Scotiabank looking to add rich clients with U.S. acquisition
Bank of Nova Scotia would consider buying a U.S. money manager that targets affluent customers as part of its effort to get more of its wealth management earnings from outside Canada.
“That’s something we would look to build or ultimately acquire,” Glen Gowland, who oversees global wealth management at Scotiabank, said in an interview. “We wouldn’t be looking to do something large retail -- it would be something that has some specific investment-management capability, and some ability to serve ultra-high-net-worth clients.”
It’s part of a new strategy by Gowland, who sees adding wealth management in the U.S. as a way to fill a gap for Canada’s third-largest lender. Of the two options -- building or buying -- Gowland said it’s hard to develop a high-quality asset manager from scratch, meaning an acquisition may be the best path for Scotiabank, which doesn’t have a retail presence in the U.S.
The company has spent the past five years reshaping its wealth management business through Canadian acquisitions and divestitures. The biggest changes came last year with the C$950 million ($720 million) purchase of Montreal-based money manager Jarislowksy Fraser Ltd. and the $2.59 billion takeover of MD Financial Management Inc. Toronto-based Scotiabank has made global wealth management a separate division, breaking it out from Canadian banking, as it gains importance for the company.
“Establishing global wealth management as a distinct business line is a testament to its success and a reflection of the important role that the business will play in our growth strategy for years to come,” Chief Executive Officer Brian Porter said in a statement Friday.
Last year’s deals helped lift Scotiabank’s wealth assets under administration to $492 billion as of the third quarter, up 19 per cent from a year earlier, while assets under management rose 17 per cent to $297 billion.
“The pieces that we’ve added in Canada filled key gaps and really gave us some leverage and capabilities to grow,” Gowland said. “We know we can bring our asset management capability more to bear in international markets.”
Adding to Earnings
Wealth management has added more than $1 billion of profit in each of the past two fiscal years, representing about 12 per cent of overall earnings. The business earned C$882 million for the first nine months of fiscal 2019, or almost 14 per cent of overall earnings. Scotiabank is scheduled to report fourth-quarter results on Nov. 26.
“We believe that wealth management should be more in line with around 15% of the earnings for the overall bank,” Gowland said, noting that growth will be driven partly by the Pacific Alliance countries of Chile, Peru, Colombia and Mexico. “We think that’s a realistic target.”
While about 80 per cent of the global wealth business is in Canada, Gowland said, profit from outside Scotiabank’s home country is likely to grow faster in the medium to long term. “You’ll see the international component start to creep up and become a larger portion of the wealth earnings,” he said.