Scotiabank doubles down on LatAm with BBVA play

Scotiabank hit the headlines when Spain's BBVA revealed that the Canadian lender was interested in acquiring its Chilean business.

BBVA issued a regulatory filing announcing that talks were underway. "The Bank of Nova Scotia has expressed to BBVA, in a non-binding manner, its interest in acquiring up to 100% of the shares held by Banco Bilbao Vizcaya Argentaria, Chile," the filing said.

That Scotiabank is seeking to expand its footprint in the region is no surprise.

For many years the company has been growing outside its home market via an aggressive M&A strategy. And in Latin America, the nations of the Pacific Alliance trading group – Mexico, Peru, Chile and Colombia – are key growth markets for the lender.

Among many M&A developments in the region, Scotiabank was authorized last year to acquire the assets and liabilities of Chile's Banco Paris from local retailer Cencosud.

And in 2015 Scotiabank picked up Citi's eight branches in Peru, serving more than 130,000 retail and commercial banking customers, in Peru.

Scotiabank has also been expanding its wealth management and insurance operations in Latin America.

In December the bank said it was targeting earnings growth of 9-11% in the Pacific Alliance nations, which have low banking penetration and a young and tech-savvy population. Part of the bank's growth plan involves rolling out digital banking branches and its so-called Digital Factory concept, which incubates fintechs to deliver solutions for its customers.

Scotiabank's strategy of growing its international footprint is paying dividends. Its international division reported earnings of Cdn$600mn (US$478mn) for the three months ending July 31, up 16% year-on-year.

"The increase reflects good loan and deposit growth, as well as higher contributions from investments in associated corporations, benefits from cost-reduction initiatives and the positive impact of foreign currency translation," the bank said in a statement.

In the region, the bank also has a presence in Central America and the Caribbean.

BBVA CHILE

BBVA has been present in Chile since 1988, when it became principal shareholder of Banco BHIF, which was rebranded BBV Banco BHIF before finally adopting its present name in 2004.

BBVA Chile has six subsidiaries, which include leasing, factoring, stock brokerage and asset management units.

At the end of June, BBVA Chile was the No. 6 bank in the country in terms of assets held: 14.0tn pesos (US$22.3bn).

Scotiabank, with 12.3tn pesos, was ranked No. 7.

Should a sale take place, based on end-June figures, Scotiabank would be ranked No. 6, behind Itaú CorpBanca, Bci, Banco de Chile, Santander and No. 1 lender by assets BancoEstado.

Scotiabank would also be ranked No. 6 for loans but it would become the No. 4 player by net income.

BBVA IN SOUTH AMERICA

At the end of last year BBVA owned 68% of BBVA Chile, with the local Said family the second biggest shareholder.

Sale talks could conclude within 45 days, local paper La Tercera reported, citing unnamed sources familiar with the matter.

BBVA's willingness to consider a sale is due to the fact that it has struggled to gain market share in Chile, the daily added.

In South America, BBVA also has operations in Argentina, Bolivia, Brazil, Colombia, Paraguay, Peru, Uruguay and Venezuela.

On Thursday, BBVA Chile's market cap was about US$1.14bn.

BBVA Chile posted 87.2bn pesos in earnings for 2016.

BBVA's South American operations posted a net attributable profit of 222mn euros (US$261mn) for Q2, up 2.1% year-on-year. Net interest income was 829mn euros, up 12.8%.

SCOTIABANK CHILE

Scotiabank Chile was born at the end of 2009 when Scotiabank completed the merger of then units Scotiabank Sud Americano and Banco del Desarrollo. In November 2007, Scotiabank closed the purchase of Banco del Desarrollo, a local lender.

Scotiabank has been present in Chile since 1990.