September 9, 2021
Scotia Group Jamaica Limited (SGJ) for the nine months ended July 31, 2021, Scotia Group Jamaica Limited’s (SGJ) Net Interest Income experienced a 9% decrease to $17.01 billion, moving from $18.71 billion for the corresponding period in 2020. Of this, Interest Income for the period decreased from $20.53 billion in 2020 to $18.41 billion while Interest Expenses declined by 23% to total $1.40 billion (2020: $1.82 billion).
The Company reported an expected Credit Loss of $1.99 billion compared to the loss of $5.25 billion for the comparable period in 2020. As such, Net Interest Income after expected credit losses rose 12% to $15.02 billion relative to the $13.45 billion recorded for the corresponding period in 2020. The Company mentioned that this was primarily due to, “the reduction in expected credit losses of $3.3 billion. Prior period results included higher provisioning given the revised assumptions incorporated in the impairment methodology, in conjunction with the adoption of a more prudent approach in determining credit loss provisions.”
Total Other Revenue increased by 10% to $14.73 billion (2020: $13.38 billion). Of this:
o Net Fees and Commission Income amounted to $4.99 billion (2020: $5.08 billion), a decrease of 2% relative to the corresponding period in 2020. The performance was, “primarily attributable 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.”
o Insurance Revenue fell by 16% and closed the period at $2.02 billion relative to $2.42 billion last year. SGJ noted, Insurance Revenue decreased due to, “the reduction in premium income stemming from the pandemic as well as lower actuarial reserve releases.”
o Net Foreign Currency Activities increased by 17% and amounted to $6.21 billion (2020: $5.30 billion).
o Net Gains on Financial Assets lowered to $506.31 million relative to $537.39 million recorded in 2020.
o Other Revenue increased from $38.69 million in 2020 to $1 billion in 2021, an increase of 2496%, “attributable to gains realized on the extinguishment of debt facilities,” as per SGJ.
As such, Total Operating Income for the period increased by 11% to total $29.75 billion versus $26.83 billion for the corresponding period in 2020. Total Operating Income for the quarter amounted to $9.63 billion, 23% more than the $7.82 billion booked for the same quarter of 2020.
Total Operating Expenses for the nine months amounted to $19.05 billion, a 2% growth from the $18.75 billion booked for the corresponding period in the prior financial year. The Company noted that, “This was primarily attributable to an increase in other operating expenses of $1 billion which was partially offset by the reduction in salaries and staff benefit costs of $602 million (due to continued expense management initiatives despite restructuring provisions recorded). The increase noted in other operating expenses was due to restructuring costs and technology expenses. Excluding restructuring and other one-off expenses, operating expenses would be $263 million or 1.4% lower than the prior comparative period.”
Under operating expenses:
o Salaries and Staff Benefits decreased to close the period at $7.31 billion (2020: $7.91 billion)
o Property Expenses (Including Depreciation) fell by 7% amounting to $1.68 billion (2020: $1.80 billion).
o Amortization of Intangible Assets declined 17% to close the period at $73.48 million versus $88.14 million in 2020.
o SGJ reported $1.22 billion for Asset Tax, 2% more than the $1.20 billion documented for the same period for 2020.
o Other Operating Expenses increased by 13% and closed the period at $8.76 billion relative to $7.75 billion in 2020.
Profit before Taxation for the period totaled $10.70 billion; this represents a rise of 32% from the $8.08 billion recorded in 2020.
Tax charges for the period totaled $3.41 billion (2020: $2.51 billion), as such Net Profit for the period totalled $7.29 billion, 31% higher than the $5.56 billion posted for the same period in 2020. Profit for the quarter amounted to $2.81 billion, 82% more than the Net Profit of $1.55 billion a year earlier.
Profit attributable to shareholders for the period totaled $7.29 billion, a 31% increase on the $5.56 billion recorded in 2020. Profit attributable to shareholders for the third quarter totaled $2.81 billion compared to $1.55 billion booked for the comparable period of 2020.
Total Comprehensive income for the nine months ended July 31, 2021, amounted to $9.18 billion (2020 loss: $3.19 billion). For the quarter, Total Comprehensive Loss amounted to $1.15 billion relative to Total Comprehensive loss of $907.31 million reported for the same quarter last year.
Earnings per share (EPS) for the period totaled $2.34 (2020: $1.79), while earnings per share for the quarter totaled $0.90 (2020: $0.50). The trailing earnings per share amounted to $3.46. 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 September 8, 2021 at a price of $38.86 with a corresponding P/E of 11.22 times.
Balance Sheet Highlights:
As at July 31, 2021, the Company’s assets totaled $578.28 billion, 6% more than its value of $544.07 billion last year. This in total assets was primarily driven by a $30.51 billion increase in ‘Cash resources’ to total $146.60 billion (2020: $116.09 billion). SGJ noted, “The increase noted was directly attributable to the growth in our core deposits in conjunction with loan repayments. The Group continues to maintain adequate liquidity levels to enable us to respond effectively to changes in our cash flow requirements.”
SGJ’s shareholders’ equity at the end of the period amounted to $116.20 billion relative to the $110.10 billion recorded in the prior year’s corresponding period. Consequently, the book value per amounts to $37.34 (2020: $35.39).
Disclaimer
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.