Scotiabank unveils strategic revamp, sees double-digit growth in Canada

TORONTO, Dec 13 (Reuters) – Canada’s Bank of Nova Scotia (BNS.TO) on Wednesday forecast double-digit growth in its domestic market and said it intends to bring its productivity ratio to about 50% over the medium-term.

The bank said it was focused on improving returns from its international banking as it prioritises capital consumption, while favouring high-return businesses in Mexico and the Caribbean.

The lender at its investor day conference acknowledged that its capital deployment has lagged peers and said over the medium-term it is targeting more than two million primary clients.

CEO Scott Thomson said the company’s loan-to-deposit ratio is the highest amongst its peers, “indicating a greater reliance on rate sensitive wholesale funding and resulting in more volatile margins and earnings.”

The strategy of Scotiabank, Canada’s third largest by assets, includes earning more on primary clients across its portfolio, growing and scaling priority businesses and digitising processes.

Investors have keenly been waiting for Thomson to unveil his plan to boost growth at Scotiabank’s businesses at home and abroad after the lender reported dismal fiscal 2023 results.

He addressed the company’s shareholders for the first time since taking over as CEO in February, a move that surprised many as it was rare for a non-banking executive to take the top job in the Canadian banking space.

Thomson, who previously headed industrial equipment dealer Finning International, is tasked with reinvigorating Scotiabank’s Latin American operations, where the lender was expected to take advantage of the largely under-banked landscape.

But the region, marred by economic challenges and political instability, has shown some signs of weakness. For fiscal 2023, Scotiabank’s adjusted earnings from international banking fell about 3%, compared with a 23% growth in the prior year.

The lender had previously forecast earnings per share growth of over 7% for the mid-term.

Scotiabank’s biggest business comes from home, where the personal and commercial banking unit makes about 40% of its income.

The lender, like its peers, looked for growth in overseas markets tapping under-banked regions. Since 2014, the bank has spent about C$11 billion ($8.11 billion) in mergers and acquisitions spanning across regions in South America and the Caribbean islands.

At home, it has faced many challenges including tough competition in Canada’s saturated and highly regulated banking industry, a series of central bank rate hikes that has dampened loan growth and rising expenses.

Thomson has been vocal about his intention to improve deposits over relying on wholesale funding as costs rise at a time Scotiabank has been trailing peers in deposit growth in Canada since the start of the pandemic.

Shares of the lender were marginally higher in morning trading.

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