Capital and Credit Financial Group increased its net profit last year by 21 per cent, to $422.63 million, a growth driven by a relatively robust expansion of its loan business at a time when its investment and fee-based operations were largely flat.

According to the group's profit and loss accounts released this week, last year's profit, reflecting earnings of 42 cents a share (25 cents in 2007), was on a $357 million or 24 per cent rise in net revenue of $1.83 billion, and against a 24 per cent jump in non-interest expense, to $1.33 billion.

Significant story

However, perhaps the most significant story in the numbers, and the one highlighted by Capital and Credit's bosses, was the success in building the group's deposit and loan business.

"Our target to increase the deposit and loan portfolios reaped substantial success, resulting in a growth of 22 per cent in deposits and 17 per cent in the loan portfolio," said Curtis Martin, the group's deputy president for banking and investment services.

The hikes in those portfolios translated to growth in income, during a period when other streams fell under pressure in the face of the global credit crisis and the sharp retreat of the equities market.

Interest on loans grew

For instance, while the group could wring a mere two per cent increase, to $4.163 billion, from its income on investments, gross interest on loans rose nearly $223 million or over 27 per cent. Yet, it managed to lower its interest expense by nearly three per cent to $3.94 billion.

At the same time, however, the group's net gain on securities trading tumbled 78 per cent, to $93.6 million, while commission and fee income, increased an anaemic $1.69 million or one per cent, to $129.35 million. A more than $235 million gain in foreign exchange trading and gains from the depreciation of the Jamaican dollar against the greenback, were not sufficient to off-set the $340 million decline in the securities trading business.

Indeed, with the stock market in a helter-skelter retreat last year, Capital and Credit took a $1.07 billion write down in the value of equities.

Group sanguine

However, the group appeared sanguine about the recovery of the brokerage and asset management arm of the business, which has been undergoing restructuring.

"While they lagged behind ... in the delivery of strong performances, the other organisational strategies implemented for these two lines of business resulted in positive trends in profitability by the end of 2008," said the group's chairman and CEO, Ryland Campbell.

The management of costs, particularly staff expenses, is likely to be an issue for Capital and Credit going forward. The group's non-interest expenses rose 26 per cent last year, well ahead of the rate of inflation.

Staff costs, rose 23 per cent, to $668.6 million, a full half of all non-interest expenses. Salaries and wages accounted for 68 per cent of staff costs, while "other staff benefits", rocketed 44.57 per cent to $137.5 million or 21 per cent of the overall staff costs.

business@gleanerjm.com