Nov 2010 Financial News

Scotia Group sees significant fall in profits for 2010. Almost J$1 billion drop due to JDX

Nov 26, 2010

Scotia Group Jamaica, for years considered Jamaica's leading banking institution came an albeit, close second to Michael Lee-Chin's NCB Group this year, posting a net income of J$10.7 billion for the year ended October 31, 2010. Last year Scotia posted net income of J$11.6 billion making it unassailably the most profitable banking institution in Jamaica. This year NCB registered a net profit of J$11.1 billion.

Scotia's total revenues for the year under review came in at J$30.49 billion, a fall on the J$31.14 billion posted for the same period last year. Net interest income was J$23.1 billion down 8.5 per cent when compared to last year. Scotia Group attributes this decline to the significantly lower yields on the securities portfolio resulting from the exchange of securities in the JDX. Scotia led the market in loweing retail and commercial lending rates this year, which undoubtedly had an impact on its performance .

Total assets increased year over year by J$10 billion to J$326 billion as at October 2010, this growth was mainly reflected in the investments portfolio and net loans. Investments increased by J$11 billion over the prior year, while net loans increased by J$3.7 billion. Customer liabilities grew to J$254 billion, up J$5 billion from the previous year. Total shareholders equity grew to J$56 billion, J$8 billion more than the prior year.

Earnings per share (EPS) for the period was J$3.34 compared to J$3.58 for the same period last year, while the year to date Return on Average Equity was 20.78 per cent. The Board of Directors approved a dividend of 37 cents per stock unit payable on January 6, 2011 to stockholders on record at December 15, 2010. The year-to-date dividend increased by 9 cents to J$1.48 per stock unit.

Cash flows provided by operating activities slowed to J$10.7 billion when compared with last year's J$11.6 billion. On the other hand cash flows provided by investing activities was a negative J$7.6 billion compared with last year's negative J$29.7 billion. Retail banking recovered somewhat posting a profit before tax of J$2.34 billion compared with last year's J$1.73 billion Corporate banking slipped significantly this year, with pre-tax profits of J$2.3 billion compared with last year's impressive J$3.23 billion. Scotia Group's insurance services continues to go from strength to strength weighing in with pre tax profits of J$4.46 billion compared with J$4.20 last year.

While many have called for Scotia Group to further reduce its lending rates and curb its fees and charges, its reticence in this area is understandable given the increase in non-performing loans. Non-performing loans as at October 31,2010 totalled J$4.2 billion, up J$628 million over the prior year and J$125 million above the previous quarter ended July31, 2010. Scotia Group's CEO, Bruce Bowen points out that the year over year increase reflects the financial difficulties being faced by borrowers, especially retail loan customers. In facr non-performing loans now represent 4.33 per cent of total gross loans compared to3.85 per cent one year ago.

Like many other local financial institutions, Scotia Group continues to see an increase in operating expenses despite efforts to curtail them. For the year under review, the Group's total operating expenses came to J$14.47 billion, J$600 million more than the J$13.8 billion posted in 2009. Salaries and staff benefits continues to pose problems.

Scotia Group Jamaica's President and CEO Bruce Bowen said: "The performance of the Group over the past year was impacted by the unprecedented Jamaica Debt Exchange (JDX) programme coupled with a weak economy. Despite this, Scotia Group has reported strong results and achieved some key objectives including growth in market share in our core lending business and growth in our off-balnce sheet fund management business."


Source:
By Al Edwards
Jamaica Observer
Friday November 26, 2010

http://www.jamaicaobserver.com/business/Scotia-Group-sees-signifant-fall-in-profits-for-2010_8189674