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.

Unfamiliar rules, red tape create extra problems for immigrant entrepreneurs.

BY MARY TERESA BITTI, POSTMEDIA NEWS OCTOBER 17, 2011

 

 

Giving new immigrants an opportunity is Arnon Melo's way of paying forward the break one of his first bosses in logistics gave him after he came to Canada.

Melo is founder and managing director of Mellohawk Logistics, an international freight forwarder based in Toronto, which was recognized this year for its leadership role in community-building by Scotiabank and the Canadian Federation of Independent Business's Small Business Big Impact Challenge awards program.

Mellohawk was selected because of its commitment to actively hiring new immigrants and its mentorship program for students to learn about logistics and/ or study English as a second language.

Melo came to Canada in 1986 to study English. ``I fell in love with Toronto and felt a close connection to Canada. I just knew I was meant to be here,'' he says. In 1990, after finishing his undergraduate degree, he emigrated to Canada from Brazil with the dream of one day owning a business.

It's a dream shared by many new immigrants. There are 2.7 million small businesses in Canada and increasingly the entrepreneurial landscape is being influenced by new Canadians, who are more inclined to be self-employed than are Canadian-born citizens. This is particularly important as small business is increasingly becoming a critical economic driver.

In the past 10 years, 98.5 per cent of all new jobs in Canada were created by companies with less than 100 employees, and nearly 60 per cent were created by companies with fewer than five employees, according to Winning Strategies for Immigrant Entrepreneurs (WISE 5) - a project funded by Citizenship and Immigration Canada, Ontario region, to encourage and support new immigrant entrepreneurs.

Many of their challenges are the same as those faced by any entrepreneur: access to financing, finding qualified workers and building markets, says Dan Kelly, senior vice-president, legislative affairs for the CFIB. ``But these challenges can be exacerbated because new immigrants don't have experience with the regulatory framework and navigating the maze of government.''

Getting that experience is why social capital in the form of ethnic networks and family ties are critical in the foundation and operation of businesses, says Sandeep Agrawal, professor and program director at Ryerson University. ``The most prevalent difficulties new immigrant entrepreneurs face include lack of funding, lack of support (from the government) and cultural differences. To overcome these difficulties, they rely on their own efforts and their resilience, a crucial characteristic of an immigrant entrepreneur.''

Melo had a string of odd jobs when he arrived in Canada - working at a battery factory, waiting tables and cleaning. ``These jobs were to survive,'' he says. ``I wanted to get an education here. I believed without that I couldn't accomplish my dreams.'' He went on to study international business at Toronto's Seneca College and soon after got a job at a freight forwarding company where he worked his way up to air freight manager. He decided to strike out on his own after new management took over.

A business's success is directly linked to the informal networks a business owner is able to tap to help with supply, talent, and leads, Kelly says. ``That's why choosing the right community to start up is particularly important for new immigrants whose networks are less developed. It's important to plug in as quickly possible with local community organizations such as the rotary club. Community activities, schools and sports can help new immigrants build those informal networks so important for business.''

That's also why provinces such as Alberta, New Brunswick and Prince Edward Island have established mentoring programs for new immigrant entrepreneurs. The CFIB's member services include business counselling particularly beneficial to immigrant entrepreneurs.

``We have 15 people across Canada who help businesses deal with the maze of government,'' Kelly says. ``We have a range of discounts on credit and debit card processing services and insurance for members, as well.'' And The Canadian Youth Business Foundation Newcomer Program offers business startup loans of up to $15,000 to new immigrants between the ages of 18 and 34.

From his vantage point as director of small business banking at Scotiabank, David Wilton says one of the best resources to help new immigrants understand the realities of the environment in which they will be operating is other small business owners in those communities. ``They can be valuable mentors particularly when it comes to understanding cultural practices and business norms.''

Still, even with the challenges they face as a group, Wilton says immigrant entrepreneurs are particularly successful. ``Their personal commitment to make businesses work is strong. We ran the Small Business Big Impact Challenge to celebrate the contributions of all small businesses to local communities and the degree to which they improve the quality of life of Canadians.''

Almost 10 years in, Mellohawk Logistics has 10 employees from diverse backgrounds who together speak 15 languages. Melo chose to make Toronto his business base because of its multicultural makeup.

``So much business came our way because of the expertise we have with the culture, the language,'' says Melo. ``I've helped clients close deals by translating on conference calls for them. My employees do the same. They bring business to us because of their language skills. We are absolutely making the most of our diversity.'' For Financial Post

© Copyright (c) Postmedia News

Fast-track sponsors willing to pay ‘medical premium’ for aging parents, immigration lawyer says

A Canadian immigration expert is proposing people sponsoring elderly parents and grandparents to Canada who are willing to pay a $75,000 “medical premium” have their applications fast-tracked.

Richard Kurland is scheduled to speak to a Commons committee Thursday and pitch his buy-your-entry idea as a way of reducing Canada’s growing immigration backlog of parent sponsorships.

Australia has a similar fast-track stream where one can pay an upfront fee to expedite a parental sponsorship. The price tag is almost $40,000, compared to a regular $3,245 fee.

“The problem with the backlog for parents has to do with money . . . concerns over their medical costs on Canadian taxpayers,” said Kurland, invited to the standing committee on citizenship and immigration by the three main political parties.

Currently, Ottawa has a backlog of nearly 80,000 parental sponsorship applications, representing 168,530 people. The annual quota for parents is 11,500 and files can take five years to process.

