SGJ reports 2% increase in three months net profit

March 11, 2022

For the three months ended January 31, 2022 Scotia Group Jamaica Limited’s (SGJ) net interest income rose 6% amounting to $6.16 billion, relative to $5.80 billion for the corresponding period in 2021, while interest expenses declined by 12% to total $452.23 million (2021: $512.44 million). Interest income for the quarter increased from $6.31 billion in 2021 to $6.61 billion for the same period ended January 2022. The Company noted, “Business segments collaborated and performed well during the quarter with insurance revenues and net gains on foreign currency activities increasing over the prior year period.”

The company reported an expected credit loss of $569.31 million compared to the loss of $430.16 million for the comparable period in 2021. As such, Net interest income after expected credit losses for the quarter rose 4% to $5.59 billion relative to the $5.37 billion recorded for the corresponding period in 2021. SGJ noted that, “Expected credit losses for the period showed an increase of $139.1 million or 32.4% when compared to Q1/2021. However, the Group’s credit quality remains strong and we are well provisioned for both our performing and non-performing loans, ensuring adequate coverage for possible future net write offs. “

Total other revenue decreased by 12% to $4.78 billion (2021: $5.44 billion). Of this:

• • Net fees and commission income amounted to $1.50 billion (2021: $1.67 billion), a decline of 10% relative to the corresponding period in 2020. The performance was due to, “The reduction noted in fee and commission revenue is due to the continued execution of the Group’s digital adoption strategies geared towards educating customers about our various electronic channels which attract lower fees coupled with rising costs associated with the cards network.”
  • Insurance revenue rose by 25% and closed the period at $793.74 million relative to $634.18 million last year. SGJ noted the movement was due to, “higher transaction volumes stemming from improved cross-selling initiatives coupled with higher actuarial reserve releases and lower refunds.”
  • Net foreign currency activities increased by 6% and amounted to $2.12 billion (2020: $2 billion). Net gains on financial assets fell to $68.95 million relative to $164.11 million recorded in 2021.
  • Other revenue fell significantly from $972.52 million in 2021 to $295.39 million due to “one-off gains reflected in the prior period from the extinguishment of debt facilities which was partially offset by current year gains realized on the disposal of property,” as per SGJ.

As such, total operating income for the year decreased 4% to total $10.37 billion versus $10.81 billion for the corresponding period in 2021.

Total operating expenses for the quarter amounted to $7.40 billion, a 5% increase from the $7.77 billion booked for the corresponding period in the prior financial year.  The company noted, “The lower operating expenses reflected as at Q1/2022 was due to Q1/2021 (prior period) restructuring provisions and the continued benefits of initiatives executed.”
Under operating expenses:

• • Salaries and staff benefits increased 4% to close the quarter at $2.66 billion (2021: $2.56 billion).
  • Property expenses (including deprecation) amounted to $528.10 million (2021: $589.84 million).
  • Amortization of intangible assets decreased by 7% to close the period at $22.74 million versus $24.50 million in 2021.
  • SGJ reported $1.36 billion for asset tax, 7% more than the $1.26 billion documented for the same period for 2021 given the increase in the Group’s assets.

Other operating expenses decreased by 15% and closed the period at $2.83 billion relative to $3.33 billion in 2021.

Profit before taxation for the period totaled $2.96 billion; this represents a decrease of 2% from the $3.04 billion recorded in 2021.

Tax charges for the period totaled $1.18 billion (2021: $1.29 billion), as such Net Profit for the quarter totaled $1.78 billion, 2% more than the $1.75 billion posted for the same period in 2021. Profit attributable to shareholders for the quarter amounted to $1.78 billion, 2% more than the total of $1.75 billion a year earlier.

Total comprehensive income for the period totaled $2.91 billion, compared to the $4.80 billion recorded for the same quarter in 2021.

Earnings per share (EPS) for the quarter totaled $0.57 (2020: $0.56), while the trailing twelve months earnings per share totaled $2.71. 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, 2022 at a price of $35.39 which corresponds to a P/E of 13.04 times.

SGJ noted, “Our loan portfolio showed a reduction by $16.4 billion or 7.6% compared to January 2021, with loans after allowances for expected credit losses reducing to $200.6 billion. Loan repayments coupled with lower commercial loan demand in light of the global pandemic accounted for the year over year movement. Our core loan book continues to do well with mortgages increasing by 17% compared to Q1/2021.”

Balance Sheet Highlights: 

As at January 31, 2022, the company’s assets totaled $590.69 billion, 7% more than its value of $552.53 billion last year earlier. The increase in total assets was primarily driven by increases in ‘Cash resources’ which closed at $172.51 billion (2021: $130.31 billion). ‘Loans, After Allowances for Impairment Losses’ tempered the overall movement in the asset base to close the quarter at $200.56 billion (2021: $216.99 billion).

SGJ’s shareholders’ equity at the end of the period amounted to $115.42 billion relative to the $114.16 billion recorded in the prior year. Consequently, the book value per share amounted to $37.09 (2021: $36.69).

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