June 12, 2020
Scotia Group Jamaica Limited (SGJ) reported an increase in Net Interest Income 2% or $240.54 million to $12.48 billion, moving from $12.24 billion for the corresponding period in 2019. Notably, Interest Income for the period increased from $13.58 billion in 2019 to $13.71 billion. Interest Expense declined 8% to total $1.23 billion (2019: $1.33 billion). Net interest income for the quarter amounted to $6.31 billion relative to $6.05 billion reported in 2019. Management noted, “The Group continues to see strong loan growth across all business lines. The results however, were largely driven by lower net fee and commission income given the reduction in transaction volumes (stemming from the COVID-19 pandemic) coupled with the continued execution of the Group’s digital adoption strategy geared towards increasing customer usage of our various electronic channels which attract lower fees.”
The company reported Expected Credit Losses of $2.67 billion compared to a loss of $1.34 billion for the comparable period in 2019. SGJ noted, “This was mainly driven by additional provisions recorded based on revised assumptions incorporated in the impairment methodology given the COVID-19 pandemic. Despite the increase in provisions our credit quality remains strong and in line with industry average.” As such, Net Interest Income after Expected Credit Losses on loans fell 10% to $9.81 billion relative to the $10.90 billion recorded for the corresponding period in 2019.
Total Other Revenue declined by 7% to $9.2 billion versus $9.85 billion recorded for the six months ended April 30, 2019. Total other revenue is broken down as followed:
- Net Fees and Commission Income amounted to $3.43 billion (2019: $4.1 billion), a 16% decrease relative to the corresponding period in 2019. According to SGJ, “The Group’s fee and commission revenues reduced year over year owing 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 rose 5% to closed the period at $1.91 billion relative to $1.81 billion last year. SGJ attributed the movement to, “higher actuarial reserve releases coupled with the year over year growth in premium income.
- Net Foreign Currency Activities increased 5% to $3.55 billion from $3.37 billion booked for the six-months ended April 30,2019. The Company attributed the movement to, “increased trading activities despite lower revaluation gains.”
- Net Gains on Financial Assets contracted to $290.15 million relative to $369.11 million recorded for the same period in 2019.
- Other revenue decreased from $202.56 million in 2019 to $18.93 million booked for the comparable period in 2020.
Total Operating Income for the year to date decreased 8% to total $19.01 billion versus $20.75 billion for the corresponding period in 2019. Total Operating Income for the quarter amounted to $8.84 billion (2019: $10.10 billion), reflecting a 13% decrease when compared to the comparable period last year.
Total Operating Expenses for the period amounted to $13 billion, a 2% growth from the $12.74 billion booked in 2019. As for the quarter, total expenses amounted to $2.95 billion, 37% decline year over year from the $4.69 billion reported in 2019.
Under operating expenses:
- Salaries and Staff Benefits decreased to close the period at $5.45 billion (2019: $5.58 billion).
- Property Expenses (Including Deprecation) rose by 15% amounting to $1.23 billion (2019: $1.07 billion) when compare to 2019 six months period.
- Amortization of Intangible Assets decreased 24% to close the period at $58.72 million versus $76.90 million booked in 2019 corresponding period.
- SGJ reported asset tax of $1.20 billion, 6% more than the $1.13 billion documented for the first six months ended April 30, 2019.
- Other Operating Expenses increased by 3% closing the period at $5.06 billion relative to $4.89 billion. Management noted, “The increase noted in other operating expenses was attributable to additional expenses incurred in relation to the pandemic coupled with timing of expense payments. The Group continues to see a reduction in fraud losses based on enhanced security measures implemented.”
Profit before Taxation for the quarter totaled $6.02 billion, this represents a decrease of 25% from the $8.01 billion recorded in 2019. For the quarter pre-tax profit decreased 37% to $2.95 billion (2019: $4.69 billion).
Tax charges for the six months totaled $2 billion (2019: $2.39 billion). As such, Net Profit for the period totaled $4.02 billion, 28% less than the $5.61 billion posted for the same period in 2019. Net profit for the second quarter closed at $2.23 billion relative to 3.29 billion for the same quarter of 2019.
Total Comprehensive loss for the period amounted to $2.28 billion compared to an income of $8.24 billion in 2019. For the quarter, tot al comprehensive loss amounted to $5.59 billion relative to a total comprehensive income of $6.34 billion reported for the second quarter of 2019.
Earnings per share (EPS) for six months totaled $1.29 (2019: $2.80). EPS for 2020 second quarter amounted to $0.72 versus $1.06 reported for the second quarter of 2019. The trailing twelve months EPS amounted to $3.73. 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 June 11, 2020, at a price of $45.40.
David Noel, President and CEO of Scotia Group Jamaica noted, “Despite the challenges that occurred in the past few months, we maintained strong growth in our total loan portfolio which increased by $33.7 billion or 18% year over year. This was primarily attributed to 28% growth in our commercial loan book which continues to maintain high credit quality with delinquency of only 0.8%. We have also seen strong growth in the retail loan portfolio which increased by 11% versus prior year. Our retail performance included a 14% increase in mortgages which has been growing steadily over several quarters and ascribes a lower risk than other loan segments. The biggest impact on overall business performance, however, was the increase in provision for credit losses of $1.33 billion. This increase is not a reflection of actual losses but an increase in the provisions for future losses as a result of the economic slowdown caused by the COVID-19 pandemic and the potential impact on loan loss levels.”
Balance Sheet Highlights:
As at April 30, 2020, the company’s assets totaled $551.95 billion (2019: $544.47 billion), 1% more than its value a year earlier. The increase in total assets was primarily driven by increases in ‘Loans, After Allowances for Impairment Losses’ by $33.71 billion to total $223.11 billion (2019: $189.40 billion). ‘Investment Securities’ increased by $12 billion to a total of $145.07 billion (2019: $133.07 billion). The overall movement was tampered by a 31% decline in ‘Cash Resources’ which closed at $91.96 billion (2019: $133.39 billion). SGJ noted the declined in cash resources was because, “Cash resources available were used to purchase investment securities and fund loans granted during the period. 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 $112.41 billion relative to the $119.79 billion recorded in the prior year’s corresponding quarter. Consequently, the book value per amounts to $36.13 (2019: $38.50).
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