Sabrina Gordon, Business Reporter

Jamaica Money Market Broker's (JMMB) turned in a disappointing performance on profits for the first quarter ending June 30, with its balance sheet reflecting both positives and negatives when compared to the similar reporting period for 2006.

The group produced a net profit of $231.2 million for this quarter, a decline of 28.5 per cent when compared to the three months ending June 2006. The bank's earnings per share also dropped to 66 cents, a 27 per cent decline.

"The 2006 period reflects unusually high gains on securities traded so the 2007 figure was down 18 per cent vis-à-vis last year," explained Marguerite Cremin,JMMB's marketing manager.

"The trend of poor earnings or earnings per share continues to occur for the quasi-banks or investment houses such as JMMB and DBG, among others, whose core product is the repo market, as margins continue to tighten and the ability to take "gains" on GOJ local paper and global bonds to "buffer" earnings continue to deteriorate," said Mark Croskery, CEO of Stocks and Securities.

He further points out that "trading gains" cannot continue into infinitum when focusing on one specific security in one asset class and a critical variable to look at is "investment revaluation reserve" as this has taken a negative swing for the period June 2006 to 2007.

The bank, however, did a better job in managing its 'repos' as net interest income (NII) grew by 12 per cent to $357.5 million. The positive performance was hinged on increases in fees and commission as well as gains from cambio trading activities.

Reduction in gains

Securities trading on the other hand suffered a 17-per-cent reduction in gains. This impacted on overall operating revenue (net of interest expense), which declined 0.9 per cent to $671.2 million. when compared to the similar period in 2006.

"Market conditions in this quarter were less conducive to trading compared to the previous 2006 first quarter," said Cremin.

The 24 per cent increase in fees and commission reflected the group's strategy of diversifying income stream driven by new product offerings.

While the company's profits declined for the period, total assets under management rose above the $100 billion mark. Assets under management grew 10 per cent to $102.9 billion.

"Investments in associates continue to weigh heavily on the group's performance," said Rex Shettlewood, research manager at Mayberry Investments. JMMB's share profit attributed to associated companies were down to $26 million from $64 million.

This reflected a year over year decrease of 59 per cent as Caribbean Money Market Broker continues to recover from a challenging fourth quarter, resulting from rising interest rates due to an inflationary environment in Trinidad and Tobago, especially for their fixed income operations.

sabrina.gordon@gleanerjm.com