Scotiabank Jamaica is successfully navigating the COVID-19 storm posting strong growth in its loan portfolio of $33.7 billion in the six months ended April 30.

This represents an 18 per cent increase year over year and was primarily attributed to a 28 per cent growth in its commercial loan book, which carries a delinquency rate of only 0.8 per cent.

The second-largest bank in Jamaica has also seen steady growth in the retail loan portfolio, which increased by 11 per cent versus the prior year.

The positive retail loan performance includes a 14 per cent increase in mortgages, which has been growing steadily over several quarters and ascribes a lower risk than other loan segments. However, the biggest impact on overall business performance was the provision for credit losses of $1.33 billion.

The bank announced these figures yesterday at its digitally held quarterly press briefing.

CREDIT QUALITY

This increase Scotia said is not a reflection of actual losses but an increase in the provisions for future losses as a result of the economic slowdown caused by the COVID-19 pandemic and the potential impact on loan loss levels.

Expected credit losses for the period showed an increase of $1.3 billion when compared to Q2 2019.

This was mainly driven by additional provisions recorded, based on revised assumptions incorporated in the impairment methodology given the COVID-19 pandemic.

Non-accrual loans (NALs), as at April 30, 2020, totalled $5.0 billion compared to $3.5 billion last year. The group’s NALs represent 2.2 per cent of gross loans, up from 1.9 per cent last year, and represent 0.9 per cent of total assets. The group’s aggregate expected credit losses for loans as at April 30, 2020 were $5.8 billion, representing over 100 per cent coverage of total non-performing loans.

President and chief executive officer of the Scotia Group, David Noel, attributed the high credit quality and low delinquency to the development of its comprehensive Customer Assistance Programme that allowed customers affected by COVID-19 to defer loan payments and insurance premiums for three months.

FURTHER FINANCIAL SUPPORT FOR BORROWERS

Noel added that customers still in need of financial support can contact the bank for further assistance.

“We believe these measures will significantly help our customers to manage through the financial impact of COVID-19,” the Scotiabank boss said.

He gave a solemn commitment that “we will continue to monitor our capital and liquidity levels throughout this pandemic, and we are well positioned to take advantage of the growth opportunities that we believe will return when the crisis ends.”

Noel declared that, in addition, the Scotia Group will be maintaining focus on its digital transformation strategy, which has become even more critical at this time.

“The significant investments made in our digital capabilities over the past three years have not only created convenience for our customers but also promoted health and safety by allowing them to continue to conduct their transactions remotely in light of the serious health risks associated with the pandemic.”

BANKING GROUP’S FINANCIAL

Scotia Group saw net income amounting to $4.02 billion for the six months ended April 30, 2020, compared to $5.62 billion for the corresponding period last year. Excluding additional provisions recorded of $1.11 billion due to the revision of the banking group’s forward-looking indicators and macroeconomic assumptions, coupled with the adoption of a more prudent approach in determining expected credit losses, net income would be down $488 million or 8.7 per cent.

Total revenues excluding expected credit losses for the six months ended April 30 was $21.7 billion and showed a reduction of $409 million or 1.9 per cent when compared to 2019. The group continues to see strong loan growth across all business lines.

The results, however, were primarily driven by lower net fee and commission income given the reduction in transaction volumes (stemming from COVID-19) coupled with the continued execution of the group’s digital adoption strategy geared towards increasing customer usage of its various electronic channels, which attract lower fees. After expected credit losses for the six-month period, net interest income was $9.8 billion, down $1.1 billion or 10 per cent compared to the previous year.

This was primarily attributable to the increase in expected credit losses of $1.1 billion given revised assumptions incorporated in the banking group’s impairment methodology, as a result of the COVID-19 pandemic.

Scotia’s board of directors approved an interim dividend of 45 cents per stock unit in respect of the second quarter, which is payable on July 22, 2020, to stockholders on record as at June 30, 2020. Consequent to guidance issued by the regulator, the payment of dividends shall be limited to shareholders that own less than one per cent of the group’s shares.

The banking group has obtained agreement and consent from all shareholders that own one per cent or more of the group’s shares concerning the deferral of payment of this dividend until such appropriate time to be determined in consultation with the regulator, which is the Bank of Jamaica.