Barita Investments made progress quarter over quarter in Q2 but the high interest rate environment impacted its year to date momentum, presenting a picture of a contrasting set of performances.

Unaudited financials for Q2, 2024 reveal Barita posting net operating revenue of J$5 billion, a decrease of J$555 million (10 %) on the same period last year. This was due to lower gains this year relative to the prior year on investment activities.

Net interest income fell by $74 million to $286 million due to a faster pace of interest expense compared to Barita’s interest income.

Fees and commission income increased by 13 per cent to $2 billion driven by increases from investment banking which brought in over $300 million.

Now headed by Ramon Small-Ferguson, Barita has seen an uptick in its traditional sources of revenue which brought in $543 million more (17%)  than the same period last year.

Treasury, trading and brokerage contributed 40 per cent of revenues with investment banking adding 9 per cent to Group revenue.

Net Profit came in at $1.9 billion compared with $2.57 billion last year, spelling a 26 per cent decline.

Earnings Per Share (EPS) for the period under review was $1.59. For the same period last year it was $2.16 making it a 26 per cent fall off. 

Total assets increased by 5 per cent to $134.2 billion and Barita has grown its loan book to $11.8 billion from 10.9 billion, an 8 per cent increase on last year.

Barita’s capital adequacy continues to be relatively strong at 26.1 per cent. Here the industry average is 19.6 per cent and the FSC Minimum Requirement is 10 per cent. 

Total Shareholder’s Equity stood at $35.6 billion  with return on average equity of 10.7 per cent. Barita has an Efficiency ratio of 46.7 per cent.

Operating expenses of  $2.32 billion increased a tad on the $2.18 billion posted last year. There was a 4 per cent increase in staff costs  and administrative costs jumped by 9 per cent. This jump here was due to asset tax which is a reflection of the growth of the balance sheet.

Barita is actively looking to reorganise its revenue mix and to manage its balance sheet to ensure optimal return on invested capital. It has been able to adroitly pivot to  a variety of other revenue streams where others have been caught flat footed and are getting hurt.

At an investor briefing on Wednesday, Barita’s CEO Ramon Small-Ferguson  said: “ If we look at our key measures from a P&L perspective (revenue and profits), we would have had an almost tripling of our revenue metric which here was $3.6 billion relative to about $1.4 billion in  Q1, 2023. So that would be around 2.5 times that sum. We had a tripling of profits with $1.9 billion in Q2, 2024 with just $470 million in Q1. That contrast in performance, QvsQ has really been driven by some of the factors we would have described in previous quarters.

“There are a few initiative we have been pursuing  and some have taken hold in this quarter. One is a continued focus on revenue diversification. We are shifting from revenue concentration and during the last quarter we would have seen a bit of a resurgence of revenues from traditional sources. We have also set the business up to be nimble and position ourselves to be able to execute on market neutral strategies regardless of the directionality of the market. What sets us up to do that is our strength of capital and  maintaining low leverage and high liquidity. Now that has worked well for the quarter under review. We see very good revenues from fixed income and equity trading.

“We are particularly focused on efficiency. Cost management has become increasingly critical given the challenging market environment. We have figured out how to do more with less. We are transitioning to a financial holding company structure. During the last quarter we saw revenue from our real estate exposures  moderate which is understandable, given that we are are moving into a phase where we are going to see revenues coming from developments vis-a-vis valuations on the real estate side. During the last quarter we would have seen more conservative marks being applied to our private equity exposures which would have offset some of the revenues generated from that category as well. Our outlook as it pertains to the revenue picture turns on what happens from a monetary policy perspective and what happens from an investor sentiment perspective given the nature of our business. We remain very constructive about how things will evolve with respect to interest rates over the next several quarters. We think there remains several untapped opportunities in trading and investment banking.”