RE:BNS signs deal to increase stake in Scotiabank Chile...BMO's comments:
February 28, 2022 | 15:21 ET~
Scotiabank BNS-TSX Rating Outperform Price: Feb-25 $91.68 Target $93.00 Total Rtn 6%
BNS to Acquire Remainder of Shares in BBVA Chile Bottom Line: BNS announced this morning that it has reached a deal to purchase Grupo Said's remaining 16.8% stake in its Chile division for $1.3bn ($650mm in cash and the issuance of 7mm shares), subject to regulatory approval.
This transaction will further increase BNS's stake in its Chilean entity to 99.8% from 83%, resulting in an additional $35mm per quarter contribution to its bottom line.
Key Points
• The Bank of Nova Scotia announced that it is paying $1.3bn to obtain near-full ownership of its Chilean division, BBVA Chile. The transaction will be funded through cash ($650mm) and the issuance of 7mm shares.
The CET1 impact is ~10bps.
• BNS increased its presence in Chile through the acquisition of BBVA Chile (closed in Q3/18) with a stake of 75% in the merged bank (Said family owned the remaining 25%). Since then, BNS has been increasing its ownership position, most recently purchasing a 7% stake from the Said family in May 2021 for $500mm.Today's transaction represents an ~8% premium from the May transaction.
• The Chilean operations have become an important part of BNS's international business strategy, representing ~20% of its earnings outside of Canada in FY2021 (up from 11% in FY2018).
The increase in its ownership position is expected to add an additional $35mm in earnings for the bank and be immediately accretive to earnings per share.
• The decision to increase its stake in the Chilean division demonstrated BNS's confidence in the business outlook in Chile. We ultimately view this transaction positively given the strong performance of BNS's Chilean operations, benefiting from the economy rebounding and higher central bank rates.
• We continue to rate BNS at Outperform. Q1/22 results will be made available tomorrow, March 1, pre-market.
Canadian Banks Sohrab Movahedi Analyst sohrab.movahedi@bmo.com (416) 359-7157 Ally Zhou, CFA Associate ally.zhou@bmo.com (416) 359-6856 Shoban Anandarajah Associate shoban.anandarajah@bmo.com (437) 998-2946 Legal Entity: BMO Nesbitt Burns Inc. 100 90 80 70 60 50 40 Aug Feb Aug Feb 30 20 10 0 LHS: Price (C$) / RHS: Volume (mm) Source: FactSet 2YR Price Volume Chart Company Description Scotiabank is Canada’s most