Scotiabank Leads Best-in-Class Banking System
Global Bankers Look With Envy at Canadian Banks
Jul 3, 2009
The impressive growth and stability of the Bank of Nova Scotia (Scotiabank) during its more than 175 years, serves as a prime example of Canada’s world-class banking expertise.
The bank has evolved from a tiny regional also-ran based on Canada’s east coast to become not only the country’s third-largest bank and its most international, but also a global financial player to be reckoned with.
Most International
Today, the bank now has more than 69,000 employees in 50 countries and has more than 12.5 million customers. Not bad for a company that opened for business in 1883 in order to take advantage of the burgeoning trans-Atlantic trade between Britain, North America and the West Indies. In short order, the bank had agents in New York, Boston and London, an early indicator of its future directions.
While Scotiabank, like Canada’s other banks, continued to go about its business as usual during the global financial crisis, even Lloyd’s of London, the venerable British bank considered by many as unassailable, was forced into a struggle for survival. Scotiabank, on the other hand, was and continues to be on the hunt for bargain acquisitions. What's more, despite the world fiscal crisis, Scotiabank has continued to pay dividends to shareholders, a practice that began with its first dividend the year after it was founded in 1883. It has paid a dividend every year since.
Continues Growing
Here are a few examples, as The New York Times reported on June 23, 2009: “On September 22, 2008, the bank acquired E*Trade Financial Corp. During the fiscal year ended October 31, 2008, it acquired an additional 20% of Scotiabank Peru. The bank completed the acquisition of Chile's Banco del Desarrollo on November 26, 2007. In March 2009, the Company announced the acquisition of a majority interest in Five Continents Financial Ltd. (FCFL), a global asset management company.”
When Scotiabank’s current leader, Rick Waugh, took over as President and CEO in 2003, he inherited a tradition that combined smart entrepreneurialism with cautious conservatism. He followed the mentorship of Peter Godsoe, his boss as president and CEO from 1993 to 2003, as well as the leadership of the legendary Cedric Ritchie, who many credit with having established the bank’s modern-day growth trajectory during his 20-year tenure as president and CEO from 1972 to 1993.
At the core of the three CEO’s growth strategies has been a practice of making relatively small acquisitions in emerging markets, particularly Latin America, the Caribbean and Asia, then riding them up. While it does have a presence in the United States, Scotiabank has avoided a major push into that market, much to its credit and financial well-being, and especially exposure to the toxic assets that brought down scores of small and large financial institutions in the U.S., Europe and Asia.
Federal Rules Help
Canada’s major banks are entitled to be given credit, if not for their prescience, at least for sticking to the conservatism that has also brought them much criticism over the years, but also saved them from the devastation experienced in the U.S., Britain, Germany and Asia.
However, in the final analysis, credit for keeping Canada’s banks out of the world’s current fiscal quagmire rests primarily with federal banking laws which impose strict regulations and accountabilities on what Canadian banks can do with the funds customers entrust to their care.
As Time Magazine reported on November 10, 2008: “When the global economy was flying high, Canadian banks complained about not being allowed to merge to become more significant international players. ‘In hindsight, that decision may have saved Canada from having a Royal Bank of Scotland on its hands,’ says Lawrence Booth, a finance specialist at the University of Toronto's Rotman School of Management.”
Neither Canada's banks, nor any other financiers with designs on the country's banking system, can expect changes to the current federal regulatory regime any time soon.
(Sources: Bank of Nova Scotia archives; scotiabank.com; New York Times, June 23, 2009; National Post/Reuters, June 22, 2009; Canada Bank Act, 1992, c 46; Time Magazine, Nov. 10, 2008)
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