RNS No 7697n
BANK OF NOVA SCOTIA
1 September 1999
SCOTIABANK MAINTAINS STRONG EARNINGS MOMENTUM IN THIRD QUARTER
Toronto, August 31 - Scotiabank maintained strong earnings momentum in the
third quarter, reporting net income of Canadian $397 million, up $39 million
or 11% from the same period a year ago. This marks the Bank's 21st consecutive
quarter of record operating income - extending a performance which dates back to
the third quarter of 1994.
Other year-over-year quarterly highlights include:
:: earnings per share rose to $0.75 from $0.68, a 10% increase
:: return on equity was 15.3%, compared to 15.5%;
:: Tier 1 capital ratio climbed to 8.0% from 6.9%;
:: total assets were $227 billion, up $5 billion.
Reflecting this strong performance, the Board of Directors today announced an
increase in the quarterly dividend of three cents to 24 cents per common
share, payable on October 27 1999, to shareholders of record as of the close
of business on October 5 1999.
"We continued to deliver solid earnings growth this quarter, with all of the
Bank's major business lines making a substantial contribution to our
results," said Peter Godsoe, Scotiabank's Chairman and Chief Executive
Officer. "We are proud of our ability in generating record operating income
every quarter during the past five years - consistency that is the product of
our highly diversified operations, above-average efficiency and an unwavering
focus on the needs of our customers."
"Best bank in Canada"
In July, Euromoney magazine named Scotiabank as "Best bank in Canada", citing
its focus and strong earnings performance during the past year.
Strong mortgage growth in Canada
"Domestically, we achieved substantial growth in residential mortgages, where
Scotiabank ranks second in market share among the six major banks," Godsoe
said. "Due to strong sales efforts by our branch teams and mortgage
specialists, our residential mortgage portfolio rose by $4.5 billion or 10%
over the same period a year ago, after adding back the mortgages we
securitised."
"Our new Scotia Total Equity Plan, a unique lifetime borrowing package
launched during the second quarter, has proven to be very popular with
customers, resulting in a significant increase in our retail lending," Godsoe
said.
To complement this product, during the third quarter the Bank launched the
"Scotia Borrower's Reality Check" - a comprehensive, interactive tool
designed to help Canadians better manage their personal financial affairs.
Available on Scotiabank's website, CD-ROM or diskette, this program enables
Canadians to examine their own personal borrowing situation and develop a plan
to reduce borrowing costs.
"By developing innovative products and advisory tools to meet Canadians'
borrowing needs, we are building on our history of leadership in retail
lending," explained Godsoe.
"Strong sales of investment services and products, such as our market-leading
stock-indexed GICs, led to success on the deposit side as well, where personal
deposits were up 5% year over year," Godsoe said.
Strong results in corporate and investment banking
"Corporate and investment banking achieved good results this quarter,
reflecting our focus on strengthening client relationships and expanding our
industry-specific expertise," Godsoe said. "Net income from corporate banking
was up 17% year over year, as a result of strong lending activity,
particularly in the United States and Europe. Investment banking income also
rose, due mainly to higher trading revenues, including foreign exchange, and
gains on the sale of investment securities."
Solid quarter in international banking
"Our international operations performed well this quarter, particularly in the
Caribbean, where our extensive branch network continued to capture market
share," Godsoe said.
Scotiabank extended its presence in the thriving market of India this quarter,
launching Scotiafinance, a new finance company focusing on retail and
commercial lending, and receiving a licence to open its fifth full-service
branch.
The Bank also announced plans to increase its stake in Chile's Banco Sud
Americano, signing a letter of intent that will give Scotiabank a majority
ownership position. "This investment solidifies our presence in Latin America
- a region with high growth potential due to its relatively untapped retail
banking market," Godsoe said.
New electronic banking initiatives
Scotiabank is committed to leading the way in electronic banking, to help
customers bank when, where and how they want. In keeping with this strategy,
the Bank launched several new electronic banking initiatives this quarter. In
partnership with Rogers Cantel, Scotiabank began offering an interactive
messaging device that gives customers banking and discount brokerage
information at their fingertips, in real time, over the Cantel AT&T wireless
network. In June, Scotiabank became the first Canadian bank to provide customers
with ABM access to up-to-the-minute information on their investments, loans and
mortgages.
Providing community support
Scotiabank continued to play a leadership role in the fight against breast
cancer during the quarter, serving as the premier sponsor of the second World
Conference on Breast Cancer. Held in Ottawa in July, the conference attracted
1,000 delegates from 62 countries around the globe to share information on new
breast cancer research developments and related programs.
"As Canada's most international bank, we believe it is important to play a
leadership role in the battle against this global killer,'' said Godsoe.
Financial results
-----------------
Highlights for the third quarter compared with the preceding quarter include:
:: net income of $397 million, an increase of 3%;
:: earnings per share of $0.75, up from $0.73;
:: return on equity of 15.3%, versus 15.7%;
:: Tier 1 capital ratio of 8.0%, further strengthened from 7.8%.
