Scotia Jamaica profits rise amid fees debate
Banking giant prefers dialogue over regulation on charges
Scotia Group Jamaica (SGJ) views Government regulation on bank fees as "difficult" and prefers dialogue with customers.
Concurrently, the group posted impressive results for its October year end, with net profit totaling $11.9 billion, up $350 million from a year earlier. It comes in the context of a slash in earnings across much of the financial sector arising from the national debt swap.
"Like any other business which operates, it incurs costs to deliver and therefore prices are set to cover costs. So it would be difficult for regulation to define what those fees should be without looking at the cost that banks incurred generally," reasoned Jacqueline Sharp president and CEO of SGJ at its fourth quarter investor briefing and Strategic Outlook at SGJ headquarters in downtown Kingston.
Sharp assumed office some two months prior upon the promotion of Bruce Bowen to a regional post.
So is SGJ against regulation on bank fees, the Caribbean Business Report asked.
The six executives laughed apparently to consider the implications.
"You might see a headline 'Scotia says no to regulation'" quipped Lissant Mitchell CEO of Scotia Investments Ja.
Responded Sharp: "Yes to dialogue". She stressed that many fees can be avoided but customers fail to take advantage of lower cost options.
"We should spend more time educating customers about options that are available. There are different ways and channels that are far cheaper or at no cost. Take for instance internet banking which has no fees," she said.
The Bank of Jamaica (BOJ) is compiling a report on bank fee fluctuations as an interim report requested by Parliament. Some members of Parliament are concerned that banks increased fees to compensate for a fall in revenue due to the debt swap. On Thursday Sharp indicated that income from fees increased year on year due to increased volumes of activity rather than rate hikes.
"Our fee income was primarily higher due to the growth in volumes and covers all parts of the business," she said.
"(So) transaction volumes grew rather than fee charges per item. There has not been a significant increase year on year."
A government committee will meet next month to evaluate the BOJ report and make recommendations to the House on steps to possibly regulate fees which are currently market determined.
"If you take a look at our numbers you will see that our fees are only a fraction of our operational costs. So we are really not charging anywhere close to what is the cost of providing the service at this point in time," she reasoned.
SGJ made roughly $34 billion in revenue with two-thirds from net interest income.
Year on year net interest income remained flat due to the debt swap and private debt exchange. It's profit growth was however fuelled by earnings derived from expanding its $134 billion loan portfolio from $122 billion a year earlier, indicated Sharp.
"We had a strong growth in our loan portfolio growing $12 billion. We were able to leverage this growth in the context of the reductions in [income] from the NDX."
The bulk of new loans were in personal retail loans. SGJ has a return on equity of 17.11 per cent up from 16.11 per cent in 2012.