June 13, 2019

Scotia Group Jamaica Limited (SGJ) for the six months ended April 30, 2019, Net Interest Income decreased by 5% to $12.24 billion, moving from $12.82 billion for the corresponding period in 2018. Interest Expenses declined by 19% to total $1.33 billion (2018: $1.64 billion). Interest Income for the period decreased from $14.46 billion in 2018 to $13.58 billion. Net interest income for the quarter amounted to $6.05 billion relative to $6.18 billion reported in 2018. Management noted, “loan and transaction volumes continued to grow across our business lines, however lower interest rates due to stable macroeconomic environment and increased competition, resulted in margin compression.”

The company reported an Expected Credit Losses of $1.34 billion compared to a loss of $554.03 million for the comparable period in 2018. As such, Net Interest Income after Expected Credit Losses on loans fell 11% to $10.90 billion relative to the $12.26 billion recorded for the corresponding period in 2018.

Total Other Revenue increased by 11% to $9.85 billion (2018: $8.83 billion) . Total other revenue is broken down as followed:

• • • Net Fees and Commission Income amounted to $4.10 billion (2018: $4.11 billion), a marginal decrease relative to the corresponding period in 2018. According to SGJ, “this was impacted by continuous customer education on alternatives to reduce fees, and the ongoing shift to online and mobile transactions which attract lower fees.”
    • Insurance Revenue fell by 4% and closed the period at $1.81 billion relative to $1.88 billion last year as a result lower actuarial reserve releases year over year, partly offset by higher premium income.
    • Net Gains on Financial Assets contracted to $369.11 million relative to $422.44 million recorded for the six month period ended April 30, 2019, due to increased market activities.
    • Other revenue increased from $16.75 million in 2018 to $202.56 million.

Total Operating Income for the six months decreased 2% to total $20.75 billion versus $21.10 billion for the corresponding period in 2018.

Total Operating Expenses for the period amounted to $12.74 billion, a 14% growth from the $11.20 billion booked for the corresponding period in the prior financial year. Management noted, “the growth in operating expenses was primarily due to increased technology investments such as ATM software, online banking enhancements, security chips for credit cards and network upgrade to support our digital strategy.”

Under operating expenses:

• • • Salaries and Staff Benefits increased to close the period at $5.58 billion (2018: $5.13 billion).
    • Property Expenses (Including Deprecation) rose by 7% amounting to$1.07 billion (2018: $995.82 million).
    • Amortization of Intangible Assets increased 2% to close the period at $76.90 million versus $75.07 million in 2018.
    • SGJ reported $1.13 billion for asset tax, 4% more than the $1.08 billion documented for the first six months ended April 30, 2018.
    • Other Operating Expenses increased by 25% to closed the quarter at $4.89 billion relative to $3.91 billion.

Profit before Taxation for the quarter totaled $8.01 billion, this represents an decrease of 19% from the $9.89 billion recorded in 2018.

Tax charges for the quarter totaled $2.39 billion (2018: $3.14 billion). Net Profit for the period totaled $5.61 billion, 17% less than the $6.76 million posted for the same period in 2018. Net profit for the second quarter closed at $3.29 billion relative to 3.34 billion for the same quarter of 2018.

Profit Attributable to Shareholders amounted to $5.61 billion, 17% less than the total of $6.76 billion reported a year earlier.

Earnings per share (EPS) for six  months totaled $1.80 (2018: $2.17). EPS for the quarter amounted to $1.06 versus $1.08 reported for the first quarter of 2018. The trailing twelve months EPS amounted to $3.74. The total number of shares employed in our calculations amounted to 3,111,572,984 units. Notably, SGJ’s stock price closed the trading period on June 12, 2019, at a price of $51.49.

David Noel, President and CEO of Scotia Group Jamaica noted, “Our strategy to focus more aggressively on growing our core business is paying off with growth in loans (net of allowances for credit losses) totaling 18.5 billion at the end of the quarter which represents an increase of 11% year over year.”

Balance Sheet Highlights:

As at April 30, 2019, the company’s assets totaled $543.57 billion, 5% more than its value a year earlier. The increase in total assets was primarily driven by increases in ‘Retirement Benefits Assets’ by $10.40 billion to total $38.90 billion (2018: $28.50 billion) and ‘Loans, After Allowances for Impairment Losses’ by $18.52 billion to a total of $189.40 billion (2018: $170.87 billion). SGJ noted the growth in assets resulted from, “higher retirement benefit asset on our defined benefit pension plan scheme.”

SGJ’s shareholders’ equity at the end of the period amounted to $119.79 billion relative to the $109.09 billion recorded in the prior year’s corresponding quarter. Consequently, the book value per amounts to $38.50 (2018: $35.06).

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