The shareholders of Scotiabank they are urging Canada’s third-largest lender to take a serious look at the Mexican consumer banking unit that Citigroup is selling, arguing that it would benefit from expanded operations in that country.
The market goes to Scotiabank as a logical bidder even though the chief executive, Brian Porter, downplayed the appetite for big deals just a day before Citi announced the sale of Citibanamex, the third largest retail bank in Mexico.
The acquisition of Citibanamex, whose value is estimated between 4,000 million and 8,000 million dollars, would help Scotiabank expand in Mexico, which represented nearly a quarter of its international business revenue in fiscal 2021 and 7.6% of total revenue.
“It’s another opportunity to expand outside of Canada, which I’m all for,” said Allan Small of Allan Small Financial Group with iA Private Wealth. “If the assets are available at the right price, I wouldn’t be surprised to see Scotiabank offer for them.”
Scotiabank had about C$7.5 billion of excess capital at the end of 2021, but Porter said the bank is not considering acquisitions outside of US equity deals or deals of less than C$900 million (about C$719 million). of dollars).
“There’s no big file on my desk about someone buying a stake in a Mexican bank or anything like that,” Porter said at a conference last week.
A Scotiabank spokesman declined to comment further.
Expansion in Mexico is not without risks. The Scotiabank international business, dominated by Mexico, Peru, Chile and Colombia, has disappointed recently as the pandemic hit some markets later and harder than at home. And the business has historically accounted for the majority of its problem loans and repayments.
Still, it has helped Scotiabank outperform in other periods. Even in 2021, strength in Mexico and Chile helped offset weakness in the other two markets, and Porter expects them to continue to lead growth this year.
With economic growth and interest rate increases faster than in Canada, the unit is also expected to fuel a recovery in net interest margins.
A deal “would add significant incremental scale that could drive better bottom lines within Mexico,” said James Shanahan, an analyst at Edward Jones.