The acquisition of Citibanamex, estimated to be worth between $4 billion and $8 billion, would help Scotiabank expand in Mexico, which accounted for 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$7.5bn 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$900m.
“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. Scotiabank’s 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 drive 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.