Scotia Group Jamaica (SGJ) Limited started its first quarter on a high note as its net profit improved by 173 per cent to $3.42 billion.

The financial conglomerate attributed this strong performance to the year-on-year improvement in its loan book which moved from $199.75 billion to $237.35 billion. As a result, its net interest income jumped 40 per cent to $9.11 billion.

“This was predominantly due to the growth in our loan portfolios with both corporate and retail which resulted in higher net interest income over the period. We also had higher insurance revenues stemming from the improved cross-selling initiatives and deepening of the customer relationships, said president and chief executive officer of Scotia Group Jamaica Audrey Tugwell Henry at the hybrid annual general meeting (AGM) held on Friday.

Its life insurance subsidiary had a five per cent increase in gross written premiums and a 12 per cent increase in creditor life premiums on a year-over-year basis as it introduced new products and benefited from further cross-selling in the group.

However, SGJ benefited from the initial implementation of IFRS 17 (International Financial Reporting Standards) which resulted in a restatement of its prior quarterly report. Thus, the segment reported a 256 per cent increase in its revenues to $1.45 billion and profit before tax moving up 718 per cent to $1.22 billion.

While the banking and insurance segments had positive outcomes, Scotia Investments Jamaica Limited saw flat performance in revenue of $822.47 million and profit before tax of $391.59 million.

“Our results signal our customers’ confidence in us to support their financial objectives. Throughout our rich history, Scotiabank has built its reputation on trust and expertise and we continue to build on that legacy,” Tugwell Henry added.

The hybrid AGM was well-attended by veteran shareholders who expressed praise for the return to in-person meetings and the Scotia team. This was also the first AGM being chaired by Anya Schnoor who became chairman in December. Aileen Corrigan, Vernon Douglas and Dr William Warren Smith were elected to the board by shareholders after being appointed in December.

Although Scotia Group’s profitability improved, its quarterly dividend declaration went from $0.35 to $0.25. In terms of the pay-out ratio with respect to earnings per share, the 2022 period was 61.4 per cent compared to 22.7 per cent now.

When shareholders queried the reduced dividend, the Scotia Group president explained that it was preparing for the Basel III implementation in July which will impact capital requirements of its banking subsidiary Scotiabank Jamaica. Scotiabank Jamaica’s capital adequacy at the end of January was 14.65 per cent.

“At this point, as we continue through the subsequent quarters and we have a better understanding of how things are unfolding in the market, then we will make the determinations at the board level accordingly,” Tugwell Henry assured.

Scotia Group Jamaica is the latest financial group to mention Basel III as a reason for culling dividends in recent times. Its competitor NCB Financial Group mentioned a similar concern at its February AGM. This is on top of the Bank of Jamaica changing the cash reserve requirements recently for deposit-taking institutions, as well.

Total assets for SGJ rose by two per cent year-over-year to $603.38 billion, which was largely comprised of $166.77 billion in cash and cash equivalents. Total liabilities grew five per cent to $899.18 billion with deposits by the public hitting $409.41 billion. Shareholder’s equity declined eight per cent to $105.20 billion due to a re-measurement of its defined benefit plan/obligations.

SGJ’s stock price increased to $34.68 which leaves it with a market capitalisation of $107.92 billion. With a trailing 12-month earnings per share of $4.45 and a book value of $33.81, SGJ’s price to earnings ratio is 7.79 times with a price to book ratio of 1.03 times. The $777.89 million dividend payment will be paid on April 20 to shareholders on record as of March 29.