FINSAC Limited, the state offloading entity benefited from bond write-offs that allowed it to triple its net profit to J$1 billion in 2011 over year-earlier levels, according to its newest financial report released in Parliament this week.
Nearly half its profit came from income related to bonds written off and the remainder from interest from loans. Profit is rare for the entity which carries J$106 billion in accumulated losses.
Finsac was set up in 1997 to address the liquidity and solvency problems within ailing banks and insurance companies in a pioneering financial rescue operation that ended up costing Government an estimated J$140 billion.
The entity earned J$4 billion in interest from loans, up three per cent year-on-year, but some J$3.5 billion was slashed from that figure as impairments. The operations, however, benefited from earnings of J$527 million as 'other income' up from just J$1 million a year prior. Three-quarters of the 'other income' or J$414 million resulted directly from collections of bond receipts that were previously written off.
"Included in other operating income is an amount of J$414.7 million for bonds payable that were written off during the year. This amount relates to bond interest that was payable to Finsac-controlled entities that are no longer in operation," stated the financials.
The specifics of the bonds were unclear. Promised explanations from Errol Campbell, general manager of Finsac, were unavailable up to press.
The auditor of the accounts, Deloitte & Touche, noted that despite the accumulated deficit Finsac company will remain as a going concern based on assurances of Government support. As at March 2011, total liabilities exceeded total assets by approximately J$1.28 billion.
"The continuation of the company as a going concern is dependent on the support of its shareholder, the Government of Jamaica, its creditors and on future sustainable profitable operations. The accountant general has indicated its continued support," said Deloitte, in its assessment of the company.
Finsac's parent company, Financial Institutions Services, was established in the 1990s to take over the operations, assets and prescribed liabilities of certain entities, namely, Blaise Trust Company and Merchant Bank Limited, Blaise Building Society and Consolidated Holdings Limited, according to FIS financials audited by KPMG.
The Finsac rescue programme included entities such as Eagle group, National Commercial Bank, Citizen's Bank, Century National, Life of Jamaica and others.