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Scotiabank is to sell operations in nine Caribbean countries, more moves are expected

Armin Ligaya, a Canadian press

Published Tuesday, November 27, 2018 11:14 PM EST

TORONTO – The Bank of Nova Scotia plans to sell its banking operations in nine Caribbean countries and its insurance operations on two other regional markets – and its chief executive expects more international layoffs in the pipeline.

Scotiabank signed an agreement Tuesday to sell its banking operations in nine "non-core" markets – including Grenada, St. Maarten, and St. Lucia – the Republic of Financial Holdings Ltd. for undisclosed amount.

The bank also said its subsidiaries in Jamaica and Trinidad and Tobago will sell their insurance business and will cooperate with Sagicor Financial Corp. Ltd. to provide products and services in both countries for an undisclosed amount.

These exits are part of Scotiabank's wider strategy to "sharpen our focus, increase the scope in basic geographic and business activities, improve the quality of earnings and reduce the risk to the bank," said chief executive Brian Porter .

The bank intends to remain in its core Caribbean markets, as well as the Pacific Alliance countries in Peru, Chile, Colombia and Mexico, but has more seizures on the horizon, he told analysts at a conference call.

"We have a few more to go and you will hear more of us in 2019, but they do not apply to Latin America or to the Pacific Union," Porter said.

The distribution was announced after the Toronto lender announced its earnings for three months ended on October 31, closing the 2018 financial year with a nearly 10% increase in fourth-quarter profit in comparison with a year ago, less than market expectations .

Scotiabank earned $ 2.27 billion or $ 1.71 per diluted share for three months ending on October 31, as opposed to $ 2.07 billion or $ 1.64 for a diluted share of net income at the same time last year.

On an adjusted basis, the bank posted earnings per share of $ 1.77 compared to $ 1.65 a year ago. Analysts averaged expected adjusted earnings per share of $ 1.79 during the fourth quarter of the bank, according to Thomson Reuters Eikon.

Scotiabank is the first of its peers to report their quarterly and full revenues for the financial year of 2018. Royal Bank of Canada, Toronto-Dominion Bank and the Canadian Imperial Bank of Commerce reported later this week.

For its full 2018 financial year, Scotiabank says it has earned $ 8.72 billion or $ 6.82 per diluted share, compared with a profit of 8.24 billion dollars or $ 6.49 per diluted share in 2017.

Recent bank acquisitions, including the majority stake in the Chilean bank, are tough at the bottom of expectations, said John Aiken, an analyst at Barkley in Toronto.

"Furthermore, Scotland could not avoid the weakness of capital markets in the quarter, despite lower relative exposure," he said in a note to customers. "Despite the miss, we believe there are significant reasons for advancing optimism, including possible improvements in successful takeover, as acquisitions are integrated and improving feelings by removing certain operations in the Caribbean that are considered non-essential."

The latest results of the bank in Toronto were prompted by its international banking business, which recorded quarterly net income growth of more than 21% to $ 804 million. For the full financial year, the bank's international operations registered a tailor-made increase in earnings of 18 per cent to a constant currency, Porter said.

This was prompted by Scotiabank's operations in the trade bloc Pacific Alliance, which saw a double-digit loan and deposit growth, partially reflecting the recent creditor acquisitions in the region, Porter said.

The bank is buying shares in the country and abroad over the past year, including the completion of the acquisition of the majority stake in the Chilean bank BBA Chile in July. The Lender also announced earlier this year to offer customers and small and medium-sized businesses to Citibank in Colombia for an undisclosed amount and the purchase of Banco Dominique del Progreso, which has operations in the Dominican Republic in August.

The next year will focus on integrating recent acquisitions of Scotiabank in Chile, Peru, Colombia and the Dominican Republic, Porter said.

Scotiabank has the most international influence among its peers and is targeting Latin America for its strong growth prospects, since activity in Canada is slowing down.

Refocusing its Caribbean strategy stems from "increased regulatory complexity and the need for continued investment in technology to support our regulatory requirements," said Ignacio Deschamps, Scotiabank international banking group, in a statement.

The bank's decisions were guided, in part, by size. For example, Jamaica has a population of about 2.8 million, while the Dominican Republic, where Scotiabank expects to be the No. 3 bank, has about 11 million, Porter says. Other markets where Scotiabank's operations will be sold to Republican Financial Holdings are Anguilla, Antigua, Dominica, Guyana, St. Kitts and Nevis, Saint Vincent and the Grenadines.

"When you look at what we have retained in the Caribbean, it's 90 percent of the population," Porter said. "This strikes at the heart of our strategy for increasing and increasing the volume of markets and geographic and business entities that we think are important, where we can turn the dialing for our clients and shareholders."

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