Barita profits climb to over $2 billion
Published:Friday | January 1, 2021 | 12:14 AMNeville Graham - Business Reporter
Listed stockbroker and investment house Barita Investments Limited blew past the $2 billion mark in profits, its 2020 year-end financials show. For the year ending September 30, 2020, Barita posted net profits of $2.7 billion, just over $1 billion or approximately 60 per cent more than the $1.7 billion it recorded in 2019. Profit was only one of several growth metrics for Barita in a performance that defied a major economic fallout from the COVID-19 pandemic and significant retreat by the equities market for the nine months of calendar year 2020 included in its financials.
The big profits came on the back of $5.2 billion in net operating revenue for the year. This was $1.2 billion more than the just under $4 billion in net revenues at the end of September 2019. The Barita revenue and profit jump was also spurred on by a $232 million increase in net interest income and a $1.13 billion or 160 per cent increase in fees and commission income over 2019. It recorded significant foreign exchange trading and translation gains of close to $1 billion, compared to similar gains of $353.5 million in the prior year.
In an apparent reflection of COVID-19 hold-off on dividend payments to shareholders by several companies however, dividend income fell to $8.6 million from $30.6 million in the prior year.
The company grew assets to more than $70 billion in 2020, from just over 40 billion for the prior year to September 2019. At the same time total liabilities grew to$43.2 billion from $27.3 billion in 2019. Stockholders equity ended the year at $27.4 billion compared to $13.6 billion in the previous 12 months to September 2019, while funds under management grew to $290 billion from $181 billion in its 2019 financial year.
Barita is 74 per cent owned by Cornerstone Financial Holdings.
Barita’s vice-president for asset management and research, Ramon Small-Ferguson, told the Financial Gleaner that the overall increase in revenues, particularly net interest income and fees and commission income, is a reflection of company growth and more robust business.
“The growth of net interest income really reflects the growth of our balance sheet. With assets growing from $41 billion to over $70 billion year-on-year, it follows that we would earn from that percentage of our assets that are real investment and even from the fixed portfolio,” Small-Ferguson said, breaking down the make-up of the increased revenues.
He gave an insight into the diversity of the business, noting that: “Fees and commissions emanate from three main areas – asset management, which deals with the management of off-balance sheet items such as unit trusts, pension funds, client portfolios, investment banking and equities brokerage.”
Through its subsidiary Barita Unit Trust Management, Barita manages a number of Unit Trusts that provide customers with investment opportunities across several asset classes, including foreign exchange bonds, real estate and equities.
On the big gains from foreign exchange trading and translation, Small-Ferguson attributed this to closer management of the foreign exchange portfolio. He said the growth in revenue from foreign exchange was driven by increased volume and value in the market.
“In prior years the management of foreign exchange was fairly passive. We have pivoted to a more active role, optimally positioning based on our assessment of the situation and preserving value for shareholders,” he said, adding that there was also a change in Barita’s cambio activities.
“It’s really doing more business with existing customers while onboarding and deepening new relationships. We now have the ability to do larger transactions on a consistent basis when it comes to foreign exchange,” according to Small-Ferguson.
Notes in the financial statements explained that, “The company entered a non-deliverable forward currency contract selling transaction with Cornerstone Financial Holdings Limited for US$63 million with trade date of 24 August 2020 and settlement date of 1 October 2020. The settlement was duly executed and the company booked a gain of J$719,982,900 in these financial statements due to movement in exchange rate. The transaction was executed in the ordinary course of business.”
On a $400 million dip in gain on sale of investments, Small-Ferguson confirmed that that is directly attributable to the ongoing COVID-19 pandemic as assets for sale were affected by the resulting downturn in the equities market.
Operating expenses were up near $500 million from new hires and increased marketing during the year as Barita builds out its investment banking arm, the company official said.
“We’ve been investing in talent and this has proven to be a critical differentiating factor. This allowed us to expand existing business lines and add new business lines to the operation. We increased our market presence, in addition there were some build-out costs with the addition of a new location and the reorganisation of our existing location.”
In October, Barita hit $100 billion in market capitalisation for the first time, joining a select few stocks on the Jamaica Stock Exchange. Since then it has pared back to $90.6 billion as at close of trading on Wednesday this week.