The Bank of Nova Scotia building is shown in the financial district in Toronto this past summer. The Bank of Nova Scotia is doubling down on Chile with a $2.9-billion offer to buy a majority stake in a Chilean bank, as the Canadian lender’s latest quarterly profits rose despite a drop in trading revenues, natural disasters and a flying loonie. THE CANADIAN PRESS/Nathan Denette

The Bank of Nova Scotia building is shown in the financial district in Toronto this past summer. The Bank of Nova Scotia is doubling down on Chile with a $2.9-billion offer to buy a majority stake in a Chilean bank, as the Canadian lender’s latest quarterly profits rose despite a drop in trading revenues, natural disasters and a flying loonie. THE CANADIAN PRESS/Nathan Denette

Scotiabank Q4 profit up, submits $2.9-billion offer for Chilean bank

TORONTO — The Bank of Nova Scotia is doubling down on Chile with a $2.9-billion offer to buy a majority stake in a Chilean bank, as the Canadian lender’s latest quarterly profits rose despite a drop in trading revenues, natural disasters and a flying loonie.

Scotiabank (TSX:BNS) said Tuesday it has submitted a binding offer to acquire Banco Bilbao Vizcaya Argentaria, S.A.’s (BBVA) interests in its Chilean banking operation, BBVA Chile, and certain subsidiaries.

If the deal goes through, it would double Scotiabank’s market share in Chile to roughly 14 per cent and make the Canadian lender the third-largest non-state owned bank in the country, it added.

The bank said the transaction is in line with its strategy to increase its scale within the Chilean banking sector and the high-growth Pacific Alliance countries, which also includes Mexico, Peru and Colombia.

“This is a high-quality asset bank,” Scotiabank’s president and chief executive Brian Porter told analysts on a conference call.

“It’s very well run,” he said. “We think it’s a good fit of assets, and will be a good fit of people and technology.”

BBVA owns about 68 per cent of BBVA Chile — which has $29 billion in assets and has 4,000 employees at 127 branches — and its minority partner, the Said family, owns about 32 per cent. Scotiabank added that BBVA is willing to accept the deal if the Said family does not exercise its right of first refusal under a shareholders agreement.

The $2.9-billion offer came hours before Scotiabank posted fourth-quarter earnings of $2.07 billion in net income or $1.64 diluted earnings per share for the three months ended Oct. 31, up from $2.01 billion or $1.57 during the same time last year.

Canada’s third-biggest lender was the first of the country’s biggest banks to report its fourth-quarter earnings. Scotiabank posted net interest income, or the profit generated from loans, of $3.83 billion, up five per cent from a year earlier. Adjusting for the negative impact of foreign currency translation, fourth-quarter net interest income grew seven per cent.

Scotiabank’s latest quarter was helped by its Canadian banking division, with net income attributable to shareholders up by 12 per cent to $1.06 billion. Its international banking division saw an 11 per cent rise in net income to $605 million during the period, even amidst a string of natural disasters including hurricanes in the Caribbean and an earthquake in Mexico.

Still, these profit bumps were offset by a 15 per cent drop in fourth-quarter net income in its global banking and markets division to $391 million.

Scotiabank’s provision for credit losses, or money set aside for bad loans, was $536 million, down from $550 million in the same period a year earlier.

“Overall, we had been anticipating a weak close to the capital markets year for the group and, at least so far, that is what we have gotten,” said CIBC analyst Robert Sedran in a note to clients. “Soft revenues held back the results this quarter.”

Shares of Scotiabank were down as much as 2.45 per cent on Tuesday to $81.43 in early morning trading in Toronto.

Even still, the bank reported a nearly 11 per cent increase in net income for the fiscal year to $8.24 billion up from $7.37 billion a year earlier. Scotiabank’s diluted earnings per share for the 2017 fiscal year rose eight per cent to $6.49, compared to $6 in 2016.

