Regional finance house JMMB Group put in an improved performance for the 2023-2024 financial year, posting operating revenue of J$22.4 billion, down four per cent.

This generated profit attributable to stockholders of J$11.85 billion.

Like many of its competitors, JMMB saw its net interest income slip significantly. Here the Haughton Avenue-headquartered group posted net interest income of J$9.1 billion, 18 per cent down on the J$11.17 billion posted for the prior financial year.  

Assets climbed to J$675.1 billion up on the J$649.15 billion posted in the previous year. Operating expenses increased to J$22.7 billion. Foreign exchange margins from cambio trading dropped to J$1.7 billion for the period under review, almost 50 per cent lower than the J$3.25 billion posted last year. 

Interest income increased by 13 per cent to J$40 billion, however, the increase in interest costs due in the main to the repricing of liabilities and higher interest rates (liabilities growing faster than the asset side) saw interest costs going up by J$6 billion (26 per cent) making net interest margins compressed.

That had a deleterious impact on JMMB’s investment business lines. Gains and securities trading yielded J$5.9 billion, a J$2.3 billion increase.  JMMB did well with this line in the Dominican Republic where it benefited from one-off gains. However, fees and commissions remained flat, with just J$3 billion in earnings.

Group CFO Patrick Ellis said: “In terms of our strategic direction over the last four or five investor briefings, we continue to improve our other revenue streams, with what we call our SMART Growth, making the most of our off-balance sheet revenue lines. For the financial year 2023/24 other revenues accounted for 37 per cent of total revenue, which would have been up by two per cent from 35 per cent in the prior year. This shows that while our NII line would have been impacted, other business lines have moved positively. Revenues from our managed funds contributed J$2.4 billion and our capital markets weighed in with J$680 million in a very difficult environment. Our dividend streams were up by 37 per cent to J$263 million.

“Our diversification strategy is very important. Our investment in Sagicor Financial Company (SFC) paid off significantly for us in the financial year as the largest shareholder there with 23.62 per cent. That investment contributed J$20 billion for the financial year, J$4 billion of that would have been from core operations and J$16 billion from the one-off acquisition of Ivari. JMMB garnered approximately J$1 billion from dividends this financial year from its investment in Sagicor. We expect increased dividend flows from Sagicor going forward.

“On the expense side of our book, we saw an increase from J$19.9 billion to J$22.7 billion, a 14 per cent increase. There were one-off costs on the staff side and restructuring costs of about J$526 million. If those one-off costs were backed out, the increase in expenses would come to about six per cent, in line with inflation.  Our digitalisation and standardisation platforms for the year under review came to J$642 million. JMMB incurred capital expenditure costs of $149 million. Some of these costs going forward are not expected to be reoccurring. With the restructuring of our business lines, we expect scale in our operations going forward.

“No doubt you would have seen provisions of J$12.6 billion relating to our impairment, a significant increase year-over-year. Nevertheless, our core operations remain strong and the growth we are seeing in our banking lines continues to contribute positively [to] the group. On the loan side, we registered a 12 per cent growth which took us to J$199 billion, J$20 billion during the financial year. That growth was funded by our deposits.”

What is apparent is that JMMB is looking to maximise its off-balance sheet operations, unit trusts, and collective investment schemes to generate growth and so free up assets on the balance sheet which gives it the opportunity to take advantage of what comes its way.

Jamaica contributed 56 per cent in terms of revenue (J$30 billion), Dominican Republic, $11.4 billion, Trinidad&Tobago a strong $8 billion and Barbados, a relatively new market, coming in with a strong $4 billion. The group’s banking line increased by 10 per cent in net contribution year over year.

The group’s capital base is now $55 billion as of the end of the financial year. The board has approved a dividend payment of 25 cents per share for payment on August 12. 

Giving an overview of JMMB’s performance for the year under review, group CEO Keith Duncan surmised, “ The financial year 2023/24 proved to be one of a challenging environment globally. There was a tight monetary policy environment across Jamaica, Dominican Republic and to a lesser extent Trinidad & Tobago. In the USA, the monetary policy was kept tight due to the inflationary environment which continues to persist over the year. Many thought that inflation would have been transitory and would have come down into the target ranges. That has not been the case yet although in both Jamaica and the Dominican Republic, inflation has come back within the target range.

“What has persisted is a higher for longer interest rate environment along with tight monetary policy in terms of liquidity in the markets. The flagship of JMMB is our investment business line and that would have been more impacted than other business lines in the JMMB Group. We saw reduced margins on interest income, however, what the JMMB Group has done for a period of time is continue to diversify. We have done so with our banking business, money transfer, JMMB real estate, insurance brokerage, investments, and private equity-we continue to diversify our earning streams and what we look for is performance from various quarters. As far as diversification is concerned, we are looking at countries, business lines, and investment portfolios and this has paid off well for us in these challenging times. This year saw us deliver a net profit of $11.8 billion which is a decent number given the challenges faced throughout the year. That is a return on equity of 25 per cent.

“The results while being positive, represent a mixed bag with material positive and negative results in specific areas. The banking business line while challenged with the operating environment and compressed net interest margins in any event continued to deliver moderate profits in Jamaica and Trinidad and Tobago. Within the Dominican Republic, we just got the commercial banking licence during the last financial year. This sees us in the early stages of build-out. The Group’s banking business line contributed 67 per cent of net income for the period.”

It must be noted that the investment business lines in both Jamaica and the Dominican Republic were extremely challenged due to the tight monetary policy environment. Bank of Jamaica CDs range between nine and 12 per cent on 30-day CDs.

That impacted JMMB’s overall cost of funds and liability management. The investment business line in Trinidad & Tobago took a hit due to the performance of the stock market there.

The fixed-income market in Trinidad was also insipid. The Dominican Republic investment business line was however able to deliver good profits for opportunistic trading despite being challenged with their net interest income due to the monetary policy there. In short, both Jamaica and Dominican Republic’s investment business lines were a casualty of the environment.

Duncan continued: “We sat down as a team and devised strategies to reverse this setback and to move the JMMB investment line into profitability. Trinidad and the Dominican Republic were able to deliver profits for the Group but Jamaica was pulled down by the investment business which showed losses which offset profits delivered by banking, fund managers, money transfer, real estate and the insurance brokerage. As a result of this, the JMMB Group reported a marginal operating loss of $345 million, however, our diversification strategy paid rich dividends for us. The $12.6 billion impairment was due in the main to an early start-up greenfield transaction in the energy sector which was rated investment grade by CariCRIS. This project ran into supply contract difficulties and has not been able to continue operations and service its debt obligations. I stress this is a one-off impairment. This will not be repeated as JMMB is revising its investment policy statement to establish limits as to capital that will ensure that JMMB will not experience losses of this magnitude from an early start-up greenfield investment.”