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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 No 6698m BANK OF NOVA SCOTIA 2nd December 1998 Scotiabank reports solid earnings for 1998 TORONTO, December 2,1998 -- Scotiabank today reported a net income of $1,394 million for the year ended October 31, 1998, or $2.64 per share. This compares to $1,514 million, or $2.95 per share reported in 1997. The return on equity for 1998 was 15.3%, compared to 20.2% in 1997. For a clearer picture of year-over-year performance, the unusual items reported in fiscal 1997 -- including the acquisition of National Trust and the reversal of a portion of the country risk provision -- should be excluded. Taking these into account, Scotiabank's 1998 earnings were up a solid $171 million, an increase of 14% or $0.28 per share, from the adjusted earnings in 1997 of $1,223 million. The return on equity for 1998 was 15.3% compared to 16.4% in 1997, excluding the unusual items. Net income in the fourth quarter of 1998 was $359 million as compared to $533 million for the last quarter of 1997 (or $319 million after excluding the unusual items mentioned previously). Earnings per share during the quarter were $0.67 compared to $1.05 for 1997 (or $0.62 excluding unusual items), and return on equity was 14.8% compared to 26.3% (or 16.2% excluding unusual items). Today, the Board of Directors approved an increase to the quarterly dividend to 21 cents from 20 cents per common share, payable on January 27, 1999, to shareholders of record as of the close of business on January 5, 1999. "The strength and diversification of our core business lines led to strong results despite turbulent global capital markets in the latter half of 1998," observed Peter Godsoe, Scotiabank Chairman and Chief Executive Officer. Business Lines Domestically, Scotiabank's Canadian Retail and Commercial Banking produced an income of $605 million, 43% of the Bank's net income. "During the year, we saw a substantial gain of 9% in residential mortgages," said Godsoe. "Sales were generated through the branch network as well as through alternative delivery channels including the Internet, mortgage brokerage units and mobile sales managers. Commercial lending, which includes the very important small and medium size business sector, also rose substantially." The Bank's electronic banking services enjoyed continued success, as more customers used the convenience of ABM, telephone and Internet banking. Together, telephone banking and Internet banking processed more than six million transactions in the fourth quarter of 1998. Scotia OnLine, the Bank's Internet service, with its innovative and user-friendly Entrust security system, has won high praise from customers and an Award of Excellence from the Canadian Information Productivity Awards (CIPA) for Internet Commerce. "In October, Scotiabank reinforced its commitment to electronic banking by expanding its strategic alliance with Entrust Technologies to include support for a broad range of internal and external electronic commerce, e-mail and communication applications," Godsoe stated. International Banking contributed $255 million or 18% of the Bank's total net income for 1998. The Bank's operations in the Caribbean and Central America continued their tradition of solid performance, with average assets in the Caribbean region increasing to $13 billion. The Bank expanded its electronic banking channels throughout the region by adding ABMs, opening a call centre in Trinidad and Tobago (which currently handles 7,000 calls a month) and introducing a debit point of sale network in Jamaica. "The Bank continued to expand into new markets with good long-term potential. During the year we completed the acquisition of Banco Quilmes, in Argentina," said Godsoe. "Scotiabank became the first Canadian bank to open a branch in Chongqing, China's largest municipality, and a branch in Bangkok, Thailand. We also had another Canadian first, announcing plans to open a branch in Colombo, Sri Lanka. These branches provide a wide range of financial services to local clients and Canadian companies operating abroad." Corporate Banking had another year of strong performance with earnings of $431 million, representing 31% of the Bank's total earnings. U.S. Corporate Banking provided the largest portion of the business line's gain in earnings. "The U.S. syndicated