Bank of Nova Scotia is aggressively pursuing a second phase of international expansion, broadening the suite of products it offers in foreign countries to more closely mirror its operations at home.
Long regarded as Canada's most international lender, with sizable personal and commercial banking operations in Latin America and Asia, Scotiabank is now doubling down in countries such as Mexico, Chile and Peru, expanding its capital markets and wealth management services.
The bank has the benefit of an existing presence. While retail and commercial banking have been the focus in these countries, already it has research analysts in Mexico covering more than 50 Latin American companies, and its emerging markets desk in New York already offers products such as plain vanilla swaps and foreign exchange services abroad. The bank also manages some money in Latin America.
Now Scotiabank wants to build out these offerings, all with the intent of diversifying its business model. "It's a continuation of our strategy here in Canada," chief executive officer Brian Porter said in an interview.
While Scotiabank can count on some organic growth because of its existing presence in these countries, management is also striking small acquisitions, such as buying a 50 per cent stake in AFP Horizonte, BBVA's pension fund management business, last spring to quickly bolster its bottom line. Currently, Scotiabank derives 47 per cent of its profit from outside of Canada, and much of that comes from personal and commercial banking. It could be wealth management and capital markets that tip it over the 50-per-cent mark.
Although the global economic recovery is boosting the value of potential acquisitions, Mr. Porter said striking any additional deals isn't out of the question. Prices are more expensive, but "it depends on where you are," he said. "I wouldn't call them robust actions."
Scotiabank's efforts have a familiar ring to them, echoing international expansions at its rivals. Bank of Montreal is making a major capital markets push in the U.S., attempting to service mid-market companies, while Royal Bank of Canada continues to build out its strong capital markets arms in New York and London.
To investors, a capital markets push may seem an odd choice for Scotiabank, which is not a traditional heavyweight in this business in Canada. Instead, the bank is better known as a corporate lender. Yet outside of Canada the bank has a sizable U.S. energy business, Scotia Waterous, and executives believe it can use their geographic mix to their advantage. While the mining industry is struggling, longer-term it could be a focus for the bank because of its existing presence in Colombia and Peru, growing hot spots within the sector.
Such plans correspond with Mr. Porter's skill set. Before he joined Scotiabank's executive team in 2005, he rose through the ranks of Scotia Capital, the wholesale banking arm, giving him ample experience in capital markets.
Scotiabank's foreign wealth management push aligns with the bank's broad strategic goal. This business has been a big focus for the bank over all, jumping from 3 per cent of its bottom line a year ago to 20 per cent today, and this fall executives hosted an investor day focused solely on wealth management to raise awareness of the business.
Scotiabank is particularly keen on expanding its pension operations in Latin America, especially in Peru and Colombia. In these two countries, plus the Dominican Republic, Scotiabank's pension business accounts for 18 per cent of assets under management.
The pension world is so lucrative in Latin America because many countries in the region do not have government-run programs like the Canada Pension Plan. Instead, the government mandates that a portion of each employee's paycheque goes into a defined contribution account, which Scotiabank can then manage.