Asset tax hits Scotia Group margins
Jacqueline Sharp, president and CEO of Scotia Group Jamaica Limited, says shrinking margins and asset taxes continue to impact profitability as the bank closed out its third quarter.
For the nine-month period ending July, Scotia Group reported net profit of $6.16 billion, representing return on average equity of 10.22 per cent.
Last year, restated nine-month profit amounted to $7.97 billion, for a return on average equity of 14.33 per cent.
Net revenue of $25 billion was virtually unchanged from the previous period, whose results were restated to conform with accounting rules. Third-quarter revenue dipped from $8.8 billion to $8.2 billion, and experienced a similar contraction in quarterly profit from $3 billion to $2.3 billion.
Sharp noted that "diversified earning streams" for the group continues to provide sustainable revenues from each business line, and that the bank had seen growth in key areas of deposits and lending, insurance and asset management.
Total assets increased $23.4 billion, or 5.8 per cent, to $424 billion at July 2015, which the bank president said was primarily attributable to increases of $4.1 billion, or 2.9 per cent, in the loan portfolio.
Scotia Group liquidated a subsidiary called Interlink Investments, whose total holdings were valued at $2.3 million of cash at wind-up on June 30.
The bank otherwise reported non-performing loans of $4.7 billion, representing 3.1 per cent of the portfolio. The non-performing portfolio was fully covered by $5.2 billion of loan loss provisions.
Operating expenses of $16.05 billion for the nine months to July reflected an increase of $1.34 billion year-over-year.
Sharp said the increase was due primarily to sustained impact of the asset tax resulting from the adoption of IFRIC 21 accounting, as well as the increase in the asset tax rate from 0.14 per cent to 0.25 per cent for regulated financial institutions.
"This resulted in asset tax of $1.29 billion being recorded in the financial results for July 2015, compared to $484 million for July 2014, an increase of $803 million," she said in a statement appended to the bank's quarterly financial report.