The plan focuses on growth, from the Canadian province of Quebec to the US and Mexico. Scotiabank will receive an approximate 20% ownership stake in Davivienda on a pro forma basis.
Scotiabank aims to advance its execution plan to improve sustainability and profitability in its international banking markets. The focus is on building a connected value proposition focused on client primacy across Central and Latin America.
Davivienda, as a financial institution with operations in Latin America, will become a key partner in supporting Scotiabank’s Global Wealth Management and Global Banking and Markets businesses in Colombia and Central America.
This move comes after Scotiabank, despite stating its confidence in the Colombian and Peruvian markets, announced its intention to sell its subsidiaries in South America due to their poor performance.
With this integration, Davivienda's assets are expected to grow by 30% in Colombia, 90% in Costa Rica, and 180% in Panama, and its total assets are projected to reach approximately USD 60 billion, representing a growth of close to 40%.
Scotiabank transfers banking operations to Davivienda in exchange for a combination of newly issued common and preferred shares, reflecting approximately 20% equity ownership stake in the newly combined entity.
As part of the agreement, Scotiabank will have the right to designate individuals to Davivienda's Board of Directors, proportional to its ownership stake.
The bank’s operations that are part of the transaction will be considered held for sale, with an after-tax impairment loss of approximately USD 1.022 billion will be recognised in Q1 2025.
In addition, there may be further adjustments to the loss before closing, due to changes in the value of the shares received and the carrying value of the assets being sold. As part of the transaction, Mercantil Colpatria will sell its interest in Scotiabank Colpatria in Colombia.
The bank also estimates that additional losses of approximately USD 219 million will be recorded on closing, primarily relating to cumulative foreign currency translation losses.
Overall, the transaction is capital neutral, with potential upside to earnings in future years, while reducing operational complexity. It is expected to be completed in approximately 12 months from the signing date.
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