Stunning 47% increased Scotia profit

Scotia Group reported a stunning in net earnings jumping 47 percent for the third quarter to $3.3 billion over the 2015 July quarter. For the nine months, net earnings jumped 36.7 percent to $8.2 billion. Total comprehensive income for shareholders of the group ended at $9.3 billion for the nine months ended July 2016 up 10.5 percent from $8.8 billion.
For the third quarter, total comprehensive income of declined from $4.4 billion to $3.66 billion.
The results translate to earnings per share of $1.07 cents in the July quarter and $2.64 for the nine months, with full year’s earnings set to end around $3.90 and would put the PE at 7.8 versus an average of 9 based on estimated 2016 earnings for the main market valuation.
President and CEO of the banking group, Jackie Sharp, in a report to shareholders, commenting on the performance stated, “We continue to show strong performance this year, resulting from the execution of our strategic initiatives to grow revenues and reduce operating costs. All business lines showed good volume growth year over year, as we continued to meet our customer’s diverse needs. Our loan portfolio, after allowance for impairment losses, grew by $15.2 billion or 10.2 percent year over year. Customer Deposits also increased by $42.4 billion or 20.8 percent year over year. Funds under management in our wealth business grew by $15.9 billion or 14.9 percent year over year.”

“Total revenues excluding impairment losses on loans for the nine months ended July 2016 was $28.8 billion, representing an increase of $2.46 billion above prior year. The positive movement was achieved through increased volumes and improved non-interest revenue, which cushioned the impact of reduced margins. Net interest income after impairment losses for the period was $17.6 billion, $670 million above the same period in 2015. This was due to an increase in net interest income of $745 million, resulting from growth in loan volumes, particularly our Retail loans, Residential Mortgages and Small Business portfolios, coupled with lower levels of wholesale funding. Impairment losses on loans increased by $75 million when compared with the same period last year.
Other revenue for the nine months ended July 2016 amounted to $10 billion, an increase of $1.7 billion or 20.6 percent compared to the same period last year. This was due to growth in net fee and commission income from increased transaction volumes on our deposit and payment services, credit card and merchant service business segments, as well as higher foreign currency gains.”
Sharp went on the further state “Operating Expenses amounted to $15.6 billion over the nine months ended July 31, 2016, a decrease of $464 million or 2.9 percent compared to prior year. Salary related expenses declined by $400 million, which offset higher operating expenses of $276 million. There was also a decline in asset tax of $330 million.”
Loans, after allowance for impairment losses amounted to $163.9 billion as at the end of the 2016 quarter, while nonperforming loans totalled $4.4 billion, representing 2.7 percent of total gross loans down from 3.1 percent last year. Total customer liabilities represented by deposits, securities sold under repurchase agreements, and policyholders’ funds grew to $350 billion, an increase of $35.3 billion or 11.2 percent compared to July 2015. A significant portion of the growth was reflected in core deposits, which grew by 20.8 percent year over year the company stated.
The stock that traded at $30.50 on the Jamaica Stock Exchange is undervalued and importantly with strong growth in the third quarter and increased growth in the loan portfolio as well as a pickup in economic growth in Jamaica augurs well for strong growth in profits going forward. Note need to be taken of a possible fall in foreign exchange gains an area that grew sharply in the July quarter by 127 percent to $1.17 billion.
The group declared another dividend of 45 cents per share and seems set to pay total dividend for the fiscal year of $1.80 providing an attractive yield of 6 percent.