the period ended September 2007,
2008 and the first quarter period ended December 31, 2008. NCB Capital Markets
earnings per share for the financial year ended September 30, 2007 was $1.30. The
Company’s earnings per share for the financial year ended September 30, 2008 was
$0.60.
The impairment loss provision of $1.2 billion dollars for securities held with the
Lehman Brother Group negatively affected net earnings for the financial year ended
September 30, 2008 which contributed significantly to the Company’s earnings per share
been reduced from $1.30 in 2007 to $0.64 in 2008. NCB Capital Markets earnings per
share for the first quarter ended December 31, 2008 was $0.40, an increase of $0.05 over
the corresponding period ended December 31, 2007.
Analysis of Assets
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62. Capital Markets
NCB Capital Markets total assets as at September 30, 2008 were $66.1 billion.
Approximately 98% of the company assets comprised of investment securities and
Reverse Repurchase Agreements. The investment securities instruments included
corporate and Government of Jamaica debts as well as quoted and unquoted equities.
The fact that NCB Capital Markets is primarily a customer driven organization, the assets
are dominated by the income received from the company’s services. Unlike other
financial Companies, NCB Capital Markets income is predominately driven from
investments rather than mortgage bankers.
Analysis of Liabilities and Capital Risk Management
NCB Capital Markets total liabilities as at September 30, 2008 were $58.7 billion.
Liabilities are mainly dominated by payables to customers, investors (redeemable
preference share holders) and creditors (funds borrowed from overseas brokers - margin
accounts). Approximately 93% of the Company’s liabilities are dominated by repurchase
agreements which are funds invested on behalf of clients. All amounts payable to
customers are subject to the request for withdrawal by the individual customer.
The other major liabilities are redeemable preference shares and loans from overseas
brokers contributed to the company achieving the capital ratios requirements set by the
FSC. The company’s capital to total assets and capital base to risk-weighted assets as at
September 30, 2008 were 11.17% and 77.88% respectively whereas, the FSC bench mark
were 6% and 10% respectively.
As a major player in the local financial industry, NCB Capital Markets remains
financially strong. The Company brings to the industry an assurance of a strong capital
base backed by the financial strength and implicit support of the NCB Group, evidence of
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63. Capital Markets
which is illustrated in Notes 26e of the published Annual Report of 2008. This
highlighted the company’s strong capital adequacy ratios when compared to the
benchmark set by the FSC and 100 percent holdings of the company’s ordinary shares by
the National Commercial Bank.
NCB Capital Markets’ long-term growth and profitability opportunities are
extremely positive given its average track record and strong brand recognition. The
company’s Return on Average Equity (ROAE) has averaged 20.2% (excluding the
Lehman Brothers Group provision of $1.2 billion in 2008), over the past three years.
This performance is satisfactory when compared to some of the leading players in the
securities industry such as Jamaica Money Market Brokers (JMMB) who had a ROAE of
18.74% for the same period. NCB Capital Markets have historically experienced above
average profitability in comparison to other securities companies and is based on strong
and aggressive operating fundamentals.
The company should seek to increase earnings by enhancing its sales and
distribution model and implement strategies to drive future growth in its funds under
management. This should be done by improved customer retention and new business
growth. The global financial crisis will undoubtedly challenge the company’s ability to
consistently generate positive financial performances over the next few years; however, if
the company adopts and implement the recommendations suggested in this paper, it will
not only increase its earnings but also lay the groundwork to achieving a sustained
competitive advantage.
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64. Capital Markets
STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS
An efficient way of diagnosing a company is to conduct a Strengths, Weaknesses,
Opportunities and Threats (SWOT) analysis. This highlights a company’s internal
strengths and deficiencies against industry opportunities and treats. It is the most
fundamental guide towards developing strategies to guide the company forward. From
our analysis of the NCB Capital Markets we present a SWOT analysis of the company.
Table 7. SWOT Analysis
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65. Capital Markets
Strengths
1. Part of a group with strong brand
ownership and recognition.
2. Solid management team of professionals
that are experts in their individual fields
of portfolio and operations management.
3. Low operating staff cost.
4. Wide service delivery infrastructure - 24
NCB locations island-wide.
5. Strong culture.
6. Strong financial performance.
7. Employees share in profit generated by
the company.
8. Institution is well-capitalized.
Weaknesses
1. Improvement required in Information
Technology infrastructure - lack of
Customer Relationship Management
(CRM) system and online access.
2. Major gap in communicating
information across client base.
3. Aging client base where 50% of the
client base is over the age of 65 years
Product limitation.
