The Bank of Nova Scotia is forecasting favourable conditions for the domestic banking industry, and the lender is prepared to try to take more market share from its rivals in certain areas.

A relatively low likelihood of recession, strong population growth fuelled by immigration and solid employment figures were among the positives cited by Scotiabank’s group head of Canadian banking, Dan Rees.

“These types of things support consumer confidence, business confidence and the housing market,” Rees said this week during the bank’s investor day. “So our view in Canada is that this is a healthy backdrop from which to take a growth mindset into our franchise.”

Scotiabank, Canada’s third-largest lender, has a significant presence outside Canada — the investor day was held in Santiago, Chile — but the bank still generated more than 50 per cent of its earnings in 2019 from its home market.

Rees said they are looking to deepen ties with Canadian households, but also noted the outlook for business banking is favourable. The bank’s economics unit is projecting business investment in Canada to outpace that in the United States in 2020 “by a healthy margin,” Rees said, with the majority of Canadian businesses expecting to invest even more over the next 12 months.

“With moderate investment, some of which has already started, we believe that we can continue to grow share in the business segment, and the pipeline looks good,” Rees said.

Rees’ comments this week came the same day as the latest interest rate decision by the Bank of Canada. In keeping its policy rate steady, the central bank noted data coming in indicated “growth in the near term will be weaker,” but the bank still forecasts economic growth for Canada in 2020 to be 1.6 per cent.

Scotiabank is also eyeing further growth in Canada when it comes to its capital markets and investment banking business.

“We believe in Canada, our home market, which is very important to us, we’ve not yet captured what we believe is our natural market share,” said Jake Lawrence, co-group head of global banking and markets. “And so we’re working hard to protect our home base and enhance our franchise in this very important market.”

We believe in Canada, our home market, which is very important to us, we’ve not yet captured what we believe is our natural market share

Jake Lawrence

The plans to protect and gain market share in Canada come as Scotiabank has spent the past few years trying to sharpen the geographic focus of its business, with a particular emphasis on the Pacific Alliance countries of Chile, Colombia, Mexico and Peru. Key acquisitions have been made in Latin America, such as the purchase of a majority stake in BBVA Chile, but Scotiabank has also been shedding assets elsewhere, such as the sale of its 49-per-cent interest in Thailand’s Thanachart Bank Public Co. Ltd.

The bank’s international footprint has provided strong growth at times, given the favourable economic and demographic conditions that exist in Latin America for banks. In the case of Chile, though, an outburst of unrest beginning last October is expected to hurt Scotiabank’s results for the first quarter of its fiscal 2020.

“As such, the onus falls on fiscal 2021 to deliver a much-awaited return to stability,” National Bank Financial analyst Gabriel Dechaine wrote in a note on the investor day.

However, in addition to trying to reposition its international operations, Scotiabank has also made two key purchases in Canada: independent investment firm Jarislowsky, Fraser Limited and doctor-focused wealth manager MD Financial Management.

A presentation from Scotiabank’s group head of global wealth management, Glen Gowland, suggested the bank is interested in expanding in that sector as well, possibly by adding a piece in the United States.

“One gap we have is a U.S. capability that we will look to fill through build-out, but also potentially an acquisition,” Gowland said in a video, adding that “an acquisition would likely be smaller, with some investment management and ultra-high-net-worth capability for us to use for Canadian and Latin American ultra-high-net-worth clients.”

Anything bigger might be a stretch for the bank. Scotiabank CEO Brian Porter said his company’s “repositioning efforts” are substantially complete, and that their focus is on growth in its six key markets: Canada, the United States, Chile, Colombia, Mexico and Peru.

Financial Post

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