Barita’s Earnings Limited by Lower Revenue; JMMB Brokers an Earnings Jump

• Main Market Financial Service players, Barita Investments Limited (BIL) and JMMBG Group Limited (JMMBGL) had contrasting earnings performances for the September Quarter. BIL reported Q4 earnings of $763.41Mn (down 17.9% year over year), due to a falloff in net operating revenues, while JMMBGL earnings climbed on the back of higher operating revenues and a higher share of profits.
• Despite higher Net Interest Income (NII) and fees and commissions, BIL’s operating revenues declined by 25.9%, reflecting a sharp decline in gains on investments. NII increased by 5% to $417.65Mn, as it deployed proceeds from its recent bond into higher-yielding opportunities in its investment portfolio. Fees and commissions also increased (+36.5%), primarily driven by higher investment banking fees and expansion in asset management. However, this growth was offset by markedly weaker gains from investments (-71.3%).
• Buoyed by improved spread and effective cost of funds management, JMMBGL also saw its NII grow (+50.8% to $1.32Bn). Fees and Commission rose by 20.6% to J$247.63Mn, owing to its growing off-balance sheet solutions, such as unit trusts, pension funds, and money market funds. Unlike BIL, JMMBGL also had a 39.2% increase in gains on investments, which contributed to its operating revenue increase. Beyond operating revenues, the company also had a 42.7% increase in share of profit from its associate, mainly due to its 23% share in Sagicor Financial Company, which also boosted earnings.
• Both companies also had differing results regarding cost containment. BIL cut its quarterly operating expenses by 21.7% to $1.40Bn, driven by a decrease in expected credit loss, which helped to cushion the impact of the revenue decline. Notwithstanding the savings, its cost-to-Income (C/I) ratio increased to 63.9% (up from 60.5% in 2024). Conversely, inflationary increases and strategic spending drove higher operating expenses of $0.30Bn (+5.4%) for JMMBGL, albeit not enough to prevent an improvement in cost-to-income ratio from 97.8% to 76.3% YoY.
• Despite the divergent quarterly performances, the outlooks for both companies remain stable within the context of the current interest rate environment. However, there are risks to their financial performance due to the impact of Hurricane Melissa, which could generate inflationary pressures. Rising domestic prices cast doubt on the possibility of near-term rate cuts, which could weaken net interest income. Melissa’s economic fallout could also spill over into the stock market and lead to reduced trading gains. For JMMB, there is also the potential for an increase in non-performing loans arising from the devastation in western Jamaica and its impact on borrower debt servicing ability.
• Barita's stock has increased 6.0% year-to-date, closing at J$77.93 on Thursday. At this price, the stock trades at a price-to-book (P/B) ratio of 2.7x, which is above the Main Market Financial Sector’s average of 1.2x. Meanwhile, JMMB’s stock has decreased 23.4% year-to-date, closing at J$17.08 at Thursday. At this price, the stock trades at a price-to-earnings (P/B) ratio of 0.5x, which is also lower than the Main Market Financial Sector’s average of 1.2x

(Sources: JSE & NCBCM Research)