RNS Number:5699L
Bank of Nova Scotia
1 June 2000
SCOTIABANK MAINTAINS EARNINGS MOMENTUM IN SECOND QUARTER
Toronto, June 1 /PRNewswire/- Scotiabank maintained its positive
earnings momentum in the second quarter, with net income and
earnings per share both up 21% over the same period a year ago.
- Net income was $465 million, up $81 million from the second
quarter of last year;
- Earnings per share increased to $0.88 from $0.73;
- Return on equity rose to 17.7%, up from 15.7%.
"With strong revenue growth driving our results, we substantially
exceeded our performance targets this quarter," said Scotiabank
Chairman and CEO Peter Godsoe. "All of our core businesses
produced solid results, demonstrating the value of Scotiabank's
diversification strategy.
"Domestic banking, including wealth management, achieved an
excellent 30% year-over-year increase in earnings, due to
significant growth in retail lending and deposits and higher
brokerage revenues," Godsoe said. "Our international operations
also turned in a very good performance, due to improved earnings
in Asia and Latin America and continued strong results in the
Caribbean.
Healthy economy underpins record domestic earnings
"In Canada, our retail and commercial banking operations achieved
superior results, reflecting the efforts of our employees and the
positive effects of a buoyant Canadian economy," Godsoe said. "In
particular, residential mortgages grew by $4 billion or 9% over
last year, as we gained market share and customer demand remained
strong. In addition, our innovative Scotia Total Equity Plan,
which gives homeowners an opportunity to combine up to five
products into a single borrowing program, has been very popular,
with sales well above our initial expectations.
"Wealth management-related revenues increased 37% year over year,
reflecting much stronger retail and discount brokerage revenues,"
Godsoe continued. "Personal deposits were up 7% over the same
period last year and we gained market share in Canadian deposits."
In recognition of Scotiabank's asset management expertise and its
strong understanding of the Latin American market, LatinFinance
magazine named the Scotia Latin American Growth Fund the world's
top performing Latin fund over the past five years. The selection
of the winning funds was done by Standard & Poor's. The fund is
managed by Scotia Cassels Investment Counsel, the Bank's wholly
owned investment manager, and won the honour over 81 other Latin
American funds, marking the first time a Canadian team has won in
this category.
Introducing leading-edge e-commerce solutions for customers
Building on its growing reputation for leadership in electronic
banking, Scotiabank introduced several new e-commerce solutions
for customers during the quarter.
In April, the Bank joined with Bell Mobility to offer wireless
services such as basic banking and discount brokerage information
on "dot-com-ready" digital PCS cell phones. In March, Scotia
Capital launched ScotiaFX, a Web-based foreign exchange trading
system that allows clients to conduct, settle and track foreign
exchange trades over the Internet, using real-time market rates
for approximately 40 currencies. More recently, the Bank's e-
commerce subsidiary -- e-Scotia.com -- joined with Microsoft to
introduce ScotiaWeb store, which helps small and medium-sized
businesses set up and do business on the Web.
"Technology continues to facilitate huge shifts in consumer and
business behaviour, creating new ways to help customers and new
growth opportunities for the Bank," Godsoe noted. "By introducing
the latest technological advances, we are providing customers with
more options to do their banking anytime, anywhere while
complementing the efforts of our personal banking team."
International Banking turns in strong performance
Scotiabank's diversified international operations had a successful
quarter, achieving a significant 19% increase in net income year
over year. Earnings growth was mainly driven by improved
profitability in Asia and Latin America, including for the first
time the consolidation of the operating results of Banco Sud
Americano in Chile, in which Scotiabank has a 61% ownership stake.
As well, the Caribbean continued to record strong results.
During the quarter, Scotiabank signed a letter of intent to
increase its ownership stake to 55% in Mexico's Grupo Financiero
Inverlat, which includes one of the country's largest banks and
investment dealers.
"This move reflects our commitment to investing resources in high-
potential markets," Godsoe said. "Inverlat will be one of the
strongest financial institutions in Mexico and is well positioned
for the double-digit growth opportunities expected in the
financial services sector."
