At an extraordinary general meeting of Barita Investments Ltd (BIL) held on January 20, 2025, shareholders approved the transfer of majority ownership of BIL from Cornerstone Financial Holdings Ltd (CFHL) to a new entity, Barita Financial Group Ltd. BIL will remain listed on the JSE.
Effective March 28, 2025, Jamaica’s National Insurance Fund (NIF) bought 50 million shares (4.1 per cent of the total) in BIL for a total of J$3.67 billion. That purchase increased NIF’s stake in BIL from less than 1 per cent to 4.84 per cent.
Let us step back and review BIL’s results for the year ended September 2024. Unless otherwise indicated, all currency references in this article are to Jamaican dollars.
Assets expand
Total assets grew by 11 per cent from $128.2 billion to $142.3 billion (TT$6.19 billion).
Loans, which are typically secured against clients’ investment portfolio and property, increased from $11.1 billion to $13.35 billion. The Jamaica-denominated loans fell from $11.1 billion to $10 billion while US dollar loans surged from zero to $3.33 billion.
Investment securities moved from $106 billion to $108.55 billion, of which the pledged amounts expanded from $83.7 billion to $89.6 billion. Pledged assets represent collateral against repurchase agreements with customers and financial institutions.
Investments at fair value through profit or loss (FVTPL) rose from $17.7 billion to $21.5 billion and mostly comprised quoted equities and unit trusts and other funds. Investments at fair value through other comprehensive income (FVOCI) grew from $98.8 billion to $103.1 billion; this grouping is primarily populated by local, foreign government and corporate bonds. Amortised cost investments mostly include securities purchased under resale agreements; this category fell from $7.2 billion to $5.4 billion.
Securities purchased under resale agreements swelled from $564 million to $5.77 billion and is collaterised by Government of Jamaica securities.
Investment in its associate, Derrimon Trading Ltd improved from $2.28 billion to $2.31 billion and represents a 20 per cent stake in that company.
Accounts receivable surged from $2.87 billion to $7.32 billion. Net receivables from clients jumped from $1.71 billion to $5.66 billion while withholding tax climbed from $989 million to $1.5 billion. Further, prepayments edged up from $113.4 million to $115.7 million, however, other receivables dropped from $54 million to $45 million.
Boosted by the computer software work-in-progress, intangible assets surged from $21.5 million to $402 million.
Property, plant and equipment decreased from $943 million to $836.8 million as net additions of $34.3 million were overwhelmed by depreciation charges of $140.6 million.
Investment property increased from $225 million to $235.9 million. That movement reflected a positive fair value adjustment of $5 million and work-in-progress of $5.9 million.
Cash and bank balances fell from $1.97 billion to $1.42 billion. Even so, balances denominated in US dollars climbed from $443 million to $1.12 billion.
Liabilities swell
Total liabilities climbed by 15.3 per cent from $92.8 billion to $107 billion.
Secured investment notes declined from $5.94 billion to $2.52 billion. These represent short-term loan obligations at interest rates ranging from 3.5 to 8.45 per cent.
Conversely, other debt facilities climbed from $8.3 billion to $13.95 billion. Here, the US-dollar margin loan facility jumped from $4.2 billion to $8.3 billion and the loan from the Development Bank of Jamaica swelled from $250 million to $1.77 billion. Meanwhile, the secured fixed rate bond was stable at $1.51 billion while the unsecured fixed rate bond closed at $2.32 billion from $2.31 billion.
Securities sold under repurchase agreements grew from $76.5 billion to $84.3 billion. Contracts denominated in Jamaican dollars increased from $23.4 billion to $25.8 billion while agreements issued in US dollars rose from $53.1 billion to $58.5 billion.
Accounts payable surged from $1.47 billion to $5.25 billion. Dividend payable jumped from zero to $2.5 billion while client funds expanded from $1.1 billion to $2.04 billion and other payables increased from $337 million to $670 million.
Equity slips
Total shareholders’ equity settled at $35.3 billion from $35.39 billion.
Retained earnings declined from $6.69 billion to $6 billion. The current year’s profit of $3.82 billion lifted the brought forward balance while an adjustment to retained earnings of $40.8 million added to this figure. Next, dividend paid of $2.04 billion, a proposed dividend of $2.5 billion and employee share options exercised of $3.99 million lowered the ending figure.
The stock option reserve increased from $22.3 million to $30.34 million, representing the fair value of options recognised. Meanwhile, the fair value reserve improved from negative $4.54 billion to negative $3.96 billion; that positive movement reflected the net realised and unrealised gains on FVOCI investments. Also, the capital redemption reserve and the capital reserve were unchanged at $220.1 million and $175.99 million, respectively.
