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JM | May 22, 2022

Less than creditable Q1 performance by VM Investments

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90.78% fall off in net profits

Durrant Pate/Contributor

VM Investments Limited had a less than creditable performance during its first quarter ended March 2022 with net profits declining by 90.78 per cent to $8.26 million.

The management has blamed the poor performance on the volatility in the global and local markets, which caused the investment subsidiary of the VM Group to suffer unanticipated losses, even as it positions for a rebound in the real economy locally with the relaxation of containment measures and the resumption of tourism activities. 

This volatility severely impacted the company’s investment portfolio, due mostly to a fall-off in gains from investment activities, which declined 63.56 per cent from J$199.39 million to J$72.66 million for the quarter under review.

In addition, the bond market saw a general decline as several monetary authorities, including Jamaica’s, began tightening monetary policy through increased interest rates. Concurrently, the equity market also came under significant pressure as geopolitical tensions led to rises in commodity prices and increased uncertainty.

Victoria Mutual’s offices in New Kingston, Jamaica.

VM Investment’s performance was also adversely impacted by foreign exchange losses and valuation losses on bonds due to the global instability. Improvements in interest income and net fees as well as commissions of 30.34 per cent and 34.08 per cent, respectively were insufficient to compensate.

Income from capital markets fees performed well

Income from VM Investments’ capital markets fees performed well, as the strategies devised by the management team generated strong gains in the loan portfolio when compared to the activities in the prior period. These factors combined saw total revenues fall 20.57 per cent during the quarter, while operating expenses grew 5.52 per cent compared to the prior year.

Notably, the investment company was able to offset its before tax losses by way of deferred tax credits. This resulted in a net credit of J$29.16 million for the period.

According to the management, “in the midst of the challenging market environment, we remain confident that a focus on our strategic pillars of Extending Distribution, Sales & Service Excellence and Regional Expansion will allow us to navigate the turbulent environment and position VM Investments, as a nimble and strong financial institution that is able to respond to and capitalise on opportunities as they present themselves in the new and evolving world”.

During the quarter, VM Investment executed two roadshows in the United States with at least eight more to come for the remainder of 2022. This resulted in a 288 per cent increase in the number of clients in the Diaspora and a resultant increase in revenue earned from these clients.

In an effort to support expansion activities of its subsidiary, VM Wealth Management, VM Investments approved a capital injection of $600 million to be executed in two tranches, the first of which took place on March 31, 2022. This additional capital will be used to drive income generating strategies that will exploit investment opportunities that are expected to manifest based on the current investment environment.

Assets and liabilities

Assets total assets of J$30.22 billion as at March 31, 2022 represented an increase of 9.77 per cent or J$2.69 billion over the same period in 2021. The increase was driven primarily by growth in the loan portfolio which climbed by 157.16 per cent or J$2.67 billion year-over-year.

Other areas of asset growth came from an increase in property, plant and equipment (+$717.85 million), as well as an increase in deferred tax asset (+$408.68 million) year-over-year. There were declines in resale agreement balances, which were strategically reinvested in higher yielding investment securities.

Total liabilities increased year-over-year by 13.23 per cent or $3.1 billion, primarily due to additional borrowing (+$3.21 billion) year-over-year accessed through the issuance of bonds by the company.

Shareholders’ equity declined year-over-year by 9.94 per cent or J$408.43 million ending at J$3.70 billion as at March 31, 2022.

Regarding off-balance sheet assets, these have been growing steadily  and the expectation is that the growth will continue to have focused attention in the financial year as the management seeks innovative channels and products geared towards creating value for their clients.

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