A year after the implementation of the Jamaica Debt Exchange (JDX), and with the economy continuing to contract and prove inhospitable for many companies, Jamaica National Building Society (JNBS) managed to grow its assets while containing costs and maintaining its profitability during its 2011 financial year ended March 31, said General Manager Earl Jarrett.

The country’s largest building society and its subsidiaries attracted increased savings and investments, according to data from the recently released audited financial statements. Revenues from the core loans operations increased, while investment revenue fell as overall interest rates declined.

“We had a challenging and successful year. The Building Society earned a surplus of J$929 million, while the overall JN Group earned $1.294 billion,” declared Jarrett.

The JNBS surplus represented a 12 percent fall from the previous financial year, while for the JN Group, there was a 6 per cent increase. This comes against the background of a lagging Jamaican economy, which is estimated to have declined by 0.7 per cent over the reporting period, following two consecutive fiscal years of contraction averaging 2.1 per cent per annum, according to the Ministry of Finance. In January of 2010, the Government initiated a successful Jamaica Debt Exchange (JDX) programme to reduce the interest costs on its domestic debt, in order to pull the economy out of this trough.

“Interest income on investment for the Group fell from $8.4 billion in the previous year to $4.9 billion as a result of the JDX,” Mr Jarrett said. This significant $3.5 billion fall in income was countered by successful efforts to boost other revenues and cut costs.

While the Group saw a fall in income as a result of the JDX, the reverse side of this process was a lowering of its interest expense by $2.6 billion to $3.8 billion.

The fall in investment income meant that the JN Group’s core mortgage loans business once again became its mainstay, earning $5.4 billion in the year, moving up by $230 million. The building society was responsible for $4.6 billion of this sum.

“We have a good, strong loan portfolio, which we have been managing very carefully,” he said. “Compared to the industry, we had the lowest level of mortgage loan arrears at the end of the last financial year.”

Significantly, subsidiaries contributed 14 per cent of the $1.225 billion 2010 surplus; but almost doubled their contribution to 27 per cent of the $1.294 billion 2011 surplus. Income from subsidiaries grew from $172 million to $344 million. And a $580 million gain on disposal of investments also played an important role in boosting the surplus.

Another major element in the performance of the JN Group was the success of its cost-containment measures which held operating expenses at $8.6 billion, down $78 million from the year before. Costs were cut, although Bank of Jamaica data show inflation for the fiscal year was 7.8 per cent. At the same time, the value of the Jamaican dollar appreciated by 4.4 per cent against its US counterpart.

The unexpected currency appreciation was the basis for the $216 million in unrealised foreign exchange losses booked by the Group. Mr Jarrett said that traditionally, a surplus in foreign exchange assets had been maintained.

Total JN Group assets grew by $9.7 billion to $131 billion, a significant increase in a period of weak overall economic performance. A key marker was shareholders savings, which grew by $4.9 billion to $72.6 billion.

“We have been seen as an organisation with low fees; therefore, we have observed a movement of savers from some other institutions to the building society,” Mr Jarrett said, “and additionally, some people are saving more.”

Against the background of the country’s weak economic performance, the JN Group has shown good results with growth in all the subsidiaries, with particularly outstanding performances from NEM Insurance Company (Ja) Limited and JN Fund Managers Limited, Mr Jarrett pointed out.