LISSANT Mitchell, who formally succeeded Anya Schnoor as CEO of Scotia Investments earlier this week, will no doubt be looking to cement Scotia Investments’s position as the number one broker/dealer house in Jamaica and focus on off-balance sheet activities.

“Over the last two years, we have agreed on a strategy and concretised that strategy for our organisation,” Mitchell told Caribbean Business Report earlier this week in an interview at Scotia Investments headquarters on Holborn Road, Kingston.

“There has been plenty of discussion as to what is the ideal model for the broker/dealer industry. We have taken the bull by the horns and tried to drive the industry to the point where we are less focused on balance sheet intermediation and more on an off-balance approach,” he said.

That, he explained, meant “selling products and services to clients that are not resident on our balance sheet. Customers are able, then, to acquire assets, take the risk and get the commensurate returns.”

A jump in funds under management

This is in keeping with Scotia Investments’s move to push its unit trust, Caribbean Income Fund and equity-linked products, all of which, it is reporting, have seen record growth in funds under management.

In fact, over the last few weeks the fixed income fund (Scotia Premium Growth Fund) hit $2 billion, which is a 50 to 60 per cent growth over last year’s figures.

The Scotia Fixed Income Fund, as of today, is around $18 billion, making it the largest unit trust fund in the country. Scotia Investments dominates here with 64.5 per cent of the entire unit trust market.

“This week, the Scotia Premium Money Market Fund was launched. This is part of our effort to build out a suite of products,” said Mitchell. “We want to concentrate on diversifying our revenue streams.

“Last December, we began to build out our capital markets infrastructure. Here we want to bring value to our corporate clients as well as our investors. We have a decent pipeline of transactions we are working on at this point in time,” he added.

“Looking at our last set of numbers which came out in July, one sees the diversification of our revenue streams away from net interest income, largely due to the Jamaica Debt Exchange.

“In July of last year, net interest income would have accounted for about 83 per cent of our total revenues. As of July of this year it now accounts for 73 per cent. This has been the focus of our sales strategy and it has paid off as we have been selling off our off-balance-sheet products,” explained the Scotia Investments boss.

Mitchell wants to see Scotia Investments pay greater attention to customer delivery as it is important to reach for a higher customer service standard. He is of the view that customer service has to be a culture and his intention is to work through the processes to ensure that this comes to fruition.

“It shouldn’t be something that you simply do,” he said. “It should be how you live, how you behave. Therefore you build your systems, processes and products to satisfy your customers’ objectives.”

On the personnel front he wants to ensure that Scotia Investments becomes an employer of choice. He insists that his staff should know that with the firm they can achieve their goals and wants to see the synchronisation of business goals with personal goals.

Strong management team

As the new boss, he is fortunate to have a good team, among them:

* Brian Frazer, who has driven the asset management company and who Mitchell acknowledges has done a fantastic job;

* Dr Adrian Stokes, vice-president for strategic planning, projects and product development, who has been invaluable, particularly in terms of his research;

* Berisford Grey, who joined the firm at the end of 2010 and since then has built out an enviable capital markets outfit.

“We have a great leadership team and we want to continue to build that team, but at the same time we want to have a strong second eleven,” Mitchell said of his senior managers.

“We want to have strong successors in place. The idea is to have everybody around the senior leadership table have their skills and competencies constantly improving,” he said.

So what can one expect from Mitchell’s leadership style?

“My thing is that personal development is really a personal thing,” he explained. “Therefore, you work with each team member to improve their capabilities, irrespective of what position in the organisation they hold. The guys on the front line must be able to align their goals and objectives with that of the organisation.

“Now, once you can get that alignment, then productivity will increase. The idea is to focus on the drivers of the business and to ensure that the staff’s goals can be met. This will form the linchpin of my stewardship over the coming years.”

In 2008 when the current global financial crisis began, the brand served Scotia Investments very well and it saw its business growing rather well. Mitchell believes that the brand dovetails into the organisational structure, but equally important is the creation of products and services that satisfy customers in these turbulent times.

