Durrant Pate/Contributor

PROVEN’s recent acquisitions are now reaping dividends for the Jamaica-based regional financial conglomerate, which saw net revenue surging to US$42.91 million for the nine-month period that ended December 31, 2022.

This is an increase of 51.73 per cent when compared to the US$28.28 million registered over the comparable period last year. This revenue increase is mainly attributable to the acquisitions of Robert’s Manufacturing, PROVEN Bank Cayman (PBC), previously named Fidelity Bank Cayman, and Heritage Education Fund International, all of which closed at various points during the 2021/22 financial year.

The financial accounts of these subsidiaries are now fully included in this financial year’s results to date. The main revenue lines contributing to the growth included net interest income, which amounted to US$11.28 million compared to US$2.94 million in the previous year, benefitting from the inclusion of US$9.58 million in net interest income from PBC in this year’s nine-month results.

There was also a notable widening of the net interest spreads across the group’s other banking and wealth entities, as a result of the increased interest rate environment globally, which resulted in an aggregate 39.8 per cent increase in net interest income from these entities.

Borrowing costs up

These gains were however partially offset by higher group borrowing costs at increased refinancing rates in the market. Fees and commissions totalled US$8.48 million, which was 23.25 per cent higher than the similar prior year period, mainly due to the inclusion of both PBC and Heritage in this year’s results.

This was however partially offset by a 20.31 per cent decline in fees and commission income from the wealth management entities within the PROVEN Group. The group reports that global recessionary fears led to a substantial contraction in demand for fee-based investment banking and other products.

Pension fund management income was flat year over year, amounting to US$2.53 million for the period under review, as the growth in assets under management was tempered by the general weakness in market conditions and lower asset prices, both in the fixed income and equity markets, when compared to the similar period last year.

Manufacturing operations increased to US$13.89 million for the nine-month period compared to US$9.40 million last year. The current year’s results included the full nine months from Roberts Manufacturing, while last year’s results only included the seven months from the closing of the acquisition.

Other group income

Other income increased by 24.83 per cent to US$6.34 million for the nine-month period. This improvement over last year’s results of US$2.28 million was mainly attributable to the receipt of the proceeds of sale from the completion of two of PROVEN properties’ major developments during the period.

The net proceeds from these sales for the period amounted to US$2.40 million. Income from associates amounted to US$6.29 million, representing a decline of 47.76 per cent when compared to the same period last year and contributing 13 per cent to overall net revenue compared to a 30 per cent contribution last year.

For the period, JMMB Group, an associated company, contributed US$5.93 million compared to US$11.60 million recorded in the similar period ended December 2021. JMMB’s performance, which notably did not include its share of Sagicor’s profits for the quarter, was also negatively affected by the adverse global market conditions’ impact on asset prices.

The ongoing repositioning of its portfolio is however anticipated to result in a rebound over the upcoming quarters.

Big jump in expenses

Total operating expenses registered a big 81.54 per cent increase to US$45.18 million, which was mainly attributable to the inclusion of PBC, Heritage and Robert’s full results in this year’s financials to date. Excluding these companies, the final results would have resulted in a normalised increase in expenses of 10.56 per cent year over year.

This increase in expenses includes some one-off costs related to the group’s corporate restructuring, which is now complete, as well as transition expenses for the temporary services offered by the respective vendors of the acquired companies last year. The transition period for Heritage ended in October 2022 and for PBC it will end in February 2024.

Additionally, the rebranding of the group’s banking and wealth subsidiaries, which was completed on February 1, 2023, also contributed to the higher expenses during the period. Over the coming quarters, PROVEN expects a significant improvement in its efficiency ratio moving from the current 91.26 per cent.

 This improvement is expected in the context of the elimination of certain transitory expenses within the respective business units related to the transition and integration of the newly acquired companies.