Canadian lender Bank of Nova Scotia said on Tuesday it would keep its metals trading business, ending months of speculation that it could be sold, after reporting earnings that beat market expectations. However, the business will be slimmed down following a strategic review, the bank's investment banking head, Dieter Jentsch, said on a conference call.
"We will be exiting some markets, we will be simplifying our product suite, and we'll be much more judicious about our allocation of capital and liquidity," Jentsch said. The bulk of ScotiaMocatta's business is in precious metals and it is one of five banks that clear bullion in London's $5 trillion a year gold market, the world's biggest.
Reuters reported in January that the field of prospective bidders for the business had narrowed to Goldman Sachs Group and Citi and the two were undertaking due diligence checks. Scotiabank and rival Bank of Montreal reported better-than-expected quarterly earnings on Tuesday, amid overseas growth and resilient performances at their domestic businesses.
Rivals Royal Bank of Canada and Canadian Imperial Bank of Commerce have also recently reported earnings that beat analyst expectations as worries have eased over Canada's housing market and stalling talks to renegotiate the North American Free Trade Agreement. Scotiabank, Canada's third-biggest lender, reported earnings per share of C$1.86 for the first quarter, up from C$1.57 a year earlier. Analysts had expected C$1.68 per share, Thomson Reuters I/B/E/S data showed. Scotiabank has focused its international growth strategy on the Pacific Alliance, a Latin American trading bloc comprising Mexico, Peru, Chile and Columbia, where it saw loan growth of 10 percent or more during the period.
Some analysts have expressed concern that a failure to renegotiate the North American Free Trade Agreement (NAFTA) could impact the bank's Mexican business but Chief Executive Brian Porter said he expected that market to remain resilient even if talks fail.
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