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FINANCIAL SERVICES REPORTER

Bank of Nova Scotia chief executive officer Rick Waugh is nothing if not patient.

Two years ago this month, he and other senior executives from the bank hosted a delegation of executives and directors from Thailand's Siam City Bank PCL, taking them through branches, call centres, and technology centres in Toronto to show them what a great partner Scotiabank would be.

Scotiabank already held a significant stake in Thailand's Thanachart Bank, which specializes in auto loans, and foreign lenders are not allowed to own more than 49 per cent of a Thai bank.

But it was clear that Thailand's central bank would soon be looking to offload its stake in Siam City Bank, a lender with solid mortgage and credit card businesses. If Thanachart could scoop up that investment, then Scotiabank would own part of a much larger Thai bank while remaining within the ownership restrictions.

The Toronto-based bank's efforts finally paid off yesterday as Thanachart announced a deal to buy the central bank's 48-per-cent stake in Siam City. Thanachart, which already owns about 20 per cent of Siam City, will then launch a tender offer for the rest of the shares, after which the two banks will be merged.

The resulting lender, still to be called Thanachart Bank, will be the fifth largest bank in Thailand, with more than 660 branches, 2,100 bank machines and 18,000 employees. The move gives a major boost to Scotiabank's ambitions in Asia.

Michele Kwok, Scotiabank's senior vice-president for Asia Pacific and the Middle East, believes the main reason the bank won the bidding war is "because, according to the Bank of Thailand's financial master plan, they actually want local consolidation in the industry." The transaction meets that objective by bringing two medium-size local banks together, she said in an interview.

Media reports in Bangkok said more than 45 institutions expressed an interest when the central bank put its stake up for sale late last year. Of a handful of bids, it came down to two, and Thanachart edged out HSBC in the final round.

Thailand is "exactly the type of market we like to invest in," Rob Pitfield, the head of Scotiabank's international lending business, told analysts on a conference call. Political risks are manageable and there is room for more consumer banking services.

As part of the deal's financing, Scotiabank will contribute about $650-million in capital. It has already invested about $550-million in Thanachart.

Scotiabank, known as Canada's most international lender, largely for its businesses in Mexico and Central and South America, has operations in 12 Asian countries and has made the region a priority.

At an industry conference in New York yesterday, Manulife Financial Corp.'s head of Asia, Robert Cook, noted that the region has fared better than other areas in the wake of the financial crisis.

"In Asia, consumers are back shopping again," he said, adding that Asia's banking systems are "much healthier" than those in North America and Europe.

BANK OF NOVA SCOTIA (BNS)

Close: $49.15, up 3¢

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:55pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.27%51.81
BNS-T
Bank of Nova Scotia
+0.94%70.07
MFC-N
Manulife Financial Corp
+1.62%25.06
MFC-T
Manulife Fin
+1.2%33.83

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