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Scotia Group Jamaica to navigate treacherous waters
BY AL EDWARDS
Friday, February 26, 2010
As the local economy contracts and the global downturn continues to take hold, Scotia Group Jamaica managed to put in a creditable performance last year and now faces the prospect of contending with the Jamaica Debt Exchange (JDX), escalating operational costs and an economy not expected to register any growth this year. The year 2010 will truly be a test for Scotia Group Jamaica's management team. As the country's largest and most successful institution, with 900,000 customers and 2,000 staff, its ability to circumnavigate the coming financial squalls and uncertainties will undoubtedly prove that the Scotia brand can endure and overcome due in the main to its impressive asset base and unequalled liquidity position.
There can be no question that Scotia's performance will be a barometer of that of the country. Why? Because both their fortunes are inextricably linked.
A good financial performance
As it currently stands, the wind seems to be in Scotia's sails and that bodes well. For the financial year 2009, Scotia Group Jamaica's total revenue grew to J$35. 2 billion, a 23 per cent increase on the J$28.5 billion posted in the previous year. The revenue figure for 2009 reflected a growth rate of 16 per cent compounded annually over the five-year period ending October 2009.
Net profit attributable to stockholders for the year under review came to J$11.2 billion, a notable 19 per cent increase on the J$9.3 billion registered for 2008.
In 2009 the group's earnings per share grew to J$3.58 reflecting a growth rate of 18 per cent, compounded annually over a ten-year period. The increase in Earnings per Share of 56 cents represents an 18 per cent increase year over year. Scotia Group Jamaica also saw significant growth in Net Interest Income of J$7.1 billion year over year, driven primarily by the higher investment portfolio yields together with volume increases. According to CEO and president Bruce Bowen, corporate and commercial banking also saw increases in revenues as customers turned to Scotia for loans.
Strength through diversity
Scotia Group's strength lies in its diversity of services and products while at the same time functioning as an integrated unit. The bank is the dominant market leader and weighed in with 50 per cent of the Group's profits in 2009.
Scotia Insurance has proven to be no slouch and continues to hold its own with the big boys. It is undoubtedly a player on the life insurance scene. As of October 31, 2009, Scotia Jamaica Life Insurance Company (SJLIC) contributed 32 per cent to the Group's bottom line, eight per cent more than the 24 per cent registered in 2008. A major contributing factor here was a boost from improved interest margins due to high market interest rates which will not be the case this year.
The Building Society contributed four per cent to Group profits but may find the going tough in 2010 as the property market contracts. Already developers and realtors are bemoaning the inhospitable state of the market. However, a reduction in mortgage rates may well prove to be a welcome boon and herald more customers turning to Scotia Jamaica Building Society.
Scotia DBG, under the leadership of Anya Schnoor, managed to increase its contribution to group profits last year. Increased yields on earning assets and clients seeking solace in the comfort and certainty of the Scotia Group resulted in Scotia DBG share of group profits moving from eight per cent in 2008 to 14 per cent last year. The brokerage house also registered a 13 per cent growth in funds under management.
Tough times never last but tough companies will
CEO and President Bruce Bowen said: "The austerity measures associated with the IMF funding, while critical for the success of the economic programme, will present challenges for certain sectors of the society, and the journey to recovery will be difficult.
"At Scotiabank, we are not daunted by difficult times as the American reformed church minister, entrepreneur and author, Robert H Schuller said, "Tough times never last, but tough people will."
He went one step further, adding that tough companies will last during the testing times and that is the real story here. How tough will Scotia Group Jamaica prove to be?
The JDX will see less revenue from net interest income. With unemployment set to increase, fewer people will be inclined to take risks and may well steer clear of taking out loans. Businesses will defer expansion plans.
Icebergs looming
A point of major concern is the sharp increase in loan losses and this may well continue to be on the rise in 2010. Last year Scotia Group's loan losses went up by a whopping J$1.1 billion. No doubt the group will step up its recovery of bad debts as it did in 2009, which moved from J$272 million in 2008 to J$447 million in 2009.
Another iceberg looming ahead for the good ship Scotia Group Jamaica is escalating operational costs. Last year saw increases in salaries and benefits ratcheting up by J$1.2 billion. The senior management will look to ensure that there is no recurrence is not repeated this year. The group has not declared that there will be layoffs this year but it is clear that it will look to do more with less as it seeks to increase its productivity quotient.
"While we face challenges with rising costs due to inflation and loan losses, we will continue to focus on cost containment and tighter risk management to stem the increase in future," declared Bowen.
