Businessuite Markets
Victoria Mutual Investments Already Has Effective Control of Kingston Properties.
Rezworth Burchenson Chief Executive Officer of Victoria Mutual Investments Limited (VMIL) needed to move quickly. The net profit recorded during the September 2022 quarter contributed to the 1.77% or JA$54.09 million growth in retained earnings. However, this was not sufficient to offset the $1.64 billion deterioration in investment revaluation reserve, which resulted in a 34.04% or JA$1.55 billion decline in total shareholders’ equity.
Rezworth Burchenson and Kevin G Richards Chief Executive Officer Kingston Properties Limited separately released two significant announcements over the last two weeks. Separately the two announcements may seem unrelated or even connected, but Businessuite has however found interesting links between them.
Kevin G Richards Chief Executive Officer Kingston Properties Limited
Based on these links we were forced to ask the following questions: Is Victoria Mutual Investments Making A Strategic Move To Acquire Kingston Properties and Does Victoria Mutual Investments Already Have Effective Control of Kingston Properties.?
The most recent came on January 3, 2023 from Richards advising the JSE, the RMOD and the wider investing public that a total of 66,673 units of KPREIT shares were purchased under a current share buy-back programme on December 29, 2022, at an average price of $7.04 per share.
The transaction was executed through their broker VM Wealth Management Limited, which is a subsidiary of Victoria Mutual Investments Limited (VMIL), itself a part of the Victoria Mutual Group.
The other release was made on December 30, 2022 by Rezworth Burchenson
announcing that his company Victoria Mutual Investments Limited (VMIL) had acquired 135,483,871 units of Kingston Properties (KPREIT) shares for a combined consideration of JA$1,050,000,000.
This transaction increased VMIL’s stake in KPREIT to a total of twenty-three per cent (23%), up from 7% as reported in September 2022, making KPREIT an associate company of VMIL.
It should also be noted that based on Kingston Properties September 2022 Shareholding Report:
• VMWealth Property Fund exercised control over 257,885,079 shares in Kingston Properties amounting to 29% of the shareholdings.
• Prime Asset Management JPS Employees Superannuation Fund exercised control over 138,584,772 amounting to 16% of the shareholdings.
Prime Asset Management, was formed in 1996, as a division of Prime Life Assurance Company Limited and was subsequently taken over and renamed VM Pensions Management Limited (VMPM).
Based on the above, as at the September 2022 reporting, Victoria Mutual was able to effectively leverage a total of 52.3% of the shareholding of Kingston Properties.
Prime Asset Management JPS Employees Superannuation Fund and VMWealth Property Fund held the two largest blocks of shares in Kingston Properties, and so it could be argued that Victoria Mutual Investments acquired its increased position from either of those two. Our investigation revealed that the acquisition came from the VMWealth Property Fund.
So, we were able to answer one of the two questions: Yes, Victoria Mutual Investments already has a greater that 50% effective control of Kingston Properties.
This first move by Burchenson and VMIL is essentially to directly account for the share of profits on its balance sheet, effectively shoring it up. Burchenson also expects to benefit from dividend income.
“With the acquisition of the additional shares, VMIL’s 23% stake in KPREIT will result in the Company reporting a share of profit.”
Previously as part of the VMWealth Property Fund they could not do this.
Why Kingston Properties?
Market correcting actions by the Bank of Jamaica (BOJ) coupled with investor sentiment in the US declining further in Q3 2022, this as prices and interest rates rose, where all impacting on the performance of VMIL.
In his Consolidated Financial Statements for the Third Quarter ended September 30, 2022 Burchenson noted that the Bank of Jamaica (BOJ) added a total of 100 basis points to the overnight rate during Q3 2022, via two 50-basis point rate hikes that brought the rate to 6.50% as at the end of the quarter. As the interest rate increased, the yields on Treasury notes fluctuated and the money market remained liquid for short-term placements.
For Burchenson “The third quarter of 2022 was turbulent, as we saw interest rates reaching an 11-year peak, as the central bank sought to put a lid on domestic inflation. As rates across the market soared, the performance of bonds and the fixed income markets deteriorated significantly, in conjunction with the negative impact of higher inflation on the equities market.
As a result, our Gains from Investment activities experienced a 23.77% decline over the quarter, while interest expenses grew 48.22% to $285.47 million.
These market conditions were the main impetus to the 75.82% decline in net profit for the third quarter. We ended Q3 2022 with a net profit of $84.08 million, which was primarily due to net fees and commissions of $227.67 million.
Our net fees and commissions increased 7.15% year-to-date as at September 30 or by $52.20 million, as we sought to increase our capital markets and brokerage activities.”
