JMMB Group Records J$1.9B in Profit

Regional integrated financial services provider, the JMMB Group, recorded net profit of J$1.9 billion for the six-month period ending, September 2023. Additionally, the Group posted operating revenue of J$11.70 billion, which is a 6% decline year-over-year. 

In sharing insight into the Group’s performance, Patrick Ellis, JMMB Group chief financial officer, outlined that the company’s performance was largely impacted by the macroeconomic environment, which has been characterized by high interest rates and a lacklustre bond market. 

Diversification Enabling Growth
While the JMMB Group’s investment business line was adversely affected due to these conditions, Ellis underscored that the company is adequately capitalized as a result of the success of its diversification strategy. The Group’s banking and related services saw 8% growth, amounting to J$6.9 billion over the period, or 59% of the total net revenue. Additionally, there was improved performance in its other geographic markets, namely Trinidad and Tobago and the Dominican Republic, which contributed 16% and 28% respectively to the Group’s profitability, as a result of the more accommodative economic environment in those markets.

The Group’s stability and diversified strategy is backed by international rating agency and multilateral funding agencies, such as IDB Invest, that have reiterated the company’s creditworthiness. In its last rating, in 2022, Caribbean Information and Credit Rating Services Limited (CariCRIS), upgraded JMMB Group Limited’s corporate credit ratings to CariA- (Regional Local Currency) and CariBBB+ (Regional Foreign Currency) and jmAA- (Local Currency Rating) and jmA+ (Foreign Currency Rating) on the Jamaica national scale. The national scale ratings indicate ‘high creditworthiness’ of JMMB Group compared to other obligors in Jamaica. While, on the regional scale ratings, JMMB Group was assigned a ‘good level of creditworthiness’ in relation to other obligors in the Caribbean.

Mitigating Market Conditions to Help Drive Performance

While JMMB Group’s year-over-year six-month profits were impacted by market conditions, the company’s gains on securities traded stood at J$3.33 billion, which reflects a strong spike of 81%. As a result of the high interest rate conditions, margins have been eroded; resulting in the Group posting net interest income of J$4.15 billion, a 27% dip over the corresponding prior period. Further, market sentiment negatively impacted foreign exchange gains and commission income, which stood at J$1.43 billion and J$2.73 billion respectively; this reflects a 13% and 17% falloff year-over-year . The Group’s 23.44% investment in Sagicor Financial Corporation (SFC) sought to balance the mixed results, with a share of profit of J$1.61 billion, for the period. SFC’s restated profit for the prior period, as a result of change in actuarial assumptions coupled with the adoption of IFRS17 – Insurance Contracts, which the Group adopted April 1, 2023. Since the SFC adopted a retrospective approach, the prior year’s financial result was restated and reflected a share of loss of J$5.53 billion, for the six-month period in 2022/23. 

During the reporting period, operating expenses went up by 10% to J$10.96 billion, as a result of inflationary costs and project related costs. The Group, however, remains committed to managing its expenses in line with its revenue, while continuing to further manage its liabilities and cost of funds, in addition to leveraging synergies across the Group.  

At the end of the reporting period, the Group’s asset base totaled J$688.1 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$200.2 billion. The credit quality of the loan portfolio continues to be in line with international standards and the Group maintains enhanced monitoring to mitigate against possible deterioration in credit quality. Growth in the asset base over the six-month period was primarily funded by an increase in customer deposits and notes payable. Deposits grew by 6% to J$182.9 billion, while notes payable increased by 5% to J$65.5 billion.

Over the six-month period, shareholders’ equity increased by 5%, to J$51.70 billion. This was on account of increased net profit posted. Therefore, the Group continues to be adequately capitalized and all individually regulated companies within the Group continue to exceed their regulatory capital requirements.

High Interest Rate Headwinds Remain Persistent
The Group is keenly monitoring and taking steps to mitigate the risks associated with this extended high interest rate environment; whereby the Jamaican and in global central banks maintain high policy rates in a bid to ‘cool’ inflation, at the expense of the bond and equity investors. It is against this background that the benefit of the JMMB Group’s the diversification strategy is evident, in that where the Jamaican central bank continues to follow the Federal Reserve in pursuing an aggressive high interest rate regime, which resulted in second quarter losses for our Jamaican operations, these losses have been partially offset by second quarter profits from our Trinidad & Tobago and Dominican Republic operations whose central banks have created a less adverse investing environment.  

 

A Solid Path for Growth

Keith Duncan, JMMB Group CEO, noted that although the current economic climate remains challenging for all players in the financial sector, the Group has maintained credible performance, which is a testament to the company’s resilience and solid diversification model. Even as the Group continues to monitor the global and domestic economic environments for potential risks, it will accelerate its strategies that are focused on enhancing efficiency and driving revenue generation, in line with its “Smart Growth” strategy. As such, the Group is looking to roll out new solutions with a focus on payments and other digital solutions, based on their capital efficiency and the value-add that they will provide to clients. These solutions complement other recently launched solutions, namely the JMMB Money Transfer Visa Prepaid card, which was introduced in September, and digital assistant Johanna that is now live on the JMMB Group – Jamaica’s website. 

The JMMB Group head, Duncan, also emphasized, “The JMMB Group has the financial foundation to withstand the current challenging realities, and we remain focused on our strategic plan that will see us continually reassessing and re-imagining new opportunities to expand and grow our revenue and diversify our income stream; even as we seek to further strengthen our business model to remain resilient, in spite of whatever economic cycles that may impact us.”