Home' Trinidad and Tobago Guardian : February 15th 2018 Contents BG14 stocks
Thursday, February 15, 2018
Scotiabank T&T exhibits resilience
t Scotiabank T&T
Ltd (SBTT), strong
to risk manage-
ment and costs
and high dividend
pay-outs combined to keep regu-
lators, depositors, customers and
investors reasonably happy.
According to the Canadian
press, of the three Canadian banks
operating regionally, SBTT is least
likely to exit the region in the fore-
seeable future. The caption on the
2017 Annual Report “building the
economy of everyone” suggests
some consistency with that expec-
Let us now review SBTT’s results
to October 31, 2017.
Total assets grew by 4.9 per cent to
$24.39 billion from $23.26 billion.
Loans to customers improved
by 5.1 per cent to $13.96 billion
from $13.28 billion. Residential
mortgages rose by 8 per cent to
$6.03 billion from $5.58 billion,
indicating that its share of the mar-
In addition, consumer loans
closed at $4.8 billion from $4.6
In line with a changing economy,
loans to the distributive trades fell
to $650 million from $864 million
while advances to the manufactur-
ing and assembly sector increased
to $736 million from $680 million.
As more individuals try their
hand at self-employment, loans
for business and personal services
climbed to $570 million from $239
Its holding of treasury bills, all
of which mature beyond three
months, increased to $3.93 billion
from $3.07 billion. Both local and
USA components rose to $3.3 bil-
lion and $0.63 billion respectively.
However, its deposits with the
Central Bank fell to $2.8 billion
from $3.2 billion; this primarily
reflected the reduction in other
reserves to zero from $0.27 billion.
Investment securities declined
to $1.7 billion from $2.27 billion.
The largest falls were recorded
under the available-for-sale cate-
gory, which closed at $1.65 billion
from $2.16 billion.
Government and state enter-
prises debt fell to $0.72 billion
from $1.06 billion while corporate
debt securities closed at $0.91 bil-
lion from $1.07 billion.
Sums due from banks and re-
lated companies rose to $1.34
billion from $0.88 billion. All
elements exhibited increases;
amounts due from related com-
panies closed at $588.2 million
from $403.3 million while sums
due from other banks increased to
$682.1 million from $411.6 million
and cheques and other clearing in-
struments ended at $73.8 million
(2016: $65.5 million.)
Cash on hand and in transit in-
creased to $225.4 million from
$146.2 million. This change was
helped by its improved cash flows
from operating activities and its
reduced outflows from investing
Less than $20 million of its total
cash was denominated in US dol-
lars and it had an overall deficit of
$244.7 million of assets over liabili-
ties denominated in that currency.
Total liabilities increased by 5.4
per cent to $20.4 billion from $19.4
Customers’ deposits improved
by 5.5 per cent to $18.54 billion
from $17.57 billion. This upgrade
was concentrated under deposits
sourced from financial institu-
tions, which swelled by more than
100 per cent to $1.15 billion from
$0.55 billion while deposits from
commercial entities improved to
$5.96 billion from $5.60 billion.
Finally, deposits from individuals
were little changed at $11.1 billion
for both periods.
Policyholders’ funds rose from
$1.23 billion to $1.33 billion. Here,
non-participating ordinary life pol-
icies grew by 12.2 per cent to $638
million from $568.6 million while
individual annuities increased by
5.7 per cent to $655.6 million from
Total shareholders’ equity inched
up from $3.87 billion to $3.95 bil-
Stated capital was unchanged at
$267.6 million. Statutory reserves
benefitted from the transfer of
$20.3 million from retained earn-
ings and closed at $688.2 million
from $667.9 million.
Retained earnings improved to
$2.99 billion from $2.93 billion.
This component benefitted from
the current year’s profit of $657.7
million along with other net com-
prehensive income of $5.1 million.
This sum was then reduced by
dividends of $581.9 million and
the transfer of $20.3 million to the
The weighted average number
of shares was stable at 176,343,750;
consequently, the book value of
each share improved to $22.42
Net interest income rose to $1.24
billion from $1.13 billion. The in-
terest income element advanced
to $1.26 billion from $1.25 billion.
