Loans at Scotia Group, grew 10 percent since July last year, to hit $144.6 billion at the end of July this year, from $131 billion. While loans grew by only $2 billion up to April, from October last year, it jumped $8 billion in the latest quarter, a 20 percent increase annualised, a strong increase for a banking group that commands a large 39 percent of the commercial banking loan market.
The robust growth in one quarter coming after two quarters of slow growth, raises the question, if there are lumpy new loans booked in the last quarter, that are not likely to be repeated soon, making the increase not reflective of what may be expected going forward. The question was put the Scotia’s CEO Jacqueline Sharp.
“We did have some lumpy commercial loans in Q3, but we also are seeing pick-up on the retail side. So we do expect loan growth to continue, but just not as fast as the growth that took place in Q3” Sharp said.
Lending at Scotia Bank jumps
Scotia Group’s profit down, future much brighter
Scotia Group Jamaica made profit of $2.6 billion for the third quarter ending July, $337 million above the previous quarter ended April but $278 million below the quarter ended July 2013 and $7.4 billion for the nine months period, down from $8.2 billion last year.
The group increased bad loan provisions by $130 million to $497 million for the quarter over April this year and an Increase of $320 million over the July 2013 level. For the nine months to date provisions for loans is up $550 million to $1.376 billion.
Operating expenses have been under control with an increase of 7.3 percent for the quarter and 6.7 percent year to date but this is much higher than the 2.7 percent increase in income, net of interest cost for the quarter, and 1.4 percent increase for the nine months to July. “This is due primarily to higher staff related costs of $279 million and operating expenses of $579 million, reflecting an increase in the asset tax of $498 million, resulting from the recent increase in the rates,” management said in their report to investors.
The group would have enjoyed higher income from foreign exchange trading in 2013, as the value of the Jamaica dollar slipped more than it has done during the current period, leading to a $300 million decline for this line item. Importantly, while gross interest income was flat, at $15 billion up to April versus 2013, it has grown in the July quarter, due to the stronger loan growth.
Earnings per share (EPS) for the nine months is $2.36 compared to $2.64 for the same period last year and seems set to report $3.45 for the full year ending October and $4.50 for the next fiscal year.
The Return on Average Equity was 13.74 percent, down from 16.67 percent last year.
Scotia approved a third interim dividend of 40 cents per stock unit payable on October 16.
Total assets increased year over year by $12.5 billion or 3.2 percent to $401 billion, due primarily to growth in the loan portfolio of $13.6 billion. Loans grew by 10 percent since July 2013, to hit $144.6 billion. More importantly, while loans grew only by $2 billion up to April from October last year, it jumped $8 billion in the latest quarter, a 20 percent increase, annualised, putting it on track for a big surge in lending going forward if maintained, and strong growth in profits, as well. Deposit declined marginally to $197 billion at the same time. The stock remains Buy Rated.
