Barita Investments Reporting 379.7% Improvement In Q1 Net Profit To JA$108M, Even Amidst Significant Impact By Foreign Currency Translation Losses
Barita Investments Limited is report a 379.7% improvement in net profit to JA$108.4 million, even amid a significant impact by foreign currency translation losses totaling $179.5 million for the first quarter of the 2019 financial year.
With a stable currency, the profit levels would have been $288 million for the quarter they report.
Mark Myers Chairman of the company in his report accompanying the financials indicated that the translation losses were offset by gains on equity portfolio amounting to $198.4 million, and increases in all other key revenue drivers, namely fee and commission income, gain on sale of investments and dividend income.
Net profit translates to earnings per share (EPS) of $0.24 for the quarter, relative to the loss of $0.09 reported in December 2017.
Twelve-month trailing EPS to December 2018 is $1.15, relative to $0.82 reported for the audited year ending September 2018.
An increase in net interest income of 53.0% to $123.6 million, increased from $80.8 million in the corresponding quarter of the prior financial year. Interest costs on repurchase agreements continue to trend down, resulting in a 0.7% decline in top line interest income being offset by a 25.7% reduction in related expenses to $129.4 million.
Non-interest income grew 236.4%, to $270.1 million relative to the figure of $80.3 million reported for the December 2017 quarter.
The most significant driver to this growth was fair value gains on equity portfolios to the tune of $198.4 million. Other non-interest revenue areas gave strong performances as all categories except other income saw double to triple digit growth. Foreign exchange translation losses however significantly impacted the gains realised from our operating activities.
Fees and commission income added 35.4% to $158.5 million for the December quarter relative to December 2017’s $117.1 million, as the area continues to benefit in growth of funds under management, however the benefits of the strengthening of the investment banking capabilities of the organisation has resulted in revenues of $33 million being accounted for in additional fee income Myers reported.
In the context of a strengthening local dollar during the quarter, Myers reported that the Group realised a 185.8% increase in foreign exchange trading and translation losses when compared with the same period last year, resulting in this segment closing the period at loss of $156.0 million.
Of this amount, he said the foreign exchange trading (cambio) component reported a gain of $23.5 million, 217.1 % above prior year, however translation losses of $179.5 million, our most significant translation loss of any review quarter, outweighed cambio trading and a portion of our other operating revenue streams.
Gain on sale of investments closed the quarter with a four-fold increase to $64.3 million when compared to December 2017 benefitting significantly from the increased investment banking functionality.
Dividend income on equity portfolios also finished the year higher, registering growth of 90.1% to $4.1 million.
Higher staff and administrative costs resulted in total operating expenses closing the quarter at $208.5 million relative to $166.4 million in the prior year. An impairment credit of $6.2 million related to the implementation of IFRS 9 however led to lower overall expenses of $202 3 million. Administrative expenses increased by 6.9% to $83.1 million; while additional staff related costs amounted to $36.8 million, resulting from staff restructuring activities and increases in which caused this expense category to close the quarter at $125.4 million. Operating expense to total revenue ratio was 39.9%, versus 49.6% reported for QI 2017-18.
Balance sheet highlights for the Group as at December 31st 2018 are as follows:
Total assets of $18.9 billion versus $16.4 billion as at December 2017, and $18.9 billion as at the September 2018 year-end. This reflects a year-on-year change of 15.0% or $2.5 billion.
A $2.2 billion change in marketable securities to $5.2 billion was chiefly responsible for the increased asset position. Securities purchased under resale agreements followed with a 17.6% or $590.2 million for continued commitment and support.
Total liabilities increased 17.5% to $15.8 billion when compared with December 2017, attributable mainly to a 22.3% increase in repo liabilities to $14.1 billion.
Shareholders’ equity added 15.0% or $2.5 billion year-on-year to close the reporting period at $3.0 billion. Compared with the financial year ending 2018, total shareholders’ equity remained relatively unchanged.
In his outlook, Mr. Myers indicated that the Bank of Jamaica lowered its signal rate from 2.00% to 1.75% in December 2018, lending additional support to his outlook that market interest rates will remain low in the near term.
The Bank’s decision comes after an assessment that inflation could fall below the 4-6% target established, due to world crude oil prices falling below their previous forecast and remaining at low levels in the near term.
Additionally, the performance of the Jamaican dollar vis-a-vis its US counterpart continues to show marked slowdown with intermittent periods of volatility, with devaluation closing the calendar year at 2.2%.
In light of these realities he anticipates that local equities will continue to be stimulated and provide investors with the most attractive options.