JMMB profits down in June quarter

September 15, 2014 by IC Insider.com

JMMB Group posted net profit of $558 million and earnings per share of 34 cents for the quarter to June this year, but this was a huge 26 percent lower than the $754 million earned in 2013. Total revenues grew by 16 percent from $2.07 billion to $2.4 billion in the quarter helped by three acquisitions in two years.
Increased expense ate up the added income and more, pushing profit down sharply in the process. This is in contrast to the March quarter when profits rose 5 percent for that quarter. Interest margin got squeezed, falling from 69.3 percent in the 2013 quarter to only 63.74 percent this year as the Group’s Net Interest Income grew year-over-year from J$1.18 billion to only J$1.29 billion, an increase of J$112 million or 9.5 percent. This increase was driven mainly by expanded business lines through acquisition of Intercommercial Bank Limited (IBL) in October 2013, coupled with managing the Group’s investment portfolio and cost of funds.
Other operating revenues, comprising securities trading, foreign exchange margins from cambio trading and commission income increased by 12.4 percent, 95.5 percent and 32.1 percent respectively, driven mainly from increased volume.
Expansion of the Group through acquisition of IBL in the third quarter of 2013/14 resulted in operating expenses moving to J$1.72 billion compared to J$1.13 billion for the prior year. IBL contributed J$323 million or 28.6 percent, while the remaining J$272 million or 24 percent was due mainly to integration costs, growth in subsidiaries in the regional markets, and normal inflationary increases. The Group acquired of 100 percent of AIC Securities Limited, a Trinidad and Tobago based company for TT$5.36 million (J$92.7 million), on 30 April 2014. In Trinidad and Tobago operations are now poised to provide a full range of services to our clients, management stated.
Assets| At the end of June total asset of the JMMB Group increased by J$8.7 billion or 4.2 percent for the period, moving from J$206.7 billion at March 2014 to J$215.4 billion. This increase in assets was mainly funded by client deposits, long-term subordinated debt and repurchase agreements. The company acts as agent and earns fees for managing clients’ funds on a non-recourse basis under a management agreement. At 30 June 2014, funds managed in this way amounted to J$29,609,590,000 (2013 – J$23,242,771,000).
Interest rates down| During the quarter interest rates on treasury bills in Jamaica started to decline and would have resulted in some pressures on margin as commitments at fixed rates to customers would mature and then re-priced. Future looks like JMMB should still end up with earnings around $2 per share for the current year, but much will depend on how well they do in managing their investment portfolio and the impact that lower interest rates will have on valuations.