Kurland, a Quebec lawyer, said the federal government could assign 2,500 additional spots a year to those willing to pay the premium.

“Immigrants who could afford it don’t expect a free ride. They wouldn’t mind paying the price if they could get the parents here sooner,” noted Kurland, who came up with the $75,000 based on research on health insurance actuaries. Fees are normally about $1,100 to sponsor a parent.

The parents would still have to pass a criminal clearance and medical exam before permanent residency is granted, he added.

Kurland said Ottawa could also offer quicker processing to investors who applied for immigration before July 1 by doubling the required $400,000 investment. (Canada raised the bar to $800,000 for investor applications after July 1). There are 22,328 investor applications in the backlog, with an annual quota limited to 2,200.

Kurland also said the federal government could give priority to those willing to provide a cash donation of up to $225,000 to institutions such as designated Canadian hospitals and universities.

“We could pick the wealthier among the wealthy. With the extra cash, a billionaire from Beijing could be financing the health care of a (sponsored) parent from India,” added Kurland. “It could offset the cost and we could reduce the backlog.”

The idea was rejected by Sponsor Our Parents, a 1,500-member self-advocacy group.

Spokesman Felix Zhang said processing times for parents vary drastically around the world because Ottawa imposes arbitrary quotas by country.

“They are not processed on a first-come first-served basis. In some countries, you wait for 12 months because there are few applications. In other places, you must wait five years,” said Zhang.

“Why should people pay a fee to get something that someone from another country doesn’t have to pay to get?” he added. “This would only cause more unfairness. The rich would be winners and the rest would be losers.”

Jay Bryan: In a grim world, Canada’s a bright spot

BY JAY BRYAN, THE GAZETTE
MONTREAL - The bad news you already know. Canada faces a slow slog economically for the next couple of years, maybe longer, as it fights the headwinds generated by a stubborn global debt crisis.
What you may not know is that in spite of this, Canada is one of the more fortunate countries on Earth in terms of its prosperity and future prospects.
This argument comes from Sherry Cooper, chief economist of the BMO Financial Group – better known as the Bank of Montreal – and she laid out her case persuasively yesterday to a Montreal business group.
“In my opinion, Canada will continue to be a global growth leader,” said Cooper, citing a long list of growth opportunities, from investment inflows to improved competitiveness.
Admittedly, the case for good cheer faces headwinds of its own. Over the past several months, this country has been battered by an economic slowdown and market crash similar to those in the U.S.
But uncomfortable as this has made many of us, the fact is that few Canadians would want to swap places with Americans, Britons or even Germans, whose country is Europe’s economic powerhouse, but where growth is grinding to a near-halt.
All these countries suffer from one or more crippling handicaps that we’ve been lucky enough to avoid in Canada.
Americans are enduring the drawn-out agonies of a housing bust that savaged the wealth of many families and badly damaged the banking system. Now extreme political partisanship is stifling any vigorous effort to stimulate growth.
Europe has its own problems, with widespread housing busts and damage to banks’ solvency, exacerbated by the exposure of enormous unacknowledged debts run up by Greece, the weakest member of the eurozone.
As in the U.S., political gridlock has delayed any effective action to bail out Greece, in this case because 17 sovereign nations must agree unanimously on steps to rescue their shared currency.
With Europe’s government-debt crisis sapping confidence in banks (which have big holdings of government bonds), credit markets are beginning to freeze up, slowing the region’s economy to a near-halt. Some think Europe is already in recession.
By comparison, Canadian home values are still rising briskly, housing construction (which has collapsed in the U.S. and much of Europe) continues to power along and economic growth, while slowing, is nowhere near falling into a recessionary slump.
There’s no struggle to control soaring government debt, as in Europe, the U.S. and Japan, because Canada entered the recession with a very low debt burden. This increased during the recession, but only to a modest degree, making it far easier to rein in today’s deficits.
One striking comparison captures much of this country’s relative prosperity.
In the U.S., a very high jobless rate has inched down only marginally in the 12 months, to 9.1 per cent from 9.6 per cent. Meanwhile in Canada, unemployment was relatively low 12 months ago at eight per cent, and has since fallen sharply to 7.1 per cent.
Some of Canada’s good fortune stems from dumb luck. Our huge resource endowment enables us to profit mightily from the high prices of resources ranging from petroleum to copper to wheat.
But there’s more to it, Cooper noted yesterday. Canada’s financial regulation is far better than most, leaving us with a banking sector widely regarded as the most solid in the world. That’s a key asset for economic growth.
Canada’s high-valued currency – which admittedly can squeeze export profits – is also being used to leverage economic growth. A high loonie makes it cheaper to import the best high-tech industrial equipment and the smartest minds from other countries.
An immigration system that has long focused on attracting valuable skills is serving this country well, as is a quality of life that enables Canada to attract large numbers of immigrants, which creates a growing market.
Even provinces like Quebec, where soaring tax rates and a squeeze on government services is forecast to contribute to a slight rise in unemployment next year (to an average of 7.6 per cent from 7.5 per cent this year), the outlook isn’t too bad, Cooper says.
The Charest government’s focus on controlling government debt is smart, she said. Quebec should come through the current soft spot in reasonable shape, and could do even better with an upgraded education system and a more welcoming atmosphere for immigrants, of which it now attracts very few.
jbryan@montrealgazette.com

© Copyright (c) The Montreal Gazette

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