JMMB to hold off on dividends
JMMB Group Limited, a financial conglomerate engaged in the business of investments, banking and distribution of insurance products, will avoid paying dividends for now as profits and capital decline. The company last paid interim dividend of 25...
JMMB Group Limited, a financial conglomerate engaged in the business of investments, banking and distribution of insurance products, will avoid paying dividends for now as profits and capital decline.
The company last paid interim dividend of 25 cents per share in July, which amounted to a payout of nearly $490 million. Preceding that payout, its declared distributions to shareholders for the full financial year ending March topped $1.66 billion.
“We will be circumspect and conservative on how we go forward. Based on the volatility and the underlining liquidity challenges that the overall market faces we should be conservative and not declare a dividend at this time,” said Group CEO Keith Duncan at an investor briefing on Tuesday in disclosing a board decision taken last Friday.
JMMB Group capital dipped to 7.5 per cent of total assets at the end of September. The group does not operate with regulatory minimums, but its subsidiaries are regulated. Minimum capital requirements differ across the financial industry per regulated subsector, which includes insurance, banking and securities dealership, among others, but generally a ratio above above 10 per cent is preferred.
JMMB said on the investor call that all companies in the group were adequately capitalised and would receive infusions when necessary.
“We have highly regulated entities and all regulated entities are adequately capitalised,” said Chief Financial Officer Patrick Ellis. “JMMB from a capital perspective is sound,” he asserted.
“We expect to see the capital ratios improve,” said Chief Risk Officer Dereck Rajack in response to a query from the Financial Gleaner. “We are keeping a close eye on capital to ensure we manage through these volatile times.”
JMMB Group holds capital of $48 billion, which equates to 7.5 per cent of total assets at $637 billion, its September quarter financial report shows. A year ago, capital stood at $66.7 billion or 12 per cent of total assets.
It’s new stance on dividends matches the stance long adopted by its larger peer NCB Financial Group, which last paid a dividend in early 2021.
JMMB Group earned $1.8 billion in net profit between July to September 2022 when compared with $3.6 billion a year earlier.
Duncan said on the call that JMMB performed well despite a difficult trading and investment environment.
The dip stemmed from tighter spreads, which cut net revenue to $5.8 billion from $6.6 billion a year earlier. Over the first half of its financial year, from April to September, JMMB group profit grew to $3.6 billion but still under the $5.5 billion a year earlier.
“JMMB did an incredible performance in a difficult environment. This market is a difficult market environment and we believe market conditions will change as core inflation in US market trends down,” Duncan said.
JMMB’s business lines were impacted by higher benchmark rates in Jamaica and the Dominican Republic. Additionally, higher interest rates resulted in shifting funds from riskier investments such as stocks and bonds towards government securities. This resulted in fewer trading opportunities for JMMB, which built its name in part on trading, said Assistant General Manager for Trading and Treasury Greig Lindo.
“The market cycle has been a difficult one,” he added.
JMMB Group will continue to look for growth opportunities in its existing subsidiaries but also seek out acquisitions.
Its last acquisition was the Dominican Republic-based Banco Múltiple Bell Bank, which received final approval in October and was subsequently merged with Banco De Ahorro Y Crédito JMMB Bank, the group’s existing savings and loans bank in that territory. The deal marked the group’s entry into the commercial banking sector in the Dominican Republic.
JMMB also reiterated plans to invest $5 billion to build out 100,000 square feet of new commercial real estate over the medium to long term. Current projects include commercial developments in Kingston in locations downtown and in Liguanea, and in Mandeville, Manchester.