JMMB group has continued to deliver strong performance within the context of the COVID-19 pandemic, posting half-year profits of $2.2 billion.
JMMB has performed creditably despite the economic slowdown in its regional markets.
The group’s solid performance is roughly in keeping with pre-COVID results of the comparable six-month period in 2019, and demonstrates JMMB’s resilience and the effective execution of its COVID- 19 response strategy.
JMMB’s strategic response to COVID-19 initially centred on protecting clients and ensuring the sustainability of the group during and post the global pandemic.
All three countries in which JMMB operates—namely Jamaica, Trinidad and Tobago and the Dominican Republic—immediately implemented a plan to manage potential short- and medium-term shocks to its client base, operations, capital, liquidity and expenses.
In its latest unaudited financial returns for the six month period ended September 30, JMMB reports that it remains focused on pursuing growth opportunities during the pandemic, as well as embedding efficiency gains from the use of digital channels.
This focus has yielded positive results as the JMMB team across all three countries effectively executed their financial partnership strategy, thus deepening relationships with existing clients and on boarding new clients during the period.
Net operating revenue down 8%
The JMMB group posted net operating revenue of $10.80 billion for the six months ended September 30, 2020. While this represented an 8% decline when compared to the prior period, the operating environment was markedly different given the global pandemic.
In the prior period, market sentiment was bullish and the group successfully identified and capitalized on trading activities. Nevertheless, clients continued to demonstrate confidence in the value of products and services which was evidenced by strong growth in the loan and investment portfolios.
This coupled with effective spread management has resulted in an 8% growth in net interest income, which moved from $4.63 billion in the prior period to $4.99 billion in the period under review. Fees and commission income was 5% lower at $1.52 billion as lower business activity was partially offset by significant growth in managed funds and collective investment schemes across the group.
While trading lines exceeded expectation, gains were below the prior year as bond and equity trading gains was $3.2 billion, while foreign exchange trading gains was $1.07 billion.
The Banking & Related Services segment contributed $4.2 billion or 39% of net operating revenue. This represented a 9% increase when compared to the prior period and was largely on account of strong growth in the loan book which translated to increased net interest income.
On the contrary, Financial and Related Services contributed $6.41 billion and declined by 18% as a consequence of reduced trading activities. Operating expenses was $246.2 million or 3% lower than the prior period at $7.16 billion.
Given reduced business activity, the group implemented a cost containment program while prioritizing efficiency related projects. The group told shareholders in their half-yearly performance report that it will “continue to focus on extracting operational efficiency from all entities through the launch of its standardization and process improvements project.”
Total assets at the end of the reporting period was $466.84 billion, up $66.62 billion or 17% relative to the start of the financial year. This was mainly on account of a larger loan and investment portfolio as well as a larger liquidity buffer.
Investment portfolio and loans and notes receivable grew by 24% and 12% to $245.82 billion and $111 billion, respectively. The credit quality of the loan portfolio continued to be comparable to international standards and the group implemented enhanced monitoring to mitigate against possible deterioration in credit quality.
The growth in the asset base over the six-month period was funded by increases in customer deposits and repos. Customer deposits during the half year increased by $13.21 billion or 13% to $117.39 billion, while repos grew by $37.83 billion or 21% to $217.42 billion.
Over the six-month period, shareholders’ equity increased by 24% to $51.10 billion. This was on account of increased profitability as well as a rebound in emerging market bond prices which resulted in positive movement in investment revaluation reserve.
Thus, the group continued to be adequately capitalized and all individually regulated companies within the group continued to exceed their regulatory capital requirements.
Operational efficiency a major focus
Operational efficiency continues to be a key area of focus for the JMMB group to enable the sustainable delivery of strong financial results. StandardiSation of systems, policies, products and processes has been imperative to lay the foundation for efficiency and future growth.
In September 2020, the group hit a critical milestone when JMMB Bank in Trinidad and Tobago went live on JMMB Bank Jamaica’s core banking systems as well as products, services, policies and processes. With all the changes required to bring these long-term standardization efficiencies as well as new solutions services and functionalities, the group acknowledges that there have been interruptions in its internet banking services.
This has impacted the easy and enjoyable experience that clients are accustomed to and deserve. However, these issues have since been resolved and group remains committed to improving its partnership with clients by strengthening its Information Technology systems and will continue to improve, upgrade and deliver new digital products and channels within this current financial year.
The strategic investment made by the group has made it well-positioned to deliver long-term value such as the acquisition of 22.5% shareholdings in Sagicor Financial Corporation Limited (SFC), which is expected to deliver long-term strategic value to the JMMB group. While JMMB’s share of profits from SFC is currently adversely impacted by the pandemic, resulting in its share of losses of $106.9 million for the six-month period, the group remains confident about the long term returns on this investment.
The results were primarily related to US operations, which had higher Expected Credit Losses and adverse change in the actuarial adjustments due to the pandemic.
Building on the strong performance and solid results, the group will continue to execute its proven and effective strategic imperatives and is very optimistic about the second half of our financial year 2020/21. Keeping true to its revenue diversification strategy, the banking business line continues to show tremendous growth and increased its contribution to net operating revenue by 9% for the six-month period.
The rate of growth of its banking segment in all three countries continues to outpace the rate of growth of their respective markets. JMMB bank will look to augment this growth by realizing acquisition opportunities as it expands into new markets in the short term and by extending our banking products and services.
The investment business line continues to deliver robust results as the JMMB build out its solution offerings across the group through its integrated financial partnership approach for each client segment aligned to their financial life goals.
JMMB told shareholders that, “with our inorganic and organic growth combined, as well as our efficiency strategies, we expect the group will continue to grow. We will therefore take advantage of opportunities to raise capital to position ourselves for this future growth.”
JMMB is confident that it will deliver solid results and value to its stakeholders during this unprecedented pandemic and for the long-term. In concluding JMMB notes that regional credit ratings agency, CariCRIS has reaffirmed their solid credit rating on the group despite the uncertain COVID environment.
The regional credit rating agency CariCRIS reaffirmed its overall ‘good creditworthiness’ ratings of (jmA/A+). According to CariCRIS “ despite the negative impact of the coronavirus on economic activity in Jamaica and the wider Caribbean region, the Group’s financial performance will continue to be good over the next 12-15 months …”
This is a positive and significant independent affirmation of JMMB’s performance and strategy.