However, impacted by the net sale of treasury shares, share capital increased from $32.814 billion to $32.830 billion. Therefore, the year-end number of shares outstanding rose from 1,199,835,937 to 1,199,978,571; consequently, the book value per share slipped from $29.49 to $29.42.
Revenue and profit
Net operating revenue grew by 9.9 per cent from $9.09 billion to $9.998 billion.
Driving that result was fair value and realised gain on investments, which advanced from $4.36 billion to $4.87 billion. Here, realised fair value gains surged from $359 million to $1.42 billion, however, unrealised fair value gains decreased from $4 billion to $3.45 billion. The second largest contributor was fee and commission income, which expanded from $3.4 billion to $3.7 billion. Relative to the latter, investment banking activities contributed $1.2 billion while asset management undertakings accounted for $2.4 billion.
Also, net interest income advanced from $581.2 million to $646.2 million. The interest income component climbed from $6.16 billion to $7.61 billion. Driving that result was interest on FVOCI investments, which grew from $4.95 billion to $5.85 billion while interest on loans and advances surged from $754 million to $1.29 billion. Additional contributions were made by interest on resale agreements and cash; the former edged up from $448 million to $459 million while the latter expanded from $4.8 million to $7.8 million.
Further contributions to net operating income were dividends, which grew from $86.8 million to $117.2 million, however, foreign exchange trading and translation gains eased from $604.3 million to $593.9 million and miscellaneous income settled at $60.5 million from $62 million.
Total operating expenses advanced by 8.1 per cent from $4.61 billion to $4.98 billion. Within that grouping, staff costs decreased from $1.74 billion to $1.66 billion. Core wages and salaries rose from $1.1 billion to $1.21 billion while commissions jumped from $70 million to $112 million. Helping to restrict the overall picture was other staff benefits, which fell from $169 million to $119 million and stock options, which dropped from $160.6 million to $8 million.
Next, administrative expenses decreased from $2.88 billion to $2.68 billion. Notable declines were shown under professional fees, which halved from $403 million to $195 million and computer software maintenance, which fell from $306 million to $210 million. In contrast, the assets tax increased from $185.5 million to $256.8 million and depreciation and amortisation rose from $126.6 million to $150 million.
Management fees were unchanged at $930 million, however, impairment of financial assets deteriorated from a writeback of $3.6 million to a charge of $641 million.
The share of profit from its associate, Derrimon Trading, dropped from $95 million to $24 million, impacted by revenue falling from $18.7 billion to $16.9 billion. Those changes saw the profit before tax improve from $4.58 billion to $5.04 billion.
The standard tax rate remained at 33⅓ per cent while the effective tax rate fell from 25.4 to 24.3 per cent and the tax expense increased from $1.16 billion to $1.22 billion. The current year benefitted from a larger credit ($1.68 billion versus $0.44 billion) for income not subject to tax. Consequently, the net profit attributable to shareholders advanced from $3.42 billion to $3.82 billion. Those results reveal current basic EPS of $3.17 versus $2.85.
Segment contributions
Fixed income revenues grew by 23.4 per cent while the segment profit expanded by 133 per cent. This segment includes money market activities and securities brokering and hugely benefitted from buoyant market conditions.
Fund management’s segment results improved by 7.5 per cent and reflected growth in assets under management of its various mutual funds.
The topline at Cambio and other improved by 6.1 per cent, however, impacted by a six-fold increase in expenses, the segment profit declined by 25 per cent. This segment includes investment banking and stock brokering.
Q1 results
Despite incurring larger foreign exchange trading and translation losses, BIL recorded 8.7 per cent greater net operating income for the trimester ended December 2024; that measure moved from $1.32 billion to $1.44 billion.
The combination of lower staff costs reduced expected credit losses and smaller taxes helped BIL report a net period profit of $551.2 million versus $479.3 million. That result saw EPS increase by 15 per cent, from 40 cents to 48 cents.
Total assets slipped to $139.6 billion while shareholders’ equity increased to $35.45 billion; consequently, the book value per share ended at $29.54.
Shareholders’ returns
Over its fiscal year, BIL’s share price on the JSE slipped from $77.34 to $77.10 as of September 2024.
This year, the price ended at $71.24 on May 7. Annual dividends increased from $1.634 to $1.967.
The last price of $71.24 gives investors a yield of 2.76 per cent and reveals a premium of $41.70 or 41.2 percent to its December 2024 book value of $29.54. Further, using trailing EPS of $3.25, it exhibits a strong P/E multiple of 21.92.
In the next article we will review the 2023-24 results of Prestige Holdings Ltd.