Helped by greater loan balances,
interest earned on loans and re-
ceivables rose to $1.14 billion from
In addition, consistent with
higher returns from short-term in-
struments, interest on investment
securities climbed to $124.5 mil-
lion from $91 million.
Total interest expense was sta-
ble at $17.5 million for both ses-
sions; notably, although deposits
were higher, interest on same was
marginally lower at $17.2 million
versus $17.4 million.
Other net income edged up to
$481.2 million from $479.2 million.
Improvements were recorded
under net fees and commissions
and trustee and other fiduciary
fees; the former closed at $207.9
million from $189.2 million while
the latter expanded to $5.9 million
from $1.2 million.
In contrast, net insurance pre-
miums declined to $76.7 million
from $79.5 million and net trading
income weakened to $190.7 mil-
lion from $209.3 million.
These changes saw total net in-
come improve to $1.73 billion from
Total non-interest expenses fell
to $685.7 million from $691.5 mil-
The employment cost category
increased to $253.6 million from
$250 million while premises and
technology expenses fell to $126.2
million from $128.2 million and
communications and marketing
allocations edged up to $100 mil-
lion from $98.3 million.
Other expenses declined to
$206 million from $215 million;
the major contributor was the
reduction in other operating ex-
penses to $175 million from $186.6
The loan loss expenses rose to
$105.6 million from $76.8 million.
Although recoveries increased
by $3.7 million, consistent with
a challenging economic environ-
ment, the impairment charge for
the period climbed by $32.5 mil-
These changes saw pre-tax
profit register at $934.2 million
from 2016’s $840 million. The
effective tax rate increased from
25.6 to 29.6 per cent. Consistent
with a greater profit, taxation rose
to $276.5 million from $214.8 mil-
Although the core tax rate rose
from 25 to 30 per cent, there was
a credit of $10.1 million which re-
lated to the lower applicable tax
for its insurance operations.
With the net profit closing at
$657.7 million from $625.5 mil-
lion, the EPS improved from $3.55
The bulk of SBTT’s operations are
grouped under the retail, corpo-
rate and commercial banking seg-
Higher loan balances produced
larger interest income. Despite
a fatter allocation to loan losses,
other core expenses were well
managed. This division generated
7.9 per cent greater revenues and
delivered a 13 per cent pre-tax
The asset management segment
benefitted from higher income
on fresh short-term investments.
Overall, revenues grew by 48 per
cent and pre-tax contribution ex-
perienced a 45 per cent uplift.
The insurance division exhib-
ited modest growth in both total
revenue and profit expansion.
Gross premiums grew by 4.2 per
cent to $410.8 million from $394.2
Consistent with new contract
acquisitions, premium acquisi-
tion expenses, which form part
of total expenses, expanded to
$334.1 million from $314.7 million.
This largely explains why net pre-
miums fell to $76.7 million from
Over its fiscal year, SBTT’s share
price declined marginally, moving
from $58.75 on October 31, 2016
down to $58.10 last October. The
subsequent release of these results
has seen the price drift higher and
it traded as high as $62.78 on Janu-
ary 28, 2018.
Last Wednesday, some trades
were executed at $62 while the
price closed at $61.73.
Even though its EPS improved
by $0.18 to $3.73, its annual divi-
dends were stable at $3. The re-
cent price of $61.73 reflects a P/E
multiple of 16.5 and provides a div-
idend yield of 4.9 per cent.
That price also exhibits a strong
premium of 175 per cent relative
to its book value of $22.42. These
metrics suggest that investors
place a high value on SBTT’s abil-
ity to continue delivering reasona-
ble returns to its shareholders and
other stakeholders under most
Approximately 51⁄3 years ago,
SBTT’s share price closed at $65
on November 1, 2012. It then as-
cended to $73.12 on January 27,
2014, but then dipped to $51.36
on June 10, 2016 before closing at
$58.10 last October.
Perhaps, under the new man-
aging-director’s tenure, the share
price might display less volatility
and exhibit stronger upward mo-
The imminent release of its Q1
and subsequent results will help
guide investors’ expectations and
influence the share price move-
ment over the coming months.
In the next article, we will review the
2017 results of RBC Financial Caribbean
The asset management segment benefitted from higher income on
fresh short-term investments. Overall, revenues grew by 48 per cent and pre-tax
contribution experienced a 45 per cent uplift.
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