Scotia Group Jamaica Limited’s (SGJ) consolidated loan portfolio hit a record $282.28 billion at April 30 amidst continued growth in loan demand from its more than half a million customers.

The bulk of this growth can be attributed to the mortgage portfolio which grew 24 per cent during the six-month period (November to April) alongside consumer loans rising 13 per cent, credit cards by 15 per cent and commercial loans by eight per cent. This was the second-consecutive year where the mortgage segment recorded growth above 20 per cent.

While Scotia Group didn’t disclose the size of its mortgage book in the current quarterly report, its mortgage portfolio has growth by three-fifths over the last four financial years from $42.60 billion in 2020 to $77.15 billion. This is more pronounced when one looks at the Bank of Nova Scotia Jamaica Limited’s (BNSJ) residential mortgage book, which moved from $19.32 billion to $61.32 billion over the same time period.

The financial conglomerate has seen its consolidated loan book (net of credit loss provisions) rise by five per cent since October 31 where this figure was at $268.83 billion. The business and government segment represented $105.69 billion of the 2023 loan portfolio while the personal and credit card segment was $93.19 billion. Scotia Group’s consolidated loan book has also grown from $145.73 billion in 2014 to $215.96 billion in 2020 and $234.66 billion in 2022. Scotia Group’s two key lending entities are BNSJ and The Scotia Jamaica Building Society.

“The growth in our loan book, for instance, is a reflection of that partnership, the economy continues to be very resilient. We saw those results in the growth numbers that were published by the Planning Institute of Jamaica recently. Many of our clients are making significant investments in their business in terms of expanding the capacity and also improving the efficiency of their business. That is from the demand that is being generated in the economy. Certainly, that has resulted in a demand for loans and as a bank that remains very liquid and has a strong capital base, we are in a position to support those requests and we do have a strong pipeline which we look forward to executing on over the next few quarters,” stated Morris Nelson, SGJ’s senior vice-president of corporate and commercial banking, at Friday’s virtual media briefing.

The increased loan demand and higher interest rates from loans and investments resulted in SGJ’s consolidated interest income rising by 18 per cent from $9.93 billion to $11.71 billion for the second quarter (February to April). Even with a 24 per cent increase in interest expense to $459 million, net interest income still hit a record $11.25 billion. After accounting for higher credit loss provisions, net interest income was up 15 per cent to $10.24 billion.

Total operating income grew 16 per cent to $14.58 billion on the backdrop of higher fees and foreign exchange gains. Despite a slight rise in operating expenses, profit before tax came in 30 per cent higher at $7.80 billion. Net profit increased 31 per cent to $5.42 billion for the quarter.

Scotia Group has benefited over the last two years from the adjustments in its lending rates which are still among the cheapest in the commercial banking market. During March, BNSJ increased the headline rates on different loan categories such as new auto loans up 24 basis points (bp) to 8.99 per cent, 50 bp increase on mortgages to 8.99 per cent and unsecured loans up 200 bp to 21.49 per cent. In November 2021, BNSJ’s headline rate on auto loan was 7 per cent, 6.99 per cent on mortgages and 16.49 per cent on unsecured loans.

“We’ve noted that the inflation rate is finally within the central bank’s targeted level. So, we’ll wait to see where that will take us in terms of rates. So, our adjustments to lending rates is a reflection of interest rates in the market. So, that’s not something that is unique to us and while we recognise that we do have the best rates in the market, but there have been adjustments from time to time to reflect the environment that we’re operating in,” responded Audrey Tugwell Henry, Scotia Group’s president and CEO.

Scotia Group’s corporate and commercial banking segment recorded a 25 per cent increase in total revenues to $12.08 billion for the six months period with profit before tax (PBT) up 37 per cent to $7.18 billion. The investment management and insurance services segment recorded a small reduction in revenue with PBT coming in at $779.77 million and $2.05 billion, respectively.

However, the retail segment, which experienced an eight per cent lift in total revenues to $12.15 billion, saw a 23 per cent dip in PBT to $1.62 billion. Scotia Group Chief Financial Officer Gabrielle O’Connor noted that the increased expenses was attributed to higher salaries and higher cash transportation services for the ABMs (automated banking machines).

“We’ve been making continued investments in our ABM network to ensure that we offer the best services to our customers and over the last few months, we’ve upgraded over 250 ABMs with new parts just to make sure that they’re more reliable and consistently deliver the service that our customers require. We’re in the process of testing our new imaging for new machines and we have 58 new ABMs that will replace the final batch of older ABMs in our network. Once that is completed later this year, it means we’d have completed a 100 per cent upgrade of every single ABM that we have in Jamaica to a newer version and that should significantly aid with our ABM up time,” added Perrin Gayle, SGJ’s head of retail banking and small business, Caribbean North and Central on ABMs.

For the overall six months, Scotia Group’s total operating income is up 10 per cent to $28.47 billion. After accounting for a relative increase in operating expenses, PBT was up 14 per cent to $13.01 billion. Net profit was up 14 per cent to $8.54 billion with earnings per share (EPS) at $2.74. The trailing 12-month EPS was $5.87.

Total assets for SGJ year over year rose by seven per cent from $630.27 billion to $676.51 billion, which was largely comprised of $188.09 billion in cash and cash equivalents and $156.50 billion in investment securities. Total liabilities grew to $549.69 billion with total deposits up from $439.89 billion to $467.22 billion. Shareholder’s equity improved 17 per cent to $126.82 billion with the book value at $40.76.

Scotia Group’s stock price ended Tuesday down 3.44 per cent to $42.89 but remains up 11.83 per cent in 2024 with a market capitalisation of $133.45 billion. This also translates to a price to earnings ratio of 7.31 times and a price to book ratio of 1.05 times. Scotia Group declared a dividend of $0.40 totalling $1.24 billion to be paid on July 18 to shareholders on record as of June 26.

While the top 10 shareholder was largely unchanged, the National Insurance Fund purchased three million ordinary shares at $42.50 on April 22 to bring its total holdings up to 60,924,069 ordinary shares as the third-largest shareholder, slightly behind the Sagicor Pooled Equity Fund with 61,381,902 ordinary shares. The SIJL A/C 560-02 also purchased 390,843 shares to bring its total holdings up to 32,585,154 ordinary shares as the sixth largest shareholder.

Roxane De Freitas was appointed as a director to SGJ’s and BNSJ’s boards effective June 6.