ScotiaBank – A Taste of Latin America

The Company in a Nutshell

• BNS shows a 7% (CAGR) dividend growth rate over the past 10 years.
• It is your ticket for an international bank with a solid core in Canada.
• Recent quarters were fueled by stronger commercial loan demand from its international business.

Business Model

ScotiaBank is the most international of the Canadian banks. It has built various geographic streams of income coming from Latin America and Asia (emerging markets). In fact, BNS is present in 55 countries. This is a strength other banks don’t have, especially when the Canadian economy is going through challenging periods.

Potential Risks

The bank run into several challenges such as the situation in Venezuela. It seems being present in emerging markets is not always a plus. Overall, diversification is a good strategy, but BNS international presence adds more volatility to its business model.

Dividend Growth Perspective

BNS management offered two dividend hikes in 2017. The first one brought its dividend from $0.74 to $0.76 and the next payment was of $0.79 per share. The two dividend payments come to a total of +6% increase. BNS also shows an annualized growth rate of 7% over the past 10 years.

Final Thoughts

BNS is the most innovative bank in the industry. It has done lots of business outside Canada, and always with an open mind. BNS deserves its international label with 40% of its assets outside Canadian borders. This hasn’t always been an advantage as BNS ran into its share of problems with Latin American economic struggles. However, things seem to get back on track as BNS year-end report shows EPS growth of 8% after adjustments. BNS still continues to find a solid ground in Canada with a +9% growth, but international banking (+15%) and global banking and markets (16%) are its real growth vectors. If BNS succeeds in its $2.9 billion acquisition in Chile, it will become the third largest bank of this country.