Mar 2015 Financial News

Annual asset tax hits Scotia Investments

Mar 11, 2015

SCOTIA Investments Jamaica Ltd (SIJL) earned $136 million in after tax-profit for its January first-quarter 2015 or 60 per cent lower than a year earlier -- primarily due to the payment of its annual asset tax in one tranche.

It's the latest financial firm to reflect the asset tax in its financials.

The profit, however, would have still declined even without the asset tax, mainly due to revenues dipping 13 per cent to $1.3 billion.

"As we continue to be impacted by the higher operating cost environment, as evident in the increased asset tax burden on our business, we will focus on the implementation of various structural cost realignment initiatives to improve operational efficiencies. This, whilst we maintain our strategic emphasis on aggressively growing our asset management, trading and capital markets businesses; while driving value for our customers through the execution of a number of customer intimacy initiatives," stated Lissant Mitchell, chief executive SIJL, in the preface of the financial statement.

However, the dip in profits overshadow the increase in fee-based earnings, which forms an important pillar of Mitchell's lead at SIJL. Net fee and commission income totalled $245.4 million compared with $212.6 million.

"We recorded strong revenue growth from our asset management business line, consistent with our ongoing strategic initiative of diversifying our revenue sources so as to be less dependent on net interest income," stated Mitchell. "This as the company continues to reduce its overall risk profile, which is inherently embedded within a balance sheet-focused business model. All our risk management metrics have improved and our capital adequacy ratio of 48 per cent remains above the regulatory requirement of 10 per cent, thus providing healthier risk-adjusted returns to our shareholders."

Prior to International Financial Reporting Standards (IFRS) 21, the asset tax was accrued evenly throughout the financial year. But the adoption of IFRS 21 has resulted in the full charge being reflected in the first quarter. IFRS 21 dropped the SIJL return on average equity (net profit over equity) to 3.95 per cent compared to 11.28 per cent a year earlier.

The board of directors also approved a first interim dividend of 45 cents per stock unit payable on April 17, 2015, to stockholders on record at March 25, 2015.

Source:
Jamaica Observer
Wednesday March 11, 2015  

http://www.jamaicaobserver.com/business/Annual-asset-tax-hits-Scotia-Investments_18547000