Net income for the nine months ended July 31, 1999 rose by 11% to $1.149
billion, up from $1.035 billion in the same period a year ago. Year-to-date
earnings per share grew by 10% to $2.17. Return on equity was 15.3%, down
marginally from 15.5%.
Total revenues - net interest income and other income - reached $1.9 billion
in the third quarter, 6% higher than last year.
Net interest income grew to $1.156 billion, a 3% rise over the same quarter a
year ago. This increase was moderated by the securitisations undertaken by the
Bank which resulted in a transfer of net interest income to other income.
Contributing to the gains in net interest income were substantial growth in
residential mortgages in Canada and higher lending volumes in the Caribbean
and in Europe. The overall interest margin was 2.12%, unchanged from the same
period
last year, notwithstanding a decline in the Canadian interest margin.
Other income for the third quarter was $786 million, up 10% year over year,
with solid contributions by all core businesses, as well as greater
securitisation revenues. Most notably, there were higher investment banking
revenues of $44 million, and large gains in commercial and corporate credit fees
of $19 million reflecting strong lending activity. During the quarter, $89
million in investment securities gains were realised - $24 million more than a
year ago. The Bank also recorded a net write down of $22 million on a portfolio
of real estate properties which are in the process of being sold.
One of the Bank's competitive advantages is its superior productivity. The
Bank's productivity ratio - non-interest expenses as a percentage of total
revenues - was 60.4% in the third quarter versus 60.7% in the same quarter a
year ago. On a year-to-date basis, the productivity ratio of 59.9% was better
than the Bank's target of 60%.
Non-interest expenses were $1.2 billion in the third quarter, $63 million or
6% higher than the same period a year ago. Salaries - the Bank's largest
expense category - rose 6% year over year, partly due to higher
performance-linked compensation. There were increases in other expenses for new
initiatives to build sales and service capabilities, and to enhance the Bank's
technology infrastructure. Partly offsetting these higher costs were lower
deposit insurance premiums.
Net impaired loans as a percentage of total loans and acceptances at 0.2%
remained unchanged from the preceding quarter. Net impaired loans were $342
million as at July 31 1999, against $305 million last quarter.
The 1999 forecast annual specific provision for credit losses is estimated at
$435 million, unchanged from last quarter. This quarter's provision for credit
losses was $108 million, one-quarter of the estimated annual specific
provision, a reduction of $15 million from the same quarter a year ago.
General provisions remained unchanged at $750 million.
Total assets were $227 billion as at July 31 1999, almost $6 billion above the
preceding quarter. Approximately half of this increase arose from the
translation effect of a weaker Canadian dollar, with the balance resulting
from higher mortgages, securities and cash resources. Compared to a year ago,
total assets were up 2% or $5 billion.
Loans and acceptances rose to $143.4 billion or 1% over last year. After
adjusting for the $8 billion of loan securitisations completed over the past
year, loans and acceptances grew by 7%. The largest contributor to this
success was residential mortgages.
The Bank's securities portfolio was $33.4 billion as at July 31 1999, against
$29.4 billion a year ago. The surplus of market value over book value in the
Bank's investment securities portfolio was $228 million, versus $591 million
in the preceding quarter. The decline was due in part to securities gains
recognized in the current quarter, as well as lower values for emerging market
securities.
Total deposits were $156.5 billion as at July 31, 1999, basically unchanged
from a year ago. Personal deposits rose by 5%, reflecting strong sales of the
Bank's comprehensive range of deposit and investment services.
Common equity rose to $9.8 billion as at July 31, 1999, an increase of $390
million from the preceding quarter. This was mainly attributable to earnings
retention of $266 million, and a foreign currency translation adjustment of
$111 million. The quarterly increase in Tier 1 regulatory capital of almost 4%
exceeded the growth in risk-adjusted assets of 1%, resulting in an improved
Tier 1 ratio of 8.0%, up from 7.8% last quarter. The total capital ratio was
11.5% against 11.2% at the end of the prior quarter.
Performance Highlights
Scotiabank
For the three months ended
July 31 April 30 July 31
(Unaudited) 1999 1999 1998
Net income (millions) $397 $384 $358
Earnings per share $0.75 $0.73 $0.68
Return on equity 15.3% 15.7% 15.5%
Return on assets 0.71% 0.68% 0.66%
Productivity ratio 60.4% 61.0% 60.7%
For the nine months ended
July 31 July 31
(Unaudited) 1999 1998
Net income (millions) $1,149 $1,035
Earnings per share $2.17 $1.97
Return on equity 15.3% 15.5%
Return on assets 0.67% 0.66%
Productivity ratio 59.1% (1) 60.2%
(1) The productivity ratio was 59.9% when a one-time gain of $77 million
realised on the sale of shares acquired several years ago through a loan
restructuring is excluded.
