JMMB's profit slides
Listed investment and finance house Jamaica Money Market Brokers Limited (JMMB) continues to experience a sizeable year-on-year profit fall-off even as the company is pointing to a $81-million or 39.5 per cent improvement in net profit for the December quarter over the second quarter ended September 2009.
JMMB's latest nine-month unaudited financial results show a 63 per cent drop in net profits to $649 million at December 31, dragged down from $1.77 billion in the first nine months of 2008.
According to JMMB, the reduction in year-on-year net profits is due primarily to the company having benefited in 2008 from the net effects of gains from the sale of shares in Caribbean Money Market Brokers (CMMB) and provisions for impairment on its investment portfolio.
In December 2008, JMMB sold its 45 per cent stake in CMMB Trinidad, as well as its 50 per cent stake in CMMB Barbados, for more than $3 billion, fattening the company's bottom line.
At the same time, JMMB also took a significant hit, having to write off impaired investment held with the collapsed US investment bank Lehman Brothers.
The profit slide in year-on-year profit came despite a 14.7 per cent
increase in net interest income, which was eroded by sharp declines in income from fees and commission, lower returns on margins on cambio trading and depressed gains from securities and foreign exchange trading.
Net interest income moved to $1.3 billion from $1.1 billion for the 2008 period.
Earnings from fees and commission were $91.2 million, down from $137.5 million for the comparable nine months in 2008, with net gains from securities and foreign exchange trading totalling $683 million, less than half the $1.5 billion recorded for the same period the previous year.
JMMB, like other companies in the financial sector, will take a hit on net interest income in the coming months, stemming from the impact of the government's debt swap.
Whereas JMMB has not stated the extent to which income will be reduced by the Jamaica Debt Exchange (JDX), the company has maintained that programme will have minimal impact on equity and profitability, with its capital adequacy far exceeding regulatory requirements. According to JMMB, the company's capital adequacy stands at 36.4 per cent, above the 14 per cent required by the financial regulators, the Financial Services Commission.
JMMB's total equity at the end of December amounted to $6.6 billion, up from $5.9 billion recorded at December 2008.
Financial institutions, including securities dealers, are likely to experience a reduction of up to 30 per cent in net interest income arising from the JDX. Barita, the latest investment house to disclose the level of the expected impact, said, in a statement to the Jamaica Stock Exchange, it has projected a 20 per cent reduction in revenue stream resulting from the debt exchange. Balance sheet impact will, however, be negligible, it contended, with liquidity and capital adequacy levels being greater than the minimum required levels.
The company is still in recovery mode with the brokerage still focused on growing business regionally.
"The group continues to maintain its presence in the region with the steady results of the intercommercial banking group in Trinidad and the encouraging performance by its operations in the Dominican Republic," stated the directors' statement appended to the company's nine-month financial results.
JMMB also noted a continued focus on expense management, as reflected with lower operating expense totalling $1.5 billion for the period ended December 2009.
The company currently trades at $4 on the Jamaica Stock Exchange with shares outstanding on the market valued at $5.8 billion.