Scotia Group Jamaica Limited accounted for approximately 14 per cent of the bonds swapped in the just-concluded National Debt Exchange, according to new disclosures by the banking group.
SGJ said it exchanged bonds with a face value of J$119.4 billion. Chief Financial Officer Jacqueline Sharpe told Wed-nesday Business that the total incorporates the entire group, comprising the bank, building society, investment and insurance subsidiaries.
The impact of the swap for NDX bonds on which coupons have been reduced by 1-5 percentage points but maturity dates have been extended will be reflected in the bank's second-quarter results.
Scotia Group is the self-declared second-largest holder of GOJ securities behind rival National Commercial Bank Jamaica, but ahead of insurance company Sagicor Life Jamaica Limited and securities firm JMMB Group Limited.
The J$860-billion debt swap had a 99 per cent participation rate, enough for Jamaica to hurdle one of several preconditions for a bailout agreement with the International Monetary Fund.
Scotia's disclosure on its NDX exposure was made alongside the release of its first-quarter earnings report for the period ending January 2013. The NDX transaction was executed on February 22.
It's the second debt swap executed by the Jamaican Government in three years. The first, JDX, cut more than six percentage points on average off GOJ coupons. That, plus the low interest rate policy pursued by the central bank, has eroded returns on GOJ securities.
Scotia Group, for example, earned interest revenue of J$18 billion on its total securities portfolio in 2009. Following the JDX, SGJ's securities revenue dropped to J$15 billion in 2010; J$13 billion in 2011 and J$12.5 billion in 2012.
"A significant sum of the J$12.5b is GOJ securities," said Sharpe. But how much would require time to disaggregate, the bank said.
Scotia Group expects further erosion of interest revenue linked to NDX to show up in its second-quarter results.
Combined interest income from loans and investments amounted to J$7.9 billion in the January quarter, a slight improvement on the previous October quarter's J$7.7 billion and a half-billion gain compared to J$7.35 billion earned in the quarter ending January 2012.
Scotia Group president and CEO Bruce Bowen also expects that the bank's efforts at growing business this financial year could be challenged by the new taxes rolled out by Government because of their probable "negative impact on customers".
The J$16b tax package was also a precondition of an IMF deal due to be signed off on by the end of March.
Bowen also sought to assure shareholders that the bank will continue to deliver strong returns to them.
Scotia Group will pay dividend of 40 per cent per share amounting to J$1.24b on March 28, while subsidiary Scotia Jamaica Invest-ments Limited will pay 45 cents per share amounting to J$190 million. Both paid similar dividends in the previous quarter.
Scotia Group made J$2.72 billion of net profit, a marginal improvement on the J$2.65b made in the quarter ending January 2012.
The bank said it recovered a large loan and sliced half-billion dollars off its non-performing loan portfolio, which now holds J$4.76 billion of vulnerable debt. It wrote off another J$284 million of bad loans in the quarter.
Scotia has made provisions of J$4.5 billion for the non-performing loans, representing about 95 per cent coverage of the portfolio.