Its key measure of financial health, the common equity tier 1 ratio (CET1), increased to 11.5 per cent, up from 11.3 per cent in its third quarter and 11.0 per cent in the fourth quarter last year.

That strong ratio gives Scotiabank the “optionality” to deploy its capital in various ways, including acquisitions, Porter said.

If the transaction to acquire all the shares of BBVA Chile is completed, Scotiabank’s CET1 would be reduced by approximately 135 basis points, it said. Scotiabank’s chief financial officer Sean McGuckin told analysts that he expects the CET1 ratio to stay above 10.5.

If successful, Scotiabank expects to settle the transaction during its first quarter, which ends on Jan. 31, and close the deal in the summer of 2018, bank executives said.

Scotiabank shares fell on news of the proprosed deal to $1.75, or 2.10 per cent, to $81.73 at the closing of markets.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A woman checks out a jobs advertisement sign during the COVID-19 pandemic in Toronto in April. Alberta’s unemployment rate this past month was 11.1 per cent, according to Statistics Canada. This is nearly half a point lower than October when the unemployment rate was 10.7 per cent. THE CANADIAN PRESS/Nathan Denette
Job recovery in Alberta remains uneven: ATB Financial

Compared to pre-pandemic levels, employment in Alberta’s hospitality sector remains down the… Continue reading

Red Deer Rebels winger Arshdeep Bains had two assists in the first period Monday against the Lethbridge Hurricanes in WHL action in Lethbridge. (Photo by ROB WALLATOR/Red Deer Rebels)
Hurricanes hand Red Deer Rebels ninth straight loss

Hurricanes 5 Rebels 2 (Saturday) Hurricanes 8 Rebels 5 (Monday) The goals… Continue reading

Red Deer City Hall. (File photo)
Red Deerians will see a slight tax increase, but the municipal portion is at zero per cent

The provincial educational requisition went up by about half a per cent

The length of grass on people’s lawns could be part of the new Community Standards bylaw being considered by Red Deer city council. (Black Press file photo).
Loitering, noise complaints, swearing covered in proposed bylaw

A few old rules could be dropped and new rules added

Letters
Letter: Leaders like MLA Jason Stephan should work towards greater good

Red Deer South MLA Jason Stephan talks about the devastating social and… Continue reading

Opinion
Opinion: Women, hit hardest by pandemic, key to economic recovery

Events of the past year have laid bare the many disparities and… Continue reading

Children at the Port Angeles Boys & Girls Club practice social distancing throughout the day to minimize the spreading of germs and potentially the coronavirus. Photo courtesy of the Boys & Girls Clubs of the Olympic Peninsula
Opinion: Teach young people these five principles

At all ages, young people may be the subject of mean behaviours… Continue reading

LtE bug
Letter: MLAs need to think about all Albertans

I was surprised to find more than a dozen UCP MLAs were… Continue reading

Sweden skip Niklas Edin makes a shot against Scotland in the Men's World Curling Championship gold medal final in Calgary, Alta., Sunday, April 11, 2021. Curling's Humpty's Champions Cup in Calgary has been pushed back a day due to the delayed finish of the men's world championship. THE CANADIAN PRESS/Jeff McIntosh
Start of Humpty’s Champions Cup pushed back a day in Calgary

Start of Humpty’s Champions Cup pushed back a day in Calgary

Men’s world curling championship in Calgary concludes amid COVID scare

Men’s world curling championship in Calgary concludes amid COVID scare

New York Yankees starting pitcher Gerrit Cole throws against the Toronto Blue Jays during the first inning of a baseball game Monday, April 12, 2021, in Dunedin, Fla. (AP Photo/Mike Carlson)
Higashioka and Cole help Yankees beat Blue Jays 3-1

Higashioka and Cole help Yankees beat Blue Jays 3-1

Alberta doctors say trust must be rebuilt after proposed new labour deal rejected

Alberta doctors say trust must be rebuilt after proposed new labour deal rejected

Most Read