The aim now is to find relevant solutions for customers. This was the genesis of the recently launched Scotia Premium Money Market Fund.

The intention here is to provide a cash fund for customers who want flexible terms and so can access their cash at any time. It is designed to meet clients’ short-term liquidity needs.

A marriage of different cultures

Scotia’s decision to acquire the brokerage house of Dehring Bunting & Golding (DB&G) in 2006 was indeed a marriage of opposites.

DB&G, under the stewardship of Peter Bunting, had a reputation of being a hip, cutting-edge maverick operating under an inclusive management style. Scotia, however, is the epitome of conservatism and adheres to defined policies and procedures. Prudence and caution are its watchwords.

So how does one marry such disparate entities and what now currently prevails?

“Well, that was before my time with Scotia Investments, but the fundamental concept around the acquisition of DB&G would be to identify an entity that can provide a balanced approach,” said Mitchell.

“As you know, Scotia is very structured. But while it is large it has to maintain that level of flexibility in order to stay close to its customers and identify their needs.”

Segmenting the business into four areas

Explaining that Scotia has now segmented the business into four main areas, Mitchell said: “One of those is our treasury and trading operation. Another is managing the balance sheet. Then there is the asset management business, and finally our capital markets division with its sales and distribution arm.”

Two years ago, Scotia Investments launched its Caribbean Income Fund which has proved successful. In October 2009, this fund had a pot of US$7 million. Today, the Caribbean Income Fund has grown to US$60 million.

Lissant observed that despite it taking Scotia Investments sometime to launch the product, there is a high demand for it.

The fund, which is resident in St Lucia and tax free to Jamaicans, is largely short-term Caribbean and regional bonds which provide a reasonable tax-free return. It is not sold as an all-in product but rather as part of a portfolio.

Capital markets

The capital markets division has been charged with accommodating companies that want to list on the stock exchange. The aim here is to raise financing for companies, and though the equity route is well ploughed, over the last few months the company has focused on the debt market.

Lissant declared that over the coming months, both clients and industry players can expect to see Scotia Investments bringing more companies to both exchanges.

“As far as companies seeking listings are concerned, they will have to meet the requirements of our customers. We are not going to bring some company to market that we do not feel comfortable about or cannot invest in directly ourselves,” said Mitchell.

“There are two sides to raising financing; one, there is the organisation that requires financing, but at the same time we have to find the investors who will take on that risk.

“Secondly, we sit in the middle, and therefore have to be very comfortable that whatever we structure and put out there is something that we are comfortable with. Scotia places great stock in its reputation. We just don’t solely focus on the transaction but factor in reputational concerns as well.

“It’s not just about the organisation’s balance sheet. That is why we place a premium on due diligence. Yes, we want to do more of these transactions, but we want to ensure that they have significant value to our investors and that all bases are covered,” he said.

Plan for 2012

The plan for next year is to have more listings, take advantage of debt financing opportunities, and utilise hedging, particularly with energy pricing. Scotia Investments is also paying close attention to the rehabilitation of downtown Kingston and real estate Reit-type structures.

Mitchell exudes quiet confidence and one gets the impression that his will be a steady hand on the tiller. He is not given to verbosity or declarations of unrealistic expectations. After 18 years in the industry, he has garnered the reputation of being a reliable and most able banking executive who can competently lead institutions.

So how does he see the present banking landscape in Jamaica?

“I think great emphasis has to be given to increased efficiencies,” he said. “When one looks back to pre-JDX, interest rate spreads were huge. Greater efficiencies will lead to lower interest rates. Let us remember that organisations were operating in a high interest rate environment and that has now changed, therefore banks have to change their approach accordingly. I cannot overstate enough the importance of diversification of revenue streams.

“We are patently aware of the new increased capital requirements on the broker/dealer industry and how that will affect us ten years down the line. The capital requirement for balance sheet intermediation is going to be significant,” said Mitchell. “This means that you have to put considerable thought into building out your product range and migrating as best as possible from the dependence on net interest income to other areas of non-interest income.”