Monday, March 19, 2007

Scotiabank Seeks Minority Stake in Bank of Dalian

Bloomberg, Adam Satariano and Cathy Chan, 19 March 2007

Bank of Nova Scotia, Canada's third-biggest bank, said it's seeking to acquire up to 20 percent of the Bank of Dalian Co. in China to tap growth in the world's fourth-largest economy.

Scotiabank signed a memorandum with China's seventh-largest city commercial bank about the investment, the Toronto-based company said in a statement. Dalian has 90 branches, 1,650 employees and about $8 billion in assets, according to the statement.

Global financial companies including Bank of America Corp. and HSBC Holdings Plc have spent more than $20 billion buying stakes in Chinese banks to benefit from the nation's growing demand for trade financing and loans. Scotiabank is seeking to boost international expansion to temper slower growth at home.

``We are optimistic about the potential for growth in China, and this agreement further demonstrates our commitment to explore this important market,'' Rob Pitfield, Scotiabank's executive vice president for international banking, said in the statement.

China is encouraging its banks to sell shares and seek partners to prepare for increased competition with global banks, including London-based HSBC and Citigroup Inc.

Overseas lenders are targeting China's city commercial banks as some received licenses to expand outside their home cities. China lets foreign financial firms own a combined 25 percent of a local bank, with a single investor capped at 20 percent.

The 115 city commercial banks are less competitive than China's bigger banks because their capital and operating areas are limited. Fewer than a third of city banks have met the 8 percent minimum capital adequacy requirement. Selling stakes may enable them to boost assets and survive.

Bank of Dalian, formerly known as Dalian City Commercial Bank, was founded in March 1998 and has about $8 billion assets.

Dalian has a population of more than 100 million and is a ``hub for transportation, finance, trade and tourism,'' Scotiabank said in the statement. About 80 percent of northeast China's export cargo transits the city's port every year.

Surging exports boosted China's 2006 trade surplus to a record $177.5 billion, fueling the economy's growth by 10.7 percent.

Scotiabank spokeswoman Krista Pawley said today that the bank doesn't know how long the discussions with Dalian will last. Shares of Scotiabank rose 64 cents, or 1.2 percent, to C$53.51 at 4:10 p.m. in trading on the Toronto Stock Exchange.

Scotiabank's first-quarter profit rose 20 percent to C$1.02 billion ($867 million), led by higher earnings at its international unit in Mexico and the Caribbean.

The Canadian bank operates in 11 countries in the Asia- Pacific region and Middle East, with about 700 employees and 26 branches and offices. It purchased a minority stake in Xi'an City Commercial Bank with International Finance Corp. in 2004.
• 7 January 2007 Scotiabank is Likely to Invest in Dalian Bank

• 23 October 2006 Scotiabank is Vying for Bank in Dalian;