loans market was very active, and the Bank benefited from its decade-long status as a leader in the origination and distribution of syndicated loans in that market," Godsoe observed. Investment Banking contributed $218 million, or 16% to the Bank's overall results. Customer-based business generated excellent revenues in areas such as foreign exchange, derivatives and precious metals, including ScotiaMocatta. Although trading revenues declined as a consequence of the turbulent market conditions in the latter part of the year, risk control systems and effective management played an important role in minimizing the impact of these tough markets. "The major strategic issue for Corporate Banking and Scotia Capital Markets over the next year will be their integration into a single organizational unit that offers clients seamless service and access to the full range of the Bank's capabilities," said Godsoe. Financial Results Net interest income in 1998 was $4.4 billion, an increase of 18% over 1997. This was achieved through strong growth in average earning assets, notwithstanding a slight compression in the Bank's interest margin. Other income totalled $2.9 billion in 1998, up 7% over 1997. The growing popularity of the Bank's electronic banking services by both personal customers and merchants contributed to this year's increase. The Bank's wealth management revenues rose substantially. This was comprised of mutual fund fees which grew by 42%, accompanied by strong growth in personal trust revenues; an area where the Bank is a leader. Credit fees grew by a strong 20%, mainly due to the Bank's top tier status in the United States loan syndications market. Investment Banking revenues, despite the turbulent market conditions contributed a solid $798 million to other income. Non-interest expenses increased by 10% in 1998. Remuneration and benefits were $2.5 billion, a 14% increase over last year. This was chiefly due to the Bank's merit program and the addition of 3,400 employees largely arising from recent acquisitions. Scotiabank's technology related expenses increased 27% as the Bank worked to develop new products, enhance services, improve efficiencies and prepare for the Year 2000. In 1998, Scotiabank incurred $1.4 billion in taxes, an increase of 10% from last year. Bank taxation remains the highest among Canadian industries. The Bank achieved a productivity ratio -- non-interest expenses as a percentage of total revenues -- of 60.4%. This was accomplished despite the expenses related to the Year 2000 initiative and several other projects designed to set the stage for reduced expenses in future years. Net impaired loans declined $172 million or 29% to $421 million. This represented 0.3% of total loans and acceptances, a significant improvement compared to 0.5% in 1997. The decline occurred despite the turmoil in some South East Asian countries and the inclusion of impaired loans from Banco Quilmes, our new Argentinian subsidiary. Specific provisions for credit losses in 1998 increased $135 million to $495 million, and the Bank added $100 million to general provisions in the second quarter, which now total $600 million. Capital Funds reached $16.3 billion at October 31, 1998. Tier 1 capital increased $1.4 billion or 15% to $10.8 billion in 1998. The largest part of this growth was from the increase of $1,051 million in retained earnings augmented by the issue of $300 million new non-cumulative preferred shares. During the year, the bank redeemed several debentures as well as issued $1 billion in new subordinated debentures eligible for inclusion in Tier 2 capital. As a result, Tier 2 capital rose by a net $0.4 billion to $5.2 billion at year end. The Bank's Tier 1 capital ratio increased to 7.2% at year end for 1998 from 6.9% at the end of 1997. The total capital ratio increased to 10.6% at the end of 1998, compared to 10.4% at the close of 1997. As at October 31, 1998, total assets were $233.6 billion, an increase of $38.4 billion or 19.7%. The increase was attributable to strong growth across the business lines. Residential mortgages and commercial lending increased in Canada. In the U.S., corporate lending continued to be very strong. Furthermore, assets in international banking rose from continued growth in the Carribean and the acquisition of Banco Quilmes. The translation of foreign currency-denominated assets into a weaker Canadian