Burchenson also reported other corrective measures as total assets of $27.57 billion as at September 30, 2022 represented a decline of 9.31% or $2.83 billion over September 30, 2021.
“We continued to de-risk the on-balance sheet assets of our wholly-owned subsidiary VM Wealth Management, to safeguard against the sporadic changes in the bond and equity markets.
More resources were shifted towards strengthening and expanding our Corporate Lending Solutions and Margin Loan business lines. In light of this, cash and cash equivalents, resale agreements and investment securities declined 78.82%, 73.31% and 11.03%, respectively, year-over-year, while our loans receivable grew by 67.07% or $1.75 billion.
Conversely, the recent purchase of a commercial property boosted our property, plant and equipment by $713.38 million or 420.61% year-over-year.”
At the end of the third quarter of 2022, VMIL’s total liabilities declined by 4.95% or $1.28 billion, owing predominantly to the reductions in repurchase agreements, lease liabilities, income tax payable and employee benefit obligations.
In particular, Burchenson noted that “the 16.46% or $3.18 billion decrease in repurchase agreements was part of our de-risking strategy. The net profit recorded during the quarter contributed to the 1.77% or $54.09 million growth in retained earnings. However, this was not sufficient to offset the $1.64 billion deterioration in investment revaluation reserve, which resulted in a 34.04% or $1.55 billion decline in total shareholders’ equity.”
Burchenson we suspect saw Kingston Properties as a low hanging fruit that could be easily picked, and create an immediate positive impact on the balance sheet of VMIL.
Leverage Their Collective Real Estate Competence
Victoria Mutual full acquisition of Kingston Properties or a shareholding move to exercise more control over the company would be consistent and in line with the VM Groups vision.
VM Group wants to leverage the collective Real Estate competence embedded within the Group. The acquisition would also be in line with VMIL’s thrust to expand its real estate investments. The addition of KPREIT to the VMIL portfolio adds significant strength to its balance sheet and enhances its business development capacity.
VMIL will have an opportunity to diversify its real estate investments outside of Jamaica, based on KPREIT’s expansive portfolio in other Caribbean jurisdictions and North America.
Brian Frazer joins the VM Group
Brian Frazer Deputy CEO at VMIL and VMWM
Rezworth Burchenson is already a board member of Kingston Properties, and could push to get Brian Frazer to join him on the Kingston Properties board so as to increase participation in the strategic direction of KPREIT, going forward.
Brian Frazer joined the VM Group in September 2022 as the Deputy CEO at VMIL and VMWM, working closely with Burchenson.
Brian joined the team with over 20 years of experience in the financial services industry and has vast experience in Trading, Treasury, Asset Management,
Risk Management, Compliance, Corporate Governance, Operations, and Product Development.
Brian is expected to further foster VMIL’s growth and contribute to providing oversight to VMIL’s operations as well as all aspects of the fiduciary, financial and operating performance.
Skin In The Game
Burchenson we suspect is hoping that these strategic moves will be sufficient to offset the deterioration in investment revaluation reserve, and restore the billion decline in total shareholders’ equity at Victoria Mutual Investments.
For Rezworth Burchenson this is also personal as he has ‘skin in the game’ with a personal stake of 421,146 Kingston Properties shares and 6,400,330 in Victoria Mutual Investments.
Kevin Richards is listed as a senior manager and not a director at Kingston Properties, and he has more ‘skin in the game’ with 2,000,035 units.
In relation to the other question, Is Victoria Mutual Investments Making A Strategic Move To Acquire Kingston Properties?
We conclude that the answer for now is No. The holdings and arrangement as of January 2023 is exactly where Burchenson and VMIL wants to be. We suspect however that over time VMIL will increase its holdings and make Kingston Properties a full subsidiary.
To be updated
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Businessuite Markets
Unlocking Opportunities for SMEs in Jamaica’s Emerging Financial Hub
Rather than being overshadowed by larger corporations, SMEs can seize the moment to thrive in a rapidly evolving business environment, proving that small can indeed be mighty.
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Jamaica’s Leap Toward Becoming the Caribbean’s Leading Financial Hub
Jamaica, with its developed corporate sector, deep financial markets, and ambitious government policies, is poised to challenge these established players and emerge as the premier destination for companies seeking to domicile and expand in the region.
As global businesses look to diversify their operations and establish footholds in new markets, financial and economic hubs have become pivotal in driving investment, innovation, and growth. In the Caribbean, jurisdictions such as Bermuda, the Cayman Islands, and Barbados have long attracted international companies with favorable tax regimes and strategic incentives. However, Jamaica, with its developed corporate sector, deep financial markets, and ambitious government policies, is poised to challenge these established players and emerge as the premier destination for companies seeking to domicile and expand in the region.
