Monday, February 04, 2008

Scotiabank Expands in Guatemala & Dominican Republic

  
Dow Jones Newswires, Monica Gutschi, 4 February 2008

Bank of Nova Scotia hopes to add to its consumer finance portfolio through its purchase of bank assets in Guatemala and the Dominican Republic from Grupo Altas Cumbres of Chile.

"One of the things that we have found is that the consumer finance market is a great market in Latin America," said Frank Switzer, a spokesman for Toronto-based Bank of Nova Scotia.

Under the terms of the deal, Scotiabank will purchase Altas Cumbres' Banco de Antigua in Guatemala and select assets of Banco de Ahorro y Credito Altas Cumbres in Dominican Republic. It also has an option to purchase GAC's bank in Peru, Banco del Trabajo.

Scotiabank already operates in all three countries, but the Altas Cumbres purchase will be its first foray into consumer finance in Guatemala.

Scotiabank entered the Guatemala market in 2006 through the purchase of Costa Rica-based Corporacion Interfin, which offered leasing products.

GAC's Banco de Antigua specializes in consumer finance and remittances. It has 47 branches and 98 special service "Rapidito" kiosks in the country. It serves 160,000 clients and had US$82 million in assets at the end of June, according to Scotiabank.

The bank's focus on consumer finance was a point of attraction for Scotiabank, which has been building out its consumer finance assets in Latin over the past year. Last August it purchased a major stake in Chile's Banco de Desarrollo, which had a large consumer finance portfolio.

Switzer said the bank was hoping to leverage its expertise in the consumer finance market in Peru to other countries throughout Latin America.

Consumer finance involves granting small, short-term loans to consumers, often for a specific household purchase such as a refrigerator, motorcycle, or television. The potential market in Latin America is huge, since the majority of the population there remains unbanked. Banking penetration rates in many countries is still only 20-30%.

In the Dominican Republic, Scotiabank will purchase select GAC assets. GAC operates six branches in the country and 35 additional points of sale. Scotiabank has long been active in the Dominican Republic, and offers commercial and personal banking as well as trade finance and wealth management.

Terms weren't disclosed. Closing is expected within days.

Michael Goldberg, an analyst with Desjardins Securities, said in a note that these "in-market transactions are more valuable than planting the flag in a new market" because they expand on established operations. He said the acquisition was likely accretive but not material to earnings.

It wasn't immediately clear whether Goldberg owns Scotiabank shares nor whether his firm has an investment-banking relationship with the company.

Switzer said Scotiabank continued to look for bolt-on acquisition opportunities in countries where it already has a presence, with a focus on retail banking, wealth management, commercial banking and consumer finance.
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Financial Post, Jonathan Ratner, 4 February 2008

Scotiabank has announced that is expanding its operations in Guatemala and the Dominican Republic by buying banks from Chile’s Grupo Altas Cumbres, as well as an option to buy another in Peru. Terms of the deal were not disclosed.

Desjardins Securities analyst Michael Goldberg expects that the acquisition is accretive, but noted that it is not material to earnings in itself.

“What is notable is that these are all markets in which Scotia has established operations, so these in-market transactions are more valuable than planting the flag in a new market,” he told clients in a note, adding that these reasons should lead to a positive reaction on the news.

Mr. Goldberg has a “top pick” rating and $60 price target for Bank of Nova Scotia.
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The Globe and Mail, John Partridge, 4 February 2008

Bank of Nova Scotia is again bulking up its Latin American presence with acquisitions in Guatemala and the Dominican Republic, where it already operates.

The bank said Monday that it is buying Banco de Antigua in Guatemala and “select assets” of Banco de Ahorro y Credito Altas Cumbres in the D.R. from Chile's Grupo Altas Cumbres (GAC), with which it confirmed it was in negotiations last fall.

Under the deal, it said in a news release, it also has an option to buy GAC's Banco del Trabajo (BT) in Peru, the ninth largest commercial bank in that country, where Scotiabank Peru is already the third-largest lender.

A Scotiabank spokesman said the bank is still in negotiations with GAC about BT.

Scotiabank did not provide financial details of the transactions, which have received regulatory approval and are expected to close within days.

However, when it confirmed late last November that it was in talks with GAC — primarily, it appeared at the time, about BT — there were news reports in Chile that it was looking at a price of about $200-million (U.S.) for all three of the GAC operations.

The Peruvian bank likely would almost certainly represent the lion's share of this. It accounts for about $385-million or 77 per cent of the three banks' combined total assets of about $500-million.

Scotiabank first entered Guatemala in 2006 when it bought Costa Rican leasing company Corporacion Interfin, which sold its products in Guatemala. The acquisition of 10-year-old Banco de Antigua brings with it 47 branches and 98 special service “Rapidito” kiosks, about 160,000 clients and total assets of $82-million as of the end of last June.

As for Banco de Ahorro y Credito, it has been in the D.R. since 2002 and currently has six branches, 35 “additional points of sale,” 39,000 customers and $29-million in total assets as of last June, Scotiabank said. The Canadian bank said it is buying a “selected portion of those assets.”

It also said it would be re-branding these locations and services as “Soluciones-Scotiabank,” but the spokesman said later that this part of the announcement was premature and no decision had yet been taken.

Scotiabank currently operates the fifth largest private bank by assets on the Caribbean island.

Analyst Michael Goldberg at Desjardins Securities told clients in a note Monday that he expects the acquisitions are “accretive, although not material to earnings.”

What is “notable” about the deals, he said, is that they are in countries where the Canadian bank already operates, and “in-market transactions are more valuable than planting the flag in a new market. For these reasons, the news is likely to be seen as positive.”

Scotiabank, which bills itself as Canada's most international lender, has operations in more than 40 countries, with particular emphasis on Mexico, the Caribbean and Central and South America.

International operations accounted for 31 per cent of the $3.9-billion (Canadian) in profit the bank reported in fiscal 2007, up from 27 per cent of $2.6-billion in 2004.
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Bloomberg, Sean B Pasternak, 4 February 2008

Bank of Nova Scotia, Canada's third- biggest bank, agreed to buy lenders in Guatemala and the Dominican Republic from Chile's Grupo Altas Cumbres (GAC), adding 53 branches to its Latin American business.

The purchase includes Banco de Antigua in Guatemala and parts of Banco de Ahorro y Credito Altas Cumbres in the Dominican Republic, Toronto-based Scotiabank said today in a statement. The price wasn't disclosed.

Scotiabank gets about a third of its profit from operations outside of Canada, and has agreed to spend about C$2.1 billion ($2.1 billion) in foreign acquisitions over the past two years on banks in Peru, Chile and Costa Rica.

``What is notable is that these are all markets in which Scotia has established operations, so these in-market transactions are more valuable than planting the flag in a new market,'' Desjardins Securities analyst Michael Goldberg wrote today in a note to investors.

Bank of Nova Scotia also has an option to buy Altas Cumbres's Banco del Trabajo in Peru. Scotiabank said in November it had entered talks to buy the Peruvian lender, which has about $386 million in assets and 83 branches.

Banco de Antigua in Guatemala was created in 1997 and has 47 branches and 98 kiosks, with $82 million in assets as of June. Banco de Ahorro y Credito in the Dominican Republic has six branches and $29 million in assets.

Scotiabank fell 54 cents to C$48.29 in 4:10 p.m. trading on the Toronto Stock Exchange today, and has fallen 4 percent this year.
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