RNS No 4335p
BANK OF NOVA SCOTIA
2nd March 1999
SCOTIABANK BEGINS NEW FISCAL YEAR WITH STRONG FIRST QUARTER RESULTS
Halifax -- Scotiabank continued its strong performance during the first
quarter ended January 31, 1999, earning net income of $368 million, up by $37
million or 11% from the same period a year ago. Earnings per share increased
to $0.69 from $0.63.
''All business lines contributed to our strong performance this quarter,''
said Peter Godsoe, Scotiabank's Chairman and Chief Executive Officer. ''We saw
a substantial improvement in the Bank's corporate and investment banking and
another solid contribution from retail and commercial banking activities in
Canada.
''Despite the ongoing volatility in global markets, our international banking
portfolio remained stable during the quarter and our Caribbean operations
continued their track record of consistent growth. This is a testament to our
careful and prudent approach to managing our international operations,''
Godsoe noted.
''Overall, our achievements in the first quarter highlight the strength and
diversity of Scotiabank's businesses. Diversity -- in our products, services,
customers, employees and locations -- will remain an important component of
our long-term business plans,'' Godsoe continued.
Other highlights for the first quarter, compared with the preceding quarter
include:
- net income of $368 million, an increase of $9 million or 3%;
- earnings per share of $0.69, up from $0.67;
- return on equity unchanged at 14.8 %; and
- the strengthening of reserves by adding $150 million to general
provisions.
Total revenues -- net interest income and other income -- grew to a record
$2.0 billion in the first quarter. This amount was $307 million or 18% higher
than in the same quarter a year ago, with double-digit growth in both net
interest income and other income, partly due to the consolidation of Banco
Quilmes in Argentina. Net interest income for the first quarter was $1.182
billion, with year-over-year growth of $157 million or 15% which was driven by
strong growth in average assets across most business lines. The Bank's
interest margin of 2.04% declined slightly over the prior year.
Broadly based growth across most categories led to record quarterly other
income of $807 million, an increase of $150 million or 23% from the same
period a year ago.
''Ongoing, customer-driven enhancements to our convenient electronic services
supported the strong customer demand for the Bank's retail products and
services, and led to higher revenues from deposit and payment services,'' said
Godsoe. ''As well, revenues from wealth management products and services
continue to be an important source of other income, reflecting our leadership
in personal trust and the ongoing growth of our retail brokerage operations.''
Investment banking revenues in the current quarter improved by 21% over the
same period a year ago, as trading revenues, particularly foreign exchange
trading, more than offset a decline in underwriting fees. Net gains on
investment securities were $115 million in the quarter, an increase of $38
million or 49%. Contributing to the higher gains on investment securities was
a one-time gain of $77 million realized on the sale of shares acquired several
years ago through a loan restructuring.
Non-interest expenses for the first quarter were $1.136 billion, an increase
of $111 million or 11% from the same quarter a year ago. However, excluding
the effect of consolidating Banco Quilmes, the underlying year-over-year
growth was 4%. Contributing to this increase were higher staffing levels in
sales and service positions, both in Canada and internationally, and the
Bank's ongoing investment in new technology applications and continuous
improvement programs.
The Bank's productivity ratio -- non-interest expenses as a percentage of
total revenues -- was 56.1% in the first quarter, (58.3% when the large
one-time security gain mentioned above is excluded), versus 59.9% in the same
quarter a year ago. This result is better than the Bank's target productivity
ratio of 60%. Scotiabank's productivity ratio continues to be one of the best
among the Canadian banks and is an important competitive advantage.
Credit quality remained strong, with net impaired loans declining to $288
million, or 0.2% of loans and acceptances, as at January 31, 1999. This was an
improvement from $421 million and 0.3% at the end of the preceding quarter.
The forecast 1999 annual specific provision for credit losses is estimated at
$435 million, a reduction of $60 million from 1998. One-fourth of the 1999
estimate, or $109 million, was expensed in the first quarter. In addition, the
Bank increased its general provisions by $150 million, bringing the current
quarter's total provision for credit losses to $259 million. After the $150
million increase, general provisions now stand at $750 million.
Total assets were $232.5 billion as at January 31, 1999, a slight decline from
$233.6 billion at the end of the preceding quarter. However, compared to a
year ago, total assets rose $21.8 billion or 10%.
