Scotiabank Says Latin America Reforms Should Help Results

Bank of Nova Scotia’s international lending business should improve next year if economic reforms in Latin American nations such as Mexico and Chile take hold, Chief Financial Officer Sean McGuckin said.

“When those reforms do get put in place and the market reacts to that, economic growth in those countries will return to quite high levels,” McGuckin, 50, said today in a phone interview. “We’re really at the whim of those economies growing after governments put those reforms in place.”

Latin America’s economic slowdown is “short term” and the region may recover starting in the second half of 2015, said McGuckin, who anticipates “a gradual lift in those markets” in two or three quarters if the changes are successful.

About 55 percent of the Toronto-based firm’s international banking unit’s earnings come from Latin America, McGuckin said. The lender is Canada’s most international bank, with operations in more than four dozen countries in Latin America, Caribbean and Asia. Scotiabank has targeted Mexico, Peru, Chile and Colombia as having the best growth potential.

“We’re very comfortable in terms of the long-term investment thesis that these are the right places to be,” McGuckin said. “We still see very good growth coming out of these countries in the medium to longer term.”

Shares Slide

Scotiabank fell the most in 14 months after reporting international banking profit declined 16 percent to C$452 million ($413 million) in the period ended July 31, marking the third consecutive quarter of year-over-year earnings declines in the overseas business. Total profit climbed 35 percent to a record C$2.35 billion, the bank said today in a statement, fueled largely by gains from selling a stake in money manager CI Financial Corp.

The lender cited “continuing softness” in Puerto Rico and the English Caribbean and “moderation” in Latin American economies for the decline.

Scotiabank dropped 2.4 percent to C$72.45 at 4 p.m. in Toronto, the worst performance in the eight-company Standard & Poor’s/TSX Commercial Banks Index, which slid 0.7 percent.

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