Scotiabank Misses on Earnings Amidst Expansion in Latin America

Bank of Nova Scotia has continued its push deep into Latin America with a bid of $2.9 billion for control of a rival in Chile, looking to ignite growth as fourth quarter profit for the bank edged higher although it fell short of expectations.

The first of the big banks in Canada to report quarterly earnings, Scotiabank profit for the quarter rose by 3% to over $2 billion, in comparison with the same quarter one year earlier, thanks to strength in growth in Canadian banking as well as growing returns internationally.

However, margins became tighter in key markets outside Canada, and executives with the third largest Canadian bank are pushing for more expansion in Latin America, that will help with an important pipeline for growth in the future.

With its formal offer to acquire Banco Bilbao Vizcaya Argentaria’s 68% stake in BBVA Chile, the Canadian bank is hoping to almost double its share of the banking market in Chile to over 14%. Through combining the existing operations in Chile with BBVA Chile’s assets of $29 billion, 4,000 workers and 127 branches, the Canadian bank would create the third largest non-state owned bank in Chile.

Several of the largest banks in Canada have their international operations located in highly competitive markets of the U.S., but Scotiabank has focused on four Latin American countries including Mexico, Colombia, Chile and Peru, and even though of late the region has been hit hard with natural disasters from earthquakes to hurricanes, the profit at Scotiabank for its fourth quarter from that region surged 11%, comfortably beating the rest of the growth rate of the bank in the mature market of Canada.

BBVA will accept the offer by Scotiabank if the Said family in Chile, which is a minority partner with over 31% of the bank, chooses to exercise first right of refusal. The current deal will close during the 2018 summer, if the bid by Scotiabank is successful.

CEO and president of the bank Brian Porter said the bank had done extensive work on BBVA Chile and knows the asset well.

During its fiscal fourth quarter that ended October 31, Scotiabank posted earnings of $2.07 billion equal to $1.64 per share, in comparison to $2.01 billion equal to $1.57 per share for the same period one year earlier.

Adjusting for specific items, Scotiabank’s earnings were $1.65 per share, which was one cent less than expectations by analysts.

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