Barita upgraded by rating agency

Barita Investments Ltd has been upgraded one notch by regional ratings agency CariCRIS, lifting the brokerage into the top creditworthiness band available to Jamaican obligors and putting it a step above its own parent company.

“The national scale local currency rating indicates that the level of creditworthiness of this obligor, adjudged in relation to other obligors in Jamaica, is high,” CariCRIS said in the release.

The Caribbean Information and Credit Rating Services Limited raised Barita and its subsidiaries to jmAA- for local currency and jmA+ for foreign currency on the Jamaica national scale, and to CariA and CariA- respectively on the regional scale. The action was taken on 18 June but disseminated on 24 August. A stable outlook was assigned for the next 12 to 15 months.

The upgrade rests on four factors. CariCRIS cited a stronger market position after Barita absorbed JN Fund Managers, acquired in January and renamed Barita Fund Managers in March; continued low-cost fund raising; a centralised risk function with automated assessments; and projected better earnings quality this year from fee income, investment banking and cheaper funding.

The agency also pointed to the Proven Group partnership as a source of further growth.

Constraints remain. CariCRIS flagged Barita’s asset and liability mismatches despite high rollover rates on its repurchase agreement funding and concentration risk from the company’s heavy exposure to the Jamaican economy.

The sensitivity factors set out clear thresholds. A further upgrade requires fee-based income of 50 per cent or more of total income sustained for two financial years, profit after tax growth of 15 per cent or more for three consecutive years, or tangible net worth growth above 10 per cent over the same period. A downgrade follows if the cost-to-income ratio weakens to 75 per cent or higher for three consecutive years or if tangible net worth falls to 20 per cent or less of total assets for three years.

Barita reported net profit of $1.3 billion for the quarter ended June, up 24 per cent, with earnings per share of $1.10 against $0.89 a year earlier. Revenue for the quarter nearly doubled to $5.2 billion from $2.5 billion, driven by gains on investment activities, which surged 285 per cent to $4.0 billion. For the nine months to June, net operating revenue climbed 61 per cent to $10.1 billion, and net profit rose 20 per cent to $2.7 billion.

The rating follows the Bank of Jamaica’s grant of a financial holding company licence to Barita Financial Group Limited in May, under which ownership of Barita transferred from Cornerstone Financial Holdings. Barita Financial Group holds 72.4 per cent of the brokerage.

business@gleanerjm.com