Feb 2010 Financial News

Scotia profits up again. Can NCB keep pace?

Feb 24, 2010

Scotia Group yesterday reported net profits of $2.774 billion over the first quarter ending January 31, 2009, an 11 per cent increase over the comparative period last year.

But the performance, while continuing a trend of successive quarterly growth was only $3 million better than first quarter earnings posted by rival firm National Commercial Bank (NCB), and the second consecutive quarter that Scotia's results fell in line with NCB which has been playing catch up for the better part of a decade.

NCB made $2.771 billion net profit during the three months ending December 31, 2009 -- its first quarter -- while the bank, majority-owned by Michael Lee Chin, surpassed Scotia's final quarter net profit last year, making $2.91 billion compared to Scotia's $2.85 billion.

Scotia for years has been the most profitable company listed on the Jamaica Stock Exchange, maintaining this top spot for years consistently ahead of NCB.

NCB, however, may not be able to hold the virtual tie with the country's largest financial institution, by profit, as it relies more on interest and trading income from securities.

NCB typically approximately two-thirds of its interest income from securities while Scotia makes around 40 per cent of its interest income from investments.

What's more, Scotia, known, to be the more conservative of hte two banks, doesn't conduct heavy trading in securities during the year, while NCB does.

For instance, over the last four quarters NCB made on average of $662 million in income from gains on foreign currency and investment activities, while Scotia averaged $323 milion from net foreign exchange income and other revenue over the same period.

Under the Jamaica Debt Exchange (JDX), both banks will likely see a reduction in interest income as a result of the lower rates carried on Government paper albeit the effect on net interest will also be mitigated by lowered interest expense.

Scotia released its most recent results yesterday.

During the period three months to January 31, 2010, Scotia's Earnings per share (EPS) was $0.85, compared to $0.77 last year, while the Return on Average Equity (ROE) was 22.94 per cent.

Scotia's revenues increased by 11 per cent to $7.9 billion. Net interest income for the quarter was $6.5 billion, up $970 million or 17 per cent when compared to last year. However, the firm said that lower fee income on deposit and payment services, as well as reduced revenue from securities and foreign exchange trading income, which has been impacted by the conditions in the financial markets, resulted in Other Revenue declining by 12 per cent compared to the comparative period last year.

Nonetheless, in a press release yesterday, Bruce Bowen, President and CEO of Scotia Group Jamaica said the company "...continues to report solid earnings due to the Group's strong capital and liquidity positions, and diverse business lines".

"These strengths and diversity have augured well for the Group, as despite a decline in the Net Income of the Bank, increased contributions from the Insurance and Wealth Management subsidiaries ensured that the overall results of the Group continues to satisfy our stakeholders," he noted.

Scotia DBG Investments (SDBG) -- the wealth management subsidiary -- reported net profit of $546 million over the period under review, a 42 per cent increase over the corresponding period the year prior.

Total assets increased year over year by $28.6 billion or 9.78 per cent to $321 billion as at January 31, 2010. The Group's loan portfolio totaled $93 billion, up $4 billion over the previous year, with growth reflected mainly in the commercial loan portfolio. Investments and pledged assets also increased by $24.9 billion. Customer liabilities (deposits, repurchase liabilities and policyholder's funds) grew to $254 billion, up $17.6 billion from the previous year, reflecting continued confidence in Scotiabank despite challenging market conditions.


Source:
Jamaica Observer
Wednesday, February 24, 2010

http://www.jamaicaobserver.com/business/Scotia-v-NCB_7443069