Employing effective strategies
Despite it all, Scotia Group can take heart from its performance last year which saw it making a concerted effort with cost containment through improved operational efficiencies and this year will see more of the same. It can no longer look to improved interest margins coming from rising interest rates.
A strategy that Scotia will be looking to employ is to take market share away from its competitors. Under the stewardship of Heather Goldson one can expect to see an aggressive marketing campaign showcasing an array of new products and services.
Scotia will continue to be the Government's banker as this present administration will again call on Scotia to come to its aid as it continues to struggle with public sector financing.
Recovery around the corner
Scotia Group Jamaica's chairman Robert Pitfield is confident that Scotia will have yet another successful and profitable year in Jamaica as the global economic picture improves. In his address to shareholders he noted that key segments of the economy have been affected, particularly tourism, bauxite exports and remittances.
Taking an upbeat view of the global economy, he points to a critical turn from recession to recovery.
"Growth is tentative -- it is uneven across sectors and across regions -- and there are still some areas of real concern -- but we are slowly moving in the right direction. Major world economies have benefited from unprecedented stimulus. Consumer spending has picked up, and production is also increasing. These are important steps. What's also important is that the level of panic and uncertainty that was so high even just a year ago has calmed down. The dust is settling and we have a clearer view of the road ahead of us."
Pitfield sees current trends working in Jamaica's favour. He cites the expectation that the United States is expected to return to growth in 2010 which he believes will have a stabilising effect on the region.
"As Jamaica's number one trading partner, a US recovery will have a big impact on the economic picture here. Let us keep in mind that despite the tremendous growth of India, China and other emerging markets, the US will continue to be the world's largest market for some time to come.
"That's good news because Jamaica is well- positioned geographically and diplomatically to continue to benefit from robust trade with the US as it gains a more solid footing in the coming years."
Turning his attention to Jamaica's huge debt mountain and successive governments' inability to manage the economy effectively, he noted that Prime Minister Bruce Golding's administration has taken the bull by the horns and decisively addressed the issue of government debt.
He further added: "The recent approval by the IMF has opened the door for unprecedented multilateral support, which will give the Government some much-needed breathing room. On top of that, there has been very strong participation in the Jamaica Debt Exchange, including widespread support from the financial sector.
"Beyond the obvious fiscal benefits, this support is an important vote of confidence for Jamaica. It presents a unique opportunity for growth and a chance for a new beginning."
http://www.jamaicaobserver.com/busin...-final_7449957
BY AL EDWARDS
Friday, February 26, 2010
As the local economy contracts and the global downturn continues to take hold, Scotia Group Jamaica managed to put in a creditable performance last year and now faces the prospect of contending with the Jamaica Debt Exchange (JDX), escalating operational costs and an economy not expected to register any growth this year. The year 2010 will truly be a test for Scotia Group Jamaica's management team. As the country's largest and most successful institution, with 900,000 customers and 2,000 staff, its ability to circumnavigate the coming financial squalls and uncertainties will undoubtedly prove that the Scotia brand can endure and overcome due in the main to its impressive asset base and unequalled liquidity position.
There can be no question that Scotia's performance will be a barometer of that of the country. Why? Because both their fortunes are inextricably linked.
A good financial performance
As it currently stands, the wind seems to be in Scotia's sails and that bodes well. For the financial year 2009, Scotia Group Jamaica's total revenue grew to J$35. 2 billion, a 23 per cent increase on the J$28.5 billion posted in the previous year. The revenue figure for 2009 reflected a growth rate of 16 per cent compounded annually over the five-year period ending October 2009.
Net profit attributable to stockholders for the year under review came to J$11.2 billion, a notable 19 per cent increase on the J$9.3 billion registered for 2008.
In 2009 the group's earnings per share grew to J$3.58 reflecting a growth rate of 18 per cent, compounded annually over a ten-year period. The increase in Earnings per Share of 56 cents represents an 18 per cent increase year over year. Scotia Group Jamaica also saw significant growth in Net Interest Income of J$7.1 billion year over year, driven primarily by the higher investment portfolio yields together with volume increases. According to CEO and president Bruce Bowen, corporate and commercial banking also saw increases in revenues as customers turned to Scotia for loans.
Strength through diversity
Scotia Group's strength lies in its diversity of services and products while at the same time functioning as an integrated unit. The bank is the dominant market leader and weighed in with 50 per cent of the Group's profits in 2009.
Scotia Insurance has proven to be no slouch and continues to hold its own with the big boys. It is undoubtedly a player on the life insurance scene. As of October 31, 2009, Scotia Jamaica Life Insurance Company (SJLIC) contributed 32 per cent to the Group's bottom line, eight per cent more than the 24 per cent registered in 2008. A major contributing factor here was a boost from improved interest margins due to high market interest rates which will not be the case this year.
