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VMIL profit battered by economic headwinds

VM Investments Limited got whipped by monetary belt-tightening, and falling investor confidence, which pushed down its earnings by 94 per cent in the June quarter.

Still the company said its team was “resolute” and would press ahead with growth plans that include new services and products.

“Notwithstanding the turbulent investment market conditions, we are focused on executing key strategic initiatives. These are, building our Caribbean Asset Management platform, and we hope to complete the acquisition of Republic Funds Inc (Barbados) by year end,” said CEO Rezworth Burchenson.

“We are building our private equity portfolio and are aiming to announce further progress by year end. To improve our efficiency and employee experience, our digitalisation efforts continue with multiple projects under way,” he told the Financial Gleaner.

In the June 2022 quarter, the company earned a profit of $238 million, but that was cut to $14.1 million, and most of the earnings in the current period were due to its share of the profits of Barbados-based online lending platform Carilend, amounting to $13.6 million.

“Ultimately, the inflationary pressures, higher interest rates and unsettled investment markets resulted in net profit of $14.1 million for the quarter,” said VMIL.

VM Investments is part of the VM Financial Group, which also includes VM Building Society, VM Wealth Management, VM Money Transfer, VM Pension Management and VM Finance.

The VMIL stock is currently trading below $3, falling from $7 in 2022. The stock market has been in decline with the heightening of interest rates by the Bank of Jamaica since the fall of 2021.

Financial companies have been hit by eroding asset prices as a result of the rate hikes and other turbulence.

“We redefined our internal processes, talent management, and technology during the June quarter, which resulted in improved efficiency and the automation of several procedures across the group,” said VM Investments.

The company saw a mixed bag of growth and contraction for its various services. Its loan portfolio grew 6.37 per cent, but its portfolio of resale agreements declined by 7.3 per cent. Investment securities increased 0.49 per cent and net investments in finance lease declined by 26.9 per cent.

It all contributed to a 32 per cent increase in core income for the quarter and a 23.9 per cent improvement on year-to-date basis, the company said.

However, higher interest rates overwhelmed those improvements, resulting in a 42.7 per cent increase in interest expense year-on-year. This ultimately resulted in negative net interest income of $27.7 million for the quarter and $63.89 million year-to-date. A relatively “depressed” capital market, coupled with lower brokerage volumes resulted in a 55 per cent decline in net fees and commissions to $158 million.

VMIL, however, reported growth in total equity to $3 billion, up from $2.86 million the previous year.

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