Scotiabank reports worrying rise in fraud
Published:Sunday | August 29, 2010 | 12:00 AM
Scotiabank Jamaica has seen a significant jump in credit- and debit-card fraud, which hit J$150 million over nine months to July.
The higher incidence of card fraud, said Bruce Bowen, president and chief executive officer of Scotia Group Jamaica Limited, is an industry-wide problem.
"It's substantial," Bowen said Thursday at an investors' briefing in Kingston, comparing the levels to last year's incidents.
"It is an industry problem, not just in Jamaica."
The comaparative 2009 figures were not available up to press time.
No fraud-monitoring system
But Bowen also pointed out that the problem was larger on the debit-card side in Jamaica due, he said, to the lack of a fraud-monitoring system in that segment of the business, unlike for credit cards, which the banks heavily police.
"Those are the things we are investing in to get up to that sophistication level," Bowen said.
The Scotia Group president also said unscrupulous persons commit the fraud by duplicating debit cards and using them at point-of-sale machines, ABMs and ATMs. He said customers who report the problem are usually reimbursed, with the result that the fraud becomes a cost to the bank.
He appealed for customer vigilance.
"Our challenge for efficiency is to make sure that we are continuing to upgrade our systems so that we catch those as quickly as possible so we can shut down the fraudulent cards before a lot of money is lost," he said.
The Organised Crime Unit of the Jamaica Constabulary Force reported J$665 million in losses in corporate earnings to fraud for the first half of last year. The Fraud Squad said Friday that more current data was just being compiled and was not yet available.
The data also showed that credit card and cheque fraud - obtaining money and goods by means of forged documents - was reported at US$61,967 and J$63 million.
The rising levels of fraud presents Scotiabank with yet another challenge while it is putting energy and resources into cauterising bad debts that rose to their highest levels last year.
The bank appears to have stabilised the latter, however, writing off J$1.34 billion in impaired loans in the current nine-month period, compared to a write-off of J$1.3 billion in the same period last year.
The portfolio of bad debts, however, is now at J$4 billion, an increase of J$415 million in one year.
Non-performing loans now represent 4.17 per cent of total gross loans, the bank said, compared to 3.81 per cent at July 2009.
Additionally, its loan portfolio has dipped from J$95.3 billion last year to J$93.4 billion as at this July.
Revenues overall were also down for the bank in the current nine-month period, forcing Bowen to squeeze cuts out of the cost of doing business. So while interest income fell from J$31 billion to J$27 billion, he also squeezed interest expense down from J$12 billion to J$9 billion.
Interest income down
It was, however, not enough to grow net-interest income, which after impairment charges, was down J$1.2 billion to J$16.1 billion.
Net profit also slid to J$7.7 billion from J$8.6 billion.
The bank will pay dividend of 37 cents per share, totalling J$1.15 billion, on those results.
Bowen blamed the JDX for the lower profits.
"This represents the first full quarter of 'post-JDX' results with significantly reduced yields on our securities portfolio, while at the same time our customers continue to face financial challenges given the weak economic environment," he said.
"Notwithstanding these factors, Scotia Group Jamaica continues to report solid earnings while maintaining strong capital and liquidity positions. These results are due to our continued focus on providing quality financial products and great service to our customers, and this has reflected in our growing market share in most key product lines. Looking forward, we shall continue to focus on building core earnings while prudently managing credit and balance-sheet risks and improving efficiencies across the group."
Scotia Group is now a J$316 billion company by assets, a yearlong gain of J$7 billion. It is now capitalised at J$53 billion, up by more than J$6 billion.