Bank of Nova Scotia is selling its operations in Belize, the latest in a string of Caribbean and Central American divestments as the bank narrows its international focus and redeploys capital toward its core Latin American markets.
Caribbean Investment Holdings Ltd., a holding company with Belize banking interests, has agreed to buy 100 per cent of Scotiabank (Belize) Ltd. for US$30.5-million. The price tag could increase to US$35-million if there are positive regulatory changes before the transaction closes. The deal has a 12-month closing timeline and still requires regulatory approval.
The sale is an incremental step in a broad reordering of Scotiabank’s international business. Over the past few years, the bank has trimmed exposure to Caribbean, Central American and Asian markets, while doubling down on four countries – Mexico, Chile, Colombia and Peru – that it refers to as its “Pacific Alliance.”
“This transaction supports the bank’s strategic decision to focus on operations across our footprint where we can achieve greater scale, lower operating risk, and realize more opportunities for growth,” a Scotiabank spokesperson wrote in an e-mailed statement.
The bank has put a particular emphasis on offloading non-core Caribbean and Central American assets. Last October, Scotiabank finalized the sale of banking operations in seven Caribbean countries, including St. Lucia, Grenada and Dominica, to Trinidad and Tobago-based Republic Financial Holdings Ltd. It struck a deal the following month to sell its British Virgin Islands assets, also to Republic Financial.
Earlier in 2019, it sold off assets in Peurto Rico, the U.S. Virgin Islands and El Salvador.
Not all of Scotiabank’s Caribbean exits have gone smoothly. Attempts to sell operations in Antigua and Barbuda and in Guyana to Republic Financial fell through last year when politicians and regulators in the two countries raised concerns about competition and domestic control.
The bank still has a significant presence in several Caribbean and Central American countries, including the Dominican Republic, Panama and Costa Rica. Scotiabank’s Caribbean and Central America businesses generated $608-million in revenue in its most recent quarter, ended April 30.
The bank’s footprint in Belize, where it has operated since 1968, is relatively minor. It operates nine bank branches and 21 ATMs in the country, along with an online banking service. In fiscal 2019, the Belize operations generated US$36.5-million in revenue and US$5.3-million in profit.
Other Canadian banks are also rethinking their exposure to the Caribbean. Royal Bank of Canada announced in December that it is selling its Eastern Caribbean banking operations – which include branches in Antigua, Dominica, Montserrat, St. Lucia, and St. Kitts and Nevis – to a consortium of Caribbean-based banks. The terms of the deal were not disclosed.
A month earlier, Canadian Imperial Bank of Commerce agreed to sell a controlling stake in CIBC FirstCaribbean to GNB Financial Group Ltd., a company controlled by Colombian billionaire Jaime Gilinski Bacal, for US$797-million.
Despite operating in the Caribbean for more than a century, Canadian banks appear to see the hurricane-prone region as increasingly risky. After Hurricanes Irma and Maria battered the Eastern Caribbean in 2017, Scotiabank granted loan payment deferrals to 500,000 customers.
The impact of COVID-19 has further dampened the economic prospects for the region.
“The Caribbean will be impacted significantly due to tourism in the short term,” said Ignacio Deschamps, Scotiabank’s head of international banking, on a late May earnings call. “But it’s also very much linked to the U.S. economy. As the U.S. economy recovers, the Caribbean should recover,” he added.
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