Kevin Van Paassen
Bank of Nova Scotia , which has built an impressive retail banking network around the world, is reorganizing its business lines so that it can bolster its wealth management and capital markets arms outside of Canada.
The moves announced Tuesday are also designed to round out the experience of the bank's key candidates to replace chief executive officer Rick Waugh, and to highlight the growing importance of wealth management to the bank.
Mr. Waugh said he is taking these actions now because he sees a short window of opportunity opening up, one that will make it easier to gain international market share. With banks around the world facing new rules that could require many European lenders to raise capital and jettison underperforming operations, Mr. Waugh said he thinks there is an opportunity for Canadian banks to bolster themselves abroad. Similarly, U.S. banks are facing stricter regulations at home that might force them to adjust their business models slightly.
"This window won't be open forever," Mr. Waugh said in an interview after the changes were announced. "So we have great comfort that our strategies and priorities are working, and now is the time to capitalize on it, while the window is open."
Scotiabank is reorganizing its business lines to carve out global wealth management. That means the bank will report its quarterly results from now on under four headings: Canadian banking, international banking, Scotia Capital and global wealth management. Until now, the Canadian and international banking segments each held information on the wealth management business in those geographies.
The majority of Canadian banks separate out their wealth management divisions. Canada's biggest bank, Royal Bank of Canada, carved out a wealth division in early 2007.
Mr. Waugh said the strategy is specifically designed to enhance Scotiabank's wealth management focus. "We've achieved great success in Canada and to a more limited degree in international on our wealth management," he said. "So the market share gains we've been making in mutual fund sales [and]the online brokerage business has now got wealth to a critical mass and now we want to take it to a higher level both in Canada and internationally."
On the Street, the strategy has reignited speculation about the future of Scotiabank's wealth management business, including long-standing rumours that the bank might one day sell off the unit entirely or buy either CI Financial Corp. or DundeeWealth Inc.
But analysts said Tuesday's announcement should actually end the speculation that Scotiabank might part with its wealth management arm, since insurance has been included in that business under the reorganization. Global transaction banking will also fall into the wealth management division.
Analysts continue to believe that a takeover of CI Financial or DundeeWealth, each of which Scotiabank now owns large stakes in, is possible.
Scotia Capital will continue to be co-headed by Mike Durland, who is responsible for global capital markets, and Steve McDonald, who leads global corporate and investment banking. But the division has been given a broader mandate that is designed to allow it to capitalize on wholesale opportunities in Latin America and Asia.
The reorganization includes some staff moves that are part of the bank's succession planning. Chris Hodgson, who has successfully improved Scotiabank's Canadian retail business recently, becomes group head of global wealth management. Rob Pitfield, who ran the bank's international operations, becomes chief risk officer. And Brian Porter, who had been leading risk and treasury, becomes group head of international banking. Each of those individuals will now be gaining necessary experience in new parts of the bank.
In addition, Anatol von Hahn is moving up the ranks from executive vice-president of personal and commercial banking in Canada to group head of Canadian banking, a promotion that observers say cements his position as a potential CEO candidate.
Mr. von Hahn, who has a bachelor of commerce from Concordia University, joined Scotiabank in Toronto in 1984, but has spent much of his career abroad. Fluent in Spanish, he has worked for the bank in Singapore, Chile, Argentina and, notably, Mexico, where he was CEO of Grupo Scotiabank Mexico before becoming executive vice-president in charge of Latin America.
"These moves show how experienced a management team we have, which will really enhance these initiatives," Mr. Waugh said. "Leadership development is one of our top five priorities, and this plays into it. And succession started the day I became CEO, so this is all part of a long-term strategy."
Mr. Waugh became CEO of Scotiabank in 2003. While he has not yet said when he plans to step down, observers say it's likely he will stay on for a 10-year term, retiring at some time in 2013.
Grant Robertson