Perkins - File

Donovan Perkins is, at it turns out, a nationalist and a pragmatist.

He runs a highly profitable company that has experienced eight straight years of growth, but says he is willing to sacrifice Pan Caribbean Financial Services' consistent profit spurt for a sounder national economy and the spreading of financial success to include his clients in the productive sector, now being battered by the same high interest rates that have proven so lucrative for money management firms. "This record of growing profits every year is important but at the same time, if your profits have to retreat, then we are prepared to live with that," said Perkins.

"I am not fearful of low interest rates. It is one of the necessary conditions for us (the country) to grow."

Pan Caribbean, which is more than 85 per cent owned by Sagicor, in 2008 made $1.38 billion in net profit, which was 14 per cent better than the $1.2 billion profit recorded in 2007.

The positive outturn for the Sagicor group member, was supported by steady growth in net interest income, which moved up 13 per cent to just shy of $2 billion.

High interest rates

The company grosses $5 billion to $6 billion per annum.

Prevailing high interest rates, coupled with a $212.6 million gain from the devaluation of the Jamaican dollar against its United States counterpart, would have had a significant impact on Pan Caribbean's revenue last year, even amid a slump in its fixed income business including unit trusts and mutual funds, and a substantially depressed equities market.

"The stock market fell 44 per cent," said Perkins.

"That hurt the fees we earned in our asset management business. On the stock brokerage side, we kept digging away trying to create values and ended 2008 - our fourth year in the business - as the number one stockbroker. Had the equities market been a little friendlier we would have probably made more money out of that business. On the fixed income side, it was a tough year."

He points to Pan Caribbean's liquidity, helped in no small measure by the $1.26 billion raised from its preference share offer in January last year, as an important factor in a successful year.

"We managed to raise our liquidity during the first half so when things got very tight and the central bank started hiking rates, we were on the right side of the market. We had both United States (US) and Jamaican dollar liquidity. In the second half of the year, we had strong US dollar inflows and saw our US dollar assets growing faster than our Jamaican dollar assets."

Healthy balance sheet

The company ended 2008 with healthy balance sheet assets of $63.77 billion, a 28 per cent increase on its $49.79 billion at 2007, and would have made an important contribution to parent Sagicor Jamaica's $3.9 billion 2008 profit, which was up 33 per cent over 2007.

Pan Caribbean's 2008 financials reflect the growing trend of banks and near banks posting big profits from conditions, including high interest rates and currency devaluation, which are driving many other businesses - which constitute a large chunk of the clientele of finance houses - to the wall.

So while manufacturers, hoteliers, mining companies and even some financial firms are reporting job cuts and closures, Pan Caribbean is in the process of recruiting more staff and bringing in new talent.

"The downturn in the economy has had a positive impact on us and in some respects it contributed to some of our growth last year, " Perkins acknowledged, adding: "I would much rather a healthy eco-nomy where institutions are competing, finding new ways to become more efficient and serve their customers."

Perkins' comments, made during a recent interview with the Financial Gleaner, give support to the growing lobby for the lowering of interest rates. The issue of the phenomenal disparity in profits of banking and non-banking enterprises, influenced in part by national monetary policy, is shaping up to be an explosive debate in the Jamaican business landscape.

Financial losses

Here, many entrepreneurs, ravaged by spiralling high interest rates-induced debt costs, collapsed demand for their products and services and the resulting mounting financial losses, are looking on, seething while their bankers rake in billion in profits.

Last year, for example, number one commercial bank by deposits, Bank of Nova Scotia Jamaica, led the pack with $9.6 billion in annual profit after tax, followed closely by National Commercial Bank (NCB), the bank with the largest asset base, which saw after tax profit climb to $8.7 billion for the year.

But the Pan Caribbean boss is taking little comfort from the current banking profit boom, pointing out that in the long run, all businesses stand to lose if the conditions do not exist for the prosperity of business generally.

"Eventually, financial institutions will reflect the economy in which they operate. It's going to be very difficult for any company, be it financial or non financial, to operate in an environment where those rates persist. If the situation continues to deteriorate you are going to have problems," he said.

In one respect, the problems have started to set in for Pan Caribbean, which, for the first time in 10 years has seen a decline in stockholders' equity, which inched down to $7.08 billion from $7.53 billion last year.

Pan Caribbean attributes this to its $658 million dividend pay-out last year and losses sustained from declining global bond yields when that market all but crashed in the aftermath of the Lehman Brothers investment house collapse last September.

At a time when many investors in equities have seen a major fall-off in earnings from their stockemployees through Sagicor, becomes the latest of several firms to eliminate jobs.

Just Wednesday, Radio Jamaica Limited also cut 32 positions.

Up to this month, there were more than 3,900 redundancies in Jamaica. This week's announcements pushes the tally above 4,000.

But Jamaica isn't the only Sagicor market to face cuts. The parent company Sagicor Financial Corporation is eliminating another 32 jobs elsewhere in the region, according to a statement Thursday.

Comprehensive restructuring

Said Sagicor Financial: "The group's management has commenced a comprehensive organisational restructuring which will result in a number of functions being reorganised or made redundant."

According to the company, 18 jobs are being cut in Barbados and 14 in the United States.

Jamaica's total of 75 includes former Blue Cross of Jamaica workers who joined the firm just this year.

Karl Williams, assistant vice-president of Sagicor Jamaica told the Financial Gleaner yesterday that 65 positions of the former Blue Cross company, would also be made redundant.

"This type of business restructuring during times of economic difficulty has become a harsh reality that is currently being dealt with by many businesses," the company said in a news release. "We are implementing this process with integrity and respect for the dignity of our colleagues who have been dislocated and have sought the relevant advice to follow best practice."

Sagicor Group is one of the largest financial institutions in the Caribbean with assets of approximately US$4 billion.

Over two decades the company has grown substantially due to the acquisition of some 20 companies during the period, five of which were resold.

"All of these acquisitions would have brought different systems and procedures, organisational structures, executives and staff and while we would have initially eliminated much of the duplication there is till need to further rationalise our operations," the company said.

dionne.rose@gleanerjm.com

The offices of Pan Caribbean rise to the skyline in this August 2006 Gleaner photo.