Amidst the rising demand for loan and improved financial performance, Scotia Group Jamaica Limited (SGJ) will be deepening its focus on product offerings to small and medium-sized enterprises (SMEs) alongside its corporate and commercial customers.

SGJ’s loan book expanded by $12 billion during its third quarter (Q3) to $220 billion as individuals and businesses seek capital to meet their needs. The mortgage book has expanded by 25 per cent on a year-over-year basis while the retail and corporate and commercial loan books grew by six and seven per cent, respectively, on a sequential quarter basis. This was reflected in SGJ’s Q3 34 per cent jump in net interest income to $7.65 billion and 20 per cent rise to $20.36 billion for the nine months.

“Well, SME is a key segment of our business. Our banking operation serves three large customer groups: our retail customers, our small business customers and then our corporate and commercial customers. We also recognise that SME’s are an important contributor to our economy. They hire a significant number of Jamaicans; they cover a wide cross sections of industries in the country and they’re an important part of our economy. We seek to meet the needs of the SME segment as we do with our other two core segments,” said SGJ president and Chief Executive Officer Audrey Tugwell Henry at a media briefing last Friday.

This is being supported through Scotia eCom+ with the services of a virtual terminal, API (application programming interface) and hosting services to get more customers processing transactions digitally. They also supported this through the various pillars of services offered to women-based businesses through the Scotiabank Women Initiative.

Even head of retail banking and small businesses in Jamaica for the Bank of Nova Scotia (Jamaica) Perrin Gayle noted that the distribution and retail businesses are the main sectors where loan demand from SMEs is greatest now. He also added that there was increased demand for lending in the last quarter and continues to be fairly strong for all types of businesses across the spectrum. SGJ’s retail segment saw its revenue grow by a modest two per cent to $14.25 billion, but a 31 per cent move in profit before tax (PBT) to $1.69 billion.

SGJ’s banking subsidiary is one of the three commercial banks which have not announced increased rates for variable rate products across the board. When asked about the revision of rates amid the current six per cent policy rate in Jamaica, Tugwell Henry responded, “The review of interest rates is standard and normal business practice for financial institutions. So, that is an ongoing process, and our rates reflect the market conditions. What we have done is that where there are variable rates, mainly on our corporate and commercial books, they’re adjusted in line with discussions and negotiations with our clients.”

SGJ’s total operating income increased 19 per cent to $11.49 billion for Q3 with PBT moving up 37 per cent to $5.39 billion. Net profit grew 43 per cent to $4 billion with return on average equity of 14.47 per cent. While total operating income of $31.44 billion and net profit of $8.37 billion for the nine months are close to eclipsing the 2021 performance, it still trails the total operating income of $31.90 billion and net profit of $9.79 billion earned in the same 2019 period when the asset base was $537.50 billion.

With Jam-Dex now legal tender in Jamaica, SGJ is working on the development of products surrounding the digital currency. Jam-Dex is a central bank digital currency (CBDC) is a digital currency issued by the Bank of Jamaica and is equivalent at one to one with the Jamaican dollar.

“We have established a robust project team around the delivery of the CBDC products to the market. That project team is actively working, the project continues, and it’s being closely monitored. We expect that as soon as they’re concluded to go to market, we’ll make further announcements,” Tugwell Henry added on CBDC.

Only TFOB (2021) Limited offers a digital wallet solution to process Jam-Dex. TFOB is a wholly owned subsidiary of NCB Financial Group Limited which is the parent of National Commercial Bank Jamaica Limited. JMMB Bank (Jamaica) and JN Bank have established December 2022 to April 2023 timelines for the launch of their mobile payment solutions. First Global Bank will incorporate Jam-Dex into the GK One mobile application under the GraceKennedy Financial Group.

The other major development is the current build-out of Scotia General Insurance Agency Limited, which is currently building out its staff compliment ahead of its expected launch later this year. The SGJ head explained that they’ve received one level of regulatory approval and are currently concluding the next level.

“Our general insurance is being added to allow us to provide a one stop financial services for our customers across the group. So, the general insurance offering is to support customers who do business with us that they will have that option if they want to take general insurance to the assets that they’re acquiring. The primary focus will be on our existing customers and customers that we originate new transactions for. However, we do have the capability in that business line to offer to the wider market,” Tugwell Henry expounded on the general insurance focus.

SGJ used to have Scotia Jamaica General Insurance Brokers Limited as an insurance broker up to the end of the 2008 financial year when it was liquidated. Insurance brokers represent insurance buyers/clients while the insurance agents represent one or more insurance companies. The FSC’s most recent insurance intermediary list shows 13 firms registered as corporate insurance agents.

SGJ’s current insurance subsidiary is Scotia Jamaica Life Insurance Company Limited (SJLIC) saw a 23 per cent improvement in revenue to $858.24 million for Q3 and remains up 16 per cent for the nine months to $2.36 billion. SJLIC President Debra Lopez-Spence noted that its Scotia Elevate product has been meeting expectations and that more products, innovations and enhancements can be expected going forward.

SGJ’s investment subsidiary’s revenue is down 19 per cent to $2.09 billion with PBT coming in 45 per cent lower at $1.02 billion. Segment assets are also down 10 per cent to $25.79 billion.

“What you’re seeing in terms of the financial performance pretty much reflects the current high interest rate environment. This is not a great time for SIJL in terms of the impact of the high interest rate environment would have on one aspect of the business,” Tugwell Henry explained on the investment subsidiary’s lacklustre performance. She noted that the appointment of a director to the Jamaica Stock Exchange’s board was in train.

Total assets for SGJ rose by two per cent year over year to $589.29 billion, which was largely comprised of $152.38 billion in cash and cash equivalents. Total liabilities grew four per cent to $482.35 billion with deposits by the public hitting $389.99 billion. Shareholder’s equity declined nine per cent to $106.94 billion due to $4.73 billion in unrealised losses on its investment securities and $12.85 billion reduction in re-measurement of its defined benefit plan/obligations.

Despite the improved results, SGJ’s stock price remains down six per cent year to date at $33.76 which leaves it with a market capitalisation of $105.04 billion. With a trailing 12-month earnings per share of $3.05 and a book value of $34.37, SGJ’s price to earnings ratio is 11.07 times with a price to book ratio of 0.98 times. SGJ’s stock price has rebounded off a six-year low of $30.11 in the days leading up to the results. SGJ will pay a $0.35 dividend on October 19 to shareholders on record as of September 27. This payment totals $1.09 billion.

“I mean, broadly speaking, the outlook is positive. The entire world is going through a period of high inflation and Jamaica has not been spared from that. The central bank has done an outstanding job in applying monetary policies to counter and to tame inflation, and we saw a slight improvement there. We expect that as they continue to deploy monetary policy measures, we’ll continue to see overall improvements. Jamaica continues to be in a good place and we expect that the economy will continue to do well,” Tugwell Henry closed.