4. Lack of a clearly articulated strategy.
5. Weak regional and international
presence.
Opportunities
1. Provide new wealth products and
services to satisfy needs of aging clients.
2. NCB Capital Markets can step forward
and satisfy inquiry generated by the
global financial crisis.
Threats
1. The fallout from the global financial
crisis and investor apprehension.
2. Inflation and economic slowdown.
3. Individual foreign exchange traders
and tech savvy online traders, using
e-trade.
Opportunities (Cont’d)
3. Regional expansion due to take-over
opportunities.
4. Enhance brand identity by becoming
leaders in time of crisis.
5. Leveraging the Diaspora.
Threats (Cont’d)
4. Political uncertainty due to reduced
majority in parliament could trigger
early election.
5. Diminishing returns from a manic
obsession to reduce costs
6. Scotia DB & Golding is poised to
becoming an investment powerhouse.
Government regulations
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66. Capital Markets
The SWOT analysis revealed that while NCB Capital Markets possess significant
internal strengths, their weaknesses are so fundamental to the long term survival of the
business that they must be addressed in the short term. In particular, the lack of a clearly
defined strategy retards the ability to gauge its level of performance. There also exist
numerous viable opportunities that the company can capitalize on in the pursuit of
revenue maximization and sustained competitive advantage. The threats are very real
and steps must be taken to mitigate, where possible.
PORTER’S FIVE FORCES ANALYSIS
The objective of using Porter’s Five Forces to further analyse the company is to
ascertain and highlight possible levers of competitive advantage that will guide in
developing the organization strategy that will be used to dominate its rivals. These five
forces importantly determine the level of competitiveness within the investment banking
industry which is - the bargaining power of suppliers and buyers; the threat of new
entrants; the strength of substitutes and the extent of competitive rivalry. According to
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67. Capital Markets
Porter in his article titled “The Five Competitive Forces that Shape Strategy” (Harvard
Business Review, 2008) understanding the competitive forces and their underlying
causes, reveals the roots of an industry’s current profitability while providing a
framework for anticipating and influencing competition (and profitability) over time.
A healthy industry structure should be as much a competitive concern to
strategists as their company’s own position. Understanding industry structure is also
essential to effective strategic positioning. As will be seen, defending against the
competitive forces and shaping them in a company’s favour are crucial to strategy.
We set this against the background of an almost perfectly homogenous product (Figure
18 below depicts the five forces).
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68. Capital Markets
Figure 18: Porter Five Forces
Porters Five Forces model validates what we have suspected all along NCB
Capital Markets Ltd. operates in a highly competitive industry where there are many
players of equal size and resources in a finite market.
Buyer Power
This represents the ability of
a company to control the
prices of its products while
maintaining the same or
greater levels of sales. As a
result of the wide range of
comparable choices
available to consumers, this
ability is severely limited.
Competitive Rivalry
Financial product by itself is
almost perfectly homogenous
and clients, especially savvy
investors will move funds
between instruments and
investment houses.
Value creation
New Market Entrants
The threat of entry can put a cap on potential profits
especially in a market as small as Jamaica. There are no
significant barriers to enter the investment markets as once
an individual is licensed by the FSC he can provide
financial advice. There are also numerous online platforms
where investors can purchase their own stocks and engage
in foreign exchange trading. Switching cost are non-
existent.
Threat of Substitute
The financial landscape is a fierce
battle ground between the major local
players Scotia DBG, JMMB and
NCB Capital Markets Ltd.
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69. Capital Markets
COMPETITIVE ANALYSIS
In Jamaica, the Financial Services industry is comprised of many players with
significant resources. NCB Capital Markets Limited competitive advantage pivots on a
number of key variables some of which are:
1. Heritage and trust being the oldest Brokerage House in the country (formerly
Edward Gayle).
2. Tradition of stability and high level performance.
3. Strong historical brand affiliation (NCB 178 years of reputable performance).
4. Distribution network (approximately 24 locations island-wide) and the ability to
offer a wide range of financial services at these locations which include but are not
limited investments, insurance and general banking.
In recent years however, the company’s main focus has been geared towards the
attainment of sustained profit by increasing its Funds Under Management (FUM). This
has somewhat disproportionately skewed the organizational thrust towards a sales
orientation. As a result, growth and development of a defined customer servicing
architecture and achievement of a number of the company’s objectives have been
retarded. These objectives are to:
1. Create more loyal customers,
2. Gain a greater share of pocket from satisfied customers,
3. Broaden the scope of its brand value, and
4. Broaden possibilities for other wealth services.
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70. Capital Markets
In the current and future manifestation of the financial service industry, it would
be extremely difficult for any of the original sources for competitive advantage of NCB
Capital Markets Ltd to be sustained. This is based on the consolidation and acquisition of
entities such as the Bank of Nova Scotia Jamaica and Dehring Bunting Golding which
overnight, has erased the distribution advantage.
