Bank of Nova Scotia’s recent investment in a Cleveland-based lender can help it better understand an “uncertain” U.S. market and boost profits, chief executive Scott Thomson said Tuesday after the Toronto-based bank announced third quarter results that met analysts’ estimates.
Earlier this month, Scotiabank agreed to buy 14.9 per cent of KeyCorp, which operates across 15 states, for about $3.9 billion as it looks to strengthen its North American footprint. The investment will be subject to regulatory approvals.
“It’s a low-cost, low-risk way of getting in a market that’s very uncertain right now, from a political, regulatory and economy perspective,” Thomson said on a conference call. “(It) allows us to dip our toe in the water, learn about the market and actually get the benefits … from developed market earnings over time.”
Scotiabank announced a new strategy in December that would see it allocate more capital to “stable, high-return markets” in North America. The bank’s immediate focus would be to allocate a greater share of capital to Canada as well as recycling capital from its Latin American businesses to its corporate business in the United States.
Scotia has the largest international footprint among its Canadian peers, but its businesses in Latin America have too many clients using only one banking product, Thomson said in December.
Those international operations, however, showed some strength in the three-month period that ended on July 31. Scotiabank’s international banking segmented reported adjusted earnings of about $709 million for the quarter, up ten per cent from last year due to “strong margin expansion,” the bank said.
For the quarter overall, the bank reported adjusted net income of $2.1 billion, down
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