JMMB still profits after $12b write-off
Published:Sunday | June 23, 2024 | 12:07 AM
JMMB Group Limited, which offers financial services in four markets, made $11.8 billion in annual profit despite writing off a bad bond.
The group wrote off $12.6 billion related to funds it loaned a start-up energy project in Trinidad & Tobago. The investment was set up as a bond which allowed other financial entities and wealthy individuals to partake.
“This investment, despite challenges, was able to produce but ran into supply-contract difficulties and has not been able to continue operations and serve its debt obligations,” said Keith Duncan, CEO of JMMB Group. “JMMB has taken the prudent decision to impair this asset while the management, in conjunction with noteholders, explores paths to partial or full recovery of this exposure. We believe these are credible paths going forward,” he said.
Duncan said the write-off would not reoccur, and in the future JMMB would avoid heavy investments in greenfield projects.
The bond was initially rated as investment grade by CariCRIS, the regional rating agency, which made it attractive to regional financial institutions.
Since the pandemic, CariCRIS has revised rating for entities in the energy sector. An outlier was the downgrading of Niquan Energy based in Trinidad, from good in 2022 to weak in 2023 to default in 2024. Niquan raised US$120 million in a bond issued in December 2019.
JMMB Group declined to name the issuer, with Chief Financial Officer Patrick Ellis citing “client privilege” when asked explicitly by reporters about Niquan.
“We decided to clean our balance sheet to have a good runway to continue with our growth strategies and continue to drive value to our shareholders,” Duncan explained about the bad bond.
JMMB Group operates in Jamaica, Trinidad & Tobago, Barbados, and the Dominican Republic and holds a significant investment in regional insurance giant Sagicor Financial Company, in which it holds 23 per cent interest.
During the financial year, the group’s revenues were flat at $23 billion compared to $23.4 billion the previous year.
The profit haul at $11.8 billion was 17 times that of the $690 million made in the prior year even with the bond impairment. That is because it benefited from an acquisition made by Sagicor Financial, which bought an insurance firm in Canada called Ivari.
“It is one of the highest profits that JMMB has ever delivered,” Duncan said of JMMB Group’s earnings for year ending March 2024. Its equivalent to the earnings achieved in FY2022.
During the year, JMMB made heavy investments in repos instruments, which affected cash generated from operations, but overall, its cash position remained flat $36.2 billion.
The group’s capital jumped to $54 billion, a substantial climb above the $38 billion reported in 2023. Capital is approximately eight per cent of total assets, up from six per cent a year earlier, providing a stronger buffer to withstand shocks.
Looking ahead, Duncan anticipates a reduction in interest rates in the United States by the end of the year or in 2025, which could positively influence other central banks.
Broadly, the markets expect the Federal Reserve, America’s central bank, to cut rates at least once this year.
“It would be positive for all financial services firms, globally, regionally, and in Jamaica. We expect the Bank of Jamaica to move in tandem as well as the central bank in the Dominican Republic,” Duncan said.