A JMMB branch on Knutsford Boulevard in New Kingston. - File

Jamaica Money Market Brokers (JMMB), the 17-year-old money market brokerage hit last year by the collapse of international finance house Lehman Brothers, is reporting a 58 per cent plunge in first-quarter net profit to June, precipitated by a drop in funds and a near $1-billion rise in the cost of business.

JMMB's first-quarter net profit fell precipitously to $157.9 million from $376.6 million it posted for the similar period last year, when its profit dip was just about a half of the current decline.

JMMB is claiming that its performance is credible when placed in the context of the current economic downturn.

"The group's performance indicates the ability to manage through challenging economic conditions," the company said in its directors' report to the Jamaica Stock Exchange.

Dip in bottom-line income

The stock is trading at or around $4.35 per share.

The dip in bottom-line income carries from $971-million increase year-on-year to $3.15 billion in 'interest expense' or the cost incurred by JMMB to write business in the quarter.

The rise in interest expense totally eradicated the $700 million gain in top-line income - from $2.7 billion in Q1 2008 to $3.4 billion in the current three-month period - and it spliced the company's net interest income, which fell 54 per cent from $490 million to $224 million this quarter.

Drop in portfolio funds

JMMB also reported a signi-ficant dwindling of one portfolio of funds, which dropped to $8.2 billion at June 30, 2009, a 54.9 per cent plunge from $18 billion in 2008.

Notes to the JMMB's latest financial statement explain that JMMB acts as agent and earns fees for managing clients' funds on a non-recourse basis under a management agreement.

The amount of such fees has nosedived with the funds fall-off.

JMMB is attributing its falling margins to increased cost of funds on its Jamaican and US-dollar portfolio, but says it is working to effect a turnaround.

"The JMMB Group has already taken steps to correct this position as we have reduced our US$ long position; with this the recent reduction in interest rates will have a positive impact on our net interest income going forward," said Patrick Ellis, group chief financial officer, in response to Wednesday Business queries.

Profits were also affected by a reduction in income from associated companies arising from JMMB's sale last year of its minority holding in the Trinidad-based Caribbean Money Market Brokers.

Still focused

JMMB posted gains in securities trading and foreign-exchange gains to $350.9 million, up from $236 last year, and notwithstanding a near $100-million containment of operating expenses, the results were insufficient to grow operating revenue or even rebuild it to last year's levels.

Mid-line income fell from $237 million to $150 million, JMMB reported.

Looking ahead, the brokerage remains focused on growing business outside Jamaica.

"We have also put our focus on the excellent opportunities in the Dominican Republic (DR) and Trinidad and Tobago whose economies have not been as hard hit as our local economy in Jamaica," said Ellis, "and we are in the process of acquiring a savings and loan institution in the DR and have recently opened our Intercom-mercial signature full-service branch on the waterfront in Port-of-Spain, Trinidad."

Intercommercial Bank Limited (IBL) is a small commercial bank in Trinidad co-owned by JMMB and the Mittal Group.

Ellis also points to the conti-nuation of JMMB's income diversification programme, aimed at creating long-term sustainable profit.

"We have regulatory approval for pension investment manage-ment and administration services and with a base of individual clients already in the portfolio," said Ellis.

JMMB, he added, would launch a JMMB Retirement Solutions product in the marketplace by the end of September.

JMMB earlier this year cut staff by some 14 per cent and announced a new marketing and sales programme for its under-performing insurance brokerage unit.

For the reporting period, JMMB was able to increase its assets base by 6.8 per cent to $118.7 billion.

Its net worth improved within three months, growing from $5.3 billion to $5.8 billion, but was still almost $200 million off its June 2008 position of $6.06 billion.

"This significant increase in assets was funded mainly by growth in retail and corporate client investment," the directors' report noted.

sabrina.gordon@gleanerjm.com