Furthermore, the historical variables for competitive advantage will not be valid
in the medium to long-term due to the fact that they can be easily replicated and imitated
by their competitors. According to Lynch (2006), “the only form of sustainable
competitive advantage is the culture, leadership and style of operation “This can lead to
“innovative products, exceptional levels of service, and fast responses to new market
developments” Lynch (2006) continued. Whereas this focus area maybe more difficult to
quantify than others, it somewhat adds to its unique appeal.
The global financial crisis has highlighted the fact that many investors were either
unaware of the persons with whom they did business or did not have intimate knowledge
of the products in which they invested. This will force investment banks to re-invest in
and reinvigorate the importance of client relationships as a major platform for sustained
competitive advantage.
NCB Capital Markets Ltd in utilising this approach will definitely gain the
ultimate competitive edge over its competitors, thereby ensuring that it regains the status
of market leader in the industry. According to Lynch (2006), the three main areas in
which an organization has to manage its strategy at the business level is:
1. It’s internal resources;
2. The environment in which its operates;
3. Its ability to add value to what it does (p.6).
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71. Capital Markets
VIII.
FIRM’S OVERALL FINDINGS
Our research of the company revealed a number of challenges some of which are
immediate while others will be more protracted in their impact. The current ones are:
1. Lack of an articulated, layered strategy connected to the execution of specific tactics,
serving as a template for measurement and modification. This we believe will be the
primary source for a plethora of future problems including client retention and
profitability.
2. Delivery of exceptional customer service caused in part by the organizations
technological backwardness, and resulting in serious disparity in client satisfaction
across segments.
3. Client Relationship Officers (CROs) are ranked higher in client satisfaction survey
than Wealth Advisors. This speaks to an urgent deficiency in the overall skill set of
the Wealth Advisors.
4. There is also the problem of an ageing client base and the company must find
solutions geared at preventing attrition of these funds as well as attracting new
clientele such as young professionals and alternative investor groups.
The low brand communication does not distinguish clearly from its parent
company and there are perceived problems with affiliated groups such as AIC (recent
bond payment delay) and the recent write-off from Lehman Brothers. Advertisement
messages are not sufficient; they do not create resonance nor stimulate inquiry
commensurate with estimated costs. There is also the issue of suboptimal internal
prospecting regarding the group staff.
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72. Capital Markets
No doubt, the findings highlighted above have contributed to the company losing
its coveted position of number one in recent times and the management will be
challenged to find innovate ways and implement corrective actions to regain a larger
market share.
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73. Capital Markets
IX.
SOLUTION ANALYSIS
NCB Capital Markets Limited should leverage its strengths to optimize its
position in the investment and wealth management industry as current strategies are
implicitly insufficient to afford the company sustainable competitive advantage. The first
approach that the organization needs to undertake is the development of a clear simple
strategy; redefine its business focus with congruent strategic imperatives flowing into the
overall framework. The organization must become a full service investment provider
which is not only sales driven, but values the client over a lifetime and generations to
come.
This quest should begin with the fundamental question “what business are we in,
are we in the business of selling investments or are we in the business of satisfying needs
through expert financial solutions?” Some of these needs are:
1. Retirement comfort
2. Reassurance
3. Stability
4. Provision for dependents
Investment has been viewed and indeed targeted erroneously as a need instead of
the process through which clients seek to satisfy their greater needs.
Levitt (1960) posits in his dated but groundbreaking essay “Marketing Myopia” (Harvard
Business Review, 2008) that people don’t enjoy buying gas for their car but they need
transportation. This understanding will direct all communications efforts which will be
discussed later under marketing recommendations.
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74. Capital Markets
Levitt (1960) further offers, all operations and dynamics of the organisation must
embrace this ethos or it will end up as a series of individual silos, static and at a loss for
direction. NCB Capital Markets Ltd. should aspire to understand what is currently
required for competitive advantage in the investment industry as indicated by (Rayport &
Jaworski, 2009) “interactions with customers and the customer experiences that result
from those interactions are, for many businesses, the sole frontier for competitive
advantage”. Our recommendations therefore highlight the need for improved strategies in
four symbiotic categories; which are people, processes, products and marketing, all of
which orbits the client as illustrated in Figure 16.
