Scotia chalks up profit

Scotiabank Trinidad and Tobago Limited Results for the half-year ended April 30, 2003.

Scotiabank continues to achieve impressive sequential growth in profitability.  For the half year ended April 30, 2003, Scotiabank’s income after taxation was $99.141 million, an increase of 26.17% over the corresponding figure of $78.580 million in 2002.

Top line growth was 10.61% as net interest and other income increased from $236.939 million in 2002 to $262.083 million in 2003.  Non-interest expenses grew by a paltry 4.65% moving from $119.171 million in 2002 to $124.718 million in 2003. As a consequence, net income before taxes increased by a steeper 16.64% moving from $117.768 million in 2002 to $137.365 million in 2003. Taxation declined by 2.46% moving from $39.188 million in 2002 to $38.224 million in 2003.  This as a consequence of the lower corporation tax rate. The effective tax rate declined from 33.28% in 2002 to 27.83% in 2003.  The bank continues to achieve impressive ratios with return on assets increasing to 2.67% in 2002 as compared to 2.19% for the corresponding period in 2003. The return on equity also increased from 23.05% in 2002 to 24.08% in 2003. The Managing Director in his report stated that the market continues to be characterised by ongoing weak credit demand and high levels of liquidity. He also stated that the strong performance of the Bank to the half year will provide a challenge over the next six months.  The Bank has had some success in increasing its net interest and other income but the major contributors to the increased profitability have been the Bank’s ability to contain non-interest expenses and the lower effective tax rate.

After considering all these factors, we have reaffirmed our earnings estimate of $1.85 per share. At the current price of $22.75, the share is trading at a PE of 12.29.  Thus there is still room for capital appreciation given that the bank has traditionally traded at a higher PE. The Directors have declared a second interim dividend of 17 cents to be paid on July 1, 2003 to all shareholders on the record as at June 9, 2003.