Interim Consolidated Statement of Income
Scotiabank
For the three months For the nine months
ended ended
(Unaudited) July 31 April 30 July 31 July 31 July 31
($ millions) 1999 1999 1998 1999 1998
Interest income
Loans $2,565 $2,631 $2,652 $8,004 $7,465
Securities 480 457 455 1,378 1,321
Deposits with banks 212 231 252 730 749
3,257 3,319 3,359 10,112 9,535
Interest expense
Deposits 1,720 1,787 1,862 5,501 5,286
Subordinated debentures 81 75 95 232 261
Other 300 295 283 879 762
2,101 2,157 2,240 6,612 6,309
Net interest income 1,156 1,162 1,119 3,500 3,226
Provision for credit losses 108 109 123 476 471
Net interest income after
provision for credit losses 1,048 1,053 996 3,024 2,755
Other income
Deposit and payment services 152 146 162 452 459
Investment management
and trust 79 83 83 242 231
Credit fees 136 128 117 389 334
Investment banking 246 246 202 729 671
Net gain on investment
securities 89 37 65 241 248
Other 84 110 84 290 225
786 750 713 2,343 2,168
Net interest and other
income 1,834 1,803 1,709 5,367 4,923
Non-interest expenses
Salaries 583 576 551 1,715 1,632
Pension contributions and
other staff benefits 96 83 86 257 234
Premises and equipment,
including depreciation 250 261 254 762 708
Other 267 268 242 786 729
1,196 1,188 1,133 3,520 3,303
Income before the
undernoted: 638 615 576 1,847 1,620
Provision for income taxes 228 218 207 661 558
Non-controlling interest in
net income of subsidiaries 13 13 11 37 27
Net income $397 $384 $358 $1,149 $1,035
Preferred dividends paid $27 $27 $24 $81 $70
Net income available to
common shareholders $370 $357 $334 $1,068 $965
Certain comparative amounts in these financial statements have been
reclassified to conform with current period presentation.
Consolidated Balance Sheet Highlights
Scotiabank
As at
(Unaudited) July 31 April 30 July 31
($ millions) 1999 1999 1998
Cash resources $19,626 $17,445 $19,109
Securities 33,350 32,149 29,424
Assets purchased under
resale agreements 13,706 12,606 12,778
Loans 134,114 131,300 133,775
Other assets 26,603 27,976 27,570
Total assets $227,399 $221,476 $222,656
Deposits - Personal $64,962 $64,338 $61,869
- Business and
governments 65,437 63,663 64,712
- Banks 26,099 24,582 29,767
Total deposits 156,498 152,583 156,348
Other liabilities 53,909 52,705 49,612
Subordinated debentures 5,451 5,037 6,164
Equity - Preferred 1,775 1,775 1,775
- Common 9,766 9,376 8,757
Total liabilities and equity $227,399 $221,476 $222,656
Components of Net Income and Average Assets
Scotiabank
For the three months For the nine months
ended ended
(Unaudited) July 31 April 30 July 31 July 31 July 31
($ million 1999 1999 1998 1999 1998
Net Income
By business line:
Canadian retail and
commercial banking $147 $147 $156 $455 $461
Corporate banking 144 142 122 483 314
Investment banking 97 90 43 275 197
International banking 85 82 64 220 168
Other (76) (77) (27) (284) (105)
$397 $384 $358 $1,149 $1,035
By geography:
Canada $252 $241 $208 $764 $648
United States 100 102 90 330 240
International 121 118 87 339 252
Other (76) (77) (27) (284) (105)
$397 $384 $358 $1,149 $1,035
Average Assets
By business line:
Canadian retail and
commercial banking $79,725 $78,694 $79,296 $79,637 $77,681
Corporate banking 40,993 45,723 39,305 44,528 37,155
Investment banking 66,367 69,992 62,817 69,580 62,692
International banking 27,494 27,412 24,237 27,382 22,502
Other 8,686 8,639 9,019 8,924 8,817
$223,265 $230,460 $214,674 $230,051 $208,847
By geography:
Canada $128,284 $128,487 $126,743 $129,132 $124,663
United States 34,485 39,149 30,001 37,695 28,677
International 51,810 54,185 48,911 54,300 46,690
Other 8,686 8,639 9,019 8,924 8,817
$223,265 $230,460 $214,674 $230,051 $208,847
Capital and Common Share Information
Scotiabank
As at
July 31 April 30 July 31
(Unauditd) 1999 1999 1998
Capital ratios
Tier 1 8.0% 7.8% 6.9%
Total 11.5% 11.2% 10.4%
Common shares outstanding (millions) 493.8 493.3 491.8
Book value per share $19.78 $19.01 $17.81
Market value per share $31.35 $34.65 $33.95
For the three months ended
July 31 April 30 July 31
(Unaudited) 1999 1999 1998
Common dividends paid
Total (millions) $103.7 $103.5 $98.3
Per share $0.21 $0.21 $0.20
Contact: Sabi Marwah, Executive Vice-President and Chief Financial Officer,
tel Toronto 00 1 416 866 6808 or Shelley Jourard, Senior Manager, Public
Affairs, tel 00 1 416 866 6204, both of Scotiabank
END
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