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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Bank Nova Scot | LSE:BNV | London | Ordinary Share | CA0641491075 | COM NPV |
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0.00 | 0.00% | 0.00 | - |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:7399B Bank of Nova Scotia 30 November 1999 Attention Business/Financial Editors: Scotiabank completes fiscal year with strong net income TORONTO, Nov. 30 /PR Newswire/ - Scotiabank today reported net income of $1.551 billion for fiscal 1999, up 11% from last year. This marks the Bank's tenth consecutive year of record operating income. Earnings per share were $2.93, up 11% from $2.64 last year, while return on equity was 15.3%. Net income in the fourth quarter of 1999 was $402 million, compared to $359 million for the last quarter of 1998. Earnings per share during the quarter were $0.76 compared to $0.67 in the fourth quarter of 1998, and return on equity was 15.3% compared to 14.8%. The Board of Directors today approved a quarterly dividend of 24 cents per common share, payable on January 27, 2000 to shareholders of record as of the close of business on January 4, 2000. "Strong results for fiscal 1999 reflect substantial contributions by all of our core business lines," said Peter Godsoe, Scotiabank's Chairman and Chief Executive Officer. "Our wholesale businesses -- corporate and investment banking -- had a record year, reflecting a robust North American economy and improved financial markets. International banking benefited from another year of solid growth in the Caribbean and the economic recovery in Asia. And although margins narrowed in the highly competitive Canadian retail and commercial market, our focus on customer service and product innovation led to very good growth in business volumes. "As we greet the new millennium, Scotiabank can look back on its past with great pride and toward its future knowing that we are well positioned for ongoing success," Godsoe continued. "By putting people first, continuing to build our diverse businesses and carefully managing our costs, we will maintain our record of consistent success -- for our shareholders, our customers and our employees." During the fourth quarter of 1999, the Bank recorded a one-time increase to the general provision of $550 million ($314 million after tax) as a direct charge to retained earnings, as opposed to net income. This accounting treatment, while not in accordance with Canadian generally accepted accounting principles, is in accordance with the accounting requirements specified by the Superintendent of Financial Institutions Canada (OSFI) under the Bank Act. The impact on the full year and quarterly results are summarized in the attached table of performance highlights. Business line highlights ------------------------ The Bank's Canadian Retail and Commercial Banking division earned net income of $610 million in 1999, up $5 million from last year. "Our domestic retail and commercial operations performed well in 1999 in an intensely competitive environment," said Godsoe. "We generated particularly strong growth in mortgages, up $4.1 billion, and personal deposits, which increased by $1.7 billion, giving Scotiabank the second highest market share in these two important product groups." To set the stage for future growth, the Bank introduced a number of new and innovative products, including the Scotia Total Equity Plan -- a flexible, all-in-one lending package for homeowners -- and the Scotia One Service -- a comprehensive package for customers with a large number of banking transactions and extensive investing and borrowing needs. Scotiabank also introduced low-cost, convenient packaged account plans and a new overdraft line of credit for small businesses. Fiscal 1999 also marked a successful year of helping Scotiabank customers to bank when, where and how they want with electronic banking. Scotiabank introduced wireless banking and discount brokerage services in partnership with Rogers Cantel, and was the first to offer mobile merchant terminals nationally to accept debit card payments from any location. The Bank launched e-Scotia.com to provide secure e-commerce solutions and announced a strategic partnership with Microsoft Canada, whereby the Bank will become the premier banking partner on Microsoft's portal Website, MSN.ca. During 1999, several groups within Scotiabank -- including ScotiaMcLeod, Scotia Discount Brokerage, Scotia Securities, Scotia Cassels Investment Counsel and Scotiatrust -- were realigned to better focus on investment and advisory needs of customers. The new Wealth Management Group made solid progress during the year, earning revenues of $662 million. Assets under administration were 17% higher in 1999, totalling $82 billion at the end of the year. Assets under management by Scotia Cassels Investment Counsel grew a substantial 20% from last year, to $16 billion at the end of 1999. "Our new Wealth Management Group is well positioned for solid growth in the future as a key part of our domestic strategy," said Godsoe. "By delivering these products and services