Scotiabank buys Colombia’s Banco Colpatria

BY JAMESON BERKOW, FINANCIAL POST OCTOBER 20, 2011 11:07 AM

 

 

Scotiabank is expanding its South American footprint with the purchase of Banco Colpatria on Thursday.

Among Canada’s most internationally-focused financial institutions, Scotiabank agreed to purchase 51% of the Colombian retail bank for US$500-million and 10-million Bank of Nova Scotia shares. Expected to close by December, Scotia values the transaction at approximately US$1-billion.

“We are pleased to be partnering with Mercantil Colpatria, a well-established and well-regarded Colombian conglomerate that has successfully led the growth of Banco Colpatria for more than 40 years,” Rick Waugh, President and CEO of Scotiabank, said in a release.

“We look forward to the success we will achieve by combining the unique strengths of our two companies and focusing on our future growth in Colombia.”

Banco Colpatria is Columbia’s fifth largest financial group and the country’s second-largest credit card issuer. As of last month, the bank had US$6.2-billion in assets and US$4.2-billion in deposits.

Scotiabank first entered the Colombian market last year with its acquisition of RBS wholesale banking for an undisclosed amount in March 2010, but has maintained a strong presence in the region since the 1970s. The bank currently has more than 22,000 employees in 820 branches spread across Central and South America.

The acquisition “dovetails quite nicely with [Scotia's] Latin American presence,” John Aiken said in a brief note to clients on Thursday morning. But the Barclays Capital analyst expressed surprise that shares were involved as part of the deal, saying it was the first time in recent history the bank had done so, with the DundeeWealth transaction being the sole exception.

“This may have been a result of the fact that it was a sizeable transaction at roughly US$1-billion versus the roughly US$700-million spent on just under 20% stake in the Bank of Guangzhou,” Mr. Aiken said.

“We view the acquisition positively and believe it incrementally adds to Scotia’s very positive growth profile.”

The strategy, according to Scotia international banking chief Brian Porter, is to use Banco Colpatria’s retail network of 175 branches and 308 ATMs to provide more comprehensive banking services to the approximately 45 million potential customers in the Latin American country.

“Working with our partner’s strong management team we will provide support and expertise to leverage Banco Colpatria’s competencies and accelerate its growth in Colombia,” Mr. Porter said in a release.

“The strengths of their retail business complemented by our wholesale operations in the country will enable Banco Colpatria to service and grow new client segments in the Colombian market.”

Scotia will have the option of purchasing the remaining 49% of Banco Colpatria at a “fair market value” after seven years. The deal will add to Scotia’s earnings for its 2012 fiscal year, the bank said, with a double digit return on invested capital.

© Copyright (c) National Post

Canadian banks top choice for U.S. money market funds

BY JOHN SHMUEL, FINANCIAL POST

In the wake of a deteriorating European debt crisis, U.S. money market funds have made Canada their top investment destination.

Based on data from Fitch Ratings for the month of September, Canadian banks now represent 10.7% of American money market fund exposure. That is because exposure to Canadian banks increased a whopping 12% from August to September.

The increase comes at the expense of European banks, which have seen U.S. money market funds steadily pull out over the last few months. European bank exposure now represents 37.7% of total holdings of $654-billion, based on a sample of the 10 largest money market funds surveyed by Fitch.

That’s a decrease from the 42.1% of total assets exposed to European banks in August, and a further retreat from the 47.2% exposure in July.

“In percentage terms, the current exposure level is the lowest observed within Fitch’s historical time series, which dates back to second-half 2006,” Robert Grossman, group managing director for Fitch Ratings, said.

U.S. money market funds have been particularly sheepish about France in recent months. Exposure to French banks tumbled to 6.7% in September, down from 11.2% in August. While that was one of the steepest drops thus far, it represents a continuing trend. Exposure to French banks peaked in the second half of 2009, when French lenders represented 16.4% of U.S. money market assets.

So which banks do money market managers prefer? According to Fitch, the top Canadian bank was Bank of Nova Scotia, with 3.1% exposure. That still makes Scotiabank fifth overall, however, trailing Germany’s Deutsche Bank, which averaged 3.5% exposure. Tied with Deutsche for the top spot was the United Kingdom’s Barclays and Australia’s Westpac.

The second most held Canadian bank was Royal Bank of Canada, with 3% exposure. No other Canadian banks made it into the top 10, which represented a combination of European, American, Australian and Japanese lenders.