Home' Trinidad and Tobago Guardian : March 16th 2017 Contents MARCH 16 • 2017 guardian.co.tt BUSINESS GUARDIAN
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SIJL continues to evolve
As one of its ongoing priorities,
Scotia Investments Jamaica
Ltd (SIJL) continues to focus
on reducing its very high
dependence on net interest
income. Let us now review
SIJL's results for its fiscal year ended Octo-
ber 31, 2016.
Changes in financial position
Total assets rose by 3.4 per cent to J$71.2
billion from J$68.8 billion.
Total cash resources climbed to J$5.7 billion
from J$2.22 billion. Within this grouping, sums
due from other financial institutions rose to
J$2.84 billion from J$1.1 billion, while sums
held with parent and related parties advanced
to J$2.85 billion from J$1.1 billion.
Pledged assets declined marginally to J$52.4
billion from J$53.8 billion. The repurchase
agreement component, all of which mature
within twelve months, fell from J$41 billion to
J$37 billion. Meanwhile, the capital manage-
ment and government securities funds portion
rose to J$15.4 billion from J$12.8 billion. These
represent the investment of contributions from
third-party clients. An identical sum is also
shown under liabilities.
Investment securities balances declined to
J$6.9 billion from J$7.2 billion. Here, credit
linked notes fell to zero from J$1.2 billion. In
addition, government securities declined to
J$1.9 billion from J$2.4 billion. Partially off-
setting these declines, corporate bond balances
grew to J$4.4 billion from J$3.2 billion.
Financial assets at fair value through profit
or loss declined to J$354 million from J$459
million; this mainly reflected its lower holdings
of Government of Jamaica securities, which
contracted to zero from J$155 million.
The total of other assets improved to J$5.7
billion from J$5.1 billion. Customers' liabilities
under guarantees rose to J$4.1 billion from J$3.5
billion, while taxation recoverable declined to
J$971 million from J$1.28 billion. However,
sundry assets climbed to J$412 million from
J$158 million; primarily, this represented the
increase in accounts receivable and pre-pay-
ments, which rose to J$405 million from J$151
Almost occupying a minor footnote, net
loans fell to J$69.4 million from J$97.8 million.
Total liabilities increased by 2.8 per cent to
J$56.2 billion from J$54.7 billion.
Securities sold under repurchase agreements
fell to J$34.3 billion from J$37.6 billion. Both
balances with clients and with other finan-
cial institutions declined; the former fell to
J$25.7 billion from J$27.5 billion while the latter
contracted to J$8.7 billion from J$10.1 billion.
The total of other liabilities jumped by 50
per cent to J$6.6 billion from J$4.4 billion. The
largest item, guarantees issued, closed at J$4.1
billion (2015: J$3.5 billion) and mirrors the sums
shown on the assets side.
Other liabilities climbed to J$2.34 billion
from J$681 million. Amounts due to clients
jumped to J$1.46 billion from zero. In addi-
tion, accrued liabilities rose to J$495.5 million
from J$352.5 million while sundry liabilities
ended at J$381.5 million from J$328.3 million.
Meanwhile, taxation payable declined to J$43.2
million from J$184.6 million.
Shareholders' equity rose to J$14.95 billion
from J$14.15 billion.
Unappropriated profits (retained earnings)
ended at J$12.76 billion from J$12.18 billion.
The current year's profit of J$1.35 billion boost-
ed the brought forward figure while dividends
to shareholders of J$761.8 million lowered the
The cumulative re-measurement result from
available-for-sale financial assets climbed
to J$245.8 million from J$41.5 million. This
expansion reflected the net un-realised gain
of J$216.5 million on these assets, which was
then reduced by gains of J$12.1 million that
was realised when some of these assets were
sold during the year.
The share capital of J$1.91 billion was un-
changed at the end of the year.
Having 423,194,765 shares outstanding, each
share had a book value of J$35.32 versus J$33.43
as at year-end 2015. (On the TTSE's website,
on which this security is also traded, it shows
SIJL having issued shares of 309,258,639; that
figure dates back to early 2007!)
Revenues and profit
The table shows both the range of SIJL's in-
come streams; these activities include invest-
ment advisory and brokerage services, portfolio
and fund management, pension investment
management services and operating of foreign
Total revenues expanded by almost 10 per
cent to J$3.54 billion from J$3.21 billion.
Total net interest income after loan impair-
ments fell by 11.7 per cent to J$1.55 billion from
J$1.76 billion. This sub-category includes
interest from loans, deposits and securities,
which are reduced by interest expenses and
In line with lower balances, interest income
on loans declined to J$86.5 million from J$131.6
million. Partly offsetting this, interest from
banks and other financial entities rose to
J$199.4 million from J$159 million. The largest
component, interest on securities, came in at
J$2.65 billion from J$3.22 billion. Consequent-
ly, total interest income closed at J$2.94 billion
compared with 2015's J$3.52 billion.
Interest expenses also declined to J$1.4 bil-
lion from J$1.76 billion. Interest on repurchase
agreements fell to J$1.39 billion from J$1.74
billion while interest on capital management
and government securities funds closed at
J$11.6 million from J$19 million.
