SGJ reports 2% decrease in three months net profit

March 12, 2021

For the three months ended January 31, 2021 Scotia Group Jamaica Limited’s (SGJ) net interest income declined 6% amounting to $5.80 billion, relative to $6.17 billion for the corresponding period in 2020, while interest expenses declined by 18% to total $512.44 million (2020: $627.92 million). Interest income for the quarter decreased from $6.79 billion in 2020 to $6.31 billion for the same period ended January 2021. The Company noted, “Total revenues continue to be heavily impacted by the COVID-19 pandemic as evidenced by the ongoing reduction in interest rates offered in the market, leading to a reduction in Group’s net interest income coupled with the decline in transaction volumes resulting in lower net fee and commissions as well as insurance revenues.”

The company reported an expected credit loss of $430.16 million compared to the loss of $894.87 million for the comparable period in 2020. As such, Net interest income after expected credit losses for the quarter rose 2% to $5.37 billion relative to the $5.27 billion recorded for the corresponding period in 2020. SGJ noted that this, “was primarily attributable to the reduction in expected credit losses of $465 million, partially offset by reduced yields from the current macro-economic environment. Prior period results included additional provisions of $408 million (one time impact) based on the adoption of a more prudent approach in determining credit loss provisions.”

Total other revenue increased by 11% to $5.44 billion (2020: $4.91 billion). Of this: 

    • Net fees and commission income amounted to $1.67 billion (2020: $2.01 billion), a decline of 17% relative to the corresponding period in 2020. The performance was due to, “lower transaction volumes stemming from the COVID-19 pandemic in conjunction with the continued execution of the Group’s digital adoption strategy geared towards educating customers about our various electronic channels which attract lower fees.”
    • Insurance revenue declined by 40% and closed the period at $634.18 million relative to $1.06 billion last year. SGJ noted the movement was, “due to the reduction in premium income stemming from the pandemic as well as lower actuarial reserve releases.”
    • Net foreign currency activities increased by 17% and amounted to $2 billion (2020: $1.71 billion). Net gains on financial assets improved to $164.11 million relative to $115.26 million recorded in 2020. SGJ noted that the increase in Net gains on foreign currency activities and financial assets was due to “higher revaluation gains.”
    • Other revenue rose significantly from $9.50 million in 2020 to $972.52 million due to “was attributable to gains realized on the extinguishment of debt facilities,” as per SGJ.

As such, total operating income for the year increased 6% to total $10.81 billion versus $10.18 billion for the corresponding period in 2020.

Total operating expenses for the quarter amounted to $7.77 billion, a 9% increase from the $7.12 billion booked for the corresponding period in the prior financial year.  The company noted, “ This was primarily attributable to an increase in other operating expenses of $804 million which was partially offset by the reduction in salaries and staff benefit costs of $196 million (due to continued expense management initiatives despite restructuring provisions recorded). The increase noted in other operating expenses was due to provisions for non-salary related restructuring and other technology expenses. Excluding restructuring and other one-off expenses, operating expenses would be flat compared to Q1/2020.”

Under operating expenses:

    • Salaries and staff benefits decreased 7% to close the quarter at $2.56 billion (2020: $2.76 billion).
    • Property expenses (including deprecation) amounted to $589.84 million (2020: $560.85 million).
    • Amortization of intangible assets decreased by 17% to close the period at $24.50 million versus $29.39 million in 2020.
    • SGJ reported $1.26 billion for asset tax, 2% more than the $1.24 billion documented for the same period for 2020, given the increase in the Group’s assets.
    • Other operating expenses increased by 32% and closed the period at $3.33 billion relative to $2.53 billion in 2020.

Profit before taxation for the period totaled $3.04 billion; this represents a decrease of 1% from the $3.06 billion recorded in 2020.

Tax charges for the period totaled $1.29 billion (2020: $1.28 billion), as such Net Profit for the quarter totaled $1.75 billion, 2% less than the $1.78 billion posted for the same period in 2020. Profit attributable to shareholders for the quarter amounted to $1.75 billion, 2% less than the total of $1.78 billion a year earlier.
Total comprehensive income for the period totaled $4.80 billion, compared to the $3.31 billion recorded for the same quarter in 2020.
Earnings per share (EPS) for the quarter totaled $0.56 (2020: $0.57), while the trailing twelve months earnings per share totaled $2.90. 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 March 11, 2021 at a price of $42.75 which corresponds to a P/E of 14.75 times.

SGJ noted that, “During the quarter, we officially reopened our flagship Scotiabank Centre Head Office Branch. This branch truly represents the future of banking, combining traditional banking services with the latest technology to give our customers an elevated banking experience. As we continue to innovate and make it easier to do business with us, we also ramped up our customer education initiatives including our ‘Scotia Digital Saturdays’ initiative where we opened several branches on a Saturday solely to assist customers to learn to use our digital banking platforms. Additionally, Scotiabank Vision Achiever (SVA) now in its ninth year, commenced its new season in January 2020 to assist SMEs to manage their businesses. This is particularly important given the current economic reality. The SVA is a free capacity-building course, which the Bank offers to support the development of the SME sector which plays a crucial role in our economy. To date, 225 businesses have participated in this transformational programme.”

Balance Sheet Highlights: 

As at January 31, 2021, the company’s assets totaled $552.53 billion, 2% more than its value of $542.31 billion last year earlier. The increase in total assets was primarily driven by increases in ‘Cash resources’ which closed at $130.31 billion (2020: $113.27 billion). ‘Loans, After Allowances for Impairment Losses’ also aided the overall movement in the asset base to close the quarter at $216.99 billion (2020: $212.53 billion).

SGJ’s shareholders’ equity at the end of the period amounted to $114.16 billion relative to the $119.71 billion recorded in the prior year. Consequently, the book value per share amounted to $36.69 (2020: $38.47).


Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.