Scotia Group moves up in spite of NDX

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.

scotiabanklogo150x150Other 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

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  1. […] ironic that the group is enjoying one of their best year after having taken an almost $400 million hit when they participated in the government debt swap program. For the last quarter to October, net […]

  2. […] members to our elite Buy Rated list! All trade on the Jamaica Stock Exchange with Sagicor Life, Scotia Group and Scotia Investments on the main listing and Caribbean Producers (CPJ) on the Junior […]

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