Scotia Group Jamaica achieves historic earnings
SCOTIA Group Jamaica Limited (SGJ) was able to deliver its highest net profit to date of $17.23 billion (CA$151.50 million) as all its business lines grew, with it bringing in over $40.84 billion in interest income as its loan portfolio topped $268.83 billion.
Scotia Group’s total operating income grew 32 per cent to $53.07 billion, which was underpinned by its strong loan portfolio and limited expected credit loss provisions. The growth in net fees and commission income, along with its gains on foreign currency activities, propelled the group’s numbers forward. This was against the backdrop of rising interest rates which saw its interest expense double from $579.79 million to $1.38 billion.
“[The year] 2023 is more or less the first year of operations out of COVID, even though that financial year runs from November 1, 2022 to October 31, 2023. There was still a little bit of COVID noise in the numbers but we’re seeing a very high demand for credit — both for retail customers and for our corporate, commercial, and small business banking customers. The economy is performing well, it’s fully reopened, and so persons are taking advantage of the opportunities the market is presenting. Scotiabank being a highly liquid institution is able to fund that loan demand and so we’ve been able meet that demand,” stated Scotia Group President and Chief Executive Officer Audrey Tugwell Henry at Monday’s press briefing.
With its key commercial banking subsidiary, The Bank of Nova Scotia Jamaica Limited (BNSJ), having some of the most affordable rates on secured lending products, its consolidated mortgage portfolio grew 25 per cent from $61.66 billion to an estimated $77.08 billion. Of this $15.42 billion in new mortgages, eight per cent or $1.23 billion originated from its mortgage switching programme.
Its consumer loans also grew by nine per cent, commercial loans by 12 per cent, and credit cards by eight per cent. This was reflected by the group CEO who noted that it captured an additional 1.20 per cent in market share for loans, and 0.60 per cent for deposits. It was also able to disburse $1.1 billion under its Scotiabank Women Initiative. SGJ’s loan portfolio was $234.66 billion in the prior year.
Its newest subsidiary, Scotia General Insurance Agency Limited (dubbed ScotiaProtect), brought in $400 million in annualised premiums while exceeding several of the planned targets that were set. This was facilitated by it receiving $5 million in 2022 and $65 million by BNSJ in capital injections to get its operations up and running under Gary-Vaughn White’s oversight.
With a key focus on cost management, total operating expenses only rose 12 per cent to $27.63 billion. This translated to its profit before taxation growing two-thirds to $25.44 billion, with its earnings per share (EPS) coming in at $5.54.
SGJ’s fourth quarter saw total operating income rising 24 per cent to $13.21 billion on the backdrop of its interest income surpassing $11.59 billion for the first time. It also benefited from significant foreign currency gains as well. Even with operating expenses climbing 15 per cent to $6.80 billion, profit before tax (PBT) increased 34 per cent to $6.40 billion with net profit at $4.44 billion.
In the fourth quarter BNSJ launched Garmin Pay which allows customers to use their Garmin watches and Scotiabank Mastercard credit cards to make payments without the need of a phone or physical card. When asked by the Jamaica Observer when Google Pay would be introduced to Jamaica and about the expansion of Garmin Pay, Tugwell Henry responded, “Once Google Pay, Apple Pay, or all those other ones are in the market, it is our intention to pursue those. They’re not yet fully in our region yet so we started with Garmin Pay because that is what was available. In terms of availability on other products, the answer is yes.”
Scotia Group’s investment management services segment was able to grow revenue 10 per cent to $3.09 billion while improving PBT 17 per cent to $1.73 billion, due to flat expenses. This was driven by higher interest rates and the growth in assets under management.
The insurance segment, which had restated numbers due to IFRS 17, grew revenues 56 per cent to $4.21 billion along with PBT rising 83 per cent to $3.87 billion. Its Elevate product saw 29 per cent growth in sales, with its latest product (called Solace) to be fully digital end to end in the coming weeks.
BNSJ had transferred $4 billion from its retained earnings to retained earnings reserve during the 2023 FY, with $2 billion in Q4 alone. Its capital adequacy ratio is currently at 13.55 per cent, which is among the highest in the commercial banking space ahead of the Basel III implementation in 2024.
“So, the BOJ has not yet advised on when the additional buffers will be implemented; we are just at the point of advisory in terms of the implementation of Basel III, which is to be implemented in March 2024. That has remained the same and we are well on our way to transitioning at that point in time but, as it relates to the other two buffers, no further advisory has been communicated to the market in relation to the implementation of those,” said SGJ Chief Financial Officer Gabrielle O’Connor.
Scotia Group’s total assets grew 12 per cent to $664.74 billion, with its investment securities portfolio at $158.76 billion and cash resources at $178.61 billion. Total liabilities also rose 10 per cent to $538.19 billion, with deposits climbing to a record $444.88 billion and the loan to deposit ratio at 60.43 per cent. Shareholders’ equity grew 19 per cent to $126.55 billion, which also benefited from unrealised and realised gains on its investment securities and remeasurement of its defined benefit obligations. The book value was $40.67.
Due to IFRS 17 and changes to the recognition of loan origination fees, the prior year and 2021 results were restated with 2022’s total assets adjusted downwards by $1.18 billion and $1.29 billion, respectively.
While SGJ received a moderate uplift of 1.74 per cent to $34.56 on Monday, the stock price closed Tuesday down to $34.53, which leaves the stock up 0.88 per cent year to date; it also resulted in a market capitalisation of $107.44 billion. This makes it the third-largest Jamaican firm on the overall market by market capitalisation — just behind NCB Financial Group Limited (NCBFG) and Sagicor Group Jamaica Limited at of $165.80 billion and $160.29 billion, respectively. SGJ is the fourth-largest company by market cap when Massy Holdings Limited is included.
The current stock price translates to a price-to-earnings ratio of 6.23 times and a price-to-book ratio of 0.85 times. SGJ will pay a $0.40 dividend on January 19 to shareholders on record as of December 28, with the dividend totalling $1.24 billion. This dividend payment aligns closer to pre-COVID-19 dividend values.
Scotia Investments CEO Sabrina Cooper was appointed to the JSE’s board on July 19. BNSJ added Yvette Anderson to the role of director, customer experience and advocacy on October 16; and Keisha Brown to the role of regional director, Jamaica Retail District A, on December 18. When asked if Scotia would absorb any of the seven executives who just left NCBFG, Tugwell Henry noted that there were no obvious vacancies and that she was proud of her full complement of executives.
“Risk management and governance have been the hallmark of our 134 years of operations, operating as Scotiabank, under the same parent company. Our ability to manage risk allows us to be able to go through periods of adversity without severely impacting our performance. We are very good at efficiently running our business. We pay attention to key efficiency metrics, we’re consistently fine-tuning, and that in 2023 was largely supported by our digital-first mindset,” the group CEO closed.