Net profit tumble to J$84.08 million

Durrant Pate/Contributor

Jamaican investment company VM Investment Limited experienced a turbulent third quarter, as net profits tumble amid the performance of bonds and the fixed income markets deteriorating significantly.

This came about in conjunction with the negative impact of higher inflation on the equities market, as local interest rates reached an 11-year peak as the Bank of Jamaica sought to put a lid on domestic inflation. As a consequence, net profit at the VMBS Group subsidiary tumbled from J$347.77 million in 2021 to J$84.08 million during the September third quarter.

VM Investment Limited dropped year-to-date profit, posting $334.78 million for the September 2022 combined three quarters in comparison to $623.33 million in September 2021. Gains from investment activities experienced a 23.77 per cent decline over the quarter, while interest expenses grew 48.22 per cent to $285.47 million.

Small increase in net fees and commissions

These market conditions were the main impetus to the decline in net profit for the third quarter with J$84.08 million, primarily due to net fees and commissions of J$227.67 million. Net fees and commissions increased 7.15 per cent year-to-date as at September 30 or by J$52.20 million, as the VMBS Group investment subsidiary sought to increase its capital markets and brokerage activities.

Total assets came out at J$27.57 billion as at September 30, 2022 representing a decline of 9.31 per cent or J$2.83 billion over September 30, 2021.

De-risking VM Wealth Management subsidiary

In the meantime, the management reports it continues to de-risk the on-balance sheet assets of VM Investment Limited’s wholly-owned subsidiary, VM Wealth Management to safeguard against the sporadic changes in the bond and equity markets.

According to Board Chairman Michael McMorris and CEO Rezworth Burchenson, “more resources were shifted towards strengthening and expanding our corporate lending solutions and margin loan business lines”.

In light of this, cash and cash equivalents, resale agreements and investment securities declined by 78.82 per cent, 73.31 per cent and 11.03 per cent, respectively, year-over-year, while loans receivable grew by 67.07 per cent or $1.75 billion. Conversely, the recent purchase of a commercial property boosted the company’s property, plant and equipment by J$713.38 million or 420.61 per cent year-over-year.

Liabilities & Shareholders’ Equity

At the end of the third quarter of 2022, total liabilities declined by 4.95 per cent or J$1.28 billion, owing predominantly to the reductions in repurchase agreements, lease liabilities, income tax payable and employee benefit obligations. In particular, the 16.46 per cent or J$3.18 billion decrease in repurchase agreements was part of our de-risking strategy.

The net profit recorded during the quarter contributed to the 1.77 per cent or $54.09-million growth in retained earnings. However, this was not sufficient to offset the $1.64-billion deterioration in investment revaluation reserve, which resulted in a 34.04 per cent or J$1.55 billion decline in total shareholders’ equity.

Off-balance sheet assets under management

VM Wealth Management continues to earn fees for managing clients’ funds on a non-recourse basis under management agreements. As at September 30, 2022, these funds amounted to J$44.89 billion (June 30, 2022: J$43.20 billion).

This includes custodial arrangements for assets at September 30, 2022, which amounted to J$11.25 billion (June 30, 2022: J$9.32 billion), Unit Trust Assets of J$23.47 billion (June 30, 2022: J$23.43 billion) and Portfolio Management Clients of J$10.18 billion (June 30, 2022: J$10.45 billion). The 3.93 per cent growth in our off-balance sheet assets, highlights efforts to de-risk the on-balance sheet assets and capitalise on each opportunity and strategy to improve our clients’ portfolios.