Dennise Williams, Staff Reporter
RYLAND CAMPBELL
ITS MUTUAL fund subsidiary having lagged over the past year, the bosses of Capital and Credit Merchant Bank (CCMB) are looking towards a $100 million grab back to drive growth and profit on their Giltedge Fund.
For the other mutual fund laggards, the CCMB executives hope for a continued resuscitation of the Jamaica Stock Exchange, where the bears have held sway for a long time.
"All the unit trusts based on stock market are experiencing decline," CCMB's chairman and CEO, Ryland Campbell, told shareholders at the group's annual general meeting on Friday. "But in terms of the Jamaica Stock Exchange, we can't do anything. We will hope and pray it will improve because that is the long-term behaviour."
Last year CCMB increased its net profit by nearly 35 per cent to $1.16 billion, but when shareholders met in Kingston last week for the AGM, the group's executives had to face tough questions from stockholders about the performance of mutual fund management subsidiary, Capital and Credit Fund Managers Ltd.
WORST PERFORMING UNIT TRUST
For instance, for the 12 months up to last Friday, its Income and Growth Fund, which invests primarily in the equity market, had suffered a 33.7 per cent loss.
"This is the worst performing unit trust in the market," com-plained shareholder Ralph Chen.
"We are disappointed," conceded Campbell.
But it was not only the performance of the Income and Growth Fund about which investors were concerned. They complained, too, about its Capital Growth Fund, which has an equity component, mixed with real estate and fixed income. Over the same 12-month period, this fund declined 23.43 per cent.
However, the Giltedge Fund, which is all fixed income, although its performance has not been spectacular, has kept pace with inflation, returning 12.12 per cent to investors. And this fund is where CCMB hopes to strengthen the return to unit holders - with help from the $100 million that is to be retrieved from the tax authorities.
"We are certain we can improve the returns on this fund," said Curtis Martin, deputy group president and president of Capital and Credit Merchant Bank. "In a couple weeks, we will recover $100 million that the Government had for us. We will pump these funds into the Giltedge fund and over the next three to four months this should help its return."
The cash to be clawed back, Martin explained, is really withheld taxes "from Government of Jamaica securities that the Giltedge fund had bought some time ago".
Essentially, the money market funds along with pension funds are allowed to invest tax-free. However, the 25 per cent taxes on interest are withheld at source and are to be refunded by the government within 45 days. Normally, though, refunds take significantly longer.
HEALTHY PROFIT POSITION
Fees and commissions and other non-interest revenues, up more than 114 per cent last year, contributed $1.12 billion to Capital and Credit's earning in 2005, and to the group's healthy profit position.
"These incomes were generated from contributions from fixed income and equities portfolios held by the group, as well as expanding the stock brokerage activities and manage-ment of unit trust funds during the year," Capital and Credit explained in its annual report.
As it pumped up its non-interest earnings, Capital and Credit boasted it, at 40 per cent, was able to maintain among the industry's best efficiency ratios - that is, non-interest expenses as a proportion of net interest income and other revenues. Last year, non-interest expenses amounted to $872 million, against $666.1 million in 2004.
In the first quarter up March 31, 2006, Capital and Credit had loans, after the provision for loan losses, of $2.61 billion, marginally lower than the figure at the end of last December. Nonetheless, the group says that this year it intends to grow net interest income through the focus on loans.
"This will be a significant part of our business and we intend to launch new products in the next few months that will bring value to customers," said Martin.
Officials, however, realise that growing the loan book will be challenging.
"Competition for the loan business is not just other banks," acknowledged Campbell. "There are motor vehicle companies offering loans; supermarkets offering credit cards; foreign companies offer investment services physically and electroni-cally in Jamaica. And so we have to change with the times."
But like with the prospects for the loan portfolio, Campbell, praising his team for the performance of the past 13 years, remained optimistic about the future of the organisation.
"People didn't think that we would reach this far. So let us not revel in our success. We are in the delicate stage of puberty and the challenge is great for us as a financial institution," he said.
'All the unit trusts based on stock market are experiencing decline. But in terms of the Jamaica Stock Exchange, we can't do anything. We will hope and pray it will improve because that is the long-term behaviour.'
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