Big Six bank CEO unveils plan to boost growth, including focus on boosting returns from international banking
Canada’s third-largest lender is looking to the domestic market, and looking as well to key overseas markets, as part of a strategic revamp to boost growth.
At Scotiabank’s investor day conference Wednesday, attendees got to hear details of the master plan by CEO Scott Thomson to squeeze more profit at businesses domestically and abroad, following dismal results for the fiscal year 2023.
As reported by Reuters, the lending giant’s adjusted earnings from international banking declined by roughly 3%, in contrast to 23% growth the previous fiscal year.
The Bank of Nova Scotia is forecasting double-digit growth in Canada, with plans to achieve a roughly 50% productivity ratio in the medium term.
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The bank said it’s leaning into its international banking operations, particularly its high-return businesses in Mexico and the Caribbean, as it looks to prioritise capital consumption. Since 2014, it’s spent roughly $11 billion in mergers and acquisitions encompassing regions in South America and the Caribbean islands.
In Canada, Scotiabank has been beset by a panoply of challenges – including market saturation, stiff regulation, aggressive rate hikes that have put a chill on loan growth, and rising expenses. Since the start of the pandemic, it has trailed Canada’s other big banks in terms of deposit growth – something that Thomson has been very vocal about reversing.
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Those domestic headwinds have weighed especially heavily given the fact that its personal and commercial banking unit represents roughly 40% of its income, making home its biggest source of business.
Thomson acknowledged the bank’s loan-to-deposit ratio – the highest among Canada’s Big Six banks – “[indicates] a greater reliance on rate sensitive wholesale funding and resulting in more volatile margins and earnings.”
Amid higher costs of funding, the lender has made a deliberate effort to bring in more deposits over the past year — they’re up 9% from a year earlier, it said in late November.
The Toronto-based bank has also lagged behind its rivals in share-price performance for a decade amid disappointing returns in its Latin America operations.
As part of its turnaround plans, Scotiabank is also looking to earn more from primary clients across its portfolio, moving towards digital processes, and scaling priority businesses.
- with files from Bloomberg.
