Nov 2006 Financial News

Scotiabank Releases Year End Results

Nov 29, 2006

Results for the Year Ended October 31, 2006.

Scotiabank (T&T) Limited (SBTT) continued to report impressive results as its Earnings Per Share (EPS) increased 38.63 per cent to 178.7 cents for the year ended October 31, 2006. The comparative EPS of 128.9 cents was restated to reflect the additional shares outstanding as a result of the recent bonus issue. Scotiabank’s Managing Director, Richard Young, attributed the growth to the Bank’s “excellent execution of its strategic initiatives undertaken throughout the Group”.

The strong performance was driven by growth in its top line as Net Interest Income grew 24.24 per cent to $520.546 million while Other Income increased by 19.05 per cent to $193.939 million. Total Income increased 22.79 per cent to $714.485 million in 2006.

The top line growth was complimented by a relatively small increase in Non-Interest Expenses of 13.06 per cent to $305.478 million. Salaries & Staff Benefits was the major component (45.87 per cent) of this expense and saw a marginal increase of 4.89 per cent. Premises and Technology also saw a small rise in expenses of 7.60 per cent to $62.979 million. Other Non-Interest Expenses such as Communications & Marketing and Loan Loss Expenses rose by 40.34 per cent and 14.39 per cent respectively.

The combination of top line growth and expenditure control resulted in a 31.22 per cent improvement in Income Before Taxation to $409.007 million. SBTT also benefited from a reduction in its Effective Tax Rate from 27.10 per cent in 2005 to 22.97 per cent in 2006. Ultimately, Income After Tax rose 38.65 per cent to $315.060 million.

The Bank’s Asset Base grew 16.94 per cent to $9.192 billion over the year with Net Loans comprising over 75 per cent of the Bank’s Assets. On the Liabilities side, Total Liabilities (excluding Deferred Tax Liability) rose 17.13 per cent to $7.815 billion. Deposits rose 13.01 per cent to $6.773 billion.

Given this strong performance, we are forecasting Earnings Per Share of $2.05 for the year ended October 31, 2007. At the forecasted EPS and the current price of $24.00, SBTT is trading at a price earnings ratio of 11.71 times earnings. This ratio is considered low for this Company which usually trades at a premium to the market. Hence, at the current price and forecasted EPS, we maintain our recommendation of a BUY.

The Directors have declared a final dividend of 24 cents per share to be paid on December 27, 2006. This brings the total dividend paid for the year to 70 cents per share.

Sreshtha Tewari
WISE Research Team