Sterling Investments was able to generate significant increases in its income, US$ dividends and capital gains during its first quarter of 2021.

This came about as the investment company took advantage of brief spikes in volatility and intermittent market declines to acquire attractive assets and lock in good income and yields for the future. The result was a 26.84 per cent increase in interest income compared to the first quarter of 2020.

During the quarter, Sterling purchased additional securities to increase the income available to its shareholders. Investors will continue to benefit from the US dollar income that Sterling Investment’s portfolio generates through dividend payments.

The value of investment securities held increased by 47 per cent during the quarter under review. This was partially attributed to the rise in value of the existing portfolio and also the acquisition of new assets that have subsequently appreciated in price.

Sterling well-positioned to benefit from global economic recovery

The management reports that Sterling Investments is well-positioned to benefit from the global economic recovery given that its exposure to developed countries suggests that it will be among the first companies on the local stock exchange to benefit from a global economic recovery. The investment management company remains focused on monitoring duration and positioning its investment portfolio to take advantage of future volatility that may arise.

In the event that inflation or interest rates rise, the portfolio is well-positioned to take advantage of the resultant opportunities with enhanced diligence amid COVID-19. Sterling Investments performs enhanced due diligence on the credits within the portfolio and hunts for undervalued securities to improve shareholder value.

Income statement

Revenue totalled $80.432 million for the first three months of 2021, which was 63% higher compared to the same period in 2020 when revenue amounted to $49.331 million. This was driven by larger foreign exchange gains, an increase in interest income and a jump in the gains on sale of debt securities.

Net interest income rose by 29 per cent year-over-year from $24.89 million in the first quarter of 2020 to $32.1 million in the first quarter of 2021. This reflects the reduction in U.S. interest rates by the Federal Reserve.

Total foreign exchange gains rose from $12.30 million for March 31, 2020 to $28.40 million for the period ending March 31, 2021. The Jamaican dollar depreciated by 2.8 per cent in the first quarter of 2021 moving from J$142.10 per US$1 as at December 31, 2020 to J$146.58 as at March 31, 2021.

Sterling’s net income position

Net income totalled $55.231 million for the quarter under review compared to $4.58 million for the same period in 2020. The profit for the quarter ended March 31, 2020 included a J$32.847 million unrealised loss on structured notes and equity investments at fair value through profit and loss.

This was the result of a dramatic decline in market prices in the early response to the COVID-19 pandemic. For the first quarter of 2021, the unrealized loss on structured notes and equity investment securities at fair value through the profit and loss was J$621,218.

The improved market prices led to a substantially smaller unrealised loss and thus contributed to a much higher profit for the period. Other operating expenses rose from J$8.15 million in the first quarter of 2020 to $12.58 million in the quarter under review, primarily a result of increased management fees.