Archives for August 2013

Profits for the nine months to July this year are up for one for the Jamaica’s largest financial institutions even as the debt exchange that the banking group engaged in during the April quarter knocked millions out of profits.

Scotia Group Jamaica reported net income of $3.06 billion for the third quarter ended July, $127 million above the previous quarter ended April and $468 million above the quarter ended July, 2012. For the nine months end to July, net profit was $8.7 billion compared to $7.95 billion for the same period last year. Earnings per share for the nine months was $2.70 compared to $2.45 for the same period last year.

Revenues | Profit flowed from operating income, comprising net interest income after impairment losses and including other revenue of $25.5 billion, an increase of $2.2 billion or 9.32 percent relative to the prior year. Overall total operating income, which is net of interest expenses and loan impairment losses amounted to $3.14 billion in the quarter, a strong 36.6 percent higher than in the similar period in 2012 and $8.6 billion year to date, 24.6 percent higher than in 2012. The year to date figure is affected by the loss picked up with the debt exchange. The instability of the Jamaican dollar made a good contribution to the group’s fortunes as they generated significant gains from this area for the year-to-date but not as much in the latest quarter.

Net interest income | Net interest income after impairment losses for the period was $16.86 billion, up $470 million or 2.87 percent when compared to the same period last year. The Group continues to report strong growth in loan and deposit volumes over the period. Loan loss expense increased by $215 million when compared with prior year, reflecting growth in the loan portfolio and the impact of continued contraction in the economy, especially on our retail customers.

Other revenues | Other revenues for the nine months was $8.6 billion, up $1.7 billion or 24.6 percent when compared with prior year. This was due primarily to increased insurance revenue and fee income, gains on securities trading, as well as higher gains on our foreign currency trading and investments. Insurance premium grew to $1.9 billion in the year to date from $1.6 billion in 2012 and foreign exchange trading gains from $1 billion to $2 billion. Net fee income moved up for the same period from $3.95 billion to $4.32 billion. The gains from Foreign exchange is unlikely to continue at the pace seen to date in the next fiscal year.

Expenses | Operating expenses are up 18 percent in the July quarter over that of the similar 2012 quarter and 14.6 percent for the nine months over 2012, which are much slower than that of net revenues. While property cost was pretty subdued at 3.6 percent increase for the year to date with the quarterly figure increasing around the same level, labour cost jumped by 14.5 percent for the nine months and a big 23.8 percent for the quarter over 2012. Other operating cost, which amounted to $1.62 billion in the quarter, jumped 16.2 percent over 2012 and 19.9 percent for the nine months to July to $4.9 billion.

Loans | loans increased to $131 billion, an $8.5 billion or 7 percent increase and a $4 billion increase over April’s amount.  Non-performing loans (NPLs) at July, 2013 totalled $4.7 billion, reflecting an increase of $470 million from prior year and a decrease of $330 million from the previous quarter ended April, 2013 as recoveries increased in the quarter. The increase year over year is in line with the growth in the loan portfolio. Total NPLs now represent 3.51 percent of total gross loans compared to 3.58 percent last year and 3.88 percent as at April 30, 2013. The Group’s aggregate loan loss provision as at July, 2013 was $4.8 billion, representing 100 percent coverage of the total non-performing loans. For most of these doubtful loans, the Group holds meaningful collateral.

Balance sheet | Total assets increased year over year by $40 billion or 11.56 percent to $389 billion as at July. Cash resources increased by $29 billion to $77.7 billion primarily as a result of the growth in deposits and placing the group in a very liquid position.

Total customer liabilities (deposits, repo liabilities and policyholder’s funds) grew to $299 billion, an increase of $34 billion over last year. This growth was mainly reflected in the deposit portfolio as the group management stated that they “continued to acquire new customers and see increased balances from existing customers”. Total shareholders’ equity grew to $70.9 billion, $4.2 billion above prior year.

Insider call | Scotia is unlikely to be a major trailblazer as far as rapid profit growth is concerned with the Jamaican  economy in the state that it is in now. However, the earnings are such and the stock price is at a low $20, that it is very good buy for dividend income with a yield around 7.5 percent and capital gains ahead. An investment in this stock could double ones money over the next twelve months. Scotia Bank is now a IC Insider Buy Rated stock.

Related posts | Scotia: No change in dividends | Scotiabank wins Service Award | Scotia Group’s profit surprise

Scotia Investments Jamaica’s profit for the quarter to July this year was $562 million or 51 percent above the $372 million earned in the previous quarter and 18 percent above the $477 million made in the 2012 quarter. For the nine months ended July 31, 2013, net profit was $1.42 billion, down $90 million or 6 percent when compared to the same period last year. Earnings per share for July quarter was $1.33 compared to $1.13 in 2012. For the nine months earnings per share was $3.36 compared to $3.57 for the same period last year.

Revenues | Operating Income comprising net interest revenue and other income for the quarter amounted $1.178 billion, up $228 million or 25 percent from the $949 million recorded for the previous quarter. Operating Income, came out at $3.236 billion for the nine months period, up $142 million or 5 percent above the $3.094 billion for the same period 2012.

The company has recovered from the negative impact of the NDX on net interest income as net interest income for the quarter was $692 million, $66 million or 10 percent above the results of the previous quarter. Net interest income after impairment losses for the nine months period was $2.081 billion, down $33 million or 2 percent when compared to the same period the year before.

Non-Interest Income | Non-interest income, inclusive of fees, securities trading gains and net foreign exchange trading income was $1.155 billion for the period, up $175 million or 18 percent compared to the same period last year and $485 million for the quarter, up $162 million or 50 percent over the $324 million recorded last quarter. The major factors contributed to the improvement is net fees and commission as there was a $69 million jump in this category in the quarter and $183 million year to date, net foreign exchange gain dropped sharply in the quarter from the prior quarter to $30 million, which was slightly lower than the $33 million generated in 2012. Year-to-date, the increase is $105 million with $100 million of than being generated in the April quarter.

Gains from securities trading climbed to $197 million in the July quarter compared to $78 million in July 2012 and year to July income amounted to $273 million versus $293 million. The difference reflect the impact of losses sustained when the company engaged in the debt swap with the Government of Jamaica resulting in a loss on investments due to receiving a lower value for bonds held.

Expenses| Surprisingly, they were able to hold expenses below the amount in the prior quarter to $366 million, down from $418 million in the April quarter but up on the $327 million for 2012. For the nine months expenses climbed sharply to $1.2 billion versus $984 million in 2012.

Assets | Total assets of $72.6 billion remained relatively flat year over year. “There was a $1 billion or 1.3 percent reduction relative to the year ended October 31, 2012, which is consistent with our strategic initiative to focus on growing our off-balance sheet portfolios,” the company stated. Meanwhile, Shareholder’s Equity amounted $11 billion.

Off balance sheet | Assets under management, including the Company’s custody book, were $115.3 billion as at the end of the quarter, up $14.2 billion or 14 percent above the same period last year and up $5.8 billion or 5.3 percent over the previous quarter. The growth was driven by increased net asset values in the managed funds.

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