Lower Q2 profit for Scotia Group

Scotia Group reported a 19 percent rise in half profit to $6.76 billion after tax, but that clouds the fall in profit for the second quarter to April that fell marginally thanks to a big jump in loan provisioning of $560 million compared to a small recovery of $6 million in the January quarter.
The half year earnings are bolstered by a gain on sale of subsidiary of $753 million.
Shareholders don’t have much to cheer about except that loan losses are within the range of that of 2017 along with a few other good developments. Net interest income fell to $6.2 billion from $6.5 billion in April 2017 quarter, Insurance revenues fell from $1.1 billion to $707 million. Cost were contained well, with salaries and benefits declining from $2.84 billion in 2017 to $2,46 billion in the April quarter while other operating costs, rose marginally from $1.76 billion to $1.86 billion.
Year to date, net interest income moved from 13.17 billion to $12.82 billion while loan impairment fell sharply from $975 million to $564 million. Net fee income declined from $4.4 billion to $4.1, but gains from foreign exchange trading activities delivered $1.66 billion versus $1.1 billion in 2017. While the half year figures show a bit of positive signs, investors should be focused on more recent developments, as these are more likely to point the way forward.
The group made modest progress in increasing loans, the most important asset for a bank. At the end of April, loans grew to $171 billion from $166.5 billion at the end of 2017 fiscal year, the increase is twice the growth rate between April last year and the year end. Investment securities rose from $120 billion at the end of October in 2017 to $131.6 billion and cash resources from $116.5 billion to $126.2 billion, at a  much faster pace than increased in lending. Deposits by the public moved from $260.6 billion to $383 billion.

David Noel new Scotia Group’s CEO.

Scotia ended with earnings per share of $1.08 for the quarter and $2.17 for the half year, including the one-off capital gains from sale of the former subsidiary. A dividend of 48 cents per share was declared by the board, payable on July 18.
The strongest positive for the group is that they currently lend out just about 52 percent of deposited funds by its customers, leaving much room to grow loans whenever that time comes around.
The stock traded on the Jamaica Stock Exchange and closed at $53 but with these results, further movement up is going to be very challenging in the short term and leaves NCB Financial as the banking group of choice for investors seeking growth in stock price.

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