These changes resulted in net interest in-
come of J$1.53 billion versus J$1.76 billion for
In both 2015 and 2016, SIJL's bad debt recov-
eries exceeded its provisions for loans losses.
Consequently, these recoveries added to its
current income; this figure improved from
J$2.9 million in 2015 to J$15.3 million in 2016.
These changes resulted in net interest income
after impairments closing at J$1.55 billion from
The second largest income stream was from
fees and commissions, which rose by 13.5 per
cent to J$1.25 billion from J$1.1 billion. Here,
the biggest contribution came from asset man-
agement fees, which increased by13.1 per cent
to J$1.07 billion from J$948.6 million.
Smaller but significant contributions were
generated from trust fees (2016: J$52.5 million;
2015: J$48.8 million), structured financing fees
(2016: J$46.4 million; 2015: J$47.3 million) and
stock brokerage fees (2016: J$40 million 2015:
Net foreign exchange trading income con-
tributed J$177.7 million, up by 254 per cent from
2015's J$50.2 million. This includes gains made
from the devaluation of the Jamaican dollar.
Net gains on financial assets mostly reflect-
ed the movements on debt securities held for
trading (J$323.7 million) and debt classified as
available-for-sale (J$129 million); the appre-
ciation on its equities holding contributed J$75
million. In total, this line item advanced from
J$284.8 million to J$530.8 million.
Other miscellaneous revenue rose from
J$25.4 million to J$30.8 million.
At J$1.7 billion, total expenses exhibited al-
most no change from the previous year. How-
ever, there were significant swings among some
of its components.
First, staff costs and benefits declined to
J$865.5 million from J$970.2 million. Here,
the wages and salaries element fell to J$708
million from J$806 million; similarly, all ancil-
lary components fell proportionally. The CEO's
report states that "some functions within se-
lect areas of our operations were consolidated
within the wider group" (Scotia Group Jamai-
ca); consequently, this drop seems to reflect
lower direct head count at SIJL.
Property expenses, including depreciation,
fell to J$102.7 million from J$115.5 million. Sim-
ilarly, the asset tax declined to J$136.2 million
from J$147.8 million.
On the other hand, the amortisation of in-
tangible assets consumed J$36.3 million (2015:
zero) and was confined to charges on computer
Finally, other expenses rose to J$564.4 mil-
lion from J$472.8 million. Among the most
notable contributors were computer related
expenses (2016: J$168.8 million; 2015: J$146.4
million), management and consultancy fees
(2016: J$134.1 million; 2015: J$110.2 million)
and other miscellaneous expenses, which bal-
looned to J$147 million from J$100 million.
(Large sums of miscellaneous or other expenses
(or income) tend to raise huge nagging ques-
tions in the minds of most readers.)
The net effect of these movements resulted
in pre-tax income of J$1.83 billion; this was
21.4 per cent greater than the J$1.51 billion
recorded for 2015.
At J$480.1 million, taxes were marginally
lower than the J$483.4 million allocated in
2015; this reflected an effective tax rate of
26.2 per cent versus 32.1 per cent in 2015. In-
terestingly, the primary tax charge declined
to J$682.5 million from J$690 million; this
indicates that subsidiaries operating in low-
er tax jurisdictions generated greater profits.
In addition, tax exempt income rose to J$64.5
million from J$43.9 million. There was also
a credit of J$11.4 million with respect to the
The net profit improved by 31.8 per cent to
J$1.35 billion from J$1.02 billion. The greatest
improvement was recorded from its subsid-
iaries, which recovered from a loss of J$97.4
million to earn a profit of J$314.3 million. These
results translated to EPS of J$3.19 versus J$2.42
Both the parent, Scotia Investments Jamaica
Limited and its subsidiary, Scotia Asset Man-
agement (Jamaica) Limited pay taxes at 33 per
cent. On the other hand, the subsidiary, Scotia
Jamaica Investment Management Limited is
taxed at 25 per cent, while Scotia Asset Man-
agement (St Lucia) Inc. is taxed at 1 per cent.
In the current year's results, we have seen
that profit improvements, particularly at the
last two companies, had a very beneficial effect
on the effective tax rate.
Share price and dividends
On its home market, SIJL closed at J$27.50
as at year-end October 2015. It then peaked at
J$33.50 on November 26, 2015 before closing
at J$30.00 on October 31, 2016. In 2017, the
price closed at J$35.22 on February 2, then hit
J$41.41 on February 9. Last Friday, the price
closed at J$35.54. For both 2015 and 2016, div-
idends totalled J$1.80.
At the recent price of J$35.54, the yield is 5.01
per cent. That price also reflects a P/E multiple
of 11.1 and price to book premium of 1.01.
On the TTSE, the price advanced from
TT$1.61 as at October 2015 to TT$1.80 last
year-end. It first broke through the TT$2 mark
on December 14, 2016 and last week settled at
TT$2.19, which is equivalent to about J$41.42.
Its Q1 2017 EPS to January 2017 was J$0.35
versus J$0.28 for Q1 2016.
In the next article, we will review GraceKennedy
Ltd 2016 results.
Scotia Investments Jamaica Ltd 2016 results
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