According to Bloomberg, Scotiabank is making significant strategic changes by refocusing on North America and redirecting capital from underperforming Latin American operations, aiming to enhance profitability.
Scotiabank has established a transformation office to improve productivity and shift to a profit-centric approach in customer acquisition, as outlined by CEO Scott Thomson during an investor day.
Thomson highlighted challenges in winning primary relationships, with only 16% of clients using Scotiabank for daily banking. This is attributed to a high loan-to-deposit ratio in Canada, reliance on costlier wholesale funding, and lower market share.
The bank plans to allocate 90% of incremental capital to priority businesses in Canada, the US, Mexico, and the Caribbean, leveraging the C$1.6 trillion ($1.2 trillion) annual trade flows among these countries.
Scotiabank will selectively allocate capital to its Peruvian and Chilean businesses, considering a turnaround or exit from Colombian operations. Francisco Aristeguieta, group head of international banking, emphasized swift capital redeployment if improvements aren't observed.
The bank aims for a 50% productivity ratio in the medium term, positive operating leverage by 2024, and a C$200 billion increase in deposits by 2028.
CEO Thomson, an outsider appointed in February, affirmed the next CEO would be chosen internally. Scotiabank plans to enhance workplace culture, create a "psychologically safe environment," and improve performance in credit cards, insurance, and mutual funds.
Analyst Nigel D'Souza commended the emphasis on Canadian banking, wealth management, and capital markets, but noted achieving targets implies a prolonged journey to improve performance.
