With the COVID-19 pandemic creating tumult among investment and banking houses the world over, the JMMB Group had to come up with a strategy to both absorb shocks yet thrive; make strides and deliver gains to shareholders and clients.

The Group was founded by the inspirational and far-sighted Joan Duncan with a vision of conducting financial business with benevolence and a reciprocal approach.

Her children and her family have remained true to the legacy bequeathed to them and taken the company much further.

Joan would be proud of what Keith, Donna and the Duncan family have accomplished and the way they continue to operate.

In an age where some finance house place great stock in image, obfuscation , a lack of transparency and where “ alternative investments’ takes on an altogether new meaning, it’s heartening to see a Jamaican banking house underpinned by sound principals.

Speaking at its virtually held AGM earlier this week, Group CEO Keith Duncan gave insight into the measures undertaken to reposition JMMB during COVID.

It had to convey to clients and shareholders alike that it could adapt while still protecting and growing its clients’ portfolios.

It remained cognizant that confidence and safety are the watchwords of banking houses and in that respect went to work.

 In the time of COVID

“ We are living in a once in a 100-year event and when it started last year, we had gone through an extensive budget process which we were just about getting ready to present to the board and then comes the COVID pandemic. We had to rethink our operations. In March of last year, there was just one case of COVID in Jamaica and the world turned upside down. Today we have 82, 000 cases. There is still tremendous uncertainty out there.

“The JMMB board had to recalibrate. We had to decide how are we going to protect our capital, our clients, our liquidity in the event that JMMB could sustain any fall out in the market. We had to deepen our relationship with the clients because they too were very uncertain. People were unsure what was going to happen to their investment portfolios. Many of them lost jobs and income and so we had to demonstrate to them solutions such that they should not have to sell their assets at depressed values in a market that had fallen off. We were there with our clients step by step through the process,” recounted Keith Duncan.

Efforts were made to prepare JMMB and its operations in the region to coexist with COVID by pulling together country managers, and the Culture and Human Resources teams.

They made the adjustments, building work bubbles to reduce exposure to the virus, creating remote working arrangements with our IT department who stepped up ensuring a level of continuity.

Here Duncan singled out Keisha Forbes and Donna Duncan-Scott for commendation for this exercise.

Addressing the importance of the digital component to the Group’s operations, Duncan observed that the pandemic has brought forward the fourth level of the industrial revolution-the digital age, faster than was anticipated. It has in effect been fast tracked. JMMB had to standardize its operations and while doing so, some disruption took place, more so in Trinidad

Duncan continued: “The world has changed, and these changes will become baked in. It will no longer be business as usual. We are not going back to the world we knew. While making these adjustments in strategy and execution, we were still able to deliver a good performance.”

Group CFO Patrick Ellis declared that JMMB was able to strengthen its capital which allowed it to facilitate organic and inorganic growth. This allowed for regional diversification giving it core and sustainable earnings. For the financial year ended March 2021, JMMB’s capital stood at approximately J$61 billion.’

 Liquidity management

Turning his attention to liquidity management Ellis noted that last year, asset prices fell off significantly and that without sufficient liquidity on the balance sheet, it makes it  difficult to secure opportunities when they arise.

“ If you look at our balance sheet for the financial year ended March 31, 2021 you see growth in our total assets by J$114 billion. At the end of March, it was $513 billion. We were able to grow our core pillars. We grew our loan portfolio by $20 billion to $119 billion. On the investment side our portfolio came in at $265 billion, a growth of $67 billion or 34 per cent increase.

“We maintained our liquidity so we can manage all the volatility and take advantage of opportunities within the market. At the end of March, we had cash of J$67 billion which grew by 58 per cent or $24 billion. If you take our investments, loans and cash together, you are looking at 80 per cent of our total assets which means the core earning assets of the JMMB Group’s balance sheet is in good stead,” said Ellis.

For the year under review, funds under management grew by $107 billion, moving from $415 billion to $523 billion. Customer deposits grew by $24 billion (23 per cent)
 to $128 billion. On the repo side, this line grew by $48 billion or 27 per cent.

Collective investment schemes. This is off-balance sheet funds (unit trusts and pension funds) and here JMMB did rather well considering investors would be skittish in this current environment. Here the Group increased this line by 21 per cent to $78 billion. JMMB has partnered with the IDB securing funding of US$35 million to facilitate lending to JMMB’s SME clients.

