Scotiabank ‘to focus on key markets’ as it sells El Salvador businesses
TORONTO Bank of Nova Scotia said Friday that it had struck a deal to sell its banking and insurance operations in El Salvador, a move the Canadian lender says fits into its strategy of targeting bigger markets.
The bank said it is selling those businesses, including the 22-yearold Scotiabank El Salvador, to Imperia Intercontinental Inc., which has ownership stakes in both a bank and an insurer in the Central American country.
The transaction is subject to regulatory approval and the meeting of certain closing conditions, but it continues a recent trend that has seen Scotiabank narrow down the number of markets abroad in which it does business.
In November, for example, Scotiabank announced that it was selling businesses in nine Caribbean countries.
The following month, it announced that it was disposing of its pension administration and related insurance businesses in the Dominican Republic.
Scotiabank said Friday in a release that the decision to sell its operations in El Salvador “is driven by the bank’s strategy to focus on key markets which can generate greater scale for Scotiabank.”
The lender added that the agreement it reached in El Salvador is expected to create an after-tax loss of around $170 million, which “primarily” is made up of the carrying value of goodwill related to the business.
Scotiabank said it would record the loss in the second quarter of its fiscal 2019.
When the deal closes, however, Scotiabank said its common equity tier 1 ratio, a measure of financial strength, would be boosted by approximately six basis points.
“This transaction with Imperia is in the best interest of our customers, employees and shareholders,” said Ignacio Deschamps, head of international banking and digital transformation at Scotiabank, in a release. “We are confident that Imperia, with the support of a talented team, will be well positioned to continue to grow the businesses and provide a high level of service to customers in El Salvador.”
Combining all of the recent sales of its international businesses, Scotiabank said it is expected to net an after-tax gain of $250 million. The lender is anticipating its CET1 ratio will jump by around 25 basis points as well.
“Until regulatory approvals are obtained and the transaction closes, all operations, branches and products will continue to operate as usual,” the bank said Friday. “Scotiabank and Imperia will work together to ensure a smooth transition for both employees and customers.”
In addition to slimming down the list of its international markets, Scotiabank has also been digesting some big acquisitions it made last year, such as the doctor-focused wealth firm MD Financial Management and a majority stake in a bank in Chile.