People
The Wealth Advisors are the tip of the spear and must be well trained
professionals, with exceptional networking and communication skills across all client
groups. They must be conversant with market research and daily fluctuations in the
industry. Staff must understand the strategic importance of client relationships in
garnering greater share of wallet from clients and utilise the technology to improve
efficiency and service of clients.
They should also understand modern sales and prospecting tactics and be
provided with consistent training schedule and programs. The leadership must
incorporate these skill set into a formal training architecture as none currently exists. This
will act as a template even if there is staff attrition as evidenced in the financial services
firm, Edward Jones which was named a top company for training, ranking number 54 on
Training magazine's 2008 Training Top 125.
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75. Capital Markets
As Jim Weddle (2008), a managing partner of the firm opines “A comprehensive training
program is a vitally important part of providing exceptional client service. Training helps
everyone at this firm stay focused on doing what's right for our clients.
Customer Focus
In looking at the shortcomings of NCB Capital Markets Ltd. strategy we think
that the service–profit framework as offered by Heskett, Jones, Sasser Jr, and
Schlesinger. “Putting the service profit chain to work” HBR 2008) could be adopted with
adjustments by the company. The service-profit chain establishes relationships between
profitability, customer loyalty and employee satisfaction, loyalty and productivity. Profit
and growth are stimulated primarily by customer loyalty, a direct result of customer
satisfaction which is influenced by value of services, outlined in Figure 17 of
Appendices.
This position is validated by the results of a customer service survey conducted by
NCB Capital Markets Ltd. in 2006 which recognized that the most satisfied clients are
the ones with the largest portfolios. Interviews conducted with Wealth Advisors have
confirmed that the more satisfied a client is, the more willing he/she is to bring in new
funds, although this correlation between service quality and profit is sometimes difficult
to prove. Reichheld and Sasser Jr. (1990) stated that a 5% increase in customer loyalty
can produce profit increases ranging from 25% to 85%.This is borne out by the Royal
Bank of Canada (RBC), Canada’s largest financial institution were able to improve its
customer servicing capacity and as a consequence, an increase in dividends from 68 cents
per share (in Canadian dollars) in 1996 to $1.72 per share in 2003.
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76. Capital Markets
This drove a 20% increase in high-value customers and a 13% rise in average customer
profitability between 1997 and 2001 (Gulati & Oldroyd, 2005).
Product
The organization should, with the approval of FSC, explore and implement new
products that will increase its funds under management. The organization should set up a
Special Investment Unit (SIU) that will be responsible for creating special sales thrust
into unique high revenue earners and target clients such as established and upcoming
Sports Stars, Reggae Artists and Informal Commercial Importers for example, Usain
Bolt, Dexter Lee and Sean Paul among others.
Some products that could be offered include Estate and Charitable Planning.
Estate Planning
This product will be geared towards mature clients with excess funds which will
help them to plan towards retirement and on the other hand, increase NCB Capital
Markets funds under management portfolio. The product includes assessing probate and
non-probate assets and reviewing beneficiary’s designations. Estate planning will
estimate and mitigate exposure to inheritance taxes and outline estate planning vehicles
appropriate to an individual’s life experience. This requires a Trust establishment,
funding and management services.
This service would be of particular priority against the background of a clientele
base of which 50% are over 60 years old. There is no guarantee that the inheritors of
these accounts will be inclined to keep their funds within the organisation unless a
specific plan can mitigate risk of attrition.
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77. Capital Markets
Charitable Planning
This product includes working with clients to develop their philanthropic goals
and to implement and manage these strategies. A number of high net worth clients are
interested in philanthropic ventures and this would definitely add value to the overall
product offering of NCB Capital Markets Limited.
Processes
Due to the inadequacies of the current information technology systems, the
organization needs to improve all business processes that clients utilize ranging from
account opening, online services to improvement and an efficient customer. The
implementation of a Customer Relationship Management (CRM) system is the platform
on which the ability to utilize client service as the competitive advantage rests.
CRM will be the medium that allow for client data to be easily accessed and fed into the
overall client service architecture by all members of staff at varying levels. This for
example, will afford the organization the ability to mine data thereby allowing access of
information on client such as birthdays, their professions, associations to which they
belong to name a few.
This enhances customer service as cards can be automatically issued to clients
celebrating birthdays or Wealth Advisors being able to easily check how many doctors
are investors, thus making marketing and communication efforts more direct and concise.
The data that feeds into this system needs to be totally clean, coordinated and maintained
by a neutral facility like an Information Technology Department. NCB Capital Markets
Ltd. could easily use the IT framework of the parent company to cost effectively manage
this process.
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