Loans and acceptances grew by 15% to $149.4 billion on a year-over-year basis.
Residential mortgages in Canada rose 9%, with an increased volume of
applications being generated through specialized sales forces and the
Internet. Corporate and commercial lending increased substantially in the past
year, particularly in the U.S. and Caribbean operations, due to the Bank's
strong presence in these markets and the translation effect of a weaker
Canadian dollar.
Total deposits increased to $165.2 billion at the end of the quarter, up 10%
year-over-year. Personal deposits grew by more than 4%, partly attributable to
the success of Scotiabank's Stock-Indexed GICs, a product where the Bank is a
market leader. The balance of the deposit growth came from wholesale deposits
to support the increase in corporate and commercial lending.
Securities holdings were $30.9 billion, as at January 31, 1999, 7% higher than
a year ago. As at January 31, 1999, the surplus of market value over book
value in the Bank's investment securities portfolio was $208 million.
Common equity rose to $9.2 billion as at January 31, 1999, an increase of $182
million from the preceding quarter, primarily from strong earnings retention
of $237 million in the quarter. Partially offsetting this increase was a
foreign currency translation adjustment of $69 million due to strengthening of
the Canadian dollar in the current quarter. With the Bank's careful management
of its balance sheet, the Tier 1 capital ratio remained a solid 7.2%,
unchanged from the preceding quarter. Tier 2 capital grew a modest $99
million, as a result of adding $150 million to general provisions, partially
offset by a reduction in subordinated debentures. As a result, the total
capital ratio remained at 10.6%.
A quarterly dividend of 21 cents per common share was approved by the Board of
Directors at its March 1, 1999, meeting, payable on April 28, 1999, to
shareholders of record as of the close of business on April 6, 1999.
Other first quarter developments
--------------------------------
- To more effectively meet customer demand for alternate delivery
channels, Scotiabank brought all of its electronic services under the
umbrella of a new Electronic Banking Group in November of 1998.
- The Bank piloted the Scotia 2020 Mobile, Canada's first hand-held
wireless point of sale terminal using the Cantel AT&T wireless data
network.
- Scotiabank added to its selection of RRSP products and services. Among
the offerings are the recently expanded Scotia Mutual Funds family (27
funds), asset allocation services, Scotia RRSP Catch-Up Loans and
Stock-Indexed GICs.
- In addition, Scotia Discount Brokerage gave self-reliant investors a
boost when it became the first major financial institution to share its
back-end load mutual fund commissions with customers.
- In December 1998, Scotiabank was named as the number one Canadian bank
in overall customer service, according to customers polled by the
independent research organization Market Facts of Canada, Ltd.
- In the first quarter of 1999, Scotiabank continued to commit time and
resources to the communities in which we serve. In 1999, the Bank's
total community support is expected to reach more than $16 million.
- In November, 1998, Scotiabank, together with The Hospital for Sick
Children, presented Dialogue on Childhood Cancer, a free educational
forum for families who have a child with cancer. The Dialogue was an
important component of Scotiabank's $720,000 endowment at The Hospital
for Sick Children to support cancer research.
- In addition, as a national sponsor of Take Our Kids To Work Day,
Scotiabank welcomed more than 900 students and their parents or
sponsors to offices and branches across Canada on November 4, 1998.
Performance Highlights Scotiabank
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For the three months ended
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January 31 October 31 January 31
(Unaudited) 1999 1998 1998
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Net income (millions) $368 $359 $331
Earnings per share $0.69 $0.67 $0.63
Return on equity 14.8% 14.8% 15.2%
Return on assets 0.62% 0.62% 0.65%
Productivity ratio 56.1% (1) 60.9% 59.9%
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(1) The productivity ratio was 58.3% when a one-time gain of $77
million realized on the sale of shares acquired several years ago
through a loan restructuring is excluded.