Lessons from Regional Financial and Economic Hubs
Countries in the Caribbean and beyond have demonstrated the transformative potential of financial hubs:
Bermuda: Known for its insurance and reinsurance sector, Bermuda’s regulatory environment and tax neutrality have made it a magnet for global financial services firms. However, reliance on low taxes has also attracted criticism and regulatory scrutiny.
Cayman Islands: With no direct taxation and a strong legal framework, the Cayman Islands is a leading jurisdiction for hedge funds, private equity, and structured finance. Its reputation as a tax haven, however, underscores the importance of balancing incentives with transparency.
Barbados: By offering double taxation treaties, Barbados has positioned itself as a more compliant alternative to traditional tax havens. Its focus on substance and economic activities ensures companies contribute to the local economy.
These examples highlight both the opportunities and challenges Jamaica will face as it carves its path. The key lies in ensuring transparency, compliance with global standards, and alignment with domestic economic priorities.
Jamaica’s Competitive Edge
Jamaica’s positioning as a regional financial hub offers several advantages:
Highly Developed Corporate Sector: Jamaica’s professional services sector is robust, boasting experienced attorneys, accountants, and business consultants. These professionals, along with a business-friendly legal framework, are essential for supporting international companies.
Deep Financial Markets: Jamaica has the Caribbean’s most developed stock exchange, which has received global recognition for its performance. The Jamaica Stock Exchange (JSE) provides companies with access to a dynamic capital market, facilitating fundraising and investment.
Strategic Location: Situated at the gateway to the Americas, Jamaica offers logistical advantages for businesses looking to operate across North and South America and Europe.
Political Stability and Infrastructure: The government’s commitment to economic reform, coupled with ongoing infrastructure development, positions Jamaica as a reliable base for business operations.
Benefits of Establishing Jamaica as a Financial Hub
Transforming Jamaica into a financial hub could have far-reaching benefits:
Increased Foreign Direct Investment (FDI): A thriving financial hub attracts international companies, leading to increased investment in infrastructure, technology, and human capital.
Job Creation: Establishing headquarters and operational bases in Jamaica would create high-skilled jobs in sectors such as finance, law, IT, and consulting.
Revenue Growth: While balancing competitive tax rates, Jamaica could implement substance requirements that ensure meaningful economic activities occur locally, generating tax revenue and broader economic benefits.
Economic Diversification: Reducing reliance on traditional sectors like tourism and agriculture, a financial hub would add depth and resilience to Jamaica’s economy.
Knowledge Transfer: International companies bring expertise and innovation, fostering the development of local talent and boosting productivity across industries.
Mitigating Risks and Ensuring Compliance
One major risk of becoming a financial hub is the potential to be labeled as a tax haven. Jamaica must manage this by:
Adopting Global Standards: Aligning with OECD guidelines, including a minimum corporate tax rate of 15%, would enhance transparency and mitigate reputational risks.
Economic Substance Requirements: Ensuring companies domiciled in Jamaica conduct genuine economic activities locally—such as maintaining offices and employing staff—prevents the creation of shell entities.
Robust Regulation: Building a well-regulated financial sector with strong anti-money laundering (AML) and know-your-customer (KYC) measures would ensure compliance with international norms.
Leveraging Double Taxation Treaties: Like Barbados, Jamaica could negotiate treaties with major trading partners to facilitate legitimate business operations and reduce tax liabilities for investors.
Spinoffs and Strategic Opportunities
The growth of a financial hub would create ripple effects across Jamaica’s economy:
Boost to Allied Sectors: Legal, accounting, and IT services would see increased demand, driving growth and innovation in these sectors.
Infrastructure Development: Investment in office spaces, telecommunications, and transport networks would accelerate, benefiting both businesses and citizens.
Regional Leadership: Jamaica’s success could inspire other Caribbean nations to pursue financial diversification, enhancing the region’s global competitiveness.
Expansion of Local Companies: Jamaican businesses could leverage the improved business environment to scale internationally, using the hub as a launchpad.
Preparing Existing and New Businesses
For Jamaican businesses to thrive in this new environment, they must take proactive steps:
Embrace Digital Transformation: Adopting modern financial technologies and enhancing digital capabilities will be essential for competing in a global marketplace.
Invest in Talent Development: Companies should focus on upskilling employees in areas such as international finance, compliance, and technology.
Strengthen Governance: Adhering to international best practices in corporate governance will enhance credibility and attract investors.
Explore Public-Private Partnerships (PPPs): Collaborations with the government on infrastructure and regulatory projects could yield mutual benefits.
A Roadmap for the Government
To realize its vision, the Jamaican government should:
Develop a National Strategy: A clear roadmap outlining goals, incentives, and timelines will be essential for driving investor confidence.
