Bank of Nova Scotia chief executive officer Brian Porter rejected the suggestion that the bank's international business was sputtering, saying flat revenue numbers are being skewed by the Caribbean's failure to rebound from the financial crisis.
Quarterly profit from Scotiabank's operations outside of Canada has been stuck at around $410-million for the past year. Mr. Porter said in an interview that the stagnation is the result of the stunningly weak economic recoveries in places such as Jamaica, Belize and Puerto Rico.
"Those are extremely difficult operating environments," Mr. Porter told the Globe and Mail in Washington Friday. "So people look at it and say, 'Gee, international is struggling.' It's not."
Overseas profitability is a sensitive topic for Scotiabank. About a quarter of Scotiabank's profits came from personal and commercial banking at its non-Canadian operations in the most recent quarter, while about a third of the institution's profit comes from lending to Canadian households and businesses. But there is more at stake than the bottom line. Scotiabank proudly bills itself as Canada's "most international bank" by virtue of its presence in more than 55 countries. Therefore, the institution's reputation is tied closely to its success away from home.
Mr. Porter, who is a few weeks shy of his anniversary as chief executive, has used his first year to concentrate Scotiabank's firepower on international markets where he sees the greatest opportunity for success. Importantly, he has put an extra emphasis on Mexico, Colombia, Peru and Chile, fast-growing Latin American economies that have free-trade agreements with Canada and co-operate with each other in a trading arrangement called the Pacific Alliance.
For some investors, the elevation of a handful of Latin American countries above all others raised questions about Scotiabank's commitment to other emerging markets. Mr. Porter insists there is no plan to retreat.
He was in Australia on business ahead of his arrival in Washington for weekend meetings of the Institute of International Finance, an international association of financial institutions. Mr. Porter expressed contentment with Scotiabank's business in Thailand. He even said he is keeping an eye on India, a traditionally difficult market for international banks, but one where the country's new prime minister and influential central bank governor have indicated they will overhaul regulation to encourage international investment.
"It's not exactly bank friendly," Mr. Porter said of India. "We like to see a loosening for [international] banks to be on a more level playing field."
Scotiabank's profits in Asia and Latin America are growing at double-digit rates, Mr. Porter said. Losses in the Caribbean essentially match those gains. Scotiabank bought a failed bank in Puerto Rico on the assumption the U.S. territory's economy would strengthen in lockstep with America's recovery from the financial crisis.
The U.S. recovery was much slower than Scotiabank expected and Puerto Rico suffered. So has the rest of the region. The International Monetary Fund divides the Caribbean nations into commodity producers – Belize, Guyana, Suriname, Trinidad and Tobago – and tourism magnates, a group that includes Jamaica and Barbados. Gross domestic product of the four commodity producers increased by 2.9 per cent in 2013; GDP in the tourism-dependent group increased on 0.9 per cent last year and barely at all in 2012.
The IMF predicts economic conditions will improve only marginally in the region this year and next. The economies of Britain and the U.S. are doing better, suggesting more of their citizens may flock to the tourist countries. Yet many of the region's governments have run up heavy debt burdens, and there are worries about the strength of the financial system.
Despite all this, Mr. Porter said Scotiabank was sticking with the region for the long haul. "We've become the pre-eminent bank in the Caribbean," he said. "We've seen a lot of people leave or shrink their operations. That's not what we're doing."