Thu | Dec 3, 2020

Under Noel, Scotia grew loans but outmatched on size, profit

Published:Friday | October 23, 2020 | 12:18 AMSteven Jackson - Senior Business Reporter

Over the three years in which David Noel has led Scotia Group Jamaica as president and CEO, he has grown loans by more than a third, keeping pace with the market, but the bank has been outmatched by its chief rival in terms of profits and asset growth.

Noel is headed back to Canada at year end to oversee Scotiabank’s Atlantic Region.

“It’s the east coast of Canada – Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador,” he told the Financial Gleaner, describing the region he will oversee.

Noel succeeded his boss Jacqueline Sharp in November 2017 at Jamaica’s second-largest bank, known for its conservative approach to lending, with loan growth as a major part of his remit.

It’s now up to incoming president and CEO Audrey Tugwell Henry to solve the Scotiabank Jamaica paradox: running a conservative bank, while reducing the profit divide with NCB Financial Group. Its annual profits are in the $12-billion to $13-billion range, while NCB Financial’s hit an all-time high of $30 billion last year.

Tugwell Henry worked at both financial groups, heading their respective retail banking divisions. She takes over as the boss of Scotia Group on January 1, 2021.

Under Noel’s lead, Scotia Group’s loans have grown to $222 billion, an improvement of 33 per cent from the $166-billion portfolio he inherited in 2017. It’s even higher, at 46 per cent, for the commercial banking segment alone.

Comparatively, Sharp grew loans at 23 per cent across the group over her four years at the helm, although, arguably, the bank’s performance then was hobbled by austerity measures imposed under the IMF-backed rescue programme for the economy.

“Getting back to solid loan growth and digital transformation would be two key achievements,” Noel asserted of his tenure. “And, the work initially done to divest some businesses and simplify our structure to focus on our core business lines,” he added.

He leaves to Tugwell Henry’s care a bank with $557 billion of assets on its books as at July, while NCB Financial is now a $1.7-trillion behemoth, three times the size of rival Scotia. Both banking groups will report their annual results by or before year end.

The eight banks making up the commercial banking sector held $861 billion in total loans up to June of this year, reflecting growth of 50 per since June 2017, according to Bank of Jamaica, BOJ, data. The industry data is not focused on group performance, just the operations of their retail or commercial banking outfits.

Over the years, Noel focused on digitising many of the banking operations, adding smart ATM machines, as well as modernising the banking halls. Today, the majority of the transactions at Scotiabank are done digitally, a trend that was accelerated with the onset of the COVID-19 pandemic.

Still, while Noel outperformed his predecessor on loan growth, he underperformed market leader NCB Financial, led by Patrick Hylton. Over the same three-year period, NCB Financial more than doubled its loan portfolio from $212 billion in June 2017 to $445 billion at end-June of this year.

NCB Financial’s rapid climb was due in part to its acquisition of regional insurance giant Guardian Holdings Limited and Bermuda-based Clarien Bank. But once its various segments are peeled back to just the local commercial banking operation, National Commercial Bank of Jamaica, the market leader grew loans by 34 per cent, well below the 46 per cent achieved by Noel, with the help of his replacement and current head of retail operations Tugwell Henry. JN Bank, with the third-largest loan portfolio, grew 44 per cent over the same period, according to BOJ industry data.

Noel also grew profits at the bank, but that began to erode under the coronavirus. The banking group has seen a $4-billion erosion of its bottom line, year to date. Its nine-month profit shrank from $9.79 billion to $5.56 billion as at July.

NCB Financial made nearly four times that profit in the same period under COVID-19, $20.3 billion. But that falls to $14.7 billion once the non-controlling interest in Guardian is stripped from the numbers. In the previous year, NCB Financial made a profit of $21.3 billion over nine months.

steven.jackson@gleanerjm.com