In Asia, Scotiabank invested US$84 million to purchase 8% of Long
Term Credit Bank of Japan Ltd., as part of a group led by
Ripplewood Holdings of New York. On May 11, the Bank announced
that it had sold its 40% stake in Solidbank in the Philippines for
approximately $140 million following a takeover bid by a local
Philippine bank.
Scotia Capital named top IPO underwriter in Canada
Investment banking revenues climbed to a record $218 million in
the second quarter from $169 million a year ago, with higher
trading income and underwriting fees accounting for most of this
increase.
Scotia Capital was named Canada's top underwriter of initial
public offerings (IPOs) for 1999 in the April issue of Investment
Executive. During the year, Scotia Capital led four major deals --
including the year's biggest, Manulife Financial Corp. -- and
participated in 18 others, for a total of 22 deals.
Financial results
-----------------
Highlights for the second quarter compared with the preceding
quarter include:
- net income of $465 million versus $416 million, an increase of
12%;
- earnings per share of $0.88, up $0.09 from $0.79;
- return on equity of 17.7%, up from 15.9%;
- a productivity ratio of 58.0%, a 0.6% improvement.
Net income for the six months ended April 30, 2000 was $881
million or 17% higher than the same period a year ago. Year-to-
date earnings per share grew to $1.67 from $1.42, while return on
equity rose to 16.8% from 15.3%.
Total revenues -- net interest income and other income -- rose to
$2.251 billion in the second quarter, a considerable increase of
18% or $339 million versus the same quarter a year ago.
Net interest income rose to $1.263 billion in the second quarter,
up 9% from $1.162 billion last year. The operating results of
Banco Sud Americano, Chile, in which Scotiabank has a 61%
ownership stake, were consolidated for the first time this quarter
and contributed one-third of the growth. As well, both foreign
currency and Canadian currency interest profits rose in the second
quarter as a result of improved interest margins and higher
lending volumes. In Canada, there was particularly strong growth
in residential mortgages, reflecting the buoyant economy.
Internationally, the Bank continued
to realise steady loan growth in the Caribbean and in the United
States. The Bank's interest margin rose to 2.25% in the second
quarter, up from 2.13% in the same quarter a year ago.
The second quarter was marked by significantly higher other
income, which grew by 32% to $988 million, up from $750 million in
the same quarter a year ago. Wealth management-related revenues
rose by 37%, primarily driven by much stronger retail and discount
brokerage revenues. Other substantial revenue gains were achieved
in credit-related fees and securitisation revenues. Investment
banking revenues climbed to a record $218 million in the second
quarter from $169 million a year ago. Higher trading income and
underwriting fees generated by Scotia Capital accounted for most
of this increase.
Gains on investment securities were $147 million versus $37 million
Last year, as the Bank took advantage of favourable market
conditions.
Scotiabank's productivity ratio -- non-interest expenses as a
percentage of total revenues -- was 58.0% in the quarter, a strong
improvement over the 61.0% last year, and better than the 58.6% in
the preceding quarter.
Total expenses were $1.332 billion in the second quarter, an
increase of 12% or $144 million over the same period last year.
Excluding Banco Sud Americano's expenses, the growth was 10%. The
majority of this increase arose from performance-driven
compensation consistent with the higher investment banking and
brokerage revenues. Underlying salary costs were actually lower
year over year, due primarily to efficiency gains in the branch
network arising from new technology and other initiatives.
Expenses this quarter also included write downs of certain
computer equipment and real estate assets totalling $46 million.
The current forecast for the annual specific provision for credit
losses is $665 million, an increase of $125 million from the
previous estimate, due principally to higher provisions in Scotia
Capital and $25 million arising from the consolidation of Banco
Sud Americano. The second quarter's specific provision for credit
losses was $177 million, up from $109 million a year ago, and $135
million in the preceding quarter. The general provision remained
unchanged at $1.3 billion.
The allowance for credit losses exceeded the gross amount of
impaired loans by $131 million, or (0.1)% of total loans and
acceptances, compared to $181 million last quarter.
Total assets were $245 billion as at April 30, 2000, $23 billion
or 10% higher than a year ago. The recent consolidation of Banco
Sud Americano contributed almost $4 billion to this increase.
