Jun 2011 Financial News

Scotia Investment profits jump by 25 per cent. Posts net income of $933 million for 6-month period

Jun 10, 2011

Scotia Investments has staged a remarkable recovery this year, posting a net income figure of J$466 million for the second quarter. Earnings per share came in at $1.10 compared to 48 cents for the same period last year. It issued a dividend payment of 33 cents per share for the second quarter. Return on average equity was 19.92 per cent with a productivity ratio of 32.37 per cent.

Its unaudited financial results for the six months ended April 30, 2011 saw the company post a net income figure of $932.7 million up $185 million or 25 per cent over the $747.7 million earned for the same period last year. Total revenues comprising of net interest revenue and other income was $996 million for the quarter, an increase of $34 million over the last quarter and up $70.9 million when compared to the same period last year.

Other revenue, which includes fee income and net foreign exchange trading income was $262 million for the quarter, up $36 million or 16 per cent from the $226 million reported for the first quarter. The results were also up $82 million or 46 per cent above the $180 million recorded for the same period last year. The company continues to record strong Unit Trust and mutual fund sales and the quarterly results were boosted by higher fee income on these managed funds as well as improved securities trading income.

Total assets increased year over year by $1.05 billion to $71.1 billion. The increase in total assets was driven by the growth in repo liabilities which reflected upwards growth due primarily to inflows from stable funding institutional clients.

Speaking with Caribbean Business Report from Scotia Investment's Holborn road headquarters in Kingston, CEO Anya Schnoor said: " For the period under review, we have shown a 25 per cent increase year over year in our bottom line. Coming out of the JDX we had to take a hard look at our business and decide where is it we wanted to go. Especially with the new IMF agreement we had to pay close attention to the prevailing trends. There was a lot of discussion in that agreement about the capital standards of the securities dealers in Jamaica. In fact the FSC should be making a decision on that some time this week.

"What we decided to do was to transform our business. The old securities dealer model was to grow the balance sheet as fast as you can with a lot of repos. That is model with the new regulations will become very capital intensive. There will now be restrictions on the ability to leverage. Then one will be faced with new liquidity standards not to mention capital charges in related to holding Government of Jamaica debt. Why all this? Because the IMF believes that Jamaica's securities dealers industry needs to strengthen its capital base. They are trying to move us to a more traditional broker dealers model as currently pertains in more developed markets where its all about buying and selling and not holding assets on your balance sheet."

According to Schnoor, the mission now is to grow products that does not require using its balance sheet and this should place Scotia Investments ahead of the local market. The plan now is to grow its unit trust business and to offer more advisory services. With interest rates trending down she sees clients looking for new instruments and products and so its business suite will have to expand accordingly.

" What you see in our financials is tremendous growth in our non -interest revenue which has increased by almost 50 per cent. This is all the more remarkable since we did so within a year. We have managed to curtail our expenses while increase our revenues. We are particularly proud of how we have controlled our productivity ratio and dropping more of our income to the bottom line. We have focused on ways to make our business more efficient. We are doing more with less resources rather than grow our expenses. We divested ourselves of the merchant bank and sold off an asset management company. We are now lean and focused on our core business. We are now all about wealth management, "said Scotia Investments CEO.

At the end of the quarter, funds being managed on a non-recourse basis on behalf of investors totalled $21.4 billion. This represented a growth of $10.1 billion or 89 per cent when compared to the same period last year. Scotia Investments also manages pension and trust funds which had a total asset value of $46.2 billion at the end of the quarter, an increase of $5.4 billion over prior year. During the quarter under review Scotia Investments recorded net inflows into its unit trust products of $1.94 billion while net inflows into its mutual fund products were US$9.1 million.

Schnoor added: " What we have done is made ourselves experts in particular areas. One of those is the unit trust/mutual funds market. We have set up a new unit in our capital markets space and hired Beresford Grey to lead that kind of innovation for us. That unit started six months ago and people are showing interest in it.

We are very proud of the growth in our funds under management. When you look at our total on ($59 billion) and off ($68 billion) balance sheet we are probably the largest dealer in Jamaica or if not very close to it. The growth has largely sprung from our off balance sheet endeavours. In just six month we have grown our off balance sheet by $8 billion. This is due in the main to our domination of the unit trust industry."


Source:
By Al Edwards
Jamaica Observer
Friday June 10, 2011

http://www.jamaicaobserver.com/business/Scotia-Investment-profits-jump-by-25-per-cent_8989313#ixzz1OspKiwKO