Scotiabank to sell in nine Caribbean countries, other moves are expected

TORONTO – The Bank of Nova Scotia plans to sell its banking operations in nine Caribbean countries and its insurance operations in two other regional markets – and its CEO expects more international divestitures underway.

Scotiabank announced Tuesday that it has signed an agreement to sell its banking operations in nine "non-core" markets, including Grenada, Saint Martin and Saint Lucia, to Republic Financial Holdings Ltd. for an undisclosed amount.

The bank also announced that its subsidiaries in Jamaica and Trinidad and Tobago will sell their insurance business to Sagicor Financial Corp. Ltd., a partner of this company, to provide products and services in both countries for an undisclosed amount.

These outflows are part of Scotiabank's broader strategy to "better target our objectives, increase the importance of geographies and core businesses, improve the quality of results and reduce risks to the bank," said his team. General Manager, Brian Porter.

The bank intends to remain in its main Caribbean markets, as well as the countries of Peru, Chile, Colombia and Mexico, members of the Pacific Alliance, but others Divestments are on the horizon, he told badysts at a conference call.

"We have two more and we will hear more in 2019, but they are not about Latin America or the Pacific Alliance," Porter said.

The divestments were announced as the Toronto-based lender announced its earnings for the quarter ended Oct. 31, ending its 2018 fiscal year with an increase of nearly 10% in its fourth-quarter earnings year-over-year. last, but slightly down. below market expectations.

Scotiabank posted net earnings of $ 2.27 billion or $ 1.71 per diluted share for the quarter ended October 31, compared to $ 2.07 billion or $ 1.64 per share. action after dilution for the same period last year.

On an adjusted basis, the bank reported earnings per share of $ 1.77 against $ 1.65 a year ago. Analysts on average forecasted an adjusted diluted earnings per share of $ 1.79 in the fourth quarter of the bank, according to Thomson Reuters Eikon.

Scotiabank is the first of its peers to release its quarterly and full year 2018 results. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will report later this week.

For its full 2018 fiscal year, Scotiabank reported earnings of $ 8.72 billion, or $ 6.82 per diluted share, compared to earnings of $ 8.24 billion or $ 6.49 per diluted share in 2017.

The bank's recent acquisitions – including a majority stake in a Chilean bank – weighed more heavily than expected in net income, said John Aiken, an badyst at Barclays in Toronto.

"In addition, Scotia could not escape weakness in the financial markets during the quarter, despite lower relative exposure," he told clients. "Despite this error, we believe there are good reasons for optimism, including likely improvements in operational leverage through the integration of acquisitions and improved confidence with the divestiture of certain businesses in the US. Caribbean considered non-essential.

The Toronto-based bank's latest results were fueled by its international banking division, which saw its quarterly net profit rise more than 21% to $ 804 million. For the full year, the bank's international operations recorded adjusted earnings growth of 18% in constant currencies, Porter said.

This was motivated by Scotiabank operations in the Pacific Alliance trading bloc, which recorded double-digit growth in loans and deposits, partly reflecting the lender's recent acquisitions in the region, said Porter.

The bank has embarked on a buying spree at home and abroad over the past year. In particular, it finalized the purchase of a majority stake in Chilean Bank BBVA Chile in July. In addition, the lender announced earlier this year agreements to buy Citibank's consumer operations in Colombia for an undisclosed amount and to buy Banco Dominicano del Progreso, which operates in the Dominican Republic in August.

Next year will be dedicated to integrating recent acquisitions of Scotiabank in Chile, Peru, Colombia and the Dominican Republic, Porter said.

Scotiabank has the strongest international footprint among its peers and is targeting Latin America for its strong growth prospects due to the slowdown in activity in Canada.

The refocusing of its strategy for the Caribbean stemmed from "the growing regulatory complexity and the need to continuously invest in technology to meet our regulatory requirements," said Ignacio Deschamps, head of international banking to Scotiabank in a news release.

The bank's decisions were guided, in part, by size. Jamaica, for example, has a population of about 2.8 million, while the Dominican Republic – where Scotiabank expects to be the third largest bank in the country – accounts for about 11 million, said Porter. Other markets in which Scotiabank's operations will be sold to Republic Financial Holdings include Anguilla, Antigua, Dominica, Guyana, St. Kitts and Nevis and St. Vincent and the Grenadines.

"When you look at what we have in the Caribbean, it's 90% of the population," Porter said. "This is at the heart of our strategy to strengthen and develop the markets, geographic areas and activities we consider important, where we can turn the dial for our customers and shareholders."