ScotiaBank suffers $243M in loan loss expenses last year

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… slashes non-performing loans by 50 %

ScotiaBank Guyana has managed to cut its losses from loans, including bad loans by almost half when comparisons are made between last year and 2015’s figures. This is according to the Canadian based institution’s condensed Financial Statements for the period up to October 2016.

The statements have to be published on a quarterly basis as stipulated by the Bank of Guyana’s supervision guideline No 10, which deals with Public Disclosure of Information. While ScotiaBank suffered a loan loss expense of $446.9M in 2015, that figure totaled $243.7M for last year.

The loan loss expense field covers the cost the bank attracts when loans are non-performing. It is normally associated with customers defaulting on loans or renegotiated loans that may translate to lower yields.

Collectively, the Bank’s net income for the year 2016 amounted to $2.4B. This is also a positive indicator for ScotiaBank, as their net income for 2015 was $2.1B. Tax expenses cost the bank over $1.7B for 2016, compared to $1.5B the previous year.

In addition to loan loss, the bank’s expenses included money which went to salaries and benefits, premises and technology, communication and marketing campaigns, as well as other unspecified expenses. This amounted to $3.1B, an increase compared to 2015’s $3B figure.

Last year, the International Monetary Fund (IMF) had issued a warning to the Guyana Government. Among its concerns had been non-performing loans.

According to the IMF, there was need for heightened vigilance due to increases in non-performing loans. Welcoming the changes to credit reporting legislation, they had encouraged the authorities to continue to strengthen the financial sector’s supervision.

It had also suggested tightening provisioning requirements, large exposure limits, restrictions on certain lending policies and loan classification rules.

Bank of Guyana Governor Dr Gobind Ganga had told media operatives at a press conference, following the warning that the elevated level of non-performing loans, comparable to the levels in the Caribbean, was due largely to the decline in non-oil commodity prices and reclassification of exposes by a few banks.

Dr Ganga had stated that non-performing loans represented about 11.3 per cent of the industry’s total credit portfolio, which was about 1.3 per cent above the end-December 2015 level. He estimated some $28 billion in non-performing loans.

Moreover, the BoG Head pointed out that these non-performing loans are usually fully collateralized with safeguards set up by banks. Nevertheless, he noted that this issue is among top priority of the bank.

“Non-performing loans remain the focus of intense scrutiny by the Bank of Guyana as we continue to monitor and encourage financial institutions to implement measures to reduce this level of non-performing loans.”

 

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