Profit for Scotia Group’s subsidiary Scotia Investments jumped 39 percent in the October quarter to hit $572 million from $411 million earned in 2012 driven by strong growth in non-interest income, which contributed $490 million for the quarter, up $175 million or 56% above the corresponding quarter last year. Non-interest income, which includes fee income, securities trading gains and net foreign exchange trading income, was $1.64 billion for the year, an increase of $351 million or 27% compared to 2012.
In spite of the $230 million direct loss incurred from the National Debt Exchange (NDX) earlier in the year, the investment house was able to report profits of $1.99 billion for the full year, up $71 million from $1.92 billion earned in the previous year. Earnings per share (EPS) for the year was $4.71 compared to $4.54 for last year, putting the stock value at only 5.5 times 2013 earnings including the one off NDX loss and with prospects for higher profit in 2014, it looks even cheaper.
The Return on Average Equity (ROE) stood at 17.28 percent, down from 18.8 percent last year.
Revenues | Total Operating Income, comprising net interest revenue and other income, was $4.46 billion for the year, up 8% above the $4.13 billion recorded last year and for the quarter $1.22 billion, up 18% from the $1.03 billion recorded for the corresponding quarter last year.
Net Interest | Net interest income, after impairment losses for the year, was $2.81 billion, marginally down by $23 million compared to last year and was $729 million for the quarter, $10 million above the similar period last year.
Operating expenses | Total operating expenses for the year were $1.66 billion, representing an increase of 21% or $291 million over last year. The increase was mainly due to staff related costs and other operating expenses as a result of the inflationary increases. Total operating expenses for the quarter were $447 million, 16% above the same period last year.
Balance sheet | Balance sheet assets remained static year over year at $73.7 billion at the end of October, compared to $73.87 billion in 2012 but off-balance sheet assets under management climbed 16 percent to $119.39 billion over last year. The stability in the assets seems in keeping with the concept of shifting out of the repo business thus reducing the risk to the company and putting investors into funds managed by the company. In keeping with this “the Scotia Premium Money Market Fund grew over 260% during the year to $5.15 billion,” management concluded while there was a reduction in Repurchase agreement liabilities from $45.68 billion in 2012 to $44.87 billion at the end of 2013. Shareholders’ equity stood at $12.49 billion as at October 31, 2013, an increase of $1.12 billion compared to last year.
Outlook | Had the company not suffered losses as a result of the NDX debt exchange, earnings for the year would have exceeded $5 per share, with the last quarter earnings hitting $1.35 and further growth very likely this coming year. IC Insider projects earnings to be in the $6 range.
Scotia Investments is an IC Insider Buy Rated stock
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[…] Scotia Investments Reports profit of $1.34 billion for the nine months to July and net profit for the quarter, of $504 million. For the year to July, profit is down $82 million or 6 percent from the same period last year, but up $89 million or 21 percent above the $415 million earned in the April quarter and down from $563 million in the 2013 quarter. Earnings per share (EPS) for the period, is $3.17 compared to $3.36 for the same period last year, and should end up in the $4.40 range, by this October year end. Return on Average Equity (ROE) is 13.87 percent, down from 16.10 percent last year. Operating Income, comprising net interest revenue and other income of $3.19 billion for the nine months, is down $48 million from the same period last year. Total operating income for the quarter was $1.13 billion, up $58 million or 5 percent recorded last quarter, Net income for the quarter of $580 million was flat quarter over quarter, but is down $113 million or 16.3 percent from the July 2013 quarter, due to a big jump in interest cost. Net interest income after impairment losses for the nine months period is $1.8 billion, down $288 million or 14 percent below the same period last year. Non-Interest Income|Non-interest income, amounts to $1.4 billion for the period, up $240 million or 21 percent over the year to July 2013 and $549 million for the quarter, up $55 million or 11 percent compared with the last quarter; due primarily to gains on financial assets. The 2014 outturn represent an increase over the earnings of $486 million generated in 2013 July quarter. Non-interest income, includes fee income, securities trading gains and net foreign exchange trading income. Total operating expenses for the period were $1.26 billion, up $50 million or 4 percent compared with the same period last year; $396 million for the quarter, down $47 million or 11 percent from last quarter due mainly with increased asset tax but the cost is up from the $366 million incurred in the 2013 quarter. “Overall, our fund management business has grown 9 percent year over year; and our flagship money market fund, The Scotia Premium Money Market Fund has experienced a 105 percent increase year over year, with a net asset value of over $9 billion,” Lissant Mitchell, CEO of Scotia Investments said. “Total assets of $73 billion remained flat year over year and quarter over quarter; consistent with our strategic initiative to focus on growth of our off-balance sheet portfolios. Assets under management including the company’s custody book were $135 billion as at the end of the period, up $21 billion or 18 percent above last year and $6 billion or 5 percent over last quarter. The growth was driven by the improved net asset values on managed funds.” The Investment Bankers reported to shareholders. The company’s stock traded at $21.40 on Friday with a PE ratio of 4.75 that is low but presently reflects overall market conditions. There is not much supply on sales at current prices. The forward PE is lower than the above. The company’s performance is not electric presently but lower interest rates on government paper that has be falling since May and continue growth in their asset portfolio should have improve profits for 2015. As such the Buy Rated accolade remains. […]