Scotiabank Expands East and South

From immigrants to foreign pensions, growth is everywhere

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The Motley Fool

By: Cameron Conway

Scotiabank (TSX: BNS, NYSE: BNS), for many years has advertised themselves as Canada’s most international bank, and rightfully so. With financial service offerings spread across 55 countries and 21 million customers, Scotiabank has grown to the point where 47% of its profits come from outside of The Great White, Frozen, North.

While other Canadian Banks have focused their international expansion on the U.S. or Europe, Scotia has been exploring their options elsewhere. The bank is actively assessing its prospects in Australia, India, Korea, Malaysia, Singapore, Thailand, Vietnam, Mexico Peru, Columbia, Dominican Republic and several other nations.

China: establishing brand loyalty from the beginning

One way Scotiabank has been able to draw in new customers is through partnerships with banks in China to ease the transition for migrants and immigrants coming into Canada. On December 11, 2013 Scotiabank entered into one of these of agreements with the Bank of Beijing. This will give Chinese immigrants, international students and foreign workers planning to move to Canada the opportunity to open a Scotiabank account and credit card at one of 20 participating Bank of Beijing locations. Once they arrive in Canada, their financial affairs are already in order and they’re ready to roll.

Scotiabank also has similar agreements with the Everbright Bank and the Bank of Xi’an which includes 200 participating branches in 44 cities. These oversea account activations are also supplemented by Scotiabank’s Start Right program which offers information to new visitors and residents of Canada to help them get established. This program gives the bank another way to establish brand loyalty with new residents.

Latin America: The quest for pensions

Scotiabank employs a different strategy in Latin America where a key focus is on pensions and wealth management. In many Latin American countries people do not have government run pension plans like our own CPP, but rather it’s mandated that a portion of each employee’s paycheque be deposited directly into a defined contribution account.

This type of pension structure is like a pie cooling on a window for Scotiabank who have been aggressively pushing into the market. Including purchasing a 50 per cent stake in AFP Horizonte, BBVA’s pension fund management business.

To give some perspective, pension operations in Peru, Colombia and the Dominican Republic make up 18% of Scotiabank’s assets under management. The growth/acquisitions in Peru and Columbia also contributed to a 27% growth in assets under management in the last quarter (Q4 2013).

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This type of expansion and growth has given Scotiabank the ability to post 2 consecutive quarters of record earnings. Along with the international growth of branches and assets under management, the investments into foreign markets is fueling the success of Scotiabank. In fact, its foreign operations are on track to overtake their Canadian earnings in a few years, which would officially make them Canada’s most international bank.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway does not own any of the companies mentioned in this post.  The Motley Fool does not own any of the companies mentioned in this post.

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