JMMBGL Reports 115.1% Increase in Net Profit

• JMMBGL reported a net profit attributed to equity holders of $8.28Bn for its 9 months ending December 31, 2021, which represents a 115.1% or $4.43Bn increase relative to the prior period. 
• All revenue lines increased, including net interest income, trading gains and fees and commission income. This was facilitated by increased economic activity relative to the prior period, as well as accommodative monetary policies for most of the period (since BOJ did not start raising rates until the last quarter of this 9-month period). 
• In particular, a growth in the loans and investment portfolios bolstered the 18.4% increase in net interest income, and an improvement in investor sentiments and demand for emerging market assets as global interest rates remained low, influenced the 44.7% increase in gains on traded securities. Fees and commission income was 58% higher and reflected increased economic activity as well as significant growth in managed funds and collective investment schemes across the Group. 
• The Group also recorded a 24.2% (or $2.58Bn) increase in operating costs as it transitioned to growth mode from a cost-containment strategy in the prior year, which was incorporated to dampen the effects of the pandemic. It was however able to convert the strategic spend into higher revenues relative to costs, as its operating revenues increased by 32.9%, and operating efficiency improved to 60.2% from 64.4%. 
• We expect JMMBGL to continue to benefit from the economic recovery in its main operating markets, in particular Jamaica and the Dominican Republic. Both economies are forecasted to experience real GDP growth of 5.5% and 2.7%, respectively, in 2022, which will help to fuel greater employment and corporate financial recovery, and in turn raise demand for financial services. It could realise an increase in net interest income from banking services as central banks have switched from their more accommodative policy. However, its securities business could simultaneously record reduced net interest income as its cost of funds may rise faster than its asset yields, contracting spreads and tempering the overall improvement in profitability. 
• JMMBGL’s stock price has increased by 11.8% since the start of the calendar year. The stock closed Tuesday’s trading session at $44.09 and currently trades at a P/E of 7.2x earnings which is below the Main Market Financial Sector Average of 15.1x

(Source: Company Financials and NCBCM Research)