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Spotlight on JMMB Group

Published: 
Saturday, September 22, 2018
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Photo by:Natasha Saidwan

Today, we highlight the progress of JMMB Group Ltd (JMMBGL) for the year ended March 31, 2018.

Assets growth

Total assets grew by almost 16 per cent, moving from J$251.56 billion to J$291.72 billion (about TT$15.5 billion).

Investment securities advanced from J$171.6 billion to J$194.9 billion. Held-to-maturity sovereign bonds expanded to J$369.7 million from J$57 million. However, the loans and receivables segment fell to J$14.2 billion from J$18 billion; within this grouping, Government of Jamaica securities declined to J$11 billion from J$14.5 billion.

The largest segment, available-for-sale securities, expanded from J$152.9 billion to J$179.1 billion. Here, other sovereign bonds climbed to J$43.7 billion from J$33.1 billion while corporate bonds advanced from J$13 billion to J$18.6 billion. The largest component, Government of Jamaica securities, grew to J$102 billion from J$97 billion.

Net loans and notes receivable rose from J$47.1 billion to J$55.6 billion.

At the gross level, advances to individuals edged up to J$25.9 billion from J$25.5 billion while loans to the corporate sector climbed to J$29.8 billion from J$21.1 billion. However, loans to the financial sector retreated to J$1.2 billion from J$1.8 billion.

Property, plant and equipment advanced to J$3.22 billion from J$3.07 billion. Net increases were concentrated under equipment, furniture and fittings and computer equipment.

Other receivables climbed from J$1.55 billion to J$2.06 billion. Staff loans swelled to J$605 million from J$436 million while other receivables increased to J$1.45 billion from J$1.11 billion.

Securities bought under agreements to resell closed at J$1.12 billion from J$0.92 billion, all of which are denominated in Jamaican currency and mature within twelve months.

Cash and cash equivalents advanced from J$20.9 billion to J$27.8 billion. The balances with Central Banks rose from J$8.9 billion to J$10.3 billion, which supported higher customer deposits.

The cash element swelled to J$15.1 billion from J$10.5 billion; here, the proceeds of J$9.2 billion from the March issue of redeemable preference shares boosted the year-end figure. Cash equivalents also improved from J$1.5 billion to J$2.4 billion.

The location of cash and equivalent balances showed Jamaica having almost J$14 billion and T&T holding J$8.8 billion. J$3.4 billion was lodged in North America while J$1.65 billion was located in the Dominican Republic.

Total liabilities increased by nearly 17 per cent to J$262.7 billion from J$224.8 billion.

Securities sold under agreements to repurchase closed at J$158.2 billion from J$156.6 billion. Instruments denominated in US dollars fell to J$81.6 billion (2017: J$91.2 billion) while those measured in Jamaican currency increased to J$48.9 billion from J$40 billion.

Notably, instruments written in Dominican Republic pesos advanced to J$19.8 billion from J$14.6 billion while agreements in T&T dollars rose to J$4.4 billion from J$3.2 billion.

Notes payable swelled to J$27.6 billion from J$4.5 billion. The major increase represented a J$18.8 billion US dollar denominated promissory note, which bears annual interest of 2.50 per cent, payable quarterly; this note will mature in April 2019.

In addition, there was a secured US dollar fixed rate note of J$1.87 billion; here, interest ranges from 2.85 to 3.55 per cent and the repayments will be due in November of 2018, 2019 and 2020. A previous subordinated debt of TT$80 million (J$1.52 billion) was increased to TT$100 million (J$1.82 billion).

Redeemable preference share balances climbed to J$17.8 billion from J$8.8 billion. This increase mainly comprised two new issues. The larger one valued at J$5.33 billion reflected 21,265,000 cumulative preference stock units at 5.75 per cent interest, payable in US dollars.

Another issue of 1,848,937,000 units at 7.25 per cent interest is payable in Jamaican dollars and was valued at J$3.7 billion. In August 2018, J$1.47 billion of preference shares, which were originally issued in August 2013, were redeemed.

Customers’ deposits increased from J$49.1 billion to J$52.2 billion. Of this total, J$5.5 billion was non- interest bearing and J$2.1 billion matured beyond one year. Other payables rose from J$2.45 billion to J$3.18 billion, all of which was non-interest bearing.

Equity improvements

Total equity advanced from J$26.8 billion to J$29.0 billion. After removing non-controlling interests of J$1.1 billion, shareholders’ equity improved to J$27.9 billion from J$25.9 billion. Both share capital and the retained earnings reserve were stable at J$1.86 billion and J$9.61 billion, respectively.

Retained earnings grew to J$14.8 billion from J$11.9 billion. Here, the brought forward balance benefitted from J$3.56 billion in total comprehensive income while dividends of J$701 million reduced the ending figure.

