SGJ reports 32% decrease in first quarter net profit

Date: March 15, 2019

Scotia Group Jamaica Limited’s (SGJ) Net Interest Income decreased by 7% to $6.20 billion, moving from $6.64 billion for the corresponding period in 2018. Interest Expenses declined by 19% to total $685.61 million (2017: $850.34 million). Interest Income for the period decreased from $7.49 billion in 2018 to $6.88 billion. According to SGJ, loan and transaction volumes continued to grow across our business lines, however lower interest rates due to a stable macroeconomic environment and increased competition, resulted in margin compression.”

The company reported an Impairment Loss on Loans of $854.33 million compared to the gain of $6.23 million for the comparable period in 2018. As such, Net Interest Income after Impairment losses on loans fell 20% to $5.34 billion relative to the $6.64 billion recorded for the corresponding period in 2018.

Total Other Revenue increased by 7% to $5.31 billion (2018: $4.96 billion) . Total other revenue is broken down as followed:

Net Fees and Commission Income amounted to $2.05 billion (2018: $2.10  billion), a decrease of 2% 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 13% and closed the period at $1.02 billion relative to $1.17 billion last year as a result of lower actuarial reserve releases year over year, offset by higher premium income. Net Foreign Currency Activities increased by 157% to $2.04 billion (2018: $792.75 million).

Net Gains on Financial Assets improved to $182.91 million relative to $132.04 million recorded for the first quarter ended January 31, 2018, due to increased market activities.

Other revenue increased from $8.41 million or 18% in the first quarter of 2018 to $9.97 million.

As such, Total Operating Income for the first quarter decreased 8% to total $10.65 billion versus $11.60 billion for the corresponding period in 2018.

Total Operating Expenses for the first three months amounted to $7.34 billion, a 15% growth from the $6.37 billion booked for the corresponding quarter in the prior financial year.

Under operating expenses:

Salaries and Staff Benefits increased to close the period at $2.87 billion (2018: $2.67 billion).

Property Expenses (Including Deprecation) fell by 8% amounting to$527.67 million (2018: $488.66 million).

Amortization of Intangible Assets increased 2% to close the period at $38.41 million versus $37.62 million in 2018.

SGJ reported $1.19 billion for asset tax, 6% more than the $1.12 billion documented for the first quarter of 2018.

Other Operating Expenses increased by 32% to closed the quarter at $2.71 billion relative to $2.05 billion.

Profit before Taxation for the quarter totaled $3.31 billion, this represents an decrease of 37% from the $5.23 billion recorded in 2018.

Tax charges for the quarter totaled $989.50 million (2018: $1.82 billion). Net Profit for the period totaled $2.32 billion, 32% less than the $3.41 million posted for the same period in 2018.

Profit Attributable to Shareholders amounted to $2.32 billion, 32% less than the total of $3.41 billion a year earlier.

Earnings per share (EPS) for first three months totaled $0.75 (2018: $1.10). The trailing twelve months EPS amounted to $4.67. 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 14, 2018, at a price of $51.59.

The company noted, “Board of Directors approved an interim dividend of 51 cents per stock unit in respect of this first quarter, which is payable on April 3, 2019 to stockholders on record as at April 25, 2019.”

Balance Sheet Highlights:

As at January 31, 2018, the company’s assets totaled $537.13 billion, 7% more than its value a year earlier. The increase in total assets was primarily driven by increases in ‘Loan after impairment losses’ by $18.11 billion to total $185.66 billion (2017: $167.55 billion) and ‘Cash’ by $12.11 billion to a total of $131.71 billion (2017: $119.60 billion). According to President and Chief Executive Officer (CEO) David Noel, The increase in ‘Loan after impairment losses’ was due to, “a 16% increase in loans to commercial customers and a 14% increase in mortgages. This demonstrates a positive customer response to the ongoing changes we have been making and augurs well for the future.”

SGJ’s shareholders’ equity at the end of the first quarter amounted to $115.03 billion relative to the $104.90 billion recorded in the prior year’s corresponding quarter. Consequently, the book value per amounts to $36.97 (2017: $33.71).

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.