The Building Society contributed four per cent to Group profits but may find the going tough in 2010 as the property market contracts. Already developers and realtors are bemoaning the inhospitable state of the market. However, a reduction in mortgage rates may well prove to be a welcome boon and herald more customers turning to Scotia Jamaica Building Society.
Scotia DBG, under the leadership of Anya Schnoor, managed to increase its contribution to group profits last year. Increased yields on earning assets and clients seeking solace in the comfort and certainty of the Scotia Group resulted in Scotia DBG share of group profits moving from eight per cent in 2008 to 14 per cent last year. The brokerage house also registered a 13 per cent growth in funds under management.
Tough times never last but tough companies will
CEO and President Bruce Bowen said: "The austerity measures associated with the IMF funding, while critical for the success of the economic programme, will present challenges for certain sectors of the society, and the journey to recovery will be difficult.
"At Scotiabank, we are not daunted by difficult times as the American reformed church minister, entrepreneur and author, Robert H Schuller said, "Tough times never last, but tough people will."
He went one step further, adding that tough companies will last during the testing times and that is the real story here. How tough will Scotia Group Jamaica prove to be?
The JDX will see less revenue from net interest income. With unemployment set to increase, fewer people will be inclined to take risks and may well steer clear of taking out loans. Businesses will defer expansion plans.
Icebergs looming
A point of major concern is the sharp increase in loan losses and this may well continue to be on the rise in 2010. Last year Scotia Group's loan losses went up by a whopping J$1.1 billion. No doubt the group will step up its recovery of bad debts as it did in 2009, which moved from J$272 million in 2008 to J$447 million in 2009.
Another iceberg looming ahead for the good ship Scotia Group Jamaica is escalating operational costs. Last year saw increases in salaries and benefits ratcheting up by J$1.2 billion. The senior management will look to ensure that there is no recurrence is not repeated this year. The group has not declared that there will be layoffs this year but it is clear that it will look to do more with less as it seeks to increase its productivity quotient.
"While we face challenges with rising costs due to inflation and loan losses, we will continue to focus on cost containment and tighter risk management to stem the increase in future," declared Bowen.
Employing effective strategies
Despite it all, Scotia Group can take heart from its performance last year which saw it making a concerted effort with cost containment through improved operational efficiencies and this year will see more of the same. It can no longer look to improved interest margins coming from rising interest rates.
A strategy that Scotia will be looking to employ is to take market share away from its competitors. Under the stewardship of Heather Goldson one can expect to see an aggressive marketing campaign showcasing an array of new products and services.
Scotia will continue to be the Government's banker as this present administration will again call on Scotia to come to its aid as it continues to struggle with public sector financing.
Recovery around the corner
Scotia Group Jamaica's chairman Robert Pitfield is confident that Scotia will have yet another successful and profitable year in Jamaica as the global economic picture improves. In his address to shareholders he noted that key segments of the economy have been affected, particularly tourism, bauxite exports and remittances.
Taking an upbeat view of the global economy, he points to a critical turn from recession to recovery.
"Growth is tentative -- it is uneven across sectors and across regions -- and there are still some areas of real concern -- but we are slowly moving in the right direction. Major world economies have benefited from unprecedented stimulus. Consumer spending has picked up, and production is also increasing. These are important steps. What's also important is that the level of panic and uncertainty that was so high even just a year ago has calmed down. The dust is settling and we have a clearer view of the road ahead of us."
Pitfield sees current trends working in Jamaica's favour. He cites the expectation that the United States is expected to return to growth in 2010 which he believes will have a stabilising effect on the region.
"As Jamaica's number one trading partner, a US recovery will have a big impact on the economic picture here. Let us keep in mind that despite the tremendous growth of India, China and other emerging markets, the US will continue to be the world's largest market for some time to come.
"That's good news because Jamaica is well- positioned geographically and diplomatically to continue to benefit from robust trade with the US as it gains a more solid footing in the coming years."
Turning his attention to Jamaica's huge debt mountain and successive governments' inability to manage the economy effectively, he noted that Prime Minister Bruce Golding's administration has taken the bull by the horns and decisively addressed the issue of government debt.
He further added: "The recent approval by the IMF has opened the door for unprecedented multilateral support, which will give the Government some much-needed breathing room. On top of that, there has been very strong participation in the Jamaica Debt Exchange, including widespread support from the financial sector.
"Beyond the obvious fiscal benefits, this support is an important vote of confidence for Jamaica. It presents a unique opportunity for growth and a chance for a new beginning."
http://www.jamaicaobserver.com/busin...-final_7449957