Scotiabank is buying 51% of Peru-based lender, boosting its Latin American footprint

Bank of Nova Scotia announced Wednesday evening that it had struck a deal to buy a majority stake in a Peruvian lender, deepening Scotiabank’s ties to Latin America.

Scotiabank said in a release that its Peruvian subsidiary had agreed to pay around $130 million for a 51-per-cent interest in retailer Cencosud Peru’s Banco Cencosud, which offers credit cards and consumer loans in Peru.

Banco Cencosud has more than 315,000 active clients and around $240 million in outstanding loans in the country, the release added. 

While it is still subject to regulatory approval, Scotiabank says the deal is not financially material, and that the stake in Banco Cencosud would turn Scotia into the second-largest issuer of credit cards in Peru when the transaction closes.

Scotiabank, Canada’s third-largest lender, has operated in Peru since 1997, and says its banking unit there has nearly 10,500 employees and 3.5 million customers.

The terms of the deal also include a 15-year partnership between the two companies to manage the credit card business and provide other products and services, similar to an arrangement Scotiabank and Cencosud already have in Chile and Colombia, the release said.

“Building on our existing partnership with Cencosud enables us to increase Scotiabank’s market share and presence in Peru and provides us with a larger base of customers to offer our leading financial products and services,” said Ignacio Deschamps, the group head of international banking at Scotiabank, in the release. “This transaction also aligns to Scotiabank’s broader international strategy to increase scale in the Pacific Alliance economies of Mexico, Peru, Chile and Colombia.”

The Peruvian purchase would be just the latest in a string of Latin American acquisitions for Scotiabank. Pointing to favourable demographics and fewer young people with bank accounts, Scotia said in February that Pacific Alliance countries are “an attractive and growing market,” and one the lender sees growing towards 30 per cent of its revenue “in the medium-term.”

Scotiabank had approximately 18.1 per cent of the market share of loans in Peru as of fiscal 2017, according to the lender’s February presentation to investors, a number that had risen 170 basis points since fiscal 2014. From 2014 to 2017, the bank’s Peruvian unit registered 10 per cent compound annual growth, the slides showed.

Peru also made up 11 per cent of Scotiabank’s international loan book, which in turn makes up 33 per cent of the bank’s total lending, the presentation indicated. The bank had previously made several acquisitions in Peru, including Citigroup Inc.’s commercial and retail portfolio in 2015.

In January, the lender also announced a subsidiary had struck a deal to buy Citibank’s consumer and small and medium enterprise business in Colombia, which included 47 branches. Scotiabank said the move would turn its Colombian subsidiary into the market leader in credit cards in the country, adding more than 500,00 new customers.

Prior to that, Scotiabank said in December that its approximately $2.9-billion bid for a majority stake in BBVA Chile had been formally accepted by Banco Bilbao Vizcaya Argentaria S.A.

Scotiabank said it intended to merge BBVA Chile with its own Chilean business, doubling the lender’s market share in the South American country to around 14 per cent, which would make it the third-largest private-sector bank in Chile.

Financial Post

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