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JMMB Group Limited expects further reduction in interest rates this week but remains concerned about the reduced spending in the economy.
The Bank of Jamaica, BOJ, will decide on Thursday whether to hold or adjust its policy rate, now at 6.5 per cent after two cuts in August and September.
“We expect going forward that the business environment will continue to improve as interest rates are reduced. We expect that the BOJ this week will look to probably make another 25-basis point cut,” said JMMB Group CEO Keith Duncan during an earnings call on Monday.
The regional financial conglomerate’s stance aligns with the average sentiment within the financial sector. The latest BOJ Inflation Expectation Survey in July found that half of the respondents anticipate rates will decline in the short term, while one-third expect them to remain steady. Meanwhile, five per cent predict higher rates, and an equal proportion were uncertain.
Over two years, post-COVID, the BOJ gradually raised rates from 0.5 per cent to 7.0 per cent, then kept the rate unchanged for nigh on another two years.
The central bank has since shifted off its holding pattern, cutting its benchmark rate by 25 basis points in August as well as in September to the current 6.5 per cent. Also, the United States’ central bank, the Federal Reserve, reduced rates by 0.5 per cent in September.
“The US and the region have begun to loosen monetary policy and money becomes cheaper we can look to increase our margins which were very much compressed,” Duncan said during Monday’s briefing. “It won’t change overnight. But it is a process and we will continue to deliver profitability to the group.”
The economy is projected to flatten or contract this year, driven by declining travel arrivals and weather-related disruptions, Duncan noted. He highlighted the potential negative impact on the productive sector and the financial services sectors, and reasoned that the authorities will likely reduce interest rates and increase liquidity to spur economic growth.
JMMB Group earned a profit of $2.2 billion in its second quarter ending September 2024 compared to a loss of $633 million a year earlier. Duncan said earnings were driven by its share of profit from associated company, Sagicor Financial Company.
JMMB, which is operational in its home base of Jamaica as well as Dominican Republic and Trinidad & Tobago, also reported a loss in its first quarter ending June, which resulted in cumulative profits for the year to date of $700 million, substantially less that the profit of $1.9 billion a year earlier.
The company, which now has $700 billion in assets, is looking towards better results, going forward.
“We are looking forward to an increase in activity as rates start to come down. But we do have a bit of a pipeline,” said Julian Mair, chief capital markets officer, during the briefing. “And we are looking forward for what’s to come as rates start to come down and borrowers come to the market and more issuers of equity at better multiples,” Mair said.
JMMB Group’s strategies emphasize revenue diversification, cost efficiency, and operational optimisation. Its net operating revenue over six months totalled $11.4 billion, 69 per cent of which was contributed by its banking operation, 28 per cent from financial services, and 4.0 per cent from other services.
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