Aug 2006 Financial News

Scotiabank Releases Nine Months Results

Aug 24, 2006

For the Nine Months ended July 31, 2006 Scotiabank of Trinidad and Tobago (SBTT) reported Earnings per Share (EPS) of $1.92, which represents an impressive increase of 39.13% or $0.54 on the comparable EPS of 2005. For the three months ended July 31, 2006 this represents an increase of $0.20 or 40.00 % on the comparable period, as the EPS for Q3 2006 amounted to $0.70.

Net Interest Income for the period stood at $380.79 million, an increase of 23.92% on the prior comparable period. Contributing to this increase is the fact that the Loan Portfolio grew at a faster rate than the Deposit Book (nine months on nine months). Such that, Net Loans to customers increased by 25.75% or $1.38 billion, while Deposits from customers increased by 20.00% or $1.2 billion. The overall loan increases for the period have been attributed to strong growth in the areas of Retail, Commercial and Corporate Lending.

Other Income contributed $129.46 million to the Total Income of $510.25 million. Nine months on nine months, Total Income grew by 20.02% or $85.12 million while Non-Interest Expenses increased by a meager 8.47%. The major contributor to Non- Interest Expenses was Salaries and Staff Benefits (47.26%). As a result of the Bank’s continued discipline in controlling Non- Interest Expenses, the bottom line was able to realize the substantial gains from Total Income. Thus Income Before Taxation benefited by a notable increase of 30.09% to end at $295.59 million.

The Effective Tax Rate for the period ended July 31, 2006 amounted to 23.73%, while the Rate in the comparable period of 2005 stood at 28.68%; this is no doubt the result of the 5% reduction in the Corporation Tax Rate. Thus, Income After Tax amounted to $225.44 million, an overall increase of $63.34 million or 39.10%.

On the basis of performance to date, the Board of Directors has resolved that the Bank pay a third Interim Dividend of $0.23 per ordinary share on September 26, 2006 to shareholders on record as at September 05, 2006.

Additionally, Managing Director, Mr. Richard Young, has advised that the bonus share issue approved by shareholders is still seeking Regulatory Approval.

The share price of SBTT currently stands at $37.01. Based on the current results, we have revised our forecasted EPS to $2.60. At the current price and revised forecasted EPS, this share is trading at a multiple of 14.23 times. This P/E multiple is just beyond the average for the Banking Sector of 13 times. Also, SBTT shares are very illiquid and as such, usually trades in the high range of 19 to 20 times.

Thus, based on this fundamental analysis we recommend a Medium to Long Term BUY.


Gia Singh
WISE Research Team