Newly appointed Bank of Nova Scotia BNS-T chief executive Scott Thomson says he is aiming to rejig the lender, as he sets his focus on Latin America after years of paltry investor returns.
In his first annual shareholders’ meeting since becoming CEO in early February, Mr. Thomson said the bank has launched a company-wide “refresh” to address investor concerns. He highlighted growth opportunities in the bank’s business in Mexico, and in some Canadian markets.
The annual meeting was one of two held Tuesday by Canada’s Big Six banks. Later in the day, Canadian Imperial Bank of Commerce CM-T CEO Victor Dodig made his own pitch to shareholders, telling them Canada should be focused on policies that drive economic growth.
For Scotiabank and Mr. Thomson, the spotlight on Mexico is part of a larger effort to make inroads in the Latin American trading bloc known as the Pacific Alliance – which also includes Peru, Colombia and Chile. Mr. Thomson told shareholders he plans to grow Scotiabank’s commercial and wealth banking businesses in the region by grabbing market share in industries that benefit from Mexico’s export agreements.
“The trading and commercial opportunities within the Canada-U.S.-Mexico Agreement are enormous,” Mr. Thomson said. “Further strengthening this connectivity will be a focus for us.”
Domestically, he expects to grow Scotiabank’s presence in British Columbia and Quebec, markets in which he said the bank is “underpenetrated.”
The CEO said the strategy is aimed at improving investor returns and growing customer portfolios. Among its Big Six peers, Scotiabank’s share price is the only one to have posted a loss over the past five years.
“I know that we have not delivered the level of total shareholder return that you should expect of us,” Mr. Thomson said.
The new CEO has stepped into the bank’s top job at a time of turmoil in the banking sector. The failure of California’s Silicon Valley Bank, rising interest rates and fears of a recession are all weighing on the economy.
At the CIBC shareholder meeting, Mr. Dodig said Canada should focus on measures that will bolster economic growth, such as the federal government’s plan to boost immigration. The meeting bucked industry norms by allowing only shareholders to attend in-person. Media and members of the public were able to watch online.
In an interview with The Globe and Mail ahead of the meeting, Mr. Dodig said that while two-thirds of Canada’s gross domestic product growth is generated by population increases, the country needs to catch up on building the infrastructure needed to support hundreds of thousands of newcomers each year, as well as the Canadians already building their lives here.
Canada took in a record number of immigrants last year to compensate for slowing population growth and gaps in the labour market. But critics have said that the influx of newcomers will put more pressure on an already unaffordable housing market. Home construction would need to increase by 50 per cent to keep pace with immigration, according to a February report by Desjardins Securities.
“Do we have housing availability so that those who are looking to build their hopes and dreams in Canada have a housing system that’s working to their advantage as well – in addition to Canadians already here?” Mr. Dodig asked. “When you have a good thing like immigration working for you, the entire ecosystem needs to work for you.”
As lenders deal with uncertainty in the housing market, they are also bumping up against tighter regulatory conditions. In the federal budget last week, Ottawa said it plans to generate billions of dollars from banks and insurers by amending tax treatment on dividends of Canadian shares held by financial institutions. The update would require banks and insurers to count those dividends as business income.
The move marks the Liberal government’s second major shift in taxation for the financial sector in the past year. Analysts expect earnings per share at the banks to take a modest hit of about 1 per cent this year.
Mr. Dodig said the banks will consult with the government, but he stopped short of commenting on the change. He added that banks are the “lifeblood of the economy.”
During the tumultuous month that began with Silicon Valley Bank’s failure, Canada’s highly diversified banks avoided the runs on deposits seen in the U.S., but the shockwaves that rippled across global markets did not go unnoticed by Ottawa.
The budget also proposed bolstering the powers of Canada’s banking regulator, the Office of the Superintendent of Financial Institutions. The government proposed expanding OSFI’s mandate, including by increasing the range of circumstances in which it can take control of federally regulated financial institutions.
Mr. Dodig said Canada’s financial sector has a long history of resilience and effective regulation, and that investors are looking for lenders with strong growth strategies.
“They want to make sure that they have visibility to the kinds of risks that a bank takes and how they manage those risks,” he said. “And of course, visibility to a return profile, dividend profile, a stockholder appreciation profile before they invest. Because there are many, many different choices.”
Stefanie Marotta