The cumulative translation reserve swung from a positive J$312 million to a negative J$87 million; this reflected the foreign exchange differences of J$399 million on the translation of foreign subsidiaries’ balances.

Similarly, the investment valuation reserve fell from J$2.2 billion to J$1.75 billion; this reduction of J$449 million mirrored the net unrealised losses on available-for-sale securities.

The weighted average number of shares outstanding was unchanged at 1,632,552,532; consequently, the book value of each share improved from J$15.86 to J$17.10.

Revenues

and profit

Net interest income climbed from J$6.77 billion to J$7.74 billion. The interest income component rose to J$15.88 billion from J$14.71 billion. Here, interest on loans and notes receivable advanced to J$4.65 billion from J$3.79 billion while interest on investment securities edged up to J$11.1 billion from J$10.8 billion.

Total interest expenses closed at J$8.1 billion from J$7.9 billion. Interest on repurchase agreements eased to J$5.85 billion from J$5.88 billion while interest on customers’ deposits ended at J$1.17 billion from J$988 million.

In addition, interest on notes payable rose to J$545 million from J$498 million while interest on preference shares fell to J$569 million from J$578 million.

Fee and commission income increased to J$1.2 billion from J$918 million. In contrast, net gains on securities trading retreated to J$4.87 billion from J$5.38 billion. Notably, fees earned from managing clients’ funds soared to J$690 million from J$369 million while foreign exchange margins from cambio trading improved to J$1.35 billion from J$1.22 billion.

These changes saw net operating revenue close at J$15.84 billion from J$14.65 billion.

Dividends and other income contributed J$94 million (2017: J$43 million), which improved total revenue to J$15.9 billion from J$14.7 billion.

Operating expenses increased to J$11.44 billion from J$10.45 billion. Staff costs advanced to J$6.0 billion from J$5.4 billion. In addition, other expenses rose to J$5.4 billion from J$5.1 billion. Here, legal and professional fees climbed to J$774 million from J$635 million and insurance increased to J$172 million from J$139 million.

Also, the asset tax closed at J$430 million from J$405 million while other expenses climbed to J$300 million from J$202 million. Significantly, loan losses fell to J$199 million from J$256 million.

These changes saw operating profit improve to J$4.5 billion from J$4.25 billion. After deducting the impairment loss on financial assets of J$144 million, the profit before tax registered at J$4.35 billion (2017: J$4.16 billion).

The effective tax rate declined from 19.4 to 17.2 per cent. This saw the tax charge fall to J$749 million from J$806 million. This reduction benefitted from higher income not subject to tax and larger tax losses recovered.

This change helped the net profit improve to J$3.6 billion from J$3.35 billion. After removing the profit due to non-controlling interests, the profit attributable to shareholders registered at J$3.56 billion (2017: J$3.31 billion). Those results equate to EPS of J$2.18 versus J$2.03 for 2017.

Divisional contributions

Revenues from financial and related services grew by almost 4 per cent while segment profit expanded by 13.4 per cent. This result was helped by the contributions of JMMB Investments (T&T) Ltd, where funds under management swelled by 50 per cent. The expansion of its collective investment scheme offerings in Jamaica also supported this strong result.

The banking and related services segment achieved a 13 per cent revenue increase, however, profit declined by 13.6 per cent. The net interest income component expanded by 29 per cent; that increase was mainly attributable to the commercial banking operation in Jamaica, which started in August 2017.

The profit reduction was largely influenced by the one-off expenses related to conversion to a commercial operation and the addition of new branches.

Investor

returns

On the TTSE, JMMBGL’s one-year appreciation was 47 per cent, moving from TT$1.20 as at March 2017 to TT$1.76 as at March 2018; in early September, it traded at TT$1.71.

On the JSE, its share price closed at J$16.81 on March 31, 2017. It peaked at J$30.55 on November 10, 2017 and then ended at J$26.00 on March 29, 2018. This represented a one-year appreciation of 54.7 per cent. In early September, it traded at J$28.82.

Annual dividends increased from 2017’s J$0.45 to J$0.47 for 2018. At the recent price of J$28.82, the yield is 1.63 per cent. That price also exhibits a P/E multiple of 13.2 and a premium of 69 per cent to its book value of J$17.10.

Q1 results

For the trimester to June 2018, assets grew by almost 8 per cent to J$314.7 billion from J$291.7 billion as at March 2018.

More importantly, net operating revenue expanded from J$4.1 billion to J$4.7 billion while profit attributable to shareholders swelled to J$936 million from J$617 million; that result equated to EPS of J$0.57 versus J$0.38 for the comparative 2017 period.

These solid results were driven by increases in net interest income, foreign exchange trading and fees and commission income.

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