“The Group is looking to grow its core operations and the areas where it is going to generate earnings for stakeholders. One of our accomplishments during the financial year share was our preference share offer which was 66 per cent oversubscribed. We raised in total a little over $10 billion net of fees. This strengthens our Tier Two capital. Our capital grew to $61. 2 billion, coming from $41 billion, that’s a 49 per cent growth during this COVID environment. This is a result of two factors: one, the strong profitability we generated during the financial year and two, the recovery of asset prices has led to more stability in the market thus improving the value of JMMB’s balance sheet. All regulated entities within the Group have sufficient capital and in fact have exceeded regulated capital requirements.

“Net earnings grew by 9 per cent moving from $7 billion to $7.7 billion. How did we achieve this? Part of our mandate is to grow our revenue faster than our expenses. We focused on growing our core earnings on the banking side, our portfolios, our investments, our loans while maintaining operating efficiencies,” explained Ellis.

On the revenue side, JMMB grew by 4 per cent, up from $21.5 billion to $22.4 billion.  Net interest income grew by 13 from $9.3 billion to $10.4 billion. Ellis attributes this to the performances of loan and investment portfolios as well as its earning assets. JMMB was able to grow its gains and securities trading line from $6.2 billion to $6.8 billion, a 10 per cent increase.

The earnings from managed funds (off balance sheet) were able to generate additional earnings of 5 per cent year-over-year.

Looking to the region is part of the masterplan

JMMB made the strategic move to acquire a 22.5 per cent stake in Sagicor Financial Company for US$250 million, thus securing a position in the regional insurance business while spreading its hemispheric footprint.

This now allows its core and consistent earnings from a part of the sector which isn’t considered its main business. This decision has paid off, generating $1.9 billion and dividend flows of $698 million for the financial year.

This investment continues  to have a positive impact on JMMB’s earnings and it sees an encouraging trajectory for both Q1 and Q2.

The JMMB Group is already doing well in Trinidad and the Dominican Republic and an announcement is expected soon on it planting its flag in other regional markets.

It’s all about core earnings

JMMB uses core earnings as a barometer of how it is performing. This is where it has looked to safeguard and grow during the COVID pandemic.

“ Where have we created value? You would have seen the growth in our capital. Our book value per share has grown from $20 to $35 (29 per cent growth). At March we were trading at $33 and currently we are at $ 35. We have gone as high as $40.

“How do we grow?  We know the core earnings are there, sustainable earnings are there. The quality of assets and liabilities are on the balance sheet. In March there was a reduction in dividend payouts, with us paying out $489 million. That was specifically as a result of the COVID-19 environment where restrictions were placed on the distribution of dividends to shareholders by the regulators.

“I’m pleased that those restrictions have been lifted and as a result JMMB paid out 60 cents a share and in the current financial year has issued interim dividends of $1.17 billion. We had some reduction of our cambio gains due to the countries we operate in being impacted by COVID. Our commission income saw a reduction as well. A number of transactions were halted by the closing of borders, closing of hotels and other sectors. We were still able to generate $1.7 billion in revenues from that business line,” said Ellis.

Keeping expenses in check

JMMB determined to keep a watchful eye on expense management and operational efficiencies. Here, its mantra is your operational efficiency is a function of your expense as a percentage of revenue.

“We want to grow our revenue faster than our expenses You would have seen a reduction in that efficiency ratio. The lower the ratio, the better. We moved it from 74 per cent to 64 per cent. While our revenues increased our expenses fell. Now bear in mind, we were operating in an environment where we were looking to do things differently. We benefited by investing in solar initiatives.

“Our operating costs remained flat year over year. Our staff costs were reduced but we didn’t have a fall-off in our staff complement though we did have to cut back on some benefits.

“Overall, we recorded good growth in revenue, registered improvement in the efficiency ratio. You see the consistent performance of our earnings. We issued the largest dividend payment we have ever made. This is in line with our policy of distributing 15 to 30 per cent of earnings. As we produce additional profits, we will distribute additional dividends to our shareholders where it is possible,” declared JMMB Group’s CFO, Patrick Ellis.