JMMB profit up 20% for March 2020Friday, July 31, 2020
BY DURRANT PATE
Jamaica Money Market Brokers (JMMB) posted net profit of $2.84 billion for its March 2020 fiscal year, which is 20 per cent higher over the prior period, while operating revenue totalled $10.93 billion.
This increase in operating revenue was17 per cent, an increase over the prior year, as all revenue lines, with the exception of net interest income and foreign exchange (FX) trading gains, recorded growth. Net interest income declined by three per cent to $3.62 billion, as the average portfolio size maintained over the year was lower than the prior year.
JMMB's asset base rose by 10 per cent to $212.29 billion over the period, primarily due to resale agreements and notes receivables. Total shareholders' equity stood at $19.39 billion reflecting a 17 per cent decline on account of a reduction in fair value reserves corresponding to the reduction in asset prices.
FUNDS UNDER MANAGEMENT
The asset management business line posted sound results for the period, showing growth over the prior year. This growth is due to the management's continued emphasis on leveraging on and off balance sheet solutions in partnering with clients to achieve their financial goals. As a consequence, total clients' funds under management (FUM) grew by five per cent to $241.27 billion, the majority of which was driven by on-balance sheet FUM growth.
Fees earned from managed funds amounted to $1.21 billion, an increase of 16 per cent over the prior period. The main drivers of this growth were pension funds and unit trusts as off-balance sheet solutions continued to be leveraged to assist clients with planning for and meeting their long-term financial goals.
BOND AND EQUITY TRADING GAINS
For the year, trading gains arising from equities and fixed income stood at $4.91 billion compared to $2.8 billion in the prior period. This was predicated on strong positive emerging market sentiment which was buoyed by an improved macroeconomic outlook for the better part of the year.
Despite the market downturn towards the end of the financial year, JMMB was able to accurately identify and capitalise on a number of profitable trading opportunities. Further, interest rates in the local 17 and global fixed income markets remained at historical lows, which resulted in an increased number of corporate transactions both for refinancing purposes as well as new issuances.
The local stock market suffered a sharp reversal in the fourth quarter due to a decline in investor confidence attributable to the COVID-19 pandemic. Consequently, the Jamaica Stock Exchange Combined Index declined by 4.33 per cent compared to a 29 per cent increase in the prior period. JMMB's equity trading strategy was sufficiently robust and delivered strong returns over the prior financial year with trading gains derived from the proprietary equity portfolio increasing by 78 per cent.
FOREIGN EXCHANGE (FX) MARGIN FROM CAMBIO TRADING
FX trading gains recorded strong performance of $533.6 million and the business line remained the second-largest cambio with approximately five per cent of the overall FX market (both cambios and authorised dealers). This was in spite of more stringent regulatory guidelines which constrained trading activities.
Performance in the last two months of the financial year was negatively impacted by COVID-19, as there was a marked reduction in FX inflows. This was on account of a slowdown in the tourism sector and reduction in remittance inflows from source markets. Otherwise, the local foreign exchange trading market remained buoyant for most of the financial year and was characterised by continued volatility.
Other fees and commission grew by 26 per cent to $907.5 million. This was mainly due to value-added services from the insurance brokerage and equity brokerage business lines.
ADMINISTRATIVE EXPENSES GROWING
Administrative expenses increased by 24 per cent to $8.26 billion. This increase was on account of project-related activities focused on process optimisation which should yield efficiencies for JMMB in the medium term. Given the increase, JMMB's efficiency ratio moved from 71 per cent to 76 per cent.
As critical projects related to process and technology are wrapped up in the coming year, the management team will focus on extracting the expected efficiencies from these projects to improve JMMB's overall efficiency.
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