Nov 2014 Financial News

Despite falling share price...Scotiabank sees bright future ahead

Nov 06, 2014

The oldest bank continuously operating in T&T; the first to offer consumer loans at a time when banks were believed to be for the elite in the 1960s; the first to focus on small- and medium-sized businesses; the first with an international debit card; and the first to offer e-commerce solutions, Scotiabank, this year, celebrated 60 years doing business in T&T.

Listed on the T&T Stock Exchange (TTSE) since the 1970s, Scotiabank T&T has for a long time been a favourite of local investors, who own 49 per cent of it. But this year, that favouring has turned to frowns as the bank’s stock has fallen steadily—down by 21 per cent. The stock fell from $73 per share in January to $58 Tuesday (November 4).

Asked about the company’s performance over the past year during a September 15 interview, Scotiabank managing director Anya Schnoor said: “A lot has changed in the banking system, especially locally, in the last few years. When you think of the introdocution of the mortgage market reference rate (MMRR) which was a phenomenon for T&T, that is something that all banks are grappling with. What it basically did was tie your mortgage rate to a government bond. That’s just something we have had to work our way through.”

She said: “Margins are compressing as interest rates have declined globally, across the whole world,” not only here.

Scotiabank has about 200,000 customers here, Schnoor said.

Reshard Mohammed, a vice president at the bank, who sat in on the interview, said Scotia still has a fastgrowing business though, citing growth in loans and the bank’s capital adequacy ratio.

Both Mohammed and Schnoor said in response to questions about the bank’s declining profits that they look at the long term and not quarter by quarter. First quarter (Q1) 2014 net income fell year-on-year (y-oy) for the three months ended January 31, from $144 million to $140 million. Q2 net income fell y-o-y $138 million to $105 million. Q3 net income fell y-o-y from $140 million to $131 million.

Mohammed said the bank has a fast-growing insurance business. Over the last six years, the insurance sector has been “very, very good,” Mohammed said.

He said policyholder funds increased 22 per cent year-on-year in July. Insurance accounts for 15-16 per cent of the bank’s profit, Mohammed said, showing that the bank is diversified.

“Scotia Insurance is really getting more and more into the insurance business,” Schnoor said. Scotia Insurance is the third largest insurance company in the country after having been in the insurance business here for only ten years. Guardian and Sagicor are the top two.

Insurance is a long-term product, Schnoor said, so people want to buy from a company that can be trusted to be around and in good financial condition when needed.

“And we can cross-sell to our existing customers and that’s great,” she said.

By loans, Scotia is the country’s second largest bank, after Republic.

Schnoor said: “We’re very excited about what we see as prospects for the future. The banking system in T&T is sound. We feel confident as we look out. The economy is doing a little better, and based on the projections for growth next year, certainly, we expect things to pick up.”

Source:
Trinidad Guardian, BG5
Thursday November 6, 2014