Scotia Group investing for future growth
Three of the five business segments operated by banking conglomerate Scotia Group Jamaica, SGJ, made less revenue at half year, which led to lower profits
In its financial results released on Thursday, Scotia Group profit for the April quarter dipped 1.7 per cent to $3.29 billion or $1.06 per share. Half-year earnings, for the period November 2018 to April 2019, also fell from $6.76 billion, or $2.17 per share, to $5.6 billion or $1.80 per share.
The market, however, traded the SGJ stock higher by 4.46 per cent to $53.38 on Friday. Still, investors remain cool to SGJ, overall, as the stock is trading 2.6 per cent lower than at the start of the year.
During its current earnings period, the group suffered from higher one-off costs, the bulk of which related to the $1.4 billion of spend on the refurbishing of its branch and corporate offices, which sit near the waterfront in Kingston, and additional spending on upgrades to the ATM network.
Scotia Group President & CEO David Noel said at an investor briefing on Friday that the group performed in line with its strategy, which is to focus on core activity, invest in infrastructure and then go for growth.
The bank is deploying 100 new ATMs across Jamaica, nearly half of which have been installed.
“Expenses were elevated, but we are making investments for the future. The ATM fleet was aged and had a number of customer-service issues,” said Noel. “Already, we rolled out 48 new ATMs with new software and faster and smoother screen flow. These investments are for the long run,” he added.
Scotia Group’s expenses grew 12.5 per cent in the April quarter, which doubled the pace of growth for revenue, which improved by 6.2 per cent. Over six months, however, net revenue is down from $21 billion to $20.7 billion.
“Revenue is down because net interest income is down and impacts all our business. So If rates had held steady at 2.7 per cent, then our revenues would have been up by $1.5 billion,” said Noel in oblique reference to the policy actions of the central bank which has cut interest rates to record lows.
He asserted, however, that the bank “loves” low interest rates as it incentivises demand for loans by the private sector and consumers.
Scotia’s loan portfolio has grown 11 per cent year on year to $189 billion.
“We believe in the Jamaican economy. We are growing our loans to the private sector and productive sector by relying less on these [repo] instruments and investing in the real economy. That is our focus,” the banker said.