Scotia Group reports meagre growth in profits for 2019

Scotia Group reports meagre growth in profits for 2019

BY DURRANT PATE
Observer business writer

Friday, December 06, 2019

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Scotia Group is reporting meagre growth in profits for 2019, due in part to lower net interest income from declining interest rates and higher loan loss provisions.

In its just released annual report for 2019, Scotia reports that its profits grew by a mere 3.2 per cent or $419 million across the financial group, moving from $12.77 billion in 2018 to $13.19 billion for the year ended October 31, 2019.

This profit excludes gains on the sale of a subsidiary of $753 million that occurred in the prior year, which when calculated would see net profits year-on-year increasing by $1.17 billion or 9.75 per cent.

Total loan growth within the financial group remained strong throughout the period with year over year increase of 13 per cent. The retail banking portfolio grew by 17 per cent while the mortgage portfolio performed well with growth of 13 per cent, as Scotia Building Society boasted one of the most competitive mortgage rates in the market.

Scotia reports that total commercial loans increased by 14 per cent pointing out that loans to the private sector increased by 27 per cent when compared to the same period last year while the growth in its total loan portfolio increased by $12.61 per cent to $23.02 billion.

INSURANCE SUBSIDIARY DOING WELL

Regarding its insurance business, Scotia Jamaica Life Insurance Company delivered solid results marked by a 20 per cent increase in policies sold year over year. Having decided not to pursue the sale of its insurance business earlier this year, Scotia Group's management remains committed to providing the highest levels of customer service and high quality insurance solutions and is more than ever focused on growing the business.

The improvement in business performance was partially offset by lower net interest income from declining interest rates and higher loan loss provisions, due to the adoption of IFRS 9. This is a more conservative forward-looking credit loss model compared to the previous incurred loss model under IAS 39.

CREDIT QUALITY STRONG

The group says its “credit quality remains strong and actual delinquency is down year over year with non-agricultural loans (NALs) representing 1.77 per cent of gross loans compared to 2.0 per cent last year. We are comfortable with this more prudent approach to provisioning and we are well positioned for the future.”

Operating expenses were higher than prior year partially due to increased fraud-related expenses, including investments in technology such as ATM software, online banking enhancements, security chips for credit cards, network upgrade to support Scotia's digital strategy as well as business optimisation. These investments Scotia Group contends are necessary investments for the future as the financial group continues to focus on improving customer satisfaction.

Operating expenses amounted to $24.10 billion for the period, an increase of $2.10 billion or 9.54 per cent compared to prior year.

Noel notes that core businesses have performed well this year adding that the banking group remained focused on executing its strategic objectives – accelerating growth and investing for the future.

Arising from the positive performance, the board of directors yesterday approved a final dividend of 55 cents per stock unit in respect of this financial year, which is payable on January 15, 2020 to stockholders on record as at December 24, 2019.


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