Securities, assets purchased under resale agreements and cash
resources accounted for the majority of the remaining growth of
$19 billion.
The surplus of market value over book value in the Bank's
investment securities portfolio was $649 million, up $106 million
from last quarter, despite large securities gains realised during
the quarter.
The Bank continued to maintain a solid capital base. Total
shareholders' equity was $12.0 billion, compared to $11.6 billion
in the preceding quarter, an increase of $403 million or 3%. This
growth arose mainly from strong earnings retention of $320
million, along with unrealised foreign exchange gains of $74
million.
During the quarter, the Bank issued an innovative, tax-efficient
$500 million Tier 1 capital instrument, in part to offset the
effect of recent acquisitions and the pending increase in
ownership of Grupo Financiero Inverlat. As a result, the Bank's
Tier 1 ratio climbed to 8.4%, up from 8.0% in the preceding
quarter, and the Bank's total capital ratio was 12.0% compared to
11.7%.
The Board of Directors today announced a quarterly dividend of
$0.24 per common share, payable on July 27, 2000 to shareholders
of record as of the close of business on July 4, 2000.
Performance Highlights
Scotiabank
---------------------------------------------------------------------
For the three months ended
-----------------------------------------------------------------
April 30 January 31 April 30
(Unaudited) 2000 2000 1999
---------------------------------------------------------------------
Net income (millions) $465 $416 $384
Earnings per share $0.88 $0.79 $0.73
Return on equity 17.7% 15.9% 15.7%
Return on assets 0.80% 0.72% 0.68%
Productivity ratio 58.0% 58.6% 61.0%
---------------------------------------------------------------------
For the six months ended
---------------------------------------------------------------------
April 30 April 30
(Unaudited) 2000 1999
---------------------------------------------------------------------
Net income (millions) $881 $752
Earnings per share $1.67 $1.42
Return on equity 16.8% 15.3%
Return on assets 0.76% 0.65%
Productivity ratio 58.3% 58.5%(1)
(8) The productivity ratio was 59.7% when the one-time gain of
$77 million realised on the sale of shares acquired several years
ago through a loan restructuring is excluded.
Interim Consolidated Statement of Income
Scotiabank
---------------------------------------------------------------------
For the three months For the six months
ended ended
---------------------------------------------------------------------
April January April April April
(Unaudited) 30 31 30 30 30
($ millions) 2000 2000 1999 2000 1999
---------------------------------------------------------------------
Interest income
Loans $2,898 $2,753 $2,631 $5,651 $5,439
Securities 537 550 457 1,087 898
Deposits with banks 208 206 231 414 518
---------------------------------------------------------------------
3,643 3,509 3,319 7,152 6,855
Interest expense
Deposits 1,929 1,932 1,787 3,861 3,781
Subordinated debentures 78 82 75 160 151
Other 373 337 295 710 579
---------------------------------------------------------------------
2,380 2,351 2,157 4,731 4,511
---------------------------------------------------------------------
Net interest income 1,263 1,158 1,162 2,421 2,344
Provision for
credit losses 177 135 109 312 368
---------------------------------------------------------------------
Net interest income
after provision
for credit losses 1,086 1,023 1,053 2,109 1,976
---------------------------------------------------------------------
Other income
Deposit and payment
services 154 155 146 309 300
Investment management
and trust 219 180 160 399 307
Credit fees 141 159 128 300 253
Investment banking 218 135 169 353 339
Net gain on investment
securities 147 71 37 218 152
Securitisation
revenues 49 55 39 104 68
Other 60 67 71 127 138
---------------------------------------------------------------------
988 822 750 1,810 1,557
---------------------------------------------------------------------
Net interest and
other income 2,074 1,845 1,803 3,919 3,533
Non-interest expenses
Salaries 670 585 576 1,255 1,132
Pension contributions
and other staff benefits 91 82 83 173 161
Premises and equipment,
including depreciation 269 247 261 516 512
Other 302 272 268 574 519
---------------------------------------------------------------------
1,332 1,186 1,188 2,518 2,324
---------------------------------------------------------------------
Income before
the undernoted: 742 659 615 1,401 1,209
Provision for income
taxes 263 232 218 495 433
Non-controlling interest
in net income of
subsidiaries 14 11 13 25 24
--------------------------------------------------------------------
Net income $465 $416 $384 $881 $752
---------------------------------------------------------------------
Preferred dividends paid $27 $27 $27 $54 $54
---------------------------------------------------------------------
Net income available to
common shareholders $438 $389 $357 $827 $698
Certain comparative amounts in these financial statements have been
reclassified to conform with current period presentation.
