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Barita profit soars to $4b as credit portfolio climbs

Published:Sunday | January 2, 2022 | 12:06 AMHuntley Medley - Associate Business Edit

Stockbrokerage and securities dealer Barita Investments Limited is reporting another profitable year to September 30, its bottom line having expanded to $4 billion from $2.76 billion the previous year, continuing an earnings streak since its acquisition by Cornerstone in 2018.

Barita Investments’ net profit that year was $363 million. The following year, 2019, earnings rocketed to $1.7 billion.

Its growth has come from a vastly expanded balance sheet since the Cornerstone takeover, but with that, coupled with the COVID-19 pandemic, have come bigger credit risks, resulting in significantly larger credit loss provisioning this year that grew to nearly $203 million from $33 million in 2020.

The company reported that it held an investment portfolio of some $67 billion at September 30 this year, with $19.4 billion in government paper, $17.9 billion in bonds from financial institutions, and $30.2 billion in corporate paper. These investments grew from $55 billion the year before.

Barita also grew its loan/credit portfolio threefold from $1.7 billion to $5.9 billion over the year.

On and off-balance sheet funds under management were disclosed at $316.3 billion, up from $247 billion at September 2020. For the year just ended, Barita earned $3.3 billion from its management of this funds portfolio, a sizeable improvement on the $2 billion it earned in 2020.

Its total balance sheet assets grew from $70.7 billion to $90.2 billion, and shareholder equity improved from $27.5 billion to $36.3 billion during the year.

Up to press time, Barita’s management had not responded to a request for comment on the financials, but sources close to the securities dealer said its credit provisioning was not outsized and should be looked at in relation to the company’s significantly larger credit and investment portfolio.

Barita also continued to extract higher returns from its various areas of business that include stockbrokerage services and securities dealing, investment management, pension funds administration, and foreign exchange trading. Fees and commission income grew to $3.4 billion for 2021, up from $1.8 billion in 2020, while net interest income rose to $1.5 billion from $883 million in 2020, fuelled by new business, while foreign exchange trading gains climbed to $1.6 billion from under $1 billion.

The company also earned $57 million from its 20 per cent stake representing 907 million shares in Derrimon Trading, acquired in February 2021 for just under $2 billion.

With its bigger business, Barita also managed a larger payroll, with staff wages and salaries rising to $785.5 million from $595 million, and key management compensation moving up from $161 million to $248 million.

Its cash position was reduced from $5.3 billion in 2020 to $3.8 billion in 2021, signalling more aggressive investing activities.

The Barita financials also included the performance of its subsidiaries Barita Unit Trust Management Company and Cornerstone Group Employee Share Trust, into which shares of the group’s employee share ownership plan are vested.