Home' Trinidad and Tobago Guardian : January 25th 2015 Contents JANUARY 25 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
Increasingly, the local subsidiary of
Scotiabank is generating more rev-
enues and greater profits from its
insurance services operations. This
development, together with greater
reliance on non- interest sources of
revenues, helped the local group eke
out a reasonable result in 2014.
Let us see how the various elements of its
business units contributed to the end result
for its fiscal year ended October 31, 2014.
Growth in asset balances
Total assets advanced from the restated
$19.48 billion as at October 2013 to $20.68
billion as at last October, reflecting growth of
11.7 per cent. Net loan balances now accounts
for 57.15 per cent of total assets, which is an
improvement from 2013 s 54.3 per cent.
Residential mortgages increased by 9.3 per
cent to $4.88 billion from the previous level
of $4.47 billion. In a similar vein, consumer
loans advanced from $3.07 billion in 2013 to
last year s $3.31 billion, reflecting an increase
of 7.8 per cent. These two categories combined
accounted for almost 69 per cent of 2014 s
total loan balances, before interest receivable
Other prominent increases were noted in
loans to the distributive trades, manufacturing
and assembly companies and personal and
business services. On the other hand, lower
balances were reflected in the sums due from
energy and petrochemical companies and con-
struction and engineering entities.
Cash and near-cash items, which earn only
nominal (if any) interest, all reflected declines
from the previous year. Cash on hand contracted
to $127.8 million (2013: $147.1 million) while
amounts due from banks and related companies
closed 2014 at $1.61 billion (2013: $2.15 billion)
and treasury bills balances ended at $1.88 billion
from the previous level of $1.94 billion.
In the case of amounts due from banks and
related companies, the sums due to the latter
increased marginally to $267.9 million from
$265.7 million previously. In contrast, the bulk
of the decline was reflected in the sums due
to other banks, which fell to $1.28 billion from
$1.87 billion previously.
The most significant other asset was invest-
ment securities, which climbed from $1.19 bil-
lion at the end of 2013 to $1.57 billion last
October; this reflected an increase of 32.6 per
Here, the most notable increase was in the
debt securities due to government and state
owned enterprises; this figure rose to $1.42
billion from the previous level of $966 mil-
Increases in liabilities
Total deposits from customers rose by 5.7
per cent to reach $15.2 billion from the 2013
level of $14.39 billion. Although it is the smallest
category, funds sourced from financial insti-
tutions jumped by 71.5 per cent, moving from
$345.1 million in 2013 to $591.8 million last
Deposits from personal sources rose by 4.65
per cent to $10.13 billion from $9.68 billion
while that from commercial sources advanced
by 2.85 per cent to $4.48 billion from the pre-
vious year s $4.36 billion.
The other major liability was policyholders
funds, which closed 2014 at $909 million from
the previous year-end figure of $735.6 million.
This is consistent with the growth in its insur-
Non-participating ordinary life policies
increased from $355 million to $408.2 million
last October, reflecting growth of 15 per cent.
More robustly, non-tax exempt annuities
advanced by 33 per cent to $419.8 million from
the 2013 balance of $315.8 million.
Debt securities in issue of $618 million were
unchanged from the previous year.
Changes in equity
Although it statutory reserve fund exceeds
that of its paid up equity of $267.6 million,
Scotiabank transferred $80 million to this fund,
bringing its balance up to $582.6 million.
The retained earnings figure increased to
$2.65 billion from $2.5 billion as at year-end
2013. The current year s profit boosted this
figure by $560 million while dividends paid of
$335 million and $80 million transferred to the
statutory fund lowered the net movement.
These changes resulted in the book value of
each share improving to $19.99 from the year-
end 2013 figure of $18.79.
Income and profits
Total interest income contracted by 0.93 per
cent to $941.1 million from 2013 s $949.9 mil-
lion. Despite this decline, interest on loans and
receivables increased to $884.65 million from
the previous year s $881.8 million. This is con-
sistent with the growth in loans.
The major decline was recorded with respect
to interest from investment securities, which
showed a drop of $6.5 million and other interest
income sources, which recorded a fall of $3.3
Looking at the interest expense line, we note
that the gross amount fell by 1.42 per cent to
$52.1 million from $53 million in the previous
year. Despite increases in the total deposits,
interest paid for those funds contracted by
almost 30 per cent to $15 million from $21.3
million in 2013!
