Most Canadian investors have invested in one or more of the big banks. There’s a good reason for that decision: the big banks offer some of the best growth options in their sector and have dividend yields that far surpass any of their peers south of the border.
There are some differences between the banks relating to their expansion prospects. Most of the big banks have opted to expand in the U.S. market by purchasing one of the many local chains and rebranding it to match its Canadian-owned name. This has worked incredibly well for some of the big banks, but another bank has gone in a completely different direction.
International expansion beyond the U.S. market
Instead of expanding into the U.S. market, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) opted to expand into the nations of Mexico, Columbia, Chile, and Peru.
These four nations comprise a growing trading bloc called the Pacific Alliance, which looks to eliminate tariffs and improve trade between member states — a complete reversal of the growing protectionism in the U.S. market, where Bank of Nova Scotia’s peers prioritized their growth.
In addition to the four members of the Alliance, Canada and three other nations are known as associate members. The distinction allows the full members of the bloc to negotiate trade agreements with associate members as a single entity with the aim of fostering better trade and relations.
How is Bank of Nova Scotia involved with the Alliance?
As impressive as the trade bloc sounds for international relations and improving business between nations, Bank of Nova Scotia’s involvement is less subtle but still a pure masterstroke decision.
Bank of Nova Scotia expanded heavily into all four nations of the Alliance over the past few years and has become a familiar face and the preferred go-to bank for businesses looking to expand throughout the bloc.
In terms of results, Bank of Nova Scotia’s venture into the Pacific Alliance has produced double-digit gains for the bank’s international segment on an increasingly frequent basis. In the most recent quarter, the international segment realized earnings growth of 16% over the previous quarter, primarily attributed to double-digit loan growth.
More expansion is coming
Bank of Nova Scotia announced a series of acquisitions earlier this year that should have investors more than pleased about the prospects of the bank.
The first notable acquisition that Bank of Nova Scotia made was to acquire BBVA Chile. BBVA is a subsidiary of Banco Bilbao Vizcaya Argentaria SA, which not only plays into the Pacific Alliance but also establishes Bank of Nova Scotia in Chile’s banking sector, effectively doubling its presence through the deal.
The second acquisition was for Montreal-based investment firm Jarislowsky Fraser. The firm has a portfolio of over $40 billion in assets under management, and once the deal is completed later this year, Bank of Nova Scotia will be the third-largest asset manager in the country with nearly $200 billion in assets.
Why you should buy Bank of Nova Scotia
No assessment of Bank of Nova Scotia would be complete without considering the impressive and growing dividend the bank offers, which currently provides an impressive 4.27% yield.
Beyond the yield, investors contemplating an investment in Bank of Nova Scotia should also take into consideration the correction we witnessed earlier this year, which drove prices down to discount levels. Bank of Nova Scotia is among several great investments that still trade at discount levels, with the stock currently trading at below $77 with a P/E of 11.34.
Bank of Nova Scotia remains an excellent long-term option for those investors looking at both income and growth.
