Scotiabank to sell operations in nine Caribbean countries

Bank intends to remain in core Caribbean markets, but more global divestments coming

The Bank of Nova Scotia plans to sell its banking operations in nine Caribbean countries and its insurance operations in two other regional markets — and its chief executive expects more international divestments in the pipeline.

Scotiabank said Tuesday it has signed an agreement to sell its banking operations in nine “non-core” markets — including Grenada, St. Maarten and St. Lucia — to Republic Financial Holdings Ltd. for an undisclosed amount.

The bank also said its subsidiaries in Jamaica and Trinidad and Tobago will sell their insur- ance operations to and partner with Sagicor Financial Corp. Ltd. to provide products and services in the two countries, for an undisclosed amount.

These exits are part of Scotiabank’s broader strategy to “sharpen our focus, increase scale in core geographies and businesses, improve earnings quality and reduce risk to the bank,” its chief executive Brian Porter said.

The bank intends to remain in its core Caribbean markets as well as the Pacific Alliance countries of Peru, Chile, Colombia and Mexico, but there are more divestitures on the horizon, he told analysts on a conference call.

“We’ve got a couple more to go and you’ll hear more from us in 2019, but they don’t pertain to Latin America or the Pacific Alliance,” Porter said.

The divestitures were announced as the Toronto-based lender reported its earnings for the three months ended Oct. 31, capping off its 2018 financial year with a nearly 10 per cent increase in its fourth-quarter profit compared with a year ago, but falling just short of market expectations.

Scotiabank earned $2.27 billion, or $1.71 per diluted share, for the three months ended Oct. 31, up from $2.07 billion, or $1.64 per diluted share, in net income during the same time last year. On an adjusted basis, the bank reported earnings per share of $1.77 compared with $1.65 a year ago. Analysts on average had expected adjusted diluted earnings per share of $1.79 during the bank’s fourth quarter, according to Thomson Reuters Eikon.

Scotiabank is the first of its peers to report its quarterly and full 2018 financial year earnings. Royal Bank of Canada, Toronto-Dominion Bank and the Canadian Imperial Bank of Commerce report later this week. For its full 2018 financial year, Scotiabank says it earned $8.72 billion, or $6.82 per diluted share, compared with a profit of $8.24 billion, or $6.49 per diluted share in 2017.

The bank’s recent acquisitions — including a majority stake in a Chilean bank — weighed heavier on the bottom line than anticipated, said John Aiken, an analyst with Barclays.

“Further, Scotia could not escape the capital markets weakness in the quarter, despite a lower relative exposure,” he said in note to clients. “Despite the miss, we believe that there are significant reasons for optimism going forward, including likely operating leverage improvements as the acquisitions are integrated and an improving sentiment with the disposal of certain operations in the Caribbean deemed as non-core.”