Asset tax hits VMBS surplus

Victoria Mutual Building Society (VMBS) attributed a $44.5 million dip in its after-tax surplus of $962 million during 2015 primarily to the government's increase in the asset tax.

The VMBS group was assessed higher asset taxes of $166.8 million, a liability that resulted from an increase in the asset tax rate, which the Government moved from 0.14 per cent in 2014 to 0.25 per cent in 2015 for regulated financial institutions.

Chairman Michael McMorris reported that last year, VMBS's total assets increased by $6.33 billion, or 6.5 per cent; deposit liabilities by 10 per cent to $77.6 billion; while the mortgage portfolio increased by 7.1 per cent, or $2.1 billion.

Loans in arrears greater than 90 days as a percentage of total mortgage loans fell from 4.23 per cent to 3.52 per cent, McMorris told members at the society's annual general meeting held in New Kingston on Thursday.

Among the subsidiaries, Victoria Mutual Wealth Management recorded after-tax profit of $311 million, a 31 per cent increase over the $237 million the previous year.

Prime Asset Management, VMBS's pension fund investment management and administration arm, saw an increase of 18 per cent in its after-tax profit, moving to $45 million from $38 million in 2014.

In his report to shareholders, McMorris said that although they remained guardedly optimistic, the society's board was "encouraged by the improvements in Jamaica's economic indicators" achieved under the extended fund facility with the International Monetary Fund.

ELUSIVE GROWTH

"Material growth remains elusive, but the country's prospects in this area are the best they have been in many years," he said.

The VMBS chairman said, "We must, therefore, continue to demonstrate the commitment and discipline that are necessary to realise the long-term benefits of the economic reform programme and to put Jamaica on a path to sustainable growth."

Given their belief that economic growth must be private sector-led, "we encourage local entrepreneurs and holders of capital to take advantage of Jamaica's improved macroeconomic conditions by advancing investments in initiatives and innovations that have the potential to contribute to growth in national output," McMorris said.

In outlining the outlook for 2016, the VMBS chairman said the financial services market

is expected to become increasingly competitive, particularly in the areas of savings, investments, and mortgages, and the space is likely to become more dynamic with the entry of non-financial entities offering mobile money and payment services.

He said interest rates are expected to remain low at least in the short term and increases thereafter are likely to be gradual. At the same time, he said shrinking margins and the cost of regulations will continue to impact VMBS' surplus.

During this year, McMorris said VMBS would continue to implement projects and initiatives aimed at improving service delivery and efficiency.

"We will also place a heavy emphasis on growing the business in a prudent manner to ensure the long-term sustainability and relevance of the organisation," said the chairman.

McMorris said that in 2015, income returned by way of benefits to members in the form of lower mortgage rates, higher saving rates and lower transaction fees was valued at $400 million and did not form part of the society's net surplus.

mcpherse.thompson@gleanerjm.com