By Al Edwards, Financial Editor Financial Gleaner LAST WEEK the Financial Gleaner posed the question, what makes Scotiabank so good? Fortuitously it posted its second quarter results at the end of last week, and this goes some way in answering the question.
Unaudited results show net profits of $1.62 billion, an increase of $545 million over the corresponding period for 2003 and $60 million below net profit for the quarter ended January 31, 2004. Net profit for the six months ended April 30, 2004 was $3.3 billion, compared with $2 billion for the previous year, an increase of 59 per cent.
Total revenue grew by 46 per cent last year to $8.7 billion. Net interest income was $7.4 billion up $2.5 billion or 53 per cent from last year.
INCREASE IN AVERAGE
TOTAL EARNING ASSETS
Scotiabank attributes this growth to an increase in average total earning assets and improved yields year over year. Other revenue, excluding insurance premium income, was $1.16 billion, up $140 million when compared with last year. Insurance premium was driven by the performance of ScotiaMINT. It reported gross premium income of $2.3 billion for the period under review.
The loan loss provision amounted to $667million, of which $369 million is specific and $298 million is general. As far as regulatory requirements are concerned, the loan loss provision comes to $1.47 billion, of which $733 million is specific and $741 million is general.
Non-performing loans at the end of the quarter was $958 million as compared to $950 million last year. This $958 million was $430 million below the $988 million as at January 31,2004. The Group's non-performing loans now represent 1.89 per cent of total loans and 0.59 per cent of total assets versus 2.04 per cent of total loans and 0.69 per cent of total assets at the end of the second quarter of 2003.
Earnings per share (EPS) for the quarter were $1.11 compared to 74 cents for last year, and $1.15 at the end of the previous quarter. Return on average equity (ROE) for the quarter under review was 34.37 per cent. Year - to - date, EPS grew to $2.26 up from $1.42, while ROE was 35.80 per cent.
SECOND INTERIM DIVIDEND
The board of directors at its last meeting held last week, approved a second interim dividend of 45 cents per stock unit, payable on July 1, 2004 to stockholders on record at June 10, 2004.
Speaking on these latest financial results, 'Scotiabank Jamaica's managing director, William Clarke said: "Scotiabank continues to deliver outstanding results which is a demonstration of the quality of our earnings and the ability of the business lines to deliver strong results in spite of the unstable market conditions.
'The significant reduction in market interest rates since the start of the year poses a challenge to maintaining the growth momentum experienced during previous quarters. Scotiabank is however, cognisant of this and is placing even more emphasis on expense control and stringent risk management in order to mitigate any adverse impact that may arise.
RECENT SUCCESSES
Scotiabank has made a significant investment in technology in order to make it more efficient. Today 75 per cent of savings withdrawals are done through ABMs'. Mr. Clarke said that the bank would like to see an equal amount of people making deposits through ABMs' but that is not likely to be any time soon, Bill. Tele Scotia was innovative but it has to some extent been ursurped by Internet banking. Merchants have warmed to the Point Of Sale (POS) instruments, so much so that it puts many businesses behind the 8 ball if they do not have this facility. More notably the cash management services for large commercial clients has proved an undoubted success. This allows clients to manage their own funds without the bank's intervention. You dial in through a PC and you have access to your funds enabling you to make your own investments. Clients through the private banking division have benefited tremendously from Internet banking which was introduced earlier this year.
Last year Scotiabank undertook a comprehensive restructruring of its operations regarding its support units to improve service delivery. A lot of its back office operations take place at its Trafalgar Road building. This frees up the branch network to concentrate on front office interaction with customers and it also provides support to the network.
Eighty-Five per cent of Scotiabank's staff are women and women form 45 per cent of the management cadre. Of the senior executive management pool, women comprise 23 per cent reflecting the growing presence of women in corporate Jamaica.
" The women are highly qualified, are far more committed and they don't have the excuses us guys tend to come with, like not delivering a project on time. We believe in hiring the best person for the job and therefore there is no glass ceiling at Scotiabank. We don't have issues of affirmative action to contend with here unlike in our first world operations," said Mr. Clarke.
TECHNOLOGY
Scotiabank is in the process of putting in place a new technological system that will assist it in its quest to have what it refers to as the "paperless teller" in its frontline operations. This will now mean that a customer's Scotia card will be a requisite for doing the majority of transactions at the bank. The days of writing withdrawals on slips of paper will be gone by October of this year. Scotiabank will continue to expand its Internet banking for small businesses and corporate clients. At this point in time it is experiencing high traffic of customers in its banking halls and Clarke is endeavouring to address this by utilising the technology at his disposal. He believes that people shouldn't be there if they don't have to be. He noted that in many rural communities going to the bank is almost a social event and it is very difficult to break that kind of cultural practice and since the customer is king , one has to listen to what he or she says.
The construction of new branches continues as the demographic need demands. Kingston's population over spill into Portmore will be addressed. Mr. Clarke said that the bank is in the process of finalising construction of a building down the road from the Portmore Pines Plaza. This new branch will be officially opened next month. Scotiabank will be going into Manor Park but will not be locating in Manor Plaza.
DATA MINING
In order to make its business practices more efficient, Scotiabank has compiled a data base on all its customers and then segments them accordingly in order to determine what are its customers' needs. Customers are divided into four segments and services and products are tailored to make those segments happy." "We have found that you can't treat all the customers the same way. The saying that some of us are more equal than others is a fact," said Mr. Clarke.
