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 Group Jamaica (Scotia Group) today reported record profit for the year to October 2013 of $11.92 billion compared to $10.58 billion for the same period last year. The banking group best other year was in 2009 when they reported $11.15 billion, but reported lower profits since until 2013.

It’s 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 profit was $3.22 billion, $160 million above the previous quarter ended July, 2013 and $595 million above the quarter ended October 2012.

Earnings per share (EPS) for the year was $3.70 compared to $3.26 for the same period last year. The company reported $1 per share in earnings in the October quarter. Return on average equity was 16.88 percent, up from 15.56 percent last year.

Total operating income rose to $41.37 billion, a 6 percent increase over $39 billion generated in 2012.

Net interest income | Net interest income, after impairment losses for the period, was $22.85 billion, up $740 million or 3.35 percent when compared to the same period last year. Loan loss expense increased by $168 million when compared with prior year.

Other revenue | “Other revenue for the twelve months was $11.39 billion, up $2.28 billion or 25 percent compared to 2012. This was due primarily to increased insurance revenue, fee and commission income, as well as higher gains on our foreign currency trading and investment book. Net fee and commission income increased 10 percent, due to increased account and transaction volumes in our retail and commercial portfolios, as well as, growth in our mutual funds and unit trust business” the company stated.

Expenses | “Salaries and staff benefits reflect a reduction of $126 million this year, as it includes a higher actuarially determined net credit of $1.19 billion in relation to our defined benefit pension, group life and health plans. The salaries and staff benefits expense, excluding the post retirement credit, increased by $1.06 billion or 12.22 percent year over year” the company reported. Other operating expenses grew much faster than income at 26 percent to reach $7.14 billion in the year.

Credit quality | “Non-performing loans at year end totalled $4.49 billion, reflecting a decrease of $60 million from prior year, and a decrease of $209 million from the previous quarter ended July 2013 as recoveries increased during the period. Total NPLs now represent 3.29 percent of total gross loans compared to 3.65 percent last year and 3.51 percent as at July, 2013. The Group’s aggregate loan loss provision as at October 31, 2013 was $4.5 billion, representing 100 percent coverage of the total nonperforming loans,” the Group’s management stated.

Balance sheet | Total assets increased year over year by $31 billion or 8.68 percent to $389 billion at October as the Group enjoyed growth in loan and deposit volumes over the period. Loans grew by $12.3 billion to close at $134.8 billion. Cash resources increased by $22 billion primarily as a result of the growth in deposits. Total customer liabilities (deposits, repo liabilities and policyholder’s funds) grew to $296 billion, an increase of $23 billion over last year.

Capital | Total shareholders’ equity grew to $72.8 billion, $5.2 billion above prior year.

Scotia Group has maintained its Buy Rated status as IC Insider projects earnings for 2014 to end up around $4.50. The stock, priced under $18, is already very cheap based on 2013 earnings. With the recently announced dividend of 40 cents per share, the yield is over 9 percent.

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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.

Other 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.

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Scotia Investments Jamaica’s profit for the quarter to July this year was $562 million or 51 percent above the $372 million earned in the previous quarter and 18 percent above the $477 million made in the 2012 quarter. For the nine months ended July 31, 2013, net profit was $1.42 billion, down $90 million or 6 percent when compared to the same period last year. Earnings per share for July quarter was $1.33 compared to $1.13 in 2012. For the nine months earnings per share was $3.36 compared to $3.57 for the same period last year.

Revenues | Operating Income comprising net interest revenue and other income for the quarter amounted $1.178 billion, up $228 million or 25 percent from the $949 million recorded for the previous quarter. Operating Income, came out at $3.236 billion for the nine months period, up $142 million or 5 percent above the $3.094 billion for the same period 2012.

The company has recovered from the negative impact of the NDX on net interest income as net interest income for the quarter was $692 million, $66 million or 10 percent above the results of the previous quarter. Net interest income after impairment losses for the nine months period was $2.081 billion, down $33 million or 2 percent when compared to the same period the year before.

Non-Interest Income | Non-interest income, inclusive of fees, securities trading gains and net foreign exchange trading income was $1.155 billion for the period, up $175 million or 18 percent compared to the same period last year and $485 million for the quarter, up $162 million or 50 percent over the $324 million recorded last quarter. The major factors contributed to the improvement is net fees and commission as there was a $69 million jump in this category in the quarter and $183 million year to date, net foreign exchange gain dropped sharply in the quarter from the prior quarter to $30 million, which was slightly lower than the $33 million generated in 2012. Year-to-date, the increase is $105 million with $100 million of than being generated in the April quarter.

Gains from securities trading climbed to $197 million in the July quarter compared to $78 million in July 2012 and year to July income amounted to $273 million versus $293 million. The difference reflect the impact of losses sustained when the company engaged in the debt swap with the Government of Jamaica resulting in a loss on investments due to receiving a lower value for bonds held.

Expenses| Surprisingly, they were able to hold expenses below the amount in the prior quarter to $366 million, down from $418 million in the April quarter but up on the $327 million for 2012. For the nine months expenses climbed sharply to $1.2 billion versus $984 million in 2012.

Assets | Total assets of $72.6 billion remained relatively flat year over year. “There was a $1 billion or 1.3 percent reduction relative to the year ended October 31, 2012, which is consistent with our strategic initiative to focus on growing our off-balance sheet portfolios,” the company stated. Meanwhile, Shareholder’s Equity amounted $11 billion.

Off balance sheet | Assets under management, including the Company’s custody book, were $115.3 billion as at the end of the quarter, up $14.2 billion or 14 percent above the same period last year and up $5.8 billion or 5.3 percent over the previous quarter. The growth was driven by increased net asset values in the managed funds.

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