Scotiabank to Tap Brakes on Deals After a Six-Month Buying BingeBy
Canada’s third-largest bank must absorb flurry of acquisitions
Latest pact will add 110,000 clients to Canadian wealth unit
After five deals in six months, Bank of Nova Scotia is taking a breather.
“We’ve got a lot of work to do in terms of execution and integrations now, so I think we’ll be fairly quiet on the acquisition front from here on in,” Chief Executive Officer Brian Porter told BNN Bloomberg on Friday in a TV interview set to air at 3 p.m. Eastern time.
On Thursday, Scotiabank agreed to buy MD Financial Management from the Canadian Medical Association for C$2.59 billion ($2 billion), the latest in a series of announced acquisitions that include Canadian money manager Jarislowsky Fraser Ltd. and Banco Bilbao Vizcaya Argentaria SA’s 68 percent stake in a Chilean lender.
The purchase of Ottawa-based MD Financial will add a wealth-management business with C$49 billion in assets and 110,000 clients, including affluent doctors, the Toronto-based bank -- Canada’s third-largest -- said Thursday in a statement. Also on Thursday, Scotiabank sold 19.7 million shares to raise about C$1.5 billion to help pay for the deal, an offering Porter said was “very well received."
Shares of Scotiabank were down 1.5 percent to C$77.07 at 2:37 p.m. trading in Toronto on Friday, leading the 0.5 percent decline of Canada’s eight-company S&P/TSX Commercial Banks index.
“The price appears expensive, in our view,” said Scott Chan, an analyst with Canaccord Genuity Corp. Chan said the ratio of C$2.59 billion to assets “is higher than recent deals we’ve seen in the wealth-management space.”
The deal builds on a strategy Porter highlighted at an investor event in February, 11 days before announcing a C$950 million deal to buy Montreal-based Jarislowsky Fraser. That purchase, completed last month, and the deal for MD Financial will expand Scotia Wealth Management’s assets to more than C$230 billion.
“These are trophy assets,” Porter said. “These don’t come on the market very often at all, so we feel very fortunate to have acquired both businesses, albeit in a short period of time.”
MD Financial, established in 1969, has provided specialized financial products and wealth management services to about 45,000 physicians and 65,000 family members and employees. The firm has about 350 advisers in 50 offices across Canada and about 1,150 employees in support roles.
It will operate as a stand-alone brand within the bank’s wealth-management unit, and its CEO, Brian Peters, will continue heading the business, Scotiabank said. The deal is expected to be completed by the end of October.