Scotiabank will not sell CR, Panama units as part of regional restructuring

Fresh off of the announced sale of its El Salvador banking and insurance units, Canada's Scotiabank signaled its commitment to continue operations in Costa Rica and Panama.

Hailed by rating agency Moody's as a credit positive move for Scotiabank, the El Salvador divestment follows the multinational's planned exit from multiple Caribbean territories, as the bank undergoes a major refocus in the region.

Heading off any speculation, Scotiabank's VP for Central America and general manager for Costa Rican operations, Diego Masola, offered reassurances about operations in Costa Rica and Panama, and discussed improvement plans, providing written comments to Costa Rican daily La Nación.

As cited, Masola said, "We remain committed to our operations in Costa Rica and Panama, where we recently completed an infrastructure improvement program and the successful integration of businesses that previously belonged to Citibank."

The executive added that more than 2,700 employees continue to serve the 279,000 clients in these two markets.

THE DOWNSIZING

On February 8, the Canadian lender announced the sale of its El Salvadorian operations, including Scotiabank El Salvador, its subsidiaries, and insurer Scotia Seguros, to Imperia Interncontinental.

It followed the November 27 announcement that it would be selling its operations in Antigua and Barbuda, Anguilla, Dominica, Grenada, Guyana, St Kitts & Nevis, St Lucia, St Maarten, and St Vincent and the Grenadines to Trinidad and Tobago-based Republic Financial Holdings for US$123mn.

In December, Scotiabank also said it was selling its insurance and pension operations in the Dominican Republic.

"Reducing its reliance upon earnings from international operations is credit positive for [Scotiabank] BNS," said Moody's Investors Service in a note following the El Salvador announcement. "Many of BNS' international operations, including those in El Salvador, are in countries where BNS does not have the scale and pricing power that it enjoys in its home market and that have less stable operating environments than Canada's."

The agency added that by exiting non-core geographies Scotiabank is reducing its risk exposure and making it possible to reallocate capital to more profitable markets where it has a stronger presence.

"The bank's international banking operations generated approximately 30% of net income for fiscal 2018, which ended 31 October 2018, and have had consistent performance, despite the fact that most countries in which BNS operates have riskier operating environments than Canada," said Moody's.

Scotiabank has said on several occasions that its main international focus is today on the countries that make up the Pacific Alliance trading group, namely Chile, Colombia, Mexico, and Peru.