THE JN Financial Group has entered into deals to divest two of its non-core businesses while it is in talks with investors to sell part or all of another subsidiary.

JN Financial Group is close to finalising a deal to sell an 80.1 per cent stake in its JN Bank (UK) and 100 per cent of its JN General Insurance Company (JNGI), while it remains in talks to divest and is also open to “partnership opportunities” with regard to its JN Fund Managers (JNFM) business, according to people familiar with the transactions who requested anonymity because they were not authorised to speak publicly about the matter.

However, the Jamaica Observer understands that the deals, at least one which could be completed “as soon as this week”, are expected to raise a total of $7 billion for the 150-year-old company and will see it consolidating to focus on its core banking and remittance subsidiaries. Additionally, the JN Financial Group will seek to raise more funds to boost its capital to approximately $12.3 billion, with the company’s management already in discussions with brokers with all funds expected to be in place by early next year.

The sources told the Business Observer that the JN Financial Group was forced into the sale of the assets after coming under pressure from the Bank of Jamaica (BOJ) to boost its capital adequacy ratio to 15 per cent — five per cent above the statutory requirement — in an effort to improve the buffer it has against losses it has been exposed to in its JN Bank (UK) business. Set up in 2020 to help JN Financial Group circumnavigate the continued loss of correspondent banking relationships critical for its operations overseas, JN Bank (UK) has been operating at a loss since inception with funds channelled from Jamaica to help keep it afloat, a situation which the BOJ expressed concern about in correspondence to the financial group.

JN Bank in its audited financials for the year ending March 31, 2024 said “there is already a firm offer” for its JN Bank (UK) business with expectations that the deal will be completed in September 2024.

The deal is still the subject of regulatory approval in the UK and the purchaser is said to be an “overseas entity” according to the people who declined to name the investor. That investor is however expected to operate JN Bank (UK) and recapitalise it before changing the name of the entity sometime next year.

The JN Financial Group invested approximately £64 million to establish and capitalise the bank, which is the first licenced bank in the United Kingdom to be owned by a Caribbean entity. The JN Financial Group has impaired some of its investment in the UK bank and will continue to monitor its operations going forward.

JN Bank (UK) has assets of approximately £350 million as at March 2024. Since its launch, the bank has been rated as “excellent” by the consumer review site, TrustPilot, and received an award from the British Bankers’ Association.

As for the two other entities up for sale, the Business Observer was told that JNGI is to be acquired by British Caribbean Insurance Company (BCIC) with JN Financial Group to act as an agent for the insurer. Most of its staff is expected to be made redundant. The staff were told about the sale on Tuesday.

JNGI has been incurring substantial losses on its motor book with total losses in that company booked at over $450 million in 2023.

The other entity, JN Fund Managers is to be sold to an unnamed entity at the moment, but the people told the Business Observer that JN Financial Group is hoping that it will be able to strike a deal that will see it keeping a stake in the entity. This company has racked up losses amounting to $521 million in the last financial year.

Like other entities, JN Fund Managers invested in Niquan Energy Ltd — a start-up energy project in Trinidad & Tobago — which it loaned money through a bond, but with Niquan facing difficulties meeting its obligations to bondholders, the company has suffered losses. The company is however working to find solutions to recover as much of the investment as possible.

Still, while JN Financial Group is looking to divest the three entities, it is also planning expansion of its slimmer business line which will now involve its JN Bank, JN Life Insurance and JN Money Services, its remittance business. It is preparing to add branches in a further four to five states in the United States of America and to strengthen its services to Guyana and Honduras, as well as return to offering services to Ghana from the UK. This expansion is to be financed from the proceeds of the sale of the three business units. Of the $7 billion expected from the sale, JN Financial Group will allocate $2.5 billion to meet the requirements of the BOJ to improve its capital adequacy ratio to 15 per cent by March 2025 with the other $4.5 billion to expand the remittance business.

The JN Financial Group and its member companies have been facing various challenges since 2020. The challenges include the COVID-19 pandemic itself; a series of interest rate increases by the central bank and globally; fair value adjustments on some assets; increased operational costs due to inflation; a substantial increase in the cost of regulatory compliance; cybersecurity costs; and the need to provide capital support to three subsidiaries — JN Bank (UK), JNFM and JNGI.

The JN Financial Group has sought to manage these challenges by focusing on its core business, particularly banking and remittances, to create opportunities for greater revenue generation. To this end, the group invested in new business opportunities such as merchant acquiring to offer businesses convenient solutions for accepting payments via credit and debit cards. The ONE JN Passport, which it launched recently is a unique customer onboarding application that enables convenient access to all services within the JN Financial Group including savings accounts and unsecured loans without requiring members to visit a branch to complete the process. In addition, JN Bank will shortly unveil its Visa debit card to provide greater convenience to members.

These activities were preceded by a move to consolidate the microfinance entity, JN Small Business Loans, into JN Bank Jamaica and to leverage its tools and activities to serve the growing micro, small and medium business sector. In October of last year, to preserve capital, JN Bank Jamaica also entered a strategic relationship with Eppley Caribbean Property Fund Limited, which has become part-owner of certain locations that the group operates from.

With an asset base of approximately $370 billion, the group continues to be a dominant player in the residential mortgage business and remittance services. JN Group has investments and subsidiaries in the USA, UK, Canada and the Cayman Islands and beyond.