JMMB Group Records J$11.86B in Year-End Profit, Despite Challenging Macroeconomic Environment & Increased Provisioning
The regional financial conglomerate, JMMB Group reported J$11.86 billion in net profit for the financial year ending, March 31, 2024, according to its recently published audited financials. This, while also posting operating revenue of J$22.29 billion.
Patrick Ellis, JMMB Group chief financial officer explained that the challenging macroeconomic environment characterized by persistent high interest rate during the period impacted JMMB Group’s financial performance. “As a result, our net interest income was impacted, year-over-year, moving from J$11.18 to J$9.16 billion, reflecting a 18% dip. Further, market sentiment negatively compressed foreign exchange gains, which took the hardest hit with a 48% decline compared to prior year, totaling, J$1.75 billion; while fees and commission income also saw a marginal decline, from J$3.02 billion to J$2.97 billion.” However, gains on securities traded saw a surge of 67% year-over-year, moving from J$3.51 billion to J$5.85 billion. Additionally, fees on managed funds stood at J$2.39 billion, which reflects a 15% uptick. This was driven by increased economic activity and volumes traded over the period.
JMMB Group’s financial performance was further impacted by increased loan loss provisioning of J$12.6 billion resulting in a dampening of its profitability over the short-term. In line, with the company’s transparent approach, JMMBGL continues to manage its exposures to ensure sufficient buffers to safeguard the resilience of its balance sheet and capital position. The Group CFO reassured that, “Our financial health remains robust, with strong liquidity and capital positions that enable us to deliver value to our stakeholders. We acknowledge the impact of the impairment on our financial statements, but we are confident in our strategic direction and the resilience of our business model.”
Group’s Diversification Strategy Offsets Impairment
In underscoring the credible foundation of the Group’s strategy, Ellis highlighted that its geographic diversification continues to bolster the overall profitability of the company. As evidenced by the J$1.20 billion in net earnings contributed by the Dominican Republic portfolio, delivering a boost in gains on securities trading to non-interest income revenues. This coupled with the low interest rate environment maintained in Trinidad & Tobago, has been favorably for the Group, with that country’s subsidiaries contributing J$800 million to net earnings. The JMMB Group’s 23.62% stake in SFC also continues to provide positive returns as reflected in the J$20. 29 billion one-off realized gains from SFC’s acquisition of ivari, an individual life insurance company based in Canada; in addition to J$1.10 billion in dividends, that this associate company added to JMMB Group’s bottom line. Additionally, SFC has been upgraded by Fitch Ratings from ‘BB’ to ‘BBB’ and S&P Global Ratings from ‘BB+’ to ‘BBB,’ which will redound to the benefit of JMMB’s financial results in the medium term.
During the reporting period, the Group’s operational expenses increased to J$22.80 billion, as result of inflation, build-out of strategic imperatives, designed to drive medium to long-term growth, restructuring costs and digital transformation projects. The Group remains committed to managing its expenses in line with its revenue, while it seeks to scale its operations, manage cost of funds, leverage synergies across the Group and improve its efficiency, in a bid to contribute to long-term shareholder value.
Keith Duncan, CEO, noted that in spite of the prevailing uncertainties and challenges in the global economy, the Group remains confident in its strategy to navigate the environment and capitalize on emerging opportunities to drive profitability and win-win partnership for its stakeholders. In commenting on the conservative increased loan loss provisioning, Duncan indicated that this decisive action underscores our steadfast commitment to protecting our shareholders' interests. He further emphasized, “Our focus remains on maintaining a robust balance sheet and implementing prudent risk management strategies including enforcing our prudential limits for exposures against capital.”
Adding, “The Group’s initiatives and focus on innovation continue to drive us forward, and we are confident in our ability to emerge stronger from this setback.” This is evidenced by the Group being able to maintain its capital adequacy for all individually regulated companies within the Group in keeping with regulatory capital requirements and as such has the financial resilience.
Building on SMART Growth Strategy
JMMB Group is looking to further build out its newest business lines, namely: real estate portfolio and private equity investment, through Vertex SME Holdings Limited (Vertex), a private equity vehicle managed by JMMB Securities Ltd. JMMB indicated during its quarterly investor briefing, that two of its real estate projects are expected to begin construction during this financial year (2024/25), subject to the necessary agency approvals. The company has a build and sell model, which means that on completion of the commercial property JMMB will look to sell the property in totality or lease sections over the short to medium term and sell over the long-term.
Additionally, in line with the Group’s smart growth strategy Duncan shared, “We are looking to efficiently grow our balance sheets across the Group, having set up operations in Barbados recently, and through the expansion of our offerings and reach in Trinidad & Tobago we will increase our non-interest income through value-added fees services provided. (Further) we are pursuing opportunities to increase our FX trading and grow our off-balance sheet offerings across the Group (as we) provide more fund solutions that will cater to our clients, and deliver financial products and services that enhance our risk adjusted returns of the respective business lines.”
The JMMB Group CEO also highlighted that JMMB will continue to accelerate its digital solutions with upgrades to its Moneyline App and roll-out of online onboarding to facilitate the changing needs of clients and improve its operational efficiency, while delivering financial solutions with ease and convenience. During the company’s investor briefing, Gifford Rankine, general manager, group digital services at JMMB announced that these new digital developments will go live over the next quarter.
In keeping with its approach to scale and grow leveraging technology and providing an omni channel experience to clients, JMMB Express Finance (TT) Limited has increased its year-over-year growth by conducting most of its business either on the phone or online. Duncan further noted that JMMB Group is looking to deepen its payment offerings having recently launched it Visa business debit card, in a bid to further diversify its offerings to that segment.
At the end of the reporting period, the JMMB Group’s asset base totalled J$675.10 billion, up 4% relative to the start of the financial year. This was mainly on account of a larger loan portfolio which grew by 12% to J$198.93 billion. The credit quality of the loan portfolio continued to be comparable to international standards. Growth in the asset base over the financial year was funded in part by increases in customer deposits, repos and multilateral funding. Deposits grew by 16% to J$200 billion, while repos saw a marginal decline of 3% to J$308.88 billion.
Speaking during the briefing head honcho of JMMB Group, outlined, “We remain optimistic, as we work through a difficult (macroeconomic) environment … and we continue to be proactive not reactive, strategize and continue to work towards further diversification to increase our shareholder value.” He also pointed to the positive indications in the Dominican Republic and Jamaican markets where inflation is trending downwards and noted that interest rate is expected to be reduced in the US over the short to medium term, which will have a ripple effect on Jamaica.”