Keith Collister, Business Writer

Keith Duncan, chief executive officer of Jamaica Money Market Brokers.- File

Jamaica Money Market Brokers (JMMB) has reached a landmark of 100,000 clients, making it the largest brokerage house in Jamaica "by far," according to chief executive officer Keith Duncan.

JMMB's asset base, which includes funds under management and JMMB's own account investments, has also increased by over $18 billion to a new high of nearly $82 billion.

And the group's equity base has grown to $7.15 billion, well ahead, said Duncan, of regulatory requirements according to the brokerage's own internal capital adequacy risk models.

The company's 2006 net profits were at a record high of $1.67 billion, despite a nearly 15.35 per cent increase in operating revenue, but this performance was only marginally above net profit of $1.65 billion for 2005. This mainly reflected the continued narrowing of both local Jamaican and U.S. dollar interest spreads and the consequent effect on the growth of the company's net interest income.

Duncan, in his presentation Thursday at the company's annual general meeting, explained that as a financial intermediary, JMMB bought long-dated, instruments, which it financed through borrowing short term funds.

In the Jamaican dollar market, yields have been falling across the full range of tenors, or maturities, while the gap between the long end and the short end of the interest rate curve was also narrowing.

SPREADS

The spreads on JMMB's portfolio have been narrowing while funding has been "sticky" relative to the market, said the CEO.

For Jamaican dollar investments, the spread between short and long-dated instruments has fallen by almost two thirds from about 4.0 per cent in September 2004 to barely 1.5 per cent currently.

In addition, the rise in the U.S. Fed Funds rate has reduced the U.S. dollar spread from over 5.0 per cent to less than 3.0.

Duncan sees banking and corporate finance as areas of new opportunity for JMMB, saying that "with interest rates coming down, there was now an opportunity to lend to the private sector."

JMMB's plan is to take a "balanced approach to ensure smoother revenue streams which are recurrent and less susceptible to economic shifts and market downturns," said Duncan.

Its recent structuring of financing for the largest cement shipment in the English-speaking Caribbean on behalf of Mainland International was a good example, the brokerage feels, of JMMB's ability to establish a competitive advantage through speedy and flexible solutions.

And, the acquisition of 50 per cent of the Intercommercial banking group two years ago, one of only six Trinidad commercial banks, is starting to provide good future income prospects, with a bottom line that is expected to improve three to four fold this year. JMMB's quest to become a "regional powerhouse" is on track with its continued expansion into the Dominican Republic. It hired a Citibank-trained Dominican Republic national as country manager in 2006, which presents a huge market opportunity with a population and GDP several times that of Jamaica's.

Finally, the company expects to launch a number of new products in the coming months, including additional mutual fund services through JMMB Securities Limited, consumer financing and general insurance solutions and "structured financial products for the more sophisticated investor," said the CEO.

With regard to the latter, Duncan said Jamaican investors had got used to "unreasonably high interest rate returns," and "need to understand the risk they are taking."

He stated that the planned "structured products" would be a solution for their "sophisticated clients willing to take on more risk."

business@gleanerjm.com