Scotiabank sells Puerto Rico, U.S. Virgin Islands operations
The Bank of Nova Scotia said Wednesday that it is selling its operations in Puerto Rico and the U.S. Virgin Islands and preparing to bring its campaign of unloading unwanted international assets to a close.
Scotiabank announced it had reached an agreement to sell the businesses on the islands to 55-year-old Oriental Bank, a subsidiary of San Juan, Puerto Rico-headquartered financial-services company OFG Bancorp.
The deal is still subject to regulatory approvals and certain closing conditions, but Scotiabank projects it will ultimately take an after-tax net loss of between $300 million to $360 million on the transaction, most of which is tied to the carrying value of goodwill from its Puerto Rico operations.
Scotiabank, though, says the sale will improve its credit quality by reducing its gross and net impaired loans and boosting a measure of capital strength, its CET1 ratio, by approximately five basis points.
Scotia has exited or announced plans to exit 19 countries over the past four years, as it has aimed to “redeploy” around $4 billion in capital to grow its size and market share in “key markets,” the release noted.
That strategy has seen the bank sell insurance and lending businesses in El Salvador, but also beef its presence in preferred countries such as Chile and Peru.
As it has tried to streamline its international operations, Scotiabank has also bulked up its wealth-management ambitions, acquiring Canadian firms Jarislowsky Fraser and MD Financial Management.
The bank has a long history in the U.S. Virgin Islands, where it has operated since 1963, and an even longer one in Puerto Rico, where it has done business since 1910. Scotiabank even acquired failed lender R-G Premier Bank of Puerto Rico in 2010, but the island has fallen on hard times in the wake of a deadly hurricane in 2017.
With the latest deal, Scotiabank said it is essentially finished with rearranging its operations abroad.
“With this transaction — and others which have previously been publicly announced — the repositioning of our international footprint will be substantially complete,” the release said. “Our sharper geographic focus allows us to drive sustainable earnings growth in these key markets, improve earnings quality and the customer experience while reducing risk.”
The global banking and markets division of Scotiabank teamed up with Credit Suisse as co-financial advisers on the deal. Sullivan & Cromwell LLP was Scotiabank’s legal adviser for the sale.
“We are confident that Oriental Bank, with the support of a talented team, will be well positioned to continue to grow the businesses and provide continuity to customers and employees in Puerto Rico and the USVI,” said Ignacio (Nacho) Deschamps, the head of international banking and digital transformation at Scotiabank.