in an integrated, convenient and knowledgeable way, we will help customers meet their expanding investment needs and improve their financial well-being throughout the various stages of their lives." Scotiabank's International Banking division had strong earnings of $305 million this year, up 20% over last year. "In the Caribbean, where we have a dominant 216-branch franchise, we extended our record of exceptional earnings growth," explained Godsoe. "A new brand positioning program and the use of programs proven in the Canadian market contributed to strong gains in lending and deposit volumes." In Latin America, Scotiabank reached agreement in principle to purchase an additional 33% in Banco Sud Americano in Chile, which will bring the Bank's ownership stake to more than 60%. It made significant progress in strengthening the credit and marketing processes and reducing costs at Grupo Financiero Inverlat, the Bank's Mexican affiliate and at Scotiabank Quilmes, its Argentinean subsidiary, positioning these operations for future growth and profitability. "In Asia, profitability increased substantially in 1999, driven by the economic recovery and improving credit quality," Godsoe said. "Provisions for credit losses in Asia dropped to virtually zero in 1999, and the prospects for expanding our growing trade finance business look very bright." Corporate Banking reported record earnings of $604 million, up 40% over 1998. These strong results arose from higher assets, spreads, fee income and securities gains, all of which contributed to a 30% increase in revenues. "We maintained our status as a leading player in the Canadian syndicated loan market, covering all industries but with a particular focus on the mining, media and communications and transportation sectors," Godsoe said. "And once again, we ranked among the top 10 lenders in the U.S. syndicated bank loan market -- the only Canadian bank to do so. In fact, globally, we acted as agent bank in 134 transactions with a total volume of $131 billion." Investment Banking earned a record $368 million in 1999, up 69% over 1998. Over half of this income came from Group Treasury, which had earnings of $212 million, an increase of 48% from the prior year. A substantial portion of this increase came from gains of $281 million on the sale of investment securities. Notwithstanding the gains realized during the year, the surplus of market over book value in the Bank's investment portfolio (including emerging market bonds) was $300 million as at October 31, 1999. Taking advantage of favourable market conditions, Global Trading had a very strong year, generating record earnings in five of seven groups. Fixed income results improved dramatically, reflecting the very active new issue market for bonds during 1999, and higher commercial paper volumes. The corporate finance area continued to enhance its equity research capabilities, achieving top-tier rankings in 13 industry sectors. Notable transactions in corporate finance included acting as global co-ordinator for the $2.5 billion initial public offering for Manulife Financial -- the largest IPO in Canadian history. "We devoted considerable effort in 1999 to the integration of Corporate Banking and Scotia Capital Markets, which now operate under the banner of Scotia Capital," explained Godsoe. "The move to a relationship-based approach, from a product-based approach, will provide new opportunities to bring customized, tailored solutions to clients." Financial results ----------------- Net interest income on a taxable-equivalent basis was $4.8 billion in 1999, up 7% over 1998. This arose from good asset growth across the Bank's major business lines. The full extent of the growth in interest income was understated in 1999 as a result of higher asset securitizations. In 1999, $9.4 billion of assets were securitized, compared with $1.0 billion in 1998. This reduced interest profit by $175 million, with securitization revenues being reported in other income. The Bank's net interest margin, which expresses net interest income as a percentage of average total assets, was 2.11% in 1999, unchanged from the prior year. Other income reached $3.2 billion in 1999, an 11% increase year over year. Credit fees increased by a substantial 15% in 1999, benefiting from the Bank's position as one of North America's pre-eminent corporate lenders. Investment banking revenues rose by 23%, with solid results in the securities trading, foreign exchange, derivative products and underwriting areas. Revenues from the Bank's retail and commercial accounts increased by 7% due to greater customer usage of a greater variety of products and services. Management and trust revenues also rose by 7%. Non-interest expenses were $4.8 billion in 1999, an increase of 7% or $310 million from 1998. This includes $87 million due to the inclusion of Scotiabank Quilmes for a full year. In addition, the Bank took a $60 million provision for some restructuring in the domestic branch network and the integration of Corporate Banking and Scotia Capital Markets, offset in part by a reversal into income of $20 million in National Trust-related