Scotiabank banking on South America for growth

The Bank of Nova Scotia expects to draw an increasing chunk of its revenue from businesses south of the Rio Grande in the coming years, propelled by recent acquisitions and an ongoing focus on the so-called Pacific Alliance economies.

Canada’s third-largest lender forecast at an investor day Thursday that revenue stemming from its operations in Chile, Colombia, Mexico and Peru would “grow toward” 30 per cent “in the medium-term.”

That figure would be a substantial increase from the 23-per-cent share the region contributed during the bank’s fiscal 2017, according to slides from its presentation.

Scotiabank reported total revenue for the year ended Oct. 31, 2017 of nearly $27.2 billion.

It also said it was aiming for “medium-term” earnings per share growth of seven per cent or more, instead of the previous range of five to 10 per cent.

Scotiabank’s update followed news the previous evening that, through a subsidiary, the lender had struck a deal for Citibank’s consumer and small and medium enterprise operations in Colombia, pending regulatory approval.

According to a release, Citibank’s Colombian footprint includes 47 branches and 424 “self-service access points.” Scotiabank also said the deal would turn its Colombian subsidiary into “the market-leader in credit cards.” Scotiabank did not put a price-tag on the deal, but said that its common equity tier one capital ratio would be “impacted” by fewer than 10 basis points.

The move comes as Scotiabank’s presence in Colombia is at “an inflection point,” according to the presentation. The slides showed that the lender’s market share of total loans dipped to 5.1 per cent in fiscal 2017 from 5.3 per cent in 2014.

Scotiabank also made a move to further its ties to Chile late last year, saying in December that Banco Bilbao Vizcaya Argentaria S.A. had formally accepted the bank’s offer of about $2.9-billion for a 68.2 per cent ownership stake in BBVA Chile.

Scotiabank said it intended to merge BBVA Chile with its own Chilean business, and that the transaction would double the lender’s market share in the country to around 14 per cent, making it the third-largest private-sector bank in Chile.