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Scotiabank to exit nine countries in Caribbean shake-up

by: - November 27, 2018
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(Business Financial Post)
Bank of Nova Scotia said Tuesday that it has struck a deal to sell banking businesses in nine of the smaller countries in the Caribbean, such as Antigua and Dominica, as the lender continues to narrow down the number of international markets in which it does business.

The move comes as Scotiabank, which said larger markets in Latin America are still very much part of its plans, reported that profit at its international unit grew at a greater rate than at its Canadian business over the past year.

“Exiting these non-core operations is consistent with a strategy that began five years ago to sharpen our focus, increase scale in core geographies and businesses, improve earnings quality and reduce risk to the bank,” said Scotiabank president and CEO Brian Porter during a conference call Tuesday morning, adding that the bank has now either exited or announced its intentions to exit more than 20 countries or businesses over that same period.

Scotiabank plans to sell the Caribbean businesses to Trinidad and Tobago-based Republic Financial Holdings Ltd., subject to regulatory approvals and closing conditions. Republic Financial said in a release that the purchase price is US$123 million.

Additionally, Scotiabank announced Tuesday that its subsidiaries in Jamaica and Trinidad and Tobago would be selling their insurance operations to Barbados-based Sagicor Financial Corporation Ltd., which would also underwrite insurance products for Scotia’s banking subsidiaries through a 20-year distribution agreement.

Scotiabank said these deals would not be material, but that they would increase its common equity tier one capital ratio, a measure of financial strength, by around 10 basis points when they close.

“Due to increasing regulatory complexity and the need for continued investment in technology to support our regulatory requirements, we made the decision to focus the bank’s efforts on those markets with significant scale in which we can make the greatest difference for our customers,” said Ignacio Deschamps, the head of international banking at Scotiabank, in a release.

Scotiabank has been on a bit of an acquisition binge over the past year when it comes to Latin America and wealth management. Its deals include the purchase of a majority stake in a bank in Chile from Banco Bilbao Vizcaya Argentaria S.A., turning it into one of the biggest private lenders in that country.

The lender also announced in August that it had reached an agreement to buy a bank in the Dominican Republic, with Porter saying Tuesday that “we expect to remain in our core markets across the Caribbean region.”

Scotiabank also reported Tuesday results for its fiscal 2018, which ended Oct. 31. Earnings for the bank were $9.1 billion for the year when adjusted for its acquisition-related costs, up 10 per cent from the year prior.

Of that, $4.4 billion came from Scotiabank’s Canadian business, an 8-per-cent increase over last year, while another $2.8 billion came from its international markets, which was up 16 per cent year-over-year.

“This was driven by our operations in the countries that make up the Pacific Alliance — Mexico, Peru, Chile and Colombia — which experienced double-digit loan and deposit growth, partly reflecting recent acquisitions, positive operating leverage and stable credit quality,” Porter said in a release.

The fourth-quarter results for the bank came in slightly under analyst expectations, with the lender reporting adjusted earnings per share of $1.77 for the three months ended Oct. 31, which was still up from $1.65 the previous year.

“By and large, the underlying businesses performed well this quarter versus street expectations,” Eight Capital analyst Steve Theriault wrote in a note.