restructuring charges. Excluding these items, operating expenses rose by 4%. Salary growth accounted for approximately 40% of this increase. Other factors included technology investments aimed at better serving our customers, in areas such as ABMs, point-of-sale terminals, and telephone and PC banking. In 1999, the Bank incurred $1.5 billion in taxes -- an amount almost equal to its net income for the year. Bank taxation remains among the highest of all Canadian industries. The Bank's productivity ratio -- non-interest expenses as a percentage of total revenues -- improved to 59.3%, better than the Bank's target of 60%. Net impaired loans declined by $577 million in 1999 to -$156 million, with the decrease resulting primarily from an addition to the general provision totalling $700 million in 1999. Net impaired loans as a percentage of loans and acceptances were -0.1% at October 31, 1999. This ratio has steadily improved from the peak of the early 1990s and is now at its lowest level in many years. Specific provisions for credit losses in 1999 were $485 million, compared to $495 million in 1998. The Bank also increased the general provision by $700 million to $1.3 billion. This $700 million addition was comprised of $150 million charged to the income statement in the first quarter, and a one-time adjustment of $550 million in the fourth quarter charged directly to retained earnings as specified by OSFI. Capital funds increased by $902 million to $17 billion at October 31, 1999. Seventy per cent or $630 million of this increase was growth in Tier 1 capital arising from a substantial increase in retained earnings generated by the Bank's solid net income performance. Tier 2 capital grew by about $442 million or 8% mainly because of the increase in the general provision. The Bank's Tier 1 capital ratio grew to 8.1% at October 31, 1999 from 7.2% last year, despite the 21 basis point reduction to Tier 1 capital from the addition to the general provision in the fourth quarter of 1999. As well, the Total capital ratio increased to 11.9% from 10.6%. Both ratios are well in excess of levels defined by OSFI as "well capitalized", (7% for Tier 1 capital and 10% for Total capital). Total assets were $222.7 billion at October 31, 1999. The full extent of loan growth over the last year was muted by the asset securitizations that the Bank completed in 1999, the impact of which was a reduction of $9.0 billion in total assets. Adjusting for securitizations, assets decreased by $1.9 billion, primarily due to the foreign currency translation arising from a stronger Canadian dollar. Year 2000 --------- The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems, if not modified or replaced, may incorrectly recognize a date using "00" as other than the year 2000. This could result in system failure or miscalculations, causing disruption to operations, including a temporary inability to process transactions or to engage in normal business activities. All mission-critical Bank systems and devices have been modified and tested in integrated test environments and verified as Y2K compliant. In addition, all critical business partners have confirmed they are compliant. Contingency plans to deal with any failure of mission-critical systems have been updated and rigorously tested. Disaster, back-up and recovery processes have also been successfully tested. The Bank's success in minimizing the impact of the Year 2000 issue and ensuring a reliable transition also depends on the readiness of external parties. These parties include payment systems, financial exchanges, other financial institutions, securities depositories, telecommunication companies, government agencies, data processing companies and networks in Canada and worldwide. Fully integrated testing with key external parties was successfully completed in 1999. By modifying and replacing internal Bank systems, monitoring the readiness of key external parties, and developing both specific system and overall business contingency plans, the Bank believes it has mitigated the risk of the Year 2000 issue. However, it is not possible to be certain that all aspects of the Year 2000 issue affecting the Bank, including those related to the efforts of customers, suppliers or other third parties, will not materially and adversely affect the Bank. The ability and readiness of the Bank's customers and counterparties may affect credit risk. Any failure of customers to fully address the Year 2000 issue may result in increases in impaired loans and provisions for credit losses in future years. At this time, it is not possible to estimate the amount of such increases, if any, for specific customers. Community involvement --------------------- "Vibrant, healthy communities are key to growing vibrant, healthy businesses," Godsoe concluded. "Scotiabank is committed to helping build the communities in which we do business -- in Canada and around the world -- by dedicating both financial and human resources to help meet today's social needs." In 1999, Scotiabank contributed $17 million in donations and sponsorships to worthwhile causes, including a $1.5 million