Scotiabank to buy almost 15% of U.S. regional bank KeyCorp for about $2.8 billion
Bank of Nova Scotia agreed to buy a minority stake in KeyCorp, which was among the U.S. regional banks hit hardest in last year’s tumult, for about US$2.8 billion as part of a focus on North America.
Scotiabank will acquire 14.9 per cent of Cleveland-based KeyCorp by buying shares at US$17.17 each, representing an 11 per cent premium to their volume-weighted average price over the past 20 trading days, the Toronto-based lender said in a statement Monday.
The investment “significantly increases the capital deployed to our identified priority markets,” Scotiabank chief executive Scott Thomson said in the statement. His bank operates across Canada, the United States and Mexico, while KeyCorp has about 1,000 U.S. branches offering commercial and retail banking and investment advice and services, and oversees about US$187 billion in assets.
KeyCorp is weighing restructuring its balance sheet in order to shorten the duration of some of its investment portfolio. The move hearkens back to a year ago, when investors started to sour on KeyCorp and many of its rivals after the U.S. Federal Reserve’s moves to rapidly increase interest rates saddled lenders with paper losses as the value of their bond investments took major hits.
KeyCorp’s stock has slumped 16 per cent since the start of 2023, which compares with the 24 per cent advance of the S&P 500 Financials Index.
“While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position,” KeyCorp chief executive Chris Gorman said in a separate statement.
Scotiabank will purchase about 163 million shares of KeyCorp’s common stock
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