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JMMB expects interest rates to fall by year end, hopes to ease profit pressure

Financial conglomerate JMMB Group Limited expects interest rates to start falling in Jamaica this year, which would bode well for its core investments, banking and trading arms that are currently under profit pressure.

The group listed operational in Jamaica and two other Caribbean markets reported earnings of $3.15 per share for year ending March 2023, which was down by nearly half the $5.64 per share reported the previous year. The company’s capital base also dipped over the course of the year, from $55.6 billion to $53.3 billion.

“What we expect over this year is some monetary easing,” said JMMB Group CEO Keith Duncan during an earnings call on Tuesday.

He added that the Bank of Jamaica, BOJ, could begin to reduce interest rates “towards the end of the year”, while noting that reduced interest rates would result in improved margins and better trading opportunities.

Duncan said Jamaica was now at the “top of the economic cycle” with commodity prices normalising and interest rates flattening. He added that BOJ and the US Federal Reserve, America’s central bank, are separately holding rates stable.

Additionally, in JMMB’s two Caribbean markets, rates in the Dominican Republic are already easing downwards, and have stayed flat in Trinidad & Tobago throughout the pandemic, he added.

For FY2023, JMMB Group made a profit of $6.3 billion, down 46 per cent. The group blamed the challenging economic conditions including the higher than usual interest rates which jumped since October 2021 from 0.5 per cent to 7.0 per cent.

The BOJ has held the rate stable since last November, but has imposed additional cash restrictions that took effect in April.

The JMMB Group cited rising interest rates, inflationary pressure, and depressed trading activities as key factors impacting its financial performance. Despite these challenges, the conglomerate, which is in the business of securities dealing, brokerage services, commercial banking and insurance brokering, focused on the expected fall in rates and its diversification in services and territories as the basis for its positive outlook.

For the financial year, a third of the group’s earnings came from its banking operation. Additionally, operations in Trinidad & Tobago contributed 17 per cent of the group’s profit compared to 7.0 per cent in the previous year. Furthermore, JMMB Group’s investment in Sagicor Financial Company Limited positively influenced profitability, generating $2.7 billion in share of profit and $1.1 billion in dividends.

JMMB Group’s asset base grew eight per cent to $665.3 billion, primarily due to a larger loan portfolio, which expanded by 25 per cent to $178 billion.

The group is also focused on “digital acceleration” with plans to introduce new payment options, a queue management system to reduce in-branch wait times, a prepaid money transfer card, a virtual assistant, and new features on its Moneyline banking and investment platform.

Additionally, JMMB Group plans to expand its remittance business lines into other countries of operation in the medium term, but declined to give specifics.

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