Jun 2010 Financial News

Scotia DBG records huge profit plunge. Due to sell merchant bank by month-end

Jun 04, 2010

The effects of the Jamaica Debt Exchange (JDX) — the government's swap of its domestic bonds for new debt instruments at lower interest rates and longer maturities - has continued to affect the overall financial performance of securities dealers. Scotia DBG Investments Limited (SDBG) is reporting that a its 11 per cent decline in revenue for the second quarter ended April 30, 2010 is "primarily attributable" to a fall in net interest income as a result of the participation in the JDX programme.

The securities dealer reported that net interest income declined from $835 million to $745 million quarter on quarter. Net fee and commission income increased 34 per cent emphasising SDBG's focus on fees to grow revenues.

"As part of our strategy to diversify our revenue base we have been adjusting our business model away from our reliance on net interest income. This strategy has been succeeding," CEO Anya Schnoor said. However, for the quarter under review profits declined 61.5 per cent when compared with the corresponding quarter last year. For the second quarter ended April 30, 2009 SDBJ recorded net profit of $525.5 million compared to $202 million in 2010 reflecting a depressed financial sector.

Schnoor disclosed plans to sell its 100 per cent shareholding in Scotia DBG Merchant Bank by the end of June this year. This move she said was part of a "strategic realignment of core business and to improve overall efficiencies" of the entity. The sale is priced at J$879 million to be attributed to SDBG.

"This sale, along with the closure of two of our branches in May Pen and Ocho Rios in February 2010 will allow us to improve our efficiency while reinforcing our strategic focus on our core business of providing wealth management solutions to our clients," said Schnoor.

But the efficiency gains may not have yet been realised. SDBG saw an 8.6 per cent increase in salaries and staff benefits during the February to April 2010 quarter, during which the closures would have taken place. The expense moved from $175 million to $191.5 million quarter on quarter as a result of these and other operating costs over the period. However, SDBG is reporting a 5 per cent increase in productivity over the quarter based on expense control measures throughout the year. The productivity ratio at end April 2010 was 37.02 per cent up from 31.93 per cent calculated by stating non-interest expense as a percentage of net revenue.


Source:
BY ALICIA ROACHE
Jamaica Observer
Friday, June 04, 2010

http://www.jamaicaobserver.com/business/Scotia-DBG-records-huge-profit-plunge_7674823