JMMB Group Q1 Performance Remains Resilient, Amid Negative Impact by Asset Tax and Associate Company Accounting Adjustment
JMMB Group Limited today announced its financial results for the first quarter of the financial year ending June 30, 2024. The Group is encouraged by the continued improvement in the operating results based on it’s strategic response to the sustained adverse high interest rates environment. The Group recorded a net operating revenue of J$5.66 billion, representing a 19% decrease over the last quarter, with a consolidated contribution of J$604 million from its key operating territories: Jamaica, Trinidad and Tobago, and the Dominican Republic.
Performance Highlights
The Group’s net interest income (NII) showed a commendable increase of 7%, reaching J$2.70 billion for the quarter. This improvement is a direct result of the Group’s focused execution of its Maximizing Profitability and Productivity Programme in Jamaica. The success of this program underscores the Group’s ongoing commitment to delivering sustainable earnings and dividends to its shareholders, even in challenging economic conditions.
Notwithstanding these positive developments, the JMMB Group had to absorb an annual distortionary asset tax of $1.14 billion, plus a share of loss of $1.5B from its associate company, Sagicor Financial Company Limited (SFC); and hence reported a net loss of J$1.47 billion.
Distortionary Asset taxes reduces the quarter’s profitability
The Government’s continued imposition of the distortionary asset tax on Jamaican financial institutions, which was initially proposed as a temporary measure in 2012 for three years remains a significant burden on the financial institutions and their shareholders. Many countries have phased out this distortionary tax, which is normally used as an austerity measure. If this tax has been eliminated as promised, this would increase the profitability of the group and the pools funds available for distribution to it’s over 12,000 shareholders. This distortionary asset tax payment represents more than twice what the company paid in dividends on August 12, 2024.
New accounting standard impacts Associated company
For the quarter ended 30 June 2024, Sagicor Financial Company Limited (SFC) published loss to common shareholders of US$40.2 million. This was mainly on account of unusual marked-to-market losses and IFRS 17 actuarial adjustments which approximated US$55.1 million for the quarter. Of note, the core performance for SFC continued to be positive and contributed US$25.3 million for the quarter. This adjustment to SFC’s financials resulted in the $1.48 billion negative adjustment to the Group’s share of profit, and contrasts with the $12 billion gain recorded in the previous year. In addition, it is important to note that SFC’s core earnings remained positive.
Commenting on the financial results, Patrick Ellis, Chief Financial Officer of JMMB Group, stated, “Our performance for the first quarter reflects the complex dynamics of the current economic environment, including the prolonged high-interest rate landscape and the one-off impact from our associate company, Sagicor Financial Company Limited. However, our core operations continue to demonstrate strength, with notable improvements in net interest income and the successful execution of our profitability and productivity improvement initiatives.”
Investment Business Line improved contribution
In Jamaica, the Group’s investment business line improved despite the tough market conditions. The Maximizing Profitability and Productivity Programme has been a key driver in this regard, focusing on areas such as efficient capital utilization, debt profile management, operational efficiency, and non-interest revenue growth. Notably, the Dominican Republic saw solid contributions to Group profitability, thanks to successful trading gains despite the high-interest rate environment. Trinidad and Tobago, however, faced lacklustre market conditions that impacted performance, though strategies are being executed to bolster performance in the coming quarters.
Continued Growth in Banking Business Line
The Group’s banking business line continued to perform credibly, contributing J$3.9 billion, or 69%, to the Group’s operating revenues. This robust performance is a testament to JMMB Group’s strategy of expanding its loan and deposit portfolios through renewed sales strategies and the enhancement of its digital banking services.
Real Estate, the newest Business Line Diversification yielding good results
During the quarter, the most recent addition to the diversification strategy, the real estate business line has begun to deliver solid contribution to the company.
According to Keith Duncan, the Group’s CEO, “Our diversification strategy and proactive approach are key to our resilience, and we will continue to advocate for the removal of the asset tax which will enable us to deliver even greater value to our shareholders”.
Outlook
Looking ahead, improved market conditions are expected with the US Federal Reserve signalling an easing of interest rates. With the proven results from the JMMB core operations, along with improved market conditions, JMMB projects continued strong growth in its core business for the rest of the financial year.
Keith Duncan, CEO of JMMB Group, expressed optimism about the Group’s future, stating, “Our team is encouraged by the results of our strategic initiatives and we are even more excited by receiving a client satisfaction rating of 97.8% - our highest ever! We extend our deepest gratitude to our clients for their continued trust and support. We are confident in our strategic direction and remain focused on delivering even greater value to all our clients and shareholders as we navigate these times with a positive outlook.”