Friday, August 10, 2007

Scotiabank to Negotiate Exclusively with Banco del Desarrollo

Bloomberg, Sean B Pasternak, 10 August 2007

Bank of Nova Scotia, Canada's second- largest bank by assets, confirmed that it's in talks with shareholder Inversiones Norte Sur about the firm's stake in Chile's Banco del Desarrollo.

Scotiabank said today in a statement that it signed an exclusive agreement with Inversiones Norte Sur and talks continue about Banco del Desarrollo, which has 68 branches and was founded in 1983. Krista Pawley, a spokeswoman for the Toronto-based bank, declined to comment on the accord.

Chief Executive Officer Richard Waugh, 59, who was in Chile last month, has overseen at least $1.3 billion in acquisitions since 2006 that add to the lender's international operations, where demand for banking services is growing faster than in Canada.

The company has said it wants to expand in countries such as Chile, where it owns 56 branches and 115 automated-teller machines. Diario Financiero reported yesterday that the Canadian lender will offer as much as $1.08 billion to buy 100 percent of Banco del Desarrollo.

The purchase would increase Scotiabank's market share in Chile to 6.5 percent from 2.5 percent, Blackmont Capital Inc. analyst Brad Smith wrote in a note today before the announcement.
Business News Americas, Jorge Porter, 10 August 2007

Scotiabank has signed a 30-day exclusivity agreement with Chilean investment firm Inversiones Norte Sur related to discussions concerning its stake in Chile's Banco del Desarrollo.

Discussions are continuing, Scotiabank said in a brief press release.

Inversiones Norte Sur holds a controlling 39% stake in Banco del Desarrollo. Credit Agricole, Italy's San Paolo, IIC and international microfinance institution Oikocredit hold a combined 46% stake.

"If the deal succeeds, Scotiabank will be buying a very good bank, with deep knowledge and know-how in the lower-income and SME segments," local research firm FIT analyst Natalia Aránguiz told BNamericas.

Banco del Desarrollo is Chile's seventh largest bank. It has a 4.6% market share in the corporate segment and has outpaced the market more than 2 percentage points, growing loans 17% at end-June compared to the same time in 2006.

"This loan growth will translate into higher earnings in 2008. The purchase will also allow Scotiabank to increase profitability and current 61.8% efficiency ratio," Aránguiz said.

Banco del Desarrollo boasts one of the best efficiency ratios in Chile's banking system at 46.8%. Together with locally owned Banco Security and Banco Internacional, it is in the process of revamping its IT platform through a deal signed with IT solutions provider i-flex.

Press reports have speculated Scotiabank would pay some US$1bn to take over the bank.

Banco del Desarrollo commands a 3.9% overall market share. The deal would take Scotiabank Sud Americano to sixth spot from 11th today, reaching a 6.4% loan market share.

A Scotiabank spokesperson declined to comment on the announcement when contacted by BNamericas.
Financial Post, Jonathan Ratner, 10 August 2007

Blackmont Capital analyst Brad Smith weighed in on a report out of Chile that the Bank of Nova Scotia will announce the purchase of that country’s Banco del Desarrollo over the next few days.

Scotiabank reportedly valued the company at just above US$1-billion. Some of the Canadian bank’s executives have been in the Chilean capital of Santiago since Monday to hammer out the deal’s final details, the report said.

The move would boost Scotiabank’s market share in Chile to 6.5% from 2.5%, and is consistent with its strategy, Mr. Smith told clients in a note.

“Such a development would reinforce our investment thesis, which acknowledges BNS’s international operating platform as representing a unique and potentially above average growth opportunity relative to the bank’s domestic peers,” he said, adding that the acquisition would unlikely have an impact on BNS’s near-term consolidated earnings per share.

Mr. Smith continues to rate BNS a “buy” with a $61 price target.
• 9 August 2007 Scotiabank's Rumoured Interest in Chile's Banco del Desarrollo