Engage Stakeholders: Regular consultations with local businesses, international investors, and regulatory bodies will ensure policies are balanced and effective.
Invest in Marketing: Promoting Jamaica’s advantages as a business destination through global campaigns can attract high-profile companies.
Focus on Sustainability: Building a green financial hub aligned with global ESG (environmental, social, governance) standards would position Jamaica as a forward-thinking leader.
This Is Jamaica’s Moment to Shine
Jamaica stands at the cusp of a transformative opportunity. By leveraging its inherent advantages and learning from the successes and challenges of other financial hubs, the island nation can redefine its economic future. With strategic planning, regulatory diligence, and robust stakeholder engagement, Jamaica has the potential to leapfrog regional competitors and become the Caribbean’s premier destination for international business.
As the government and private sector work together, Jamaica’s vision of becoming a financial hub is not just achievable—it is inevitable. The time to act is now.
Businessuite Markets
Scotia Group Reporting Business Lines Delivered Consistently Strong Results Throughout The Fiscal.
Scotia Group reports net income of $20.2 billion for the year ended October 31, 2024, representing an increase of $2.9 billion or 17% over the previous year. Net income for the quarter of $6.2 billion reflected an increase of $703.4 million or 13% over the previous quarter. The Group’s asset base grew by $40.3 billion or 6% to $705 billion as at October 2024 and was underpinned by the excellent performance of our loan portfolio.
In furtherance of our objective to continue to return value to our shareholders, the Board of Directors has approved a dividend of 45 cents per stock unit in respect of the fourth quarter, which is payable on January 24, 2025, to stockholders on record as at January 2, 2025.
President and CEO of Scotia Group, Audrey Tugwell Henry commenting on the year’s performance said “I am extremely pleased with our performance for the year. I am very grateful to our clients for decisively choosing Scotia Group to support their financial needs in 2024. Our results are a testament to the effectiveness of the execution of our strategy. The growth across the business reflects the hard work and dedication of our team and our commitment to simplifying our business and offering the best financial solutions in the market.”
Business Performance
Under the leadership of our executive team, each business line made a strong contribution to the overall performance of the Group. Deposits increased by $31.2 billion or 7% to $476.1 billion, signaling our clients’ continued confidence in the strength and safety of the Scotia Group.
Total loans increased by 16.3% year over year. This includes an increase of 13% in our Scotia Plan personal banking loans and an impressive 26% increase in mortgages when compared with the prior year. Our commercial banking unit continues to stand out in the market with our commercial loan portfolio increasing 11% over the previous year. We believe our commercial solutions are the best in the industry and we look forward to continuing to help local businesses to grow and succeed. In Q4, our Commercial Unit hosted a digital payments solutions seminar in conjunction with Mastercard for clients in Montego Bay. The merchant services business is a significant component of our business and will remain a key area of focus next year.
“All our business lines have delivered consistently strong results throughout the fiscal.”
Scotia Insurance reported a significant increase in net insurance business revenue of 40% year over year driven by a combination of favorable factors including higher contractual service margin (CSM) releases from our strong inforce book of business and increases in our premium revenue from creditor life. A 20% increase was also recorded in the number of policies sold when compared to the previous fiscal year.
Our newest subsidiary, Scotia Protect, has been on a continued growth trajectory since launch. Clients are very satisfied with our insurance offerings and particularly our interest-free payment options for insurance premiums. Total revenue for ScotiaProtect increased by 230% year over year and Gross Written Premiums were up 143% year over year.
At Scotia Investments, our investment advisors continue to assist our clients to navigate the market with bespoke financial advice and solutions. Assets Under Management at Scotia Investments increased by 14.4% over prior year evidencing our investor’s confidence.
During the quarter, the Group continued to advance its strategic agenda. In furtherance of our goal to make it easier to do business with us, we were pleased to launch digital onboarding for new bank clients. Clients interested in banking with us can now open a Scotiabank account online in just a few minutes. The digitization of new deposit account opening, will positively impact wait time in branch and will increase the capacity of our branch staff to serve clients more efficiently.
Services at our contact centre were also enhanced allowing clients to conduct more transactions and resolve more issues remotely. This includes transactions for both the bank and the life insurance company.
The Board of Directors of Scotia Group Jamaica Limited at its meeting held December 12, 2024 passed the following resolution:-
“Be it resolved that a final dividend of 45 cents be paid on each stock unit of the paid-up capital stock of the Company to stockholders on record as at the
close of business on January 2, 2025 and that the same be payable on January 24, 2025.
President and CEO of Scotia Group, Audrey Tugwell Henry
For More Information CLICK HERE
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