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Scotia Group Jamaica reports first quarter profit decline

Scotia Group Jamaica is reporting a J$1.78 billion decline in net income for the quarter ended January 31, 2020 compared to the J$2.32 billion net income for the corresponding period last year.

Scotiabank Jamaica’s headquarters in downtown Kingston, Jamaica.

In its latest quarterly report, Scotiabank explained that excluding gains on sale of investments in the first quarter of $126 million, and additional provisions recorded of $408 million (one-time impact) based on a more prudent approach in determining expected credit losses, the net income for the quarter under review would be on par with 2019.

Total revenues excluding expected credit losses for the three months ended January 31, 2020 was $11.1 billion and showed a reduction of $430 million or 3.7 per cent when compared to 2019. Loan and transaction volumes continue to grow across our business lines. However, lower interest rates and increased competition, resulted in margin compression.

“As we execute on our strategy that is focused on being better positioned for the future, we continue to leverage technology to better serve our customers and improve customer experience.”

– Scotia Group President and CEO, David Noel

Net interest income after expected credit losses for the quarter totaled $5.3 billion, down $69 million or 1.3 per cent when compared to the previous year. If interest rates remained unchanged year over year, the Group’s net interest income would have been higher by $400 million.

OTHER REVENUE

Other income, defined as all income other than interest income, declined by $402 million or 7.6 per cent. Net fee and commission income for the quarter amounted to $2 billion and showed a decline of $40.4 million.

President and Chief Executive Officer of Scotia Group Jamaica, David Noel

The Group’s fee and commission incomes continue to be impacted by continued customer education on the various channels which provide alternatives to reduce fees, and the ongoing shift to online and mobile transactions which attract lower fees.

Insurance revenues increased marginally by $35.8 million or 3.5 per cent to $1.1 billion due mainly to higher premium income year over year which was partially offset by lower actuarial reserve releases. Net gains on foreign currency activities and financial assets amounted to $1.8 billion, down $397 million or 17.9 per cent below last year.

This was owing to lower revaluation gains, which was partially offset by increased trading activities.

DIVIDEND APPROVED

The Board of Directors on Wednesday approved an interim dividend of 55 cents per stock unit in respect of the first quarter, which is payable on April 22, 2020 to stockholders on record as at March 31, 2020. In commenting on the performance for the quarter, President and Chief Executive Officer of Scotia Group Jamaica, David Noel noted that the bank and its subsidiary continue to see strong growth in our core business. 

He reported that “Our total loan portfolio increased by $26.9 billion or 14 per cent over the same period last year, driven by year over year double digit growth of 13 per cent in our retail loan portfolio and 16 per cent in our Commercial portfolio. Our Investment and Insurance businesses continue to perform well. Scotia Insurance delivered a 23% increase in the number of polices sold year over year, while our assets under management at Scotia Investments grew 13 per cent over the same period in 2019.”

GROWTH IN CORE BUSINESS

Noel emphasised that even though core business performed well, the revenue performance was tempered by lower interest rates on loans and investments, increased provision for credit losses and increased asset taxes.

In addition the first quarter results were negatively impacted by the annual accrual of asset taxes across the group of $1.2 billion. “As we execute on our strategy that is focused on being better positioned for the future, we continue to leverage technology to better serve our customers and improve customer experience,” the Scotia Group President and CEO said.

He added that the banking group continues to make improvements to wait time in branches with it new queuing technology. This electronic system assigns a ticket and number to customers and manages branch traffic and staff workflow while customers are seated. In addition Scotia Group has also embarked on a massive training exercise across the branch network to upskill our front line staff. These initiatives were designed to create better solutions for customers and greater value to shareholders.”