Net profits up 38.5% during second quarter to J$242.45 million

Durrant Pate/ Contributor

VM Investments Limited is continuing its derisking strategy, which has resulted in a reduction in assets of J$2.12 billion or 6.79 per cent since December 31, 2021.

The derisking strategy is targeting the balance sheet of its broker-dealer subsidiary, VM Wealth Management, in light of the volatile nature of the market during this time. VM Investments Limited’s funding base was expanded in the June 2022 quarter with its recent debt raise of $1.15 billion while derisking the balance sheet and reducing repurchase agreements by J$3.74 billion or 18.25 per cent.

Profitable performance resulted in an increase in retained earnings of J$317.78 million or 11.76 per cent, but this was countered by a reduction in investment revaluation reserve from $756 million as at June 30, 2021 to negative $574.53 million as at June 30, 2022. This was as a result of a reduction in prices of securities held, due to the increase in interest rates.

Many obstacles and uncertainties in Q2

The second quarter of 2022 came with many obstacles and uncertainties, but VM Investments Limited remained robust and posted a three-month net profit of J$242.45 million or 38.56 per cent above the quarter ended June 2021. The uptick in net profit was a result of a 47.88 per cent increase in other operating revenue, when compared to the comparable quarter in 2021, which was sufficient to offset the 62.80 per cent increase in expenses.

Net fees and commissions were the primary drivers of the increase in revenue of 157.28 per cent, attributable to a strong execution of both debt and equity-related transactions in the review period. Total year-to-date revenue increased 9.84 per cent compared to the same six-month period in 2021, particularly due to the exceptional performances of corporate finance advisory service income.

This uptick in revenue was sufficient to offset the 19.99 per cent rise in total expenses. The management reports that “the global inflationary environment increased the costs of operating domestically, as VM Investments Limited remained committed to improving the lives of members and promoting the VMIL brand. The growth in revenue enhanced the year-to-date efficiency ratio by 5.76 per cent”.

During the quarter, the company achieved many milestones such as Dolla Financial Services’ initial public offer of shares, which was the largest in Jamaica Stock Exchange Junior Market history, raising close to J$5 billion. The offer was 10 times oversubscribed and welcomed thousands of new investors.

In addition, there was Kingston Properties’ additional public offer of shares, which brought in more than J$1.50 billion and raised brand awareness.

Slight growth in assets

Total assets grew by a marginal 1.51 per cent or $0.43 billion to J$29.12 billion as at June 30, 2022. This increase was driven primarily by growth in VM Investments’ loan portfolio, which climbed by 170.72 per cent or J$2.91 billion year-over-year.

This was driven by the strategic thrust to grow its corporate lending and margin loan business and assets, including cash and cash equivalents and resale agreements were deployed to this area of the business. Assets under s management as at June 30, 2022 amounted to J$33.88 billion.

Additionally, at June 30, 2022, there were custodial arrangements for assets totalling J$9.32 billion (March 31, 2022: J$9.15 billion). Growth in off-balance sheet business will continue to have focused attention in the financial year as VM Investments Limited seeks innovative channels and new products geared towards creating value for its clients.