(Toronto) Scotiabank will focus its growth efforts closer to home and may exit some overseas markets under a new strategic plan outlined by CEO Scott Thomson on Wednesday.
Mr. Thomson said the bank will devote about 90% of its additional capital to its Canadian, U.S. and Mexican markets, while spending in its Latin American markets will receive greater scrutiny.
“We are accelerating the growth of our business in Canada and increasingly allocating capital to stable, high-yielding markets in North America,” he said during an investor presentation .
The bank will be selective in financing its personal and commercial operations in Chile and Peru, while its divisions in Colombia and Central America will need to recover without additional financing or the bank will seek to exit these markets.
“They have a plan, they are executing on it, but we will determine whether to continue that plan or redeploy the capital in a relatively short period of time,” Thomson said.
The potential exit from less profitable markets is part of a long-term trend for the bank, which has already exited 25 high-risk regions over the past decade.
For years, Scotiabank has underperformed its peers in shareholder returns, as well as metrics such as revenue growth and return on equity.
The bank focused too much on volume, growing customers and business, without paying enough attention to the return on that growth, Thomson said.
“It’s a fundamentally different philosophy on how to create shareholder value. I believe we will create value through profitable growth. There will be volume growth, but it will be value, not volume growth through the balance sheet,” he said.
To increase value, he explained the bank will work to establish more “primary relationships” where customers use Scotiabank for their daily banking and other products.
The bank also strives to achieve efficiency gains across its operations. It announced last quarter that it was reducing its workforce by around 3% and recorded a charge of 354 million to this effect. It also recorded an 87 million charge related to reducing its real estate footprint.
Mr Thomson said the bank, which has already confirmed some branch closures, is lagging behind its peers when it comes to deposits and customers per branch.
The updated plan is the result of a review Mr Thomson launched as he took over as CEO of the bank in February.