Interim Consolidated Statement of Income Scotiabank
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For the three months ended
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(Unaudited) January 31 October 31 January 31
($ millions) 1999 1998 1998
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Interest income
Loans $2,808 $2,804 $2,344
Securities 441 494 418
Deposits with banks 287 258 244
-------------------------------------
3,536 3,556 3,006
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Interest expense
Deposits 1,987 2,017 1,690
Subordinated debentures 83 93 82
Other 284 295 209
-------------------------------------
2,354 2,405 1,981
-------------------------------------
Net interest income 1,182 1,151 1,025
Provision for credit losses 259 124 124
-------------------------------------
Net interest income after
provision for credit losses 923 1,027 901
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Other income
Deposit and payment services 154 160 145
Investment management and trust 80 79 72
Credit fees 125 138 103
Investment banking 237 127 196
Net gain on investment securities 115 74 77
Other 96 112 64
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807 690 657
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Net interest and other income 1,730 1,717 1,558
-------------------------------------
Non-interest expenses
Salaries 556 561 514
Pension contributions and other
staff benefits 78 74 68
Premises and equipment, including
depreciation 251 250 222
Other 251 258 221
-------------------------------------
1,136 1,143 1,025
-------------------------------------
Income before the undernoted: 594 574 533
Provision for income taxes 215 204 193
Non-controlling interest in
net income of subsidiaries 11 11 9
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Net income $368 $359 $331
-------------------------------------
Preferred dividends paid $27 $27 $23
-------------------------------------
Net income available to common
shareholders $341 $332 $308
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Consolidated Balance Sheet Highlights Scotiabank
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As at
-------------------------------------------------------------------------
(Unaudited) January 31 October 31 January 31
($ millions) 1999 1998 1998
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Cash resources $20,745 $22,900 $20,660
Securities 30,899 29,500 28,764
Assets purchased under resale
agreements 11,140 11,189 11,620
Loans 140,246 139,293 123,096
Other assets 29,467 30,706 26,551
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Total assets $232,497 $233,588 $210,691
-------------------------------------
-------------------------------------
Deposits - Personal $63,609 $62,656 $61,031
- Business and
governments 67,275 70,779 61,607
- Banks 34,314 32,925 27,350
-------------------------------------
Total deposits 165,198 166,360 149,988
Other liabilities 51,067 50,932 45,817
Subordinated debentures 5,236 5,482 5,229
Equity - Preferred 1,775 1,775 1,473
- Common 9,221 9,039 8,184
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Total liabilities and equity $232,497 $233,588 $210,691
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Components of Net Income and Average Assets Scotiabank
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For the three months ended
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(Unaudited) January 31 October 31 January 31
($ millions) 1999 1998 1998
-------------------------------------------------------------------------
Net Income
By business line:
Canadian retail and commercial banking $161 $144 $160
Corporate banking 197 117 100
Investment banking 88 21 65
International banking 53 87 37
Other (131) (10) (31)
-------------------------------------
$368 $359 $331
-------------------------------------
By geography:
Canada $271 $190 $223
United States 128 71 70
International 100 108 69
Other (131) (10) (31)
-------------------------------------
$368 $359 $331
-------------------------------------
Average Assets
By business line:
Canadian retail and commercial banking $80,454 $80,148 $76,012
Corporate banking 46,898 44,173 35,483
Investment banking 72,394 68,459 61,579
International banking 27,244 26,124 20,483
Other 9,322 9,897 7,601
-------------------------------------
$236,312 $228,801 $201,158
-------------------------------------
By geography:
Canada $130,594 $131,551 $123,092
United States 39,499 33,958 26,395
International 56,897 53,395 44,070
Other 9,322 9,897 7,601
-------------------------------------
$236,312 $228,801 $201,158
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Capital and Common Share Information Scotiabank
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As at
-------------------------------------------------------------------------
January 31 October 31 January 31
(Unaudited) 1999 1998 1998
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Capital ratios
Tier 1 7.2% 7.2% 6.7%
Total 10.6% 10.6% 10.0%
Common shares outstanding (millions) 492.8 492.1 490.3
Book value per share $18.71 $18.37 $16.69
Market value per share $32.50 $32.20 $31.93
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For the three months ended
-------------------------------------------------------------------------
January 31 October 31 January 31
(Unaudited) 1999 1998 1998
-------------------------------------------------------------------------
Common dividends paid
Total (millions) $104 $99 $98
Per share $0.21 $0.20 $0.20
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COMPANY:SCOTIABANK
CONTACT: Catherine Hudon, Public Affairs, Tel: (416) 866-3703/
(BNS.)
END
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