Scotiabank profits up 3% for 2019
Credit losses on loans was up $769 million to $2.7 billionFriday, February 14, 2020
BY DURRANT PATE
Scotiabank Jamaica is reporting a marginal three per cent increase in profits for 2019 of $13.2 billion
This represents an increase of $419 million or three per cent more than the after-tax profits recorded for 2018. Excluding gains on the sale of a subsidiary of $753 million that occurred in 2018, net income increased year on year by $1.2 billion or 10 per cent.
In its just released 2019 Annual Report, Scotiabank reported strong growth in its core business with its total loan portfolio increasing year over year by 13 per cent. This includes an increase of 17 per cent over prior year in its Scotia Plan retail loan portfolio, and another year of double-digit growth for the mortgage portfolio, which increased by 13 per cent.
According to Scotiabank, “the significant growth in these portfolios was achieved through consistent execution of our strategic initiatives to improve service to customers, making it more convenient for them to access our suite of products and services. We also saw strong growth in our Corporate and Commercial banking portfolio with a 27 per cent increase in loans to the private sector.”
INSURANCE AND INVESTMENT SUBSIDIARIES
Scotiabank's Insurance and Investment subsidiaries also delivered strong results for 2019 with Scotia Investments chalking up a 10 per cent growth in revenue and a 13 per cent increase in assets under management. As it regards its Capital Markets Unit, the bank's annual report highlighted its successful execution of Fontana Pharmacy Initial Public Offering.
Scotia Jamaica Life Insurance Company continued to improve sales productivity delivering a 20 per cent increase in policies sold year over year. During the year, the bank took a decision to distribute accumulated earnings built up over several years and paid special dividends of $2.68.
After factoring in these dividends, the bank's capital remained strong to take advantage of future growth opportunities. Return on equity was 11.25 per cent and earnings per share amounted to $4.24, which was 3.4 per cent higher than prior year.
Expected credit losses on loans amounted to $2.7 billion, an increase of $769 million or 40 per cent from prior year impacted by the initial adoption of International Financial Reporting Standards (IFRS) 9 (Financial Instruments), which resulted in a significant change to the Scotiabank's impairment methodology. Non-accruals loans (NALs) as at October 31, 2019 was $3.7 billion, up $35.3 million or one per cent compared to prior year.
NALs currently represent 1.77 per cent of gross loans and 0.68 per cent of total assets as at year end October 31, 2019. The bank's NALs as a percentage of gross loans and total assets remain well below the industry average.
Taxes for the year were $5.3 billion, down $229 million or 4.1 per cent from prior year. The effective income tax rate reduced to 28.6 per cent from 30.2 per cent as a result of an increase in non-taxable income in 2019. When the asset tax of $1.1 billion is added, the tax expense for the year equated to 32.8 per cent of pre-tax income.
As for 2020 Scotiabank reports that it will to make advances in optimising its business processes and customer offerings in branches, as well as through the digital channels. During last year the bank piloted new systems for managing branch traffic which will be rolled out this year. In addition Scotiabank plans to change its branch operating model to better serve.
The bank says it has improved its digital banking offerings across our network with the introduction of newer and more efficient Automated teller machines (ATMs), as well as Intelligent Deposit Machines, which allow customers immediate access to their deposits. Scotia boasted that it has enhanced its online and mobile banking offerings with the introduction of new transaction and security alerts, and the addition of credit card controls, which have all enhanced customers' daily banking experience.
During the course of this year Scotiabank will continue to improve both its branch experience and user experiences on its mobile banking application and look forward to the opening of its new state-of-the-art branch at Scotiabank Centre, which will offer the best in class service to its customers.
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