Noel stresses prudence, reflects on year one as Scotiabank boss
Just shy of a year as head of the number two banking conglomerate, Scotia Group Jamaica Limited, David Noel is banking on wringing greater efficiency from core business, ploughing more investments into technology and targeting what he reckons is a large pool of unbanked persons to improve the company’s bottom line, while making banking less painful for customers.
Noel, who was named president and chief executive officer on November 1 last year, is also highlighting the bank’s new structure, which is more regional in scope and responsibilities.
In an interview with the Financial Gleaner, Noel was clear about his priorities for the bank.
“We are going back to the core of who we are. We are focused on growing the business, focused on the customers, focused on simplifying processes,” he declared.
The CEO indicated that Scotiabank in Jamaica was not about to make any dramatic changes in what has come to be regarded as its traditionally conservative posture, even as it seeks to further grow key indicators, including the loan book.
Noel inherited a loan book of $166 billion that has since expanded to $177 billion up to the third quarter in July of this year; while the bank’s total assets moved from $491 billion to $535 billion in the same period. Scotia Group’s annual results for 2018 are expected to be released around mid-December. He also inherited a profitable company, but one whose bottom line has been meandering annually around $10 billion to $12 billion.
Main rival NCB Financial Group has been growing at a faster clip and was nearly twice Scotia Group's size at $931 billion of assets in June. NCB's profit also doubles Scotia's performance.
Pointing to low delinquency at around two per cent of its portfolio, the Scotiabank approach, Noel said, would remain, a prudent lender.
"I think we have been in Jamaica for 128 years because we have been able to strike the right balance between growth and managing our credit risk. You don't want to grow at all cost and then you have delinquency levels that are unsustainable," he said.
"We want to make sure that when we are lending, we are lending in a way that's prudent; in a way that's in our best interest, but also in the best interest of the customers. It serves no one's interest if you give a loan and then a year or two later the loan is delinquent, you have to be selling the security."
The bank's loan book grew eight per cent year-on-year in the July quarter. Noel says he expects more loan growth, put placed a caveat on it, saying the bank would take a prudent approach to ensure that the new business coming in would be sustainable for the long term.
Take-up of online, mobile banking
Where there has been a revolution of sorts at Scotiabank is with the take-up of online and mobile banking, which is said to be running ahead of the bank's own projections.
Customers appear to be steering clear of high in-bank transaction charges, with Scotiabank having been regarded as having some of the highest charges on the market.
"Less than 15 per cent of our transactions happen in-branch, and that is growing rapidly. Just two years ago, you would have had more transactions in branch than online or mobile. That has been reversed. Mobile and online transactions are our fastest growing channels," Noel said.
This stems from significant investment which the bank head said Scotiabank has made in recent years and continues to make as it restructures its operation to make doing business simpler and less costly. Noel would not disclose the dollar figure of the bank's ongoing investments in technology and cybersecurity, only that it was "significant". He also avoided disclosing specifics on projections or actual cost savings from these investments. "There are no projections I am prepared to share now," he said.
With the growth in digital banking, Scotiabank has been making major investments in the security of its online platforms and the privacy of customer information. The payback from the spend appears to be almost immediate, with reports of fraud involving Scotiabank's credit cards, debit cards, ATMs, mobile and online platforms said to have fallen off drastically this year.
"Credit card losses for us in 2017 would have been material. This year, we have seen a drastic reduction in credit card losses and I suspect that would be the same across the industry," said Noel, who also assumed the leadership of the Jamaica Bankers Association earlier this year.
While conceding that fraud is a concern, he maintained that it accounts for a small percentage - less than .01 per cent - of the total number of transactions. Asked what levels of financial provisions the bank was making for fraud this year, compared to say, last year, Noel said the precise numbers were not immediately available to him. Still, he noted that the cost was "not material to the overall results" of the bank.
"We know that as an industry, we have to get it right 100 per cent. We are working assiduously to make sure we can put the controls and systems in place to further reduce fraud," he said.
On job cuts
As Scotiabank relies more on technology to drives efficiency, improve customer satisfaction and reduce costs, scores of jobs have been cut at the financial institution. Last year, some 100 positions were earmarked for the chopping block.
"You may see lower staff numbers in some areas and increased staffing in some areas. My expectation is that you will see a greater percentage of people at Scotiabank directly involved in serving customers, providing solutions, providing advice, providing products to customers - having that sort of interaction rather than being behind the scenes processing and doing administrative tasks," he countered.
Last month, Scotiabank announced a proposal to consolidate some of its functions done in Jamaica into the Caribbean Central hub in the Dominican Republic. That proposal is now being discussed by the Bustamante Industrial Trade Union, which represents workers at the bank. Noel explained that Canadian-owned Scotiabank has a number of centres of expertise in various countries of the Caribbean and the intention is to further consolidate operational functions, staff and other resources at different hubs as part of a greater push for efficiency.
"As part of a global organisation, there are efficiencies and scale you get from doing similar things in one particular place. You can make better technology investments. You can streamline processes and ultimately reduce cost to providing those services and deliver best-in-class service," he said.
Scotiabank's regional contact centre is located in Jamaica at 31-33 Trafalgar Road in New Kingston. However, the bank's collections centre is in Trinidad.
"I think being part of a global organisation has been part of our strength. It has benefited Jamaica in many ways," Noel said of the bank's structure, without elaborating.
Scotiabank in Jamaica has responsibility for the northern and central Caribbean.
"You have more and more people in Jamaica who have greater accountability for what happens in other markets and are providing excellent service, leadership, guidance there," he asserted.
Wringing greater value from existing operations and clientele will come to a point of diminishing returns, Noel acknowledged, so the bank is keen on bringing services to unbanked persons, who he estimates account for some 70 per cent of the adult population.
Smart investment in technology, he said, can increase the number of people who have access to financial services without increasing costs.
"That's where I think we have great potential," he said.