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Bank of Nova Scotia CEO Rick WaughPAUL DARROW/Reuters

Bank of Nova Scotia has been waiting more than a year for the Chinese government to approve its purchase of a stake in Bank of Guangzhou. It may not be willing to wait much longer.

Canada's third-largest bank sent a strong message to China on Tuesday that further delays in approving the transaction could imperil the deal. Scotiabank chief executive officer Rick Waugh said he would eventually have to look at putting the capital elsewhere.

"We can't wait forever," Mr. Waugh told a banking conference in Toronto. "I think there's a world of opportunities. We'll find a place for it if that [deal] doesn't go."

Scotiabank announced in September, 2011, that it had agreed with Bank of Guangzhou to purchase a 19.99-per-cent stake in the bank, located in one of China's fastest-growing regions, for $719-million. Chinese ownership limits prevent foreign investors from holding 20 per cent or more of any bank there.

However, the transaction has languished as Scotiabank awaits approval from Chinese authorities. There has been no indication whether that green light will come.

Speculation has circulated for months that the Scotiabank deal was in limbo while the Chinese government waited for Ottawa to decide on the state purchase of oil sands giant Nexen Inc. for $15.1-billion (U.S.).

But the approval of that transaction in December, a decision that took less than a year in Canada, had no immediate impact on the Bank of Guangzhou purchase. For much of the past year, Scotiabank executives have been careful not to criticize Chinese authorities over the delays, and have held off commenting on the transaction.

A few months ago, Scotiabank president Brian Porter told analysts that the bank believed the delays were partly owing to government changes in Guangzhou, a city of more than 10 million people roughly two hours by car from Hong Kong. "There has been a major change in government in the municipality of Guangzhou, at the mayor, the vice-mayor level. These are important people, and very influential in the transaction," Mr. Porter said at the time.

Scotiabank executives were in China about three months ago to discuss the proposed transaction.

Asked Tuesday about the deal at a banking conference hosted by RBC Dominion Securities, Mr. Waugh said the minority purchase has been stalled for so long that Scotiabank will now have to redo much of the number crunching it performed on the original transaction, since most of those figures are now out of date.

"We're going to have to refresh our due diligence," Mr. Waugh said.

The CEO said he is still very interested in the opportunity to buy into a Chinese bank. Scotiabank is Canada's most international bank in terms of branches, with locations in more than 50 countries, including a branch of its own in Guangzhou.

"It's a very intriguing opportunity," Mr. Waugh said. "So I think it's something that we'll be focusing on this year. But again, we did raise the equity to pay for it. So we'll have to deal with that."

Scotiabank has been operating in China for 29 years in various capacities, and has five of its own branches there, along with other assets involved in commercial lending and wealth management. It owns a minority stake in Xi'an City Commercial Bank, which it purchased for $162-million (Canadian) in 2009.

Scotiabank also owns a one-third stake in a fund management company that is a joint venture with Bank of Beijing. However, that asset doesn't fall under Chinese ownership rules.

Canadian banks have been looking to China as a way to expand their operations internationally. In August, Bank of Montreal closed a deal to purchase a 19.99-per-cent interest in Cofco Trust Co., a state-owned investment firm that manages $5.7-billion in assets. BMO is the only Canadian bank to be locally incorporated in China.

In the meantime, Scotiabank has been on the acquisition trail, having purchased ING Direct Canada last summer for $3.1-billion. The bank added about $30-billion worth of deposits in the deal, picking up a steady clientele, Mr. Waugh said.

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