THE Financial Services Commissions (FSC) in its latest sector update indicates that local security dealers now have aggregate funds under management (FUM) of approximately $1.6 trillion as at June 30, 2022, representing a $6.85-billion or 0.4 per cent increase over the previous quarter.

The year-over-year comparison saw a 15.1 per cent growth in FUM from the amount seen as at June 2021, arising from growth recorded primarily in balance sheet positions. Revenues and net profit, however, declined year over year.

As at June 30, 2022 there were 37 companies licensed as securities dealers. The FSC’s analysis is based on 30 companies whose primary activity is dealing in securities.

Combined total balance sheet assets at the end of the June 2022 quarter stood at $865.9 billion, a year-over-year improvement of 11 per cent above total assets of $780.3 billion as at June 30, 2021.

The FSC notes that the aggregate balance sheet capital at the end of the reporting period was $136.3 billion, a 3.3 per cent increase in the total balance sheet capital for securities dealers year over year.

Notably, capital to risk-weighted asset ratio (CAR) increased by 230 basis points while the capital to assets ratios C/TA fell by 320 basis points.

Revenues fall

There was a $1.8-billion or 9.7 per cent year-over-year decrease in combined total revenues (comprising interest income and other income) reported for the June 2022 quarter.

The FSC said that this is due to the 18.6 per cent fall in non-interest income (other income) when compared to the corresponding period of 2021. The regulator said that some of the main contributing factors to the contraction in the non-interest income included trading losses, foreign exchange losses, and revaluation losses.

The Jamaican dollar appreciated by 0.7 per cent against its US counterpart in the second quarter of 2022. Additionally, due to higher yields on GOJ bonds the prices of these bonds decreased.

Meanwhile, accumulated interest income and combined interest expense grew by 4.1 per cent and 34.9 per cent, respectively, for June 2022 when compared to the same period last year. The FSC notes that this is in the context of the Bank of Jamaica’s policy rate — which was increased to 5.50 per cent within the reporting quarter — against the backdrop of high inflation driven by soaring energy and food prices, supply chain disruptions, and the adverse effects of the ongoing Russia-Ukraine war.

The regulator commented, “The elevated inflationary pressure has led the BOJ, like other central banks across the globe, to adopt a hawkish stance on its monetary policy.”

Overall, cumulative total expenses remained the same as last quarter, amounting to approximately $7.6 billion; however, it increased by $2 billion or 17.7 per cent per cent when compared to the corresponding period of 2021.

For the securities sector a net profit of $3 billion was generated in the June 2022 quarter, reflecting a $6-million increase quarter over quarter and a significant $2.9-billion or 49.2 per cent decline from June 2021 levels.

The FSC said that the significant decline in the year-over-year net profits could be justified by the large fall in net profits realised by one of the securities industry’s major contributors, in particular. The broker member was not named.