Condensed Consolidated Balance Sheet
Scotiabank
---------------------------------------------------------------------
As at
---------------------------------------------------------------------
(Unaudited) April 30 January 31 April 30
($ millions) 2000 2000 1999
---------------------------------------------------------------------
Cash resources $21,082 $17,911 $17,445
Securities 37,968 36,946 32,149
Loans 158,873 151,062 143,906
Other assets 26,854 26,502 27,976
---------------------------------------------------------------------
Total assets $244,777 $232,421 $221,476
---------------------------------------------------------------------
Deposits - Personal $68,875 $67,251 $64,338
- Business and
governments 75,271 68,815 63,663
- Banks 24,965 26,507 24,582
---------------------------------------------------------------------
Total deposits 169,111 162,573 152,583
Other liabilities 58,274 52,880 52,705
Subordinated debentures 5,362 5,341 5,037
Equity - Preferred 1,775 1,775 1,775
- Common 10,255 9,852 9,376
---------------------------------------------------------------------
Total liabilities and equity $244,777 $232,421 $221,476
---------------------------------------------------------------------
Components of Net Income and Average Assets
Scotiabank
---------------------------------------------------------------------
For the three months For the six months
ended ended
---------------------------------------------------------------------
April January April April April
30 31 30 30 30
(Unaudited) 2000 2000 1999 2000 1999
---------------------------------------------------------------------
Net Income
($ millions)
By business line:
Domestic Banking $203 $189 $157 $392 $325
International Banking 95 76 80 171 130
Scotia Capital 162 163 179 325 411
Other(1) 5 (12) (32) (7) (114)
---------------------------------------------------------------------
$465 $416 $384 $881 $752
---------------------------------------------------------------------
By geography:
Canada $340 $245 $242 $585 $514
United States 87 116 102 203 230
Other International 119 99 118 218 218
Corporate adjustments (81) (44) (78) (125) (210)
---------------------------------------------------------------------
$465 $416 $384 $881 $752
---------------------------------------------------------------------
Average Assets
($ billions)
By business line:
Domestic Banking $89 $88 $85 $88 $84
International Banking 31 27 26 29 26
Scotia Capital 98 95 100 96 102
Other(1) 18 20 19 20 21
---------------------------------------------------------------------
$236 $230 $230 $233 $233
---------------------------------------------------------------------
By geography:
Canada $141 $140 $133 $140 $132
United States 38 36 39 37 39
Other International 54 51 54 53 56
Corporate adjustments 3 3 4 3 6
---------------------------------------------------------------------
$236 $230 $230 $233 $233
---------------------------------------------------------------------
(1) Represents corporate adjustments and smaller operating
segments, including Group Treasury.
Capital and Common Share Information
Scotiabank
---------------------------------------------------------------------
As at
---------------------------------------------------------------------
April 30 January 31 April 30
(Unaudited) 2000 2000 1999
---------------------------------------------------------------------
Capital ratios
Tier 1 8.4% 8.0% 7.8%
Total 12.0% 11.7% 11.2%
Common shares outstanding
(millions) 495.2 494.7 493.3
Book value per share $20.71 $19.92 $19.01
Market value per share $33.75 $29.55 $34.65
---------------------------------------------------------------------
For the three months ended
---------------------------------------------------------------------
April 30 January 31 April 30
Unaudited) 2000 2000 1999
---------------------------------------------------------------------
Common dividends paid
Total (millions) $118.8 $118.6 $103.5
Per share $0.24 $0.24 $0.21
---------------------------------------------------------------------
Contact: Sabi Marwah, Executive Vice-President, Finance at +1 416-
866-6808; or Shelley Jourard, Senior Manager, Public Affairs at +1
416-866-6204
END
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