Jan. 24 (Bloomberg) -- Bank of Nova Scotia’s ING Direct unit sees growth potential in wealth management after it completes efforts to add deposits and customers and introduces a credit card, said Peter Aceto, who heads the business.
“We see, a few years out on the horizon, wealth management as a gigantic opportunity for our business,” Aceto, 45, the unit’s chief executive officer, said yesterday in an interview at Bloomberg’s Toronto office.
The first priority is rebranding the business to Tangerine by June, wooing more customers with high-interest savings and checking accounts and introducing a credit card by next year, Aceto said. Scotiabank bought Amsterdam-based ING Groep NV’s Canadian operations in November 2012 for C$3.1 billion ($2.8 billion), gaining an online banking platform with C$30 billion of deposits and 1.8 million customers.
“We’ve grown our deposit base significantly since the change in ownership,” Aceto said. “We will be very focused on growing our customer base over the next five years.”
Scotiabank, Canada’s third-largest lender by assets, forecasted in September 2012 that the business would have 3 million clients in five years -- a goal Aceto says it expect to meet. The Toronto-based unit added more than C$1.5 billion in deposits and 85,000 to 90,000 customers last year, he said.
Scotiabank fell 1.8 percent to C$63.05 at 4:16 p.m. in Toronto. The shares have gained 7.8 percent in the past 12 months, trailing the 12 percent return of the eight-company Standard & Poor’s/TSX Commercial Banks index.
Wealth management could further help its expansion plans, Aceto said. While the company wouldn’t consider an advisory business, adding an online brokerage so customers can do their own trading is “in the cards,” he said, along with expanding its mutual-fund selection. ING Direct began offering mutual funds in 1999 and they now account for more than C$1 billion of assets under management, the company said.
“When you look at the way the mutual-fund business is done in this country, and you look at the fees people pay and the costs of wealth management, we see this as a perfect place for a direct model that has a low-cost structure,” Aceto said. “It’s something we’re thinking about, but a little further down the road -- three years or longer.”
ING Direct, which offers mortgages in addition to investments, is part of Scotiabank’s Canadian banking business, the firm’s most profitable unit. That division had a 36 percent return on equity last year and accounts for about a third of the bank’s total annual profit, according to financial statements.
ING held C$25.7 billion of mortgages at the end of fiscal 2013 and will continue offering home loans to its customers, Aceto said, though it’s not the lender’s primary focus. Scotiabank earmarked C$20.7 billion of the unit’s mortgages to sell off as of the end of October, according to financial statements.
ING Direct pays 1.35 percent on its investment savings account with no minimum balance, according to its website, while Scotiabank’s Money Master Savings account pays 0.2 percent for balances of more than C$5,000 and 0.1 percent for accounts with less than that amount.
“Savings is a cornerstone of our business, it always has been, and we want to help facilitate Canadians saving more,” Aceto said. “We think this is really important and it’s going to continue to be a big focus of ours, and I still think it’s a great growth opportunity.”
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org