donation to The University of Western Ontario's Centre for Research on Violence Against Women and Children and $200,000 to fund the second World Conference on Breast Cancer in Ottawa in July. In addition, through the Scotia Employee Volunteer Program, now in its second year, Scotiabank has donated more than $400,000 to registered charities where Scotiabank employees and pensioners have volunteered their time. Performance Highlights Scotiabank For the three months ended ---------------------------------------------------------------------- October 31 July 31 October 31 1999 (1) 1999 1998 ---------------------------------------------------------------------- Net income (millions) $402 $397 $359 Earnings per share $0.76 $0.75 $0.67 Return on equity 15.3% 15.3% 14.8% Return on assets 0.70% 0.71% 0.62% Productivity ratio 59.8% 60.4% 60.9% ---------------------------------------------------------------------- For the twelve months ended ---------------------------------------------------------------------- October 31 October 31 1999 (1) 1998 ---------------------------------------------------------------------- Net income (millions) $1,551 $1,394 Earnings per share $2.93 $2.64 Return on equity 15.3% 15.3% Return on assets 0.68% 0.65% Productivity ratio 59.3% (2) 60.4% ---------------------------------------------------------------------- (1) The above financial results have been prepared in accordance with Canadian generally accepted accounting principles (GAAP), other than the accounting for the one-time increase to the general provision for credit losses of $550 million ($314 Million after tax), recorded as a direct charge to retained earnings in the fourth quarter of 1999, which is in accordance with the accounting requirements specified by the Superintendent of Financial Institutions Canada under the Bank Act. Had the one-time increase to the general provision been recorded as a charge to the Statement of Income, the above financial results would have been as follows: a) for the three months ended October 31, 1999 -- net income $88 million, earnings per share $0.12, return on equity 2.5%, return on assets 0.15%; b) for the twelve months ended October 31, 1999 -- net income $1,237 million, earnings per share $2.29, return on equity 12.0% and return on assets 0.54%. (2) The productivity ratio was 59.9% when a one-time gain of $77 million realized on the sale of shares acquired several years ago through a loan restructuring is excluded. Consolidated Statement of Income Scotiabank For the three For the twelve months ended months ended ----------------------------------------------------------------------- October 31 July 31 October 31 October 31 October 31 ($ millions) 1999(1) 1999 1998 1999(1) 1998 ----------------------------------------------------------------------- Interest income Loans $2,650 $2,565 $2,804 $10,654 $10,269 Securities 496 480 494 1,874 1,815 Deposits with banks 213 212 258 943 1,007 ------------------------------------------------------ 3,359 3,257 3,556 13,471 13,091 ------------------------------------------------------ Interest expense Deposits 1,783 1,720 2,017 7,284 7,303 Subordinated debentures 82 81 93 314 354 Other 322 300 295 1,201 1,057 ------------------------------------------------------ 2,187 2,101 2,405 8,799 8,714 ------------------------------------------------------ ------------------------------------------------------ Net interest income 1,172 1,156 1,151 4,672 4,377 Provision for credit losses 159 108 124 635 595 ------------------------------------------------------ Net interest income after provision for credit losses 1,013 1,048 1,027 4,037 3,782 ------------------------------------------------------ ------------------------------------------------------ Other income Deposit and payment services 150 152 160 602 619 Investment management and trust 89 79 79 331 310 Credit fees 154 136 138 543 472 Investment banking 250 246 127 979 798 Net gain on investment securities 102 89 74 343 322 Securitization revenues 42 45 10 155 38 Other 53 39 102 230 299 ----------------------------------------------------- 840 786 690 3,183 2,858 ----------------------------------------------------- ----------------------------------------------------- Net interest and other income 1,853 1,834 1,717 7,220 6,640 ----------------------------------------------------- ----------------------------------------------------- Non-interest expenses Salaries 582 583 561 2,297 2,193 Pension contributions and other staff benefits 73 96 74 330 308 Premises and equipment, including depreciation 245 250 250 1,007 958 Other 356 267 258 1,142 987 Restructuring provision for National Trustco Inc. (20) - - (20) - ----------------------------------------------------- 1,236 1,196 1,143 4,756 4,446 ----------------------------------------------------- ----------------------------------------------------- Income before the undernoted: 617 638 574 2,464 2,194 Provision for income taxes 206 228 204 867 762 Non-controlling interest in net income of subsidiaries 9 13 11 46 38 ----------------------------------------------------- Net income $402 $397 $359 $1,551 $1,394 ----------------------------------------------------- ----------------------------------------------------- Preferred dividends paid $27 $27 $27 $108 $97 ----------------------------------------------------- Net income available to common shareholders $375 $370 $332 $1,443 $1,297 ----------------------------------------------------------------------- Certain comparative amounts in these financial statements have been reclassified to conform with current period presentation. (1) Refer to footnote (1) on Performance Highlights page. Consolidated Balance Sheet Highlights Scotiabank As at ----------------------------------------------------------------------- October 31 July 31 October 31 ($ millions) 1999 1999 1998 ----------------------------------------------------------------------- Cash resources $17,115 $19,626 $22,900 Securities 33,969 33,350 29,500 Assets purchased under resale agreements 13,921 13,706 11,189 Loans 131,938 134,114 139,293 Other assets 25,748 26,603 30,706 ------------------------------------------- Total assets $222,691 $227,399 $233,588 ----------------------------------------- Deposits - Personal $65,715 $64,962 $62,656 - Business and governments 64,070 65,437 70,779 - Banks 26,833 26,099 32,925 ----------------------------------------- Total deposits 156,618 156,498 166,360 Other liabilities 49,293 53,909 50,932 Subordinated debentures 5,374 5,451 5,482 Equity - Preferred 1,775 1,775 1,775 - Common 9,631 9,766 9,039 ---------------------------------------- Total liabilities and equity $222,691 $227,399 $233,588 ---------------------------------------- ----------------------------------------------------------------------- Components of Net Income and Average Assets Scotiabank ---------------------------------------------------------------------- For the three For the twelve months ended months ended ----------------------------------------------------------------------- October 31 July 31 October 31 October 31 October 31 ($ millions) 1999 1999 1998 1999 1998 ----------------------------------------------------------------------- Net Income By business line: Domestic Banking $155 $147 $144 $610 $605 International Banking 85 85 87 305 255 Corporate Banking 121 144 117 604 431 Scotia Capital Markets 42 35 3 156 74 Group Treasury 51 62 18 212 144 Corporate adjustments (1) (52) (76) (10) (336) (15) ------------------------------------------------------- $402 $397 $359 $1,551 $1,394 ------------------------------------------------------- By geography: Canada $317 $252 $190 $1,081 $838 United States 13 100 71 343 311 International 124 121 108 463 360 Corporate adjustments (1) (52) (76) (10) (336) (115) ------------------------------------------------------- $402 $397 $359 $1,551 $1,394 ------------------------------------------------------- ------------------------------------------------------- Average Assets By business line: Domestic Banking $80,943 $79,725 $80,148 $79,966 $78,313 International Banking 28,132 27,494 26,124 27,573 23,415 Corporate Banking 41,358 40,993 44,173 43,725 38,924 Scotia Capital Markets 51,377 51,694 54,858 53,999 50,567 Group Treasury 15,570 14,673 13,601 14,917 13,578 Corporate adjustments 8,792 8,686 9,897 8,857 9,176 -------------------------------------------------------- $226,172 $223,265 $228,801 $229,037 $213,973 -------------------------------------------------------- -------------------------------------------------------- By geography: Canada $130,870 $128,284 $131,551 $129,569 $126,410 United States 34,903 34,485 33,958 36,992 30,007 International 51,607 51,810 53,395 53,619 48,380 corporate adjustments 8,792 8,686 9,897 8,857 9,176 -------------------------------------------------------- $226,172 $223,265 $228,801 $229,037 $213,973 -------------------------------------------------------- (1) Refer to footnote (1) on Performance Highlights page. Capital and Common Share Information Scotiabank ----------------------------------------------------------------------- ----------------------------------------------------------------------- As at ----------------------------------------------------------------------- October 31 July 31 October 31 1999 1999 1998 ----------------------------------------------------------------------- Capital ratios Tier 1 8.1% 8.0% 7.2% Total 11.9% 11.5% 10.6% Common shares outstanding (millions) 494.3 493.8 492.1 Book value per share $19.49 $19.78 $18.37 Market value per share $33.60 $31.35 $32.20 ----------------------------------------------------------------------- For the three months ended ----------------------------------------------------------------------- October 31 July 31 October 31 1999 1999 1998 ---------------------------------------------------------------------- Common dividends paid Total (millions) $118.5 $103.7 $98.4 Per share $0.24 $0.21 $0.20 ----------------------------------------------------------------------- - /For further information: please contact: Sabi Marwah, Executive Vice-President and Chief Financial Officer, (416) 866-6808 or Shelley Jourard, Senior Manager, Public Affairs, (416) 866-6204/ (BNS.) END QRRBIBBBGUXCCCG
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