Bank of Nova Scotia appears to be in the midst of a major change in strategy.
According to The Wall Street Journal, the third-largest Canadian bank reportedly is in the hunt for National City Corp., the No. 12 U.S. bank, which is under pressure from regulators to boost its capital due to rising problem loans.
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Cleveland-based National City said April 2 it has hired Goldman, Sachs & Co. to assist it in a strategic review and is reportedly in talks with crosstown rival KeyCorp. Now the Toronto-based parent of Scotiabank has reportedly offered to buy at least a stake in National City.
BNS certainly is big enough and healthy enough to be a serious contender: It has a market cap of $45 billion compared to National City's $5 billion, and BNS' shares have fallen about 15% in the past year, compared with NCC's plunge of about 75%. What's more, Bank of Nova Scotia's rich in Canadian dollars, which are an effective acquisition currency given its recent strength.
What's surprising about the move is Bank of Nova Scotia has studiously avoided the U.S. market in the past decade or so, preferring to build up its emerging market presence. Its main acquisitions in the past few years have been bolt-on purchases in Latin America.
That's a striking contrast to its main domestic rivals. Royal Bank of Canada, the No. 1 Canuck bank, has built up its Centura franchise in the Southeast, while second-place Toronto-Dominion Bank has aggressively grown its TD Commerce Bank unit from a New England institution in to regional bank spanning the Boston to Washington corridor. Bank of Montreal has been inert, but it still has a strong Chicagoland presence with its Harris Bank unit.
If BNS walks away with National City, Canada's four biggest banks will be distinguished largely by their geographical patch in the U.S. with Bank of Nova Scotia planting its flag in the Ohio-Indiana region. - Peter Moreira
See story from The Wall Street Journal
See story from Reuters
See TheDeal.com: National City taps Goldman Sachs
See Dealscape: Fifth Third, KeyCorp front-runners for National City?
See Dealscape: Goldman Sachs to advise National City on possible sale
See Dealscape: Wells Fargo could add National City to map
See Dealscape: Canadian banks scouting for buying opportunities
