ON the face of it, Scotia Group overtook the National Commercial Bank (NCB) Group this year in terms of their profit and customer deposit base.

Scotia, which might have also edged out NCB in terms of its capital base at the end of October, posted net profit of $11.9 billion for its year ended October 31, 2013, compared to the latter’s $8.5 billion September 30 year-end earnings.

The former, which is still second in terms of its loan book and asset base, reported a four per cent increase in net interest income, from just under $23 billion in its 2012 financial year to $23.9 billion this year.

Improved interest margin reflected a 10 per cent increase in Scotia’s loan portfolio over the year (from $122.5 billion to $134.8 billion) and a $6.7 billion, or 4.2 per cent reduction in investments and pledged assets, which are mostly placed in Government securities.

NCB, which saw its loan book grow from $112 billion at the end of September 2012 to $141 billion as at September 30, 2013 and which increased its investments and pledged assets by 11.7 per cent to $235 billion, reported a sharper rise in net interest income.

Its income margin rose $2 billion or by 9.1 per cent over the year to $23.8 billion. Its loan loss provision also fell $400 million, or by 16.1 per cent over the year, although at $2.1 billion for the 12 months to September 30, it was double Scotia’s credit losses.

Scotia saw an increase in impairment for loan losses from $845 million last financial year to just over $1 billion in the year under review, but the banking group managed to cut its staff cost from $8.5 billion to $8.4 billion.

The reduction in salaries and staff benefits reflected higher actuarially-determined net credit of $1.19 billion in relation to its defined benefit pension, without which staff costs in 2013 would have been $1.06 billion, or 12.2 per cent higher than the year before.

As a result Scotia’s net profit would have looked more like $10.8 billion for the year.

However, $9.6 billion in staff expenses would still have been lower than NCB’s $11.3 billion wage bill.

The latter’s staff cost grew by $1.5 billion — by 15.5 per cent — reflecting the addition of $449 million in salaries incurred by Advantage General Insurance (AGI) — which was acquired by the banking group during the year — and undisclosed costs related to an ongoing restructuring exercise.

But even more significant for both banks was the huge hits they took from the debt swap programme earlier in 2013.

NCB included all of its debt exchange losses in its gain on foreign currency and investment activities, which fell by $2.7 billion during the year and which went straight to the bottom line.

Scotia reported its total loss associated with the debt exchange programme at $1.75 billion but only $397 million was included in the profit and loss accounts.

Even then, after taking into account Scotia’s $1.35 billion capital loss from the National Debt Exchange, its comprehensive income was $10 billion, compared to NCB’s $8.8 billion.

At the end of the two banks’ respective financial years, NCB still had substantially more assets than Scotia ($447 billion compared to $389 billion), while the former’s equity base stood at $72.5 billion compared to Scotia’s $72.8 billion.

And that is after Scotia paid out just under $5 billion in dividends during the year under review, up from $4.6 billion, compared to NCB’s $2.7 billion dividend payment, which was $200 million higher than the year before.

Scotia also managed to grow its customer deposit liabilities by 13.9 per cent to $183.4 billion at the end of October, up from $161 billion a year earlier, which was a faster pace than NCB that reported a 9.5 per cent rise in deposits over the year, from $163 billion to $178.4 billion as at September 30.

For their respective financial years, Scotia earned nearly 60 per cent of its profit from banking, 19 per cent from investment management and 21 per cent from insurance services, while 47 per cent of NCB’s profit came from banking, 32 per cent from wealth management and 21 per cent from insurance.