dollar also contributed to the increase in assets. Financial Sector Reform Fiscal 1998 was a year of change for Canada's financial sector. The proposed mergers and the publication of several reports including the MacKay report on financial services reform combined to bring to the forefront the debate on the future of Canada's financial sector. "Greater competition -- not consolidation -- must be the foundation of any changes to Canada's financial sector," said Godsoe. "Scotiabank is in favour of enabling banks and other players to grow and bolster international competitiveness." The Bank Chairman added, "In developing policies to set the future direction of Canada's financial sector, the primary aim of government must be to maintain and build upon the great strengths of our current system. This is particularly important today with global unrest and uncertainty. While I support the idea of moving forward expeditiously, it is far more important to get the policy framework right than it is to get it done fast." Community Scotiabank continued its strong commitment to the communities where its employees live, work and do business in 1998. The Bank contributed more than $16 million to community support during the year including $200,000 to the Canadian Association of Food Banks for Ice Storm relief and $150,000 for Hurricane Georges relief. Scotiabank was recognized for its sponsorship of the "Illuminated Life of Maud Lewis," receiving an award from the Business Council for the Arts. The Bank launched one its most successful partnerships - Scotiabank Fraud Awareness Program: The ABCs of Fraud, a fraud education program for seniors, taught by seniors. The Bank also announced its plans to be the lead supporter of the second World Conference on Breast Cancer. "A highlight of the year was the launch of the Scotia Employee Volunteer Program. The Bank donates up to $1,000 to charities where Scotiabank employees and pensioners have volunteered 50 hours of their time. To date, this program has raised $260,000 for local charities across Canada," Godsoe observed. Other 1998 Highlights - Scotiabank completed the acquisition of Mocatta Bullion & Base Metals to form ScotiaMocatta; establishing the Bank as one of the world's leading metal trading and bullion banks. - Opened a fourth call centre in Calgary to provide customer service for a range of products including telephone banking, Internet banking, insurance, ABMs, credit cards and debit cards. - Integrated Scotia Investment Management Ltd. with Cassels Blaikie to form Scotia Cassels Investment Counsel Limited, a premier investment management firm with assets under management of $13 billion. - Acquired American Securities Transfer and Trust Inc.; the ninth largest securities transfer agent in the United States, adding to the Bank's leadership position in stock transfer and related businesses. - Received ISO 9002 certification -- internationally recognized quality management standards - for the Corporate and Commercial Service Department, responsible for customer support of the Bank's electronic cash and treasury management products. - Became one of the largest issuers of digital certificates via Scotia OnLine Intemet banking, reinforcing the Bank's commitment to delivering a wide range of e-commerce products and services. For more information: Mr. Sabi Marwah Executive Vice-President & Chief Financial Officer (416) 866-6808 Scotiabank Performance Highlights For the three months ended October 31 July 31 October 31 1998 1998 1997(1) Net income ($ millions) $359 $358 $533 Earnings per share ($)(2) $0.67 $0.68 $1.05 Return on equity 14.8% 15.5% 26.3% Return on assets 0.62% 0.66% 1.09% Productivity ratio 60.9% 60.7% 78.8% For the twelve months ended October 31 October 31 1998 1997(1) Net income ($ millions) $1,394 $1,514 Earnings per share ($)(2) $2.64 $2.95 Return on equity 15.3% 20.2% Return on assets 0.65% 0.85% Productivity ratio 60.4% 62.4% (1) Excluding unusual items in the year, the 1997 full-year adjusted income was $1,223 million, earnings per share of $2.36, return on equity of 16.4%, return on assets of 0.68%, and a productivity ratio of 59.9%. Similarly, excluding the unusual items, the Q4/97 adjusted income was $319 million, earnings per share of $0.62, return on equity of 16.2%, return on assets of 0.65%, and a productivity ratio of 59.7%. (2) Retroactively adjusted to reflect the