Scotiabank CEO Draws Line in the Sand on Acquisitions

Bank of Nova Scotia Chief Executive Officer Brian Porter said he’s not interested in moving into new countries or pursuing takeovers that would drive the lender’s capital levels below 10 percent.

“You’re not going to see us plant a new flag in a different country, or put C$5 billion for 10 percent of a bank in country X, that doesn’t make sense for us,” Porter said Friday in a conference call with analysts, responding to questions on acquisition strategy.

Porter said he’d be uncomfortable doing deals that would reduce the Toronto-based lender’s Common Equity Tier 1 Capital Ratio of 10.6 percent below 10 percent. Based on that, Scotiabank has about C$2 billion ($1.6 billion) excess capital, according to Chief Financial Officer Sean McGuckin.

“Would we do an acquisition where our capital levels got to 10ish? Yes, we would,” Porter said. “Going a little bit below 10 and maybe beyond that, we wouldn’t feel comfortable.”

Porter reiterated that he’d consider takeovers within the bank’s existing footprint that meet the lender’s financial criteria and strategic goals, which would be easy to integrate. Scotiabank has operations in more than 55 countries in Latin America, the Caribbean and Asia.

Porter’s criteria effectively rules out HSBC Holdings Plc’s Brazilian operations, which according to people with knowledge of the matter, could bring about $4 billion for the London-based bank if sold.

Incrementalist Approach

Scotiabank earlier this month bought Citigroup Inc.’s retail-and commercial banking operations in Peru, adding eight branches and 130,000 customers, and completed its $280 million purchase of 51 percent of Cencosud SA’s financial services business in Chile. The bank has “bandwidth” for another takeover in the next two to four quarters, Porter said.

Scotiabank is exploring a bid for Citigroup’s consumer-banking units in Costa Rica and Panama with those businesses valued at about $1.1 billion, people with knowledge of the matter said last week. The lender has operations in both nations.

Scotiabank’s largest foreign purchase was the $1 billion acquisition of a 51 percent stake in Colombia’s Banco Colpatria in 2012.

“We’ve been incrementalist as we’ve grown our business internationally,” Porter said. “That’s why the largest acquisition we’ve done internationally to date is $1 billion -- we don’t want one country to get too big.”

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