SGJ reports 43% decline in nine months net profit

Scotia Group Jamaica Limited (SGJ) for the nine months ended July 31, 2020, Scotia Group Jamaica Limited’s (SGJ) Net Interest Income experienced a marginal increase to $18.71 billion, moving from $18.69 billion for the corresponding period in 2019. Of this, Interest Income for the period decreased from $20.67 billion in 2019 to $20.53 billion while Interest Expenses declined by 8% to total $1.82 billion (2019: $1.98 billion).

The Company reported an expected Credit Loss of $5.25 billion compared to the loss of $1.92 billion for the comparable period in 2019. As such, Net Interest Income after expected credit losses fell 20% to $13.45 billion relative to the $16.77 billion recorded for the corresponding period in 2019. The Company mentioned that this was primarily due to, “the increase in expected credit losses of $3.3 billion given the revised assumptions incorporated in our impairment methodology as a result of the COVID-19 pandemic.”

Total Other Revenue decreased by 12% to $13.38 billion (2019: $15.13 billion). Of this:

  • Net Fees and Commission Income amounted to $5.08 billion (2019: $5.99 billion), a decrease of 15% relative to the corresponding period in 2019. 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.”
  • Insurance Revenue  fell by 6% and closed the period at $2.42 billion relative to $2.57 billion last year. SGJ noted, Insurance Revenue decreased due to, “the reduction in premium income which was partially offset by higher actuarial reserve releases.”
  • Net Foreign Currency Activities increased by 1% and amounted to $5.30 billion (2019: $5.24 billion), SGJ noted that this was, “owing to lower trading volumes and sale of securities.”
  • Net Gains on Financial Assets lowered to $537.39 million relative to $1.13 billion recorded in 2019.
  • Other Revenue decreased from $211.47 million in 2019 to $38.69 million in 2020, a decrease of 82%.

As such, Total Operating Income for the period decreased by 16% to total $26.83 billion versus $31.90 billion for the corresponding period in 2019.  Total Operating Income for the quarter amounted to $7.82 billion, 30% lower than the $11.15 billion booked for the same quarter of 2019.

The Company noted that, “expected credit losses for the period showed an increase of $3.3 billion when compared to the prior period in 2019. This was mainly driven by additional provisions based on revised assumptions incorporated in the impairment methodology given the COVID-19 pandemic. Despite the increase in provisions our credit quality remains strong. We are well provisioned with accumulated credit losses (ACLs) for performing loans increasing by $2.7 billion or 63% since the onset of the global pandemic, ensuring significant coverage for possible future net write offs. This is not an indication of the credit quality of the portfolio which continues to be more favourable than the Industry average (lower non-accrual loans to gross loans and higher loan loss provisions to gross loans).”

Total Operating Expenses for the nine months amounted to $18.75 billion, a 2% growth from the $18.38 billion booked for the corresponding period in the prior financial year.

Under operating expenses:

  • Salaries and Staff Benefits decreased to close the period at $7.91 billion (2019: $8.35 billion)
  • Property Expenses (Including Depreciation) rose by 10% amounting to $1.80 billion (2019: $1.64 billion).
  • Amortization of Intangible Assets declined 23% to close the period at $88.14 million versus $114.32 million in 2019.
  • SGJ reported $1.20 billion for Asset Tax, 6% more than the $1.13 billion documented for the same period for 2019.
  • Other Operating Expenses increased by 8% and closed the period at $7.75 billion relative to $7.15 billion in 2019.

Profit before Taxation for the period totaled $8.08 billion; this represents a decline of 40% from the $13.52 billion recorded in 2019.

Tax charges for the period totaled $2.51 billion (2019: $3.73 billion), as such Net Profit for the period totaled $5.56 billion, 43% less than the $9.79 billion posted for the same period in 2019. Profit for the quarter amounted to $1.55 billion, 63% less than the Net Profit of $4.17 billion a year earlier.

Profit attributable to shareholders for the period totaled $5.56 billion, a 43% decrease on the $9.79 billion recorded in 2019. Profit attributable to shareholders for the third quarter totaled $1.55 billion compared to $4.17 billion booked for the comparable period of 2019.

Total Comprehensive Loss for the six months ended July 31, 2020, amounted to $3.19 billion (2019 income: $12.28 billion. For the quarter, Total Comprehensive Loss amounted to $907.31 million  relative to Total Comprehensive Income of $4.04 billion reported for the same quarter last year.

Earnings per share (EPS) for the period totaled $1.79 (2019: $3.15), while earnings per share for the quarter totaled $0.50 (2019: $1.34). The trailing earnings per share amounted to $2.88. 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 10, 2020 at a price of $48.02.

SGJ president and CEO commented, “Our financial results, however, have been significantly affected by our increased provisions for future credit losses due to the expected economic slowdown. The vast majority of these provisions is not a reflection of our existing non-performing loans but is a conservative estimate for potential future losses which may or may not arise.” Also, “Our digital agenda has been accelerated due to the current health crisis. We have continuously provided upgrades and enhancements across all our digital channels to allow customers more options to bank remotely and minimize their potential exposure to the virus.”

Balance Sheet Highlights:

As at July 31, 2020, the Company’s assets totaled $556.84 billion, 4% more than its value of $537.50 billion last year. The marginal increase in total assets was primarily driven by increases in ‘Loans, After Allowances for Impairment Losses’ by $23.31 billion to total $221.74 billion and ‘Investment Securities’ by $15.75 billion to a total of $141.06 billion (2019: $125.31 billion).  SGJ noted, “Our overall loan portfolio grew by 12% largely due to the strong performance of the Commercial Banking unit which grew by 24% versus prior year. Our retail loan growth was 5% year over year which included strong mortgage growth of 16%.”

SGJ’s shareholders’ equity at the end of the period amounted to $110.10 billion relative to the $116.18 billion recorded in the prior year’s corresponding period. Consequently, the book value per amounts to $35.39 (2019: $37.34).


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