The Group recorded a net profit of $2.4 billion for the six months ended 31 March 2006, which represented an increase of $807 million or 52% compared to the corresponding period of the previous year. Net interest income (gross interest income less interest expense) for the six months, was higher than the similar period last year by $927 million or 19% mainly due to a $636 million or 21% increase in loan income and a $296 million or 4% increase in securities income. Net trading income decreased by $610 million or 38% compared to March 2005, which was largely due to the stock market decline, as the foreign exchange and fixed income securities activity remained stable. The Group, however, continues to grow fee and commission income, which increased by $346 million or 30%.

OPERATING EXPENSES

Operating expenses for the six months totaled $5.4 billion, a decrease of $411 million or 7% compared to the six months ended 31 March 2005. The operating expenses for the comparative prior year included the impairment loss on the investment in Dyoll Group Limited of $535.8 million. There is no similar provision in the expenses for the current period under review. Staff costs for the six months increased by $226 million or 8%, while other operating expenses were below the corresponding prior period by $158 million or 8%.

PERFORMANCE AT A GLANCE

	Mar. 2006	Mar. 2005
Return on Avg. Equity	21.50%	17.50%
Return on Avg. Assets	2.35%	1.70%
Growth in Revenue	4.9%	1.1%
Cost Income Ratio	62.1%	66.1%
Net Asset Value per Share	$9.17	$7.41

ASSET BASE

The total asset base of the Group increased by $12.9 billion or 7%, moving from $193.8 billion as at 30 September 2005 to $206.8 billion as at 31 March 2006. The major increases in the Group’s asset base were investment securities which grew by $11.2 billion or 12% and loans and advances by $2.7 billion or 8%.

LOAN PORTFOLIO

Loans and advances (net of provision for credit losses) totaled $38.4 billion as at 31 March 2006 compared to $35.7 billion as at 30 September 2005. The aggregate amount of non-performing loans amounted to $1.62 billion and represented 4% of the gross loans compared to 4.3% as at 30 September 2005 and 3.9% as at 31 March 2005.

As at 31 March 2006 the accumulated provision for credit losses of $2.2 billion represented an overall coverage of 138% of non-performing loans. Provisions for credit losses that exceed the amounts required by International Financial Reporting Standards (IFRS) are credited to a non-distributable Loan Loss Reserve. As at 31 March 2006 the balance in the Loan Loss Reserve was $246.1 million. The Bank’s provis ioning policy is in compliance with the Bank of Jamaica regulations.

FUNDING

The growth in the asset base over the six months was mainly funded as follows:

	INCREASE
	$B	%
Securitisation arrangements	5.6	52.6
Repurchase Agreements	2.7	5.7
Customer deposits	1.4	1.7
Policyholders’ Liability	1.4	15.2

On 22 March 2006 the Bank raised US$100 million in structured financing backed by the securitisation of Diversified Payment Rights arising under its existing and future U.S dollar Payment Advice and Payment Order (MT 100 Series) and U.S dollar Remittances. Interest is due and payable on a quarterly basis calculated at three month US dollar LIBOR plus 180 basis points beginning 15 June 2006. Principal repayments will commence 15 June 2008 on a quarterly basis until maturity 15 March 2013.

CAPITAL

The Group’s total stockholder’s equity as at 31 March 2006 was $22.6 billion, an increase of $1.4 billion or 7% when compared to 30 September 2005 mainly due to the continued increase in the Group’s retain ed earnings. As at 31 March 2006, the Risk-based Capital Ratio was 16.96% which exceeds the minimum requirement of 10% by the Bank of Jamaica.

DIVIDENDS

At the Board of Directors meeting held 27 April 2006, an interim dividend of 14 cents per share (total payout J$345,346,795.92) was approved. The dividend is payable on 26 May 2006 for shareholders on record as at 12 May 2006.

BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and have been prepared under the historical cost convention as modified by the revaluation of available-forsale investment securities, trading securities, derivative contracts and investment property.

As of 1 October 2005, the Group adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and are effective for accounting periods beginning on or after 1 October 2005. The adoption of these new accounting standards and interpretations has resulted in changes to the Group's accounting policies in the following areas that have affected the amounts reported for the current and prior periods:

IAS 39: Originated debt securities traded in an active market, which were previously carried at amortised cost, are now carried at fair value.

IFRS 3: Negative goodwill arising from the acquisition of an associate has been derecognised as at 1 October 2004, by crediting retained earnings at that date. Under the previous accounting policy, negative goodwill would have been amortised over its expected economic life. Positive goodwill is no longer amortised but assessed annually for impairment.

IFRS 4: Certain policy contracts issued by the Bank's life insurance subsidiary in 2004 which were previously accounted for as insurance contracts did not meet the definition of insurance contracts under IFRS 4 (Insurance Contracts), as they transferred primarily financial risk and did not contain significant insurance risk. In 2004 these contracts were treated as financial instruments in accordance with IAS 39 (Financial Instruments: Recognition and Measurement). The contracts were revised during 2005 and are now treated as insurance contracts under IFRS 4. Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current period.

All amounts are stated in Jamaican dollars unless otherwise indicated .

COMMUNITY RELATIONS

NCB continues to stimulate economic and social development in the communities it serves. In support of the continuing economic developments of our small and medium-sized businesses, NCB contributed to the 2006 staging of the JMA/JEA Expo. This commitment will ensure the showcasing of the best of Jamaica’s goods and services to the general public, as well as buyers from the Caribbean and North America. In addition, NCB helped to underwrite the launch of the Young Entrepreneurs Association, with the aim of developing an emerging generation of business people in Jamaica.

Our support to Education remains unstinting. In February NCB contributed to UWI Literary Symposium with the aim of providing primary and secondary school teachers, from across the island, with tools to improve the literacy levels of Jamaican children.

NCB also began preparatory work for an initiative to restore the Holy Trinity Cathedral, a historical landmark, which has fallen into disrepair. A part of the initiative will include the training of youth in the surrounding communities in the art of restoration.

NCB’s corporate giving was also extended to sports. During February, the NCB Amateur Tennis Tournament gave Jamaica’s youth valuable experience; while the NCB Knockout Cricket Competition, held in St. Elizabeth, was contested by twelve teams from the parish.

In addition to these events, NCB branches have continued working within their communities to promote nation building.