two-for-one stock split on February 12, 1998. Scotiabank Consolidated Statement of Income For the three months ended For the twelve months ended October 31 July 31 October 31 October 31 October 31 ($ millions) 1998 1998 1997 1998 1997 Interest income Loans $2,804 $2,652 $2,218 $10,269 $8,082 Securities 494 455 361 1,815 1,636 Deposits with banks 258 252 209 1,007 770 3,556 3,359 2,788 13,091 10,488 Interest expense Deposits 2,017 1,862 1,532 7,303 5,714 Subordinated debentures 93 95 79 354 260 Other 295 283 221 1,057 797 2,405 2,240 1,832 8,714 6,771 Net interest income 1,151 1,119 956 4,377 3,717 Provision for credit losses (reversal) 124 123 (406) 595 35 Net interest income after provision for credit losses 1,027 996 1,362 3,782 3,682 Other income Deposit and payment services 160 162 141 619 531 Investment management and trust 79 83 70 310 250 Credit fees 138 117 106 472 395 Investment banking 127 202 239 798 847 Net gains on investment securities 74 65 64 322 403 Other 112 84 45 337 257 690 713 665 2,858 2,683 Net interest and other income 1,717 1,709 2,027 6,640 6,365 Non-interest expenses Salaries 561 551 543 2,193 1,973 Pension contributions and other staff benefits 74 86 54 308 229 Premises and equipment, including depreciation 250 254 194 958 778 Other 258 242 257 987 829 Restructuring costs - - 250 - 250 1,143 1,133 1,298 4,446 4,059 Income before the undernoted: 574 576 729 2,194 2,306 Provision for income taxes 204 207 188 762 758 Non-controlling interest in net income of subsidiaries 11 11 8 38 34 Net income $359 $358 $533 $1,394 $1,514 Preferred dividends paid $27 $24 $25 $97 $99 Net income available to common shareholders $332 $334 $508 $1,297 $1,415 Certain comparative amounts in these financial statements have been reclassified to conform with current period presentation. Scotiabank Consolidated Balance Sheet Highlights As at October 31 July 31 October 31 ($ millions) 1998 1998 1997 Cash resources $22,900 $19,109 $18,174 Securities 29,500 29,424 27,999 Assets purchased under resale agreements 11,189 12,778 8,520 Loans 139,293 133,775 117,219 Other assets 30,706 27,570 23,241 Total assets $233,588 $222,656 $195,153 Deposits - Personal $62,656 $61,869 $59,239 - Business and governments 70,779 64,712 56,928 - Banks 32,925 29,767 22,808 Total deposits 166,360 156,348 138,975 Other liabilities 50,932 49,612 41,613 Subordinated debentures 5,482 6,164 5,167 Equity - Preferred 1,775 1,775 1,468 - Common 9,039 8,757 7,930 Total liabilities and equity $233,588 $222,656 $195,153 Components of Net Income and Average Assets For the three For the twelve three months ended twelve months ended October 31 July 31 October 31 October 31 October 31 ($ millions) 1998 1998 1997 1998 1997 Net Income By business line: Canadian retail and commercial banking $144 $156 $157 $605 $520 Corporate banking 117 122 140 431 357 Investment banking 21 43 95 218 401 International banking 87 64 276 255 434 Other (10) (27) (135) (115) (198) $359 $358 $533 $1,394 $1,514 By geography: Canada $190 $208 $278 $838 $876 United States 71 90 96 311 336 International 108 87 294 360 500 Other (10) (27) (135) (115) (198) $359 $358 $533 $1,394 $1,514 Average Assets By business line: Canadian retail and commercial banking $80,148 $79,296 $63,813 $78,313 $62,364 Corporate banking 44,173 39,305 33,792 38,924 32,422 Investment banking 68,459 62,817 56,797 64,145 55,815 International banking 26,124 24,237 19,024 23,415 18,249 Other 9,897 9,019 20,377 9,176 10,326 $228,801 $214,674 $193,803 $213,973 $179,176 By geography: Canada $131,551 $126,743 $108,203 $126,410 $106,070 United States 33,958 30,001 24,366 30,007 23,471 International 53,395 48,911 40,857 48,380 39,309 Other 9,897 9,019 20,377 9,176 10,326 $228,801 $214,674 $193,803 $213,973 $179,176 Capital and Common Share Information As at October 31 July 31 October 31 1998 1998 1997 Capital ratios Tier 1 7.2% 6.9% 6.9% Total 10.6% 10.4% 10.4% Common shares outstanding (millions) (1) 492.1 491.8 489.8 Book value per share ($)(1) $18.37 $17.81 $16.19 Market value per share ($)(1) $32.20 $33.95 $31.08 For the three months ended October 31 July 31 October 31 1998 1998 1997 Common dividends paid Total ($ millions) $99 $98 $91 Per share ($)(1) $0.200 $0.200 $0.185 (1) Retroactively adjusted to reflect the two-for-one stock split on February 12, 1998. END QRRGCBBDGDGCCIR
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