Mixed Fortunes for Financial Stocks in Q1 2026 Thus Far

• Given the challenging macroeconomic backdrop marked by the impact of Hurricane Melissa and heightened geopolitical tensions in the Middle East, first-quarter (Q1) 2026 results across Jamaica’s financial sector reflected a mixed earnings picture. While Sagicor Group Jamaica (SJ) Limited reported a sharp 53.7% decline in earnings to $1.87Bn due to unrealised investment losses and elevated insurance provisions, VM Investments Limited returned to profitability, supported by stronger investment activity and improved cost management despite still-subdued capital market conditions.
• Long-term insurance (LTI) remained SGJ’s largest earnings contributor, generating net profit of $2.08Bn, albeit lower than the $2.35Bn reported in Q1 2025, on the back of lower interest income earned and capital net gain. In contrast, the short-term insurance (STI) segment reported a marginal net loss of $0.02Bn compared to a profit of $0.87Bn in Q1 2025. The decline came as revenue gains (2.7%) were offset by a sharp rise in insurance service expenses (19.2%), which included additional provisions of approximately $0.77Bn recognised by Advantage General Insurance Company (AGIC) related to Hurricane Melissa claims.
• Commercial Banking emerged as one of the Group’s strongest-performing segments during the quarter, with earnings rising by 69.4% year-on-year to $0.83Bn. Revenues expanded by 13%, supported by higher net interest income and increased transaction volumes across card payment portfolios. Loan portfolio growth remained healthy, while deposits and other funding liabilities also expanded during the period.
• However, Investment Banking earnings declined sharply to $0.12Bn (77.8%) as net investment income fell by 29.1%. The weaker outturn primarily reflected the absence of one-off trading gains recognised in the prior year, coupled with persistently high short-term funding rates, which drove an increase in interest expense.
• Meanwhile, VM Investments Limited (VMIL) returned to profitability during the quarter, reporting consolidated net profit of $70.1Mn compared to a loss of $32.5Mn in Q1 2025. The recovery was bolstered by investment activity and tighter cost management despite subdued capital market conditions following Hurricane Melissa and the Middle East conflict.
• Operating revenues increased by $106.5Mn (16.8%), driven primarily by a 68.6% increase in gains from investment activities, which accounted for the majority of the improvement in total revenues. However, net interest income weakened significantly by 83.3% amid softer market conditions.
• Encouragingly, cost-containment measures continued to support the bottom line. Operating expenses declined by 9.0%, reflecting a 23.3% reduction in other operating costs. This comes as management continued to benefit from recently implemented cost-saving initiatives. Staff costs, however, increased by 9.5% due to inflation-related wage adjustments. Nevertheless, net operating income moved to a surplus of $77.53Mn in Q1 2026 compared to a deficit of $94.11Mn previously.
• VMIL earnings were also supported by contributions from associated companies, with the share of profit from associates totalling $25.5Mn. Although lower YoY (-41.8%), associate income continued to provide positive support and helped lift profit before taxation to $103.04Mn compared to a loss before tax of $50.26Mn in Q1 2025.
• As at the close of trading on May 14, 2026, SJ and VMIL’s ordinary share prices closed at $41.57 and $1.62, respectively, reflecting a 3.5% year-to-date increase for SJ and a 24.3% decrease for VMIL. At these prices, SJ and VMIL have a P/B ratio of 1.42x and 0.93x, respectively. SJ trades above the Main Market Financial Sector Average of 1.09x while VMIL trades below.

(Sources: SJ Financials, VMIL Financials & NCBCM Research)