Scotia Group reported a marginally lower profit net of taxation of $1.75 billion for the quarter ending January, compared to $1.78 billion in 2019, despite the impact of the COVID-19 pandemic on its operations directly and that of their clients.
Scotia Group hiked dividend.
Profit for the quarter flowed from total revenues of $11.74 billion, similar to the amount earned in the comparative period last year. Net interest income fell to $5.8 billion from $6.2 billion in 2019, while provision for credit losses dropped from $895 million in 2019 to $430 million this year. Prior period results included additional provisions of $408 million (one time impact), based on adopting a more prudent approach in determining credit loss provisions.
According to the group’s directors,“ total revenues continue to be heavily impacted by the COVID-19 pandemic as evidenced by the ongoing reduction in interest rates offered in the market, leading to a reduction in the Group’s net interest income coupled with the decline in transaction volumes resulting in lower net fee and commissions as well as insurance revenues.”
Other income grew 10.9 percent or $535 million over 2020. Net fee and commission income amounted to $1.7 billion, a reduction of $339 million or 16.8 percent compared to the 2020 inflows, due partially to lower transaction volumes stemming from the COVID-19 pandemic in conjunction with the continued execution of the Group’s digital adoption strategy.
Insurance revenues fell $423 million or 40 percent to $634 million due to the reduction in premium income stemming from the pandemic as well as lower actuarial reserve releases. Net gains on foreign currency activities and financial assets amounted to $2.2 billion, an increase of $333 million or 18.3 percent above the prior year. Other revenues climbed by $963 million from just $9.5 million in 2020 is attributable to gains realized on the extinguishment of debt facilities.
Operating expenses amounts to $7.8 billion for the period and reflected an increase of $656 million or 9.2 percent. “This was primarily attributable to an increase in other operating expenses of $804 million, which was partially offset by the reduction in salaries and staff benefits of $196 million. The increase noted in other operating expenses was due to provisions for non-salary related restructuring and other technology expenses. Excluding restructuring and other one-off expenses, operating expenses would be flat compared to Q1/2020,” the Group reported. Asset tax expenses grew year over year by $23 million or 1.9 percent to $1.3 billion, given the increase in the Group’s assets.
Scotiabank gained $1 on Friday.
Total assets increased year over year by $10 billion to $553 billion at the end of January. This was predominantly a result of the growth in cash resources of $17 billion or 15 percent and loan portfolio of $4.5 billion or 2.1 percent, which was partially offset by a reduction in investments of $3.1 billion or 2 percent, and other assets of $8.1 billion or 13.4 percent.
The loan portfolio grew by $4.5 billion or 2.1 percent year over year, with loans after allowances for credit losses increasing to $217 billion, down from $221 billion at the end of October last year.
Deposits by the public increased to $342 billion, up from $315 billion in the previous year and up from $337 billion at the end of October.
On a positive note, the holding of profit in line with that of 2020 is a strong positive, even more so as there are large one off costs incurred during the period. The decline in loans since the October year end is negative, but loans grew 3.3 percent between October 2019 and January 2020 and a stronger 4.7 percent from February to April. Growth in the July and October quarters was flat. If the group can return to the growth rate of the first half of the last fiscal year, then profits should start to see an appreciable rise, without it, profit increase will be muted.