On the other hand, interest on debt securities
in issue rose to $36.7 million from 2013 s $30.2
million. Other interest expense fell to $506k
from $1.43 million in 2013.
These changes saw net interest income decline
to $889 million from the previous year s $897
On the other hand, other income rose by 9.5
per cent to reach $493.8 million from 2013 s
$451 million. The most prominent component,
net fees and commissions, registered at $208.1
million; this reflects a fall of $30.6 million or
12.8 per cent from the 2013 level of $238.7 mil-
In line with its more robust insurance business,
net premium income came in at $88.8 million;
this reflects a 12.7 per cent improvement over
2013 s $78.8 million.
Fortunately, foreign exchange earnings
improved to $137.3 million from the 2013 level
of $102.7 million, reflecting a rise of 33.7 per
Another important contributor, profit on the
sale of investment securities, jumped by 112.5
per cent to $53.8 million from the 2013 figure
of $25.3 million. The 2014 result includes the
profit on the sale of the bank s 960,000 shares
in HMB, which was estimated at $29.5 million.
The combined effect of all these changes
helped SBTT report total revenues of $1.38 bil-
lion; this was 2.58 per cent greater than the
$1.35 billion recorded for 2013.
Total non-interest expenses rose to $638.8
million from $612.5 million. On the plus side,
salaries and benefits declined to $246.4 million
from $263 million. In contrast, other expenses
rose to $187.2 million from the previous level
of $144.2 million.
Loan loss expenses also jumped to $28.4 mil-
lion from the 2013 figure of $4.1 million. In this
case, a substantially higher loan loss charge of
$55.2 million (2013: $36.2 million) was reduced
by lower current recoveries of $27 million (2013:
These changes saw SBTT deliver a pre-tax
profit of $715.5 million; this result was $15.75
million or 2.15 per cent lower than the $731.3
million reported for 2013. However, helped by
a lower tax bite, the after-tax profit registered
at $560 million versus $557.3 million for 2013.
This result translated into EPS of $3.175 versus
$3.160 for 2013.
Unlike FCB, Scotiabank amalgamates its retail,
corporate and commercial banking units under
one heading, which makes it almost impossible
to discern where growth exists or problems
reside. The other major segment is trust and
merchant banking with insurance services being
the third reporting operating leg.
The largest segment, retail, corporate and
commercial banking generated increases in both
revenues and pre-tax profits.
On the other hand, trust and merchant bank-
ing exhibited a precipitous drop in both revenues
and pre-tax profits; the reason for this "decline"
was that, in the 2013 presentation, retail banking
was shown as a separate segment while mer-
chant banking was included along with corporate
and commercial banking.
The insurance segment exhibits strong
growth in both revenues and pre-tax profits.
But, is this healthy result based on a strong
element of "free-loading" from the more estab-
lished units? For example, we note that there
is no depreciation charge attached to this seg-
ment. Surely, a few computers, desks and filing
cabinets are used by the insurance division?
Or, is everything leased?
Or, are we seeing a pure contract business
model with almost everything done by other
front-line staffers, e.g. loans officers? Are the
processes of collecting premiums, paying com-
missions, processing claims and making invest-
ments also farmed out to other (overburdened)
Another point is that the types of policies
issued seem to be for the most basic forms of
protection (non-participating ordinary life)
combined with a heavy dose of individual
annuities, which are investment-oriented prod-
ucts. The latter complementing the marketing
of its mutual fund products.
Perhaps, the "easy money" has been made
and future growth will be dependent on this
division forging a separate identity, with all
the attendant costs that decision entails?
Dividends and share price
Stuttering profits for much of the last year
probably convinced investors to revise down-
ward their growth expectations for this share.
This resulted in investors lowering the price
at which they would buy the share. In addition,
with falling interest rates the rage (not to men-
tion declining energy prices), investors needed
to adjust the price paid for a particular stream
of dividend income.
At a recent price of $62 and dividends of
$1.90, this share currently yields 3.07 per cent.
This is an improvement over the yield of 2.60
per cent, which was reflected in the $73.12
price tag that was attached to this share on
January 29, 2014.
Scotiabank T&T results for 2014
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