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Tax Credit props up VMIL’s Bottom-line Published: 07 August 2020

  • For the six months ended June 30, 2020, Victoria Mutual Investment Ltd. reported an unaudited audited net profit of $170.89Mn (EPS: 11¢), down by 32.4% (or $81.89Mn) YoY.
  • The company saw a pull-back in all revenue lines— net interest income was down marginally (-0.6% YoY), while other operating income contracted (18.7% YoY).  Combined with higher operating costs (up 21.7% YoY), the company’s profit before tax sank (72.1%) to $90.43Mn.  The bottom-line was supported by an $80.46Mn tax credit. 
  • The stock price has fallen 22.5% since the start of the calendar year, closing the Wednesday trading session at $6.94. At this price, the stock currently trades at a P/E of 20.4x earnings, which is above the Main Market Financial Sector Average of 14.8x.

 (Source: VMIL Financials)

Below Consensus On Peru, Panama Growth Published: 07 August 2020

  • Fitch Solutions forecast the Peruvian economy will contract 10.7% y-o-y in 2020, a more downbeat view than the Bloomberg consensus estimate of a 9.0% decline.
  • The domestic outbreak of Covid-19 will disproportionately affect Peru as stringent restrictions on business activity and personal mobility combine with weak global demand for exports to cause substantial contractions throughout much of 2020.
  • That said, Fitch expects sustained fiscal stimulus measures and a positive investment outlook will aid Peru’s rebound in the medium-to-long term, with real GDP growth of 5.2% in 2021.

(Source: Fitch)

Brazil's biggest lenders delay $44 billion in loan for consumers, companies Published: 07 August 2020

  • Brazil’s top four listed lenders are giving months-long extensions for consumers and companies to repay 235 billion reais (US$43.98 billion) in outstanding loans, a move to give financially squeezed borrowers a breathing room.
  • The loans subject to forbearance programs, which range from 13% of Banco Santander Brasil SA’s (SANB11.SA) portfolio to 10% of Itau Unibanco Holding SA’s (ITUB4.SA), are an indicator of potential defaults.
  • The extensions, granted between March and June, vary from 60 to 180 days, depending on the bank. That echoes the situation at their U.S. cohorts, some of which acknowledge more loans may go bad as forbearance plans expire.

 (Source: Reuters)

U.S. job growth forecast to slow sharply in July as COVID-19 cases soar Published: 07 August 2020

  • U.S employment growth likely slowed significantly in July amid a resurgence in new COVID-19 infections, which would provide the clearest evidence yet that the economy’s recovery from the recession caused by the pandemic was faltering.
  • A $600 weekly unemployment benefit supplement expired last Friday, while thousands of businesses have burned through loans offered by the government to help with wages.
  • A labor market relapse would be more bad news for President Donald Trump, who is lagging in opinion polls behind former Vice President Joe Biden, the presumptive Democratic Party nominee for the Nov. 3 election.

(Source: Reuters)

China's July export surge may point to more sustainable recovery Published: 07 August 2020

  • China’s economy appeared to be gathering pace in July as exports rose the most this year while some raw material imports hit record highs, adding to hopes for a more sustained recovery.
  • Exports in July increased 7.2% from a year earlier, the fastest pace since December last year, customs data showed on Friday, confounding analysts’ expectations for a 0.2% drop, and quickening from a 0.5% increase in June. Imports, on the other hand, fell 1.4%, missing market expectations for a 1.0% increase.
  • The economy is gradually emerging from a record contraction in the first quarter but the recovery remains fragile as rising coronavirus cases around the world and renewed lockdowns could hit demand.
  • Chinese consumer spending also remained subdued amid job losses and concerns about a resurgence in infections.

 (Source: Reuters)

STATIN reports a 1.4% Inflation Rate for June 2020 Published: 04 August 2020

  • The All Jamaica Consumer Price Index for June 2020 was 105.2, indicating an inflation rate of 1.4%. This increase was large as a result of the 3.6% increase in the index for the heavily weighted division ‘Food and Non-Alcoholic Beverages’ division
  • Higher prices for agricultural products such as Irish potato, yellow yam, carrot, and lettuce for the review period, resulted in the index for the class ‘Vegetables, tubers, plantains, cooking bananas, and pulses’ moving up by 14.4%. There was an increase of 0.5% in the index for the division ‘Clothing and Footwear’.
  • For the divisions ‘Furnishings, ‘Household Equipment and Routine Household Maintenance’ and ‘Personal Care, Social Protection and Miscellaneous Goods and Services’ each increased by 0.4%. These increases were however tempered by the decline in the division ‘Housing, Water, Electricity, Gas and Other Fuels’ down by 0.3% and ‘Transport’ down by 0.1%.

(Source: STATIN)

Access Financial Reports an 80.0% Decline in Profits Due to a Contraction in Revenue Published: 04 August 2020

  • In the latest release of result from Access Financial Services Limited, the company reported an 80.0% (or $131.98Mn) contraction in unaudited net profits for the three months ended June 30, 2020. Net profits fell to $33.01Mn (EPS: 12¢) from $164.98Mn (EPS: 60¢) reported in the same period one year prior.
  • This outcome was primarily driven by a 15.5%% (or $56.21Mn) decline in net interest income, a 32.9% (or $48.71Mn) fall in net fees and commission on loans, and a $20.11Mn increase in tax expenses.
  • The stock has fallen 22.0% since the start of the calendar year. AFS closed Monday’s trading session at $26.90 and currently trades at a P/E of 37.4x earnings, which is below the Junior Market Financial sector average of 43.3x earnings.

 (Source: AFS Financials)

Grenada Will Enter Historic Contraction In 2020 Before Growth Returns In 2021 Published: 04 August 2020

  • The Grenadian economy will severely contract in the coming quarters as the Covid-19 pandemic undermines tourism, commercial activity, and investment.
  • In the longer term, the country's fiscal space, investment pipeline, and competitive services sector will support an economic rebound beginning in 2021.
  • Fitch Solutions have revised their 2020 and 2021 real GDP growth forecast to -13.7% y-o-y and 5.2%, from -4.7% and 2.6% previously, as the pandemic depresses external demand for overseas travel in the near term. In 2021, Fitch expects base effects, and stronger investment will support headline growth.

(Source: Fitch Solutions)

Argentina Closing In On Debt Deal, But Hurdles Will Follow Published: 04 August 2020

  • Fitch Solutions believe Argentina will secure a deal to renegotiate its external debt obligations over the near term.
  • Even with a debt deal secured, it is expected that the government's strained relationship with its creditors and lack of a plan to restore economic stability will remain barriers to its market access.
  • Additionally, Fitch expects the IMF will push the government to develop a macroeconomic plan before agreeing to any new concessions to assist the government.

(Source: Fitch Solutions)

U.S. Gets a Debt Warning From Fitch as Stimulus Battle Rages Published: 04 August 2020

  • One of the world’s major credit-rating companies fired a warning shot regarding the U.S.’s worsening public finances, just as lawmakers in Washington contemplate spending more to combat the economic fallout from the coronavirus pandemic.
  • Fitch Ratings revised its outlook on the country’s credit score to negative from stable, citing a “deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan.” The country’s ranking remains AAA.
  • “High fiscal deficits and debt were already on a rising medium-term path even before the onset of the huge economic shock precipitated by the coronavirus,” Fitch said. “They have started to erode the traditional credit strengths of the U.S.”

 (Source: Bloomberg)