Scotiabank CEO shifts focus to North America, vows 'significant' change in mindset

financialpost.com:

The Bank of Nova Scotia will reallocate capital from developing markets to developed ones, prioritizing Canada, the United States and Mexico in that order, as it seeks to bolster profitability and shareholder returns, chief executive Scott Thomson said Dec. 13 as he unveiled a much-anticipated strategic update.

Thomson, who was plucked from the boardroom rather than the bank’s executive ranks in late 2022, promised investors “a significant change in mindset” at Scotia, which has underperformed peers over the past 10 years.

That will include a renewed emphasis on its home market and North America more broadly, as it backs away from an international strategy that has not lived up to expectations.

“Although work has been done to reposition the bank, it is important to acknowledge that we have lagged our peers in financial metrics that are key drivers of shareholder (value) creation,” Thomson said in his first presentation as CEO at Scotia’s annual investor day. “The returns on our capital deployed have not measured up in the last 10 years and, as a result, Scotiabank’s total shareholder return has underperformed peers.”

While Scotia is a top five bank in Mexico, Thomson said the $7 billion it has spent on acquisitions to build scale in markets including Chile, Peru and Colombia “have not yet met … return expectations.”

As a result, efforts are underway to improve international results and make them less volatile, with the goal of turning around those businesses through efficiency initiatives rather than allocating further capital.

“While this is a long-term strategy, and the best outcomes for these businesses would be to improve profitability and cost efficiency, if we are not able to achieve appropriate risk-adjusted