Scotiabank Sets Earnings Target for 4 Latin American Nations

  • Growth planned for Mexico, Chile, Peru and Colombia units
  • Bank in position to react on industry consolidation, CEO says

Bank of Nova Scotia, Canada’s third-largest lender by assets, aims to increase earnings by as much as 11 percent in four key Latin American countries within three to five years by adding more customers, embracing technology and cutting costs.

“Combined, our operations in Mexico, Peru, Chile and Colombia are expected to deliver an overall 9 to 11 percent growth rate in earnings, which will help offset the lower growth we’re seeing in the Caribbean region and the negative impact of increasing tax costs across our business,” Dieter Jentsch, group head for international banking, said Monday at an investor presentation in Mexico City.

Scotiabank’s goal anticipates C$40 million ($27 million) to C$60 million in added earnings from digitizing banking operations in the four so-called Pacific Alliance nations, plus C$35 million to C$50 million from developing more customer relationships and C$30 million to C$40 million by cutting costs, mostly in its Mexico and Chile businesses, Jentsch said.

‘Double-Digit’

“The Pacific Alliance countries will be our primary growth areas with low double-digit asset growth, continued improvement in efficiencies with positive impact from our strategic priorities,” Jentsch said. “Over the next three to five years, across the Pacific Alliance, we expect to deliver a productivity ratio of less than 52 percent, positive operating leverage and a more compelling and digitized customer experience.”

Scotiabank’s strategy of building a greater presence in those four key Latin American countries isn’t predicated on additional acquisitions, though the bank would “seriously look at” an opportunity if it emerged and met the bank’s criteria, Jentsch said.

The Toronto-based lender has made incremental acquisitions in the past two years in the region, including buying credit cards and consumer loans in Chile, and Citigroup Inc.’s retail bank branches in Peru, Panama and Costa Rica. Chief Executive Officer Brian Porter has been positioning Scotiabank to be ready to act on any bank consolidation in Mexico, its largest Latin American business.

‘Position to React’

“There’s going to be further consolidation in the Mexican market, there’d be opportunities for us in Peru, Colombia and Chile as well,” Porter said at the conference. “We’re managing the bank for the long term and at some juncture we’re going to see a deal that doesn’t come along very often and we’re going to be in the position to react, and be thoughtful about it.”

Porter has been focusing on the four Latin America countries as providing the best opportunities for growth for the bank, Canada’s most international lender, since he took over as CEO in November 2013. Scotiabank had 27 percent of its annual earnings from international banking in fiscal 2015, compared with 50 percent from Canadian banking and 23 percent from its capital markets unit.

Scotiabank rose 0.2 percent to C$52.38 at 4 p.m. in Toronto. The shares have declined 6.4 percent this year.

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