Scotiabank confirms Banco de Comercio merger talks

Friday, October 8, 2004

El Salvador's fourth largest bank Banco de Comercio and the local subsidiary of Canada's Scotiabank (NYSE: BNS) are currently engaged in merger negotiations, the Canadian bank said in a statement Thursday afternoon.

"Any transaction will treat all shareholders of Banco de Comercio the same. However, this process is in too much of a preliminary stage to make more comments about the terms or the progress of our talks," Scotiabank El Salvador CEO Luis Ivandic stated.

Local media reported that Scotiabank will initially acquire 59% of Banco de Comercio, with the intention of raising its stake to 100%.

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A merger would create a bank with nearly US$1.6bn in assets, a loan portfolio of just over US$1bn, and deposits of US$1.1bn, according to statistics published by banking regulator SSF for the first half.

The new bank would rank fourth in El Salvador's already concentrated banking industry, with 15.2% of assets. Scotiabank El Salvador currently occupies a distant fifth place with a 3.9% market share.

Scotiabank first entered the country through a strategic alliance with local bank Ahorromet in 1997, which was gradually extended to a 99.6% shareholding.

In recent weeks the Salvadorian press has also named as Banco de Comercio suitors a Central American bank and a European financial institution.

"Whoever ends up as the buyer will gain a well-diversified loan portfolio specialized in consumer and commercial credit. Banco de Comercio is a very solid bank with good asset quality, investments, etc," Carlos Pastor, director of ratings agency Equilibrium Clasificadora de Riesgo, told BNamericas in a telephone interview from San Salvador.

Scotiabank CEO Richard Waugh said during the group's second quarter conference call on August 31 that the bank was looking to grow in international markets where it currently has a presence through acquisitions.

"In our international operations we continue to look for opportunities. We are probably not going to look for a new country or a new market, but within those countries we are in, 45 of them, we think we have built platforms we think are ready to take many of these countries to a new level," Waugh said at the time.

Scotiabank's primary international focus today is on Mexico and parts of the Caribbean and Central America, while India, China and Malaysia also offer good growth prospects over the long term. Scotiabank has large retail banking operations in the Caribbean, Chile, El Salvador and Mexico.