Instead, the June pitches appear to have been a trigger point in an abrupt change of direction that shifted Mr. Thomson from one of the most influential voices in choosing the next CEO into a top candidate for the job himself and eventually the winner. Im not saying we wont exercise it at some point in time, but now is not the time.. Takes you to an interactive chart which cannot interact. For subscribers only. Because theres already been so much turnover, the last thing the banks investors and crucially, its employees wanted is more upheaval. Copyright 2023 The Globe and Mail Inc. All rights reserved. While its international banking arm focused on Chile, Colombia, Mexico and Peru posted a rise in net income to $654-million from $545-million, Mr. Thomson said on the call that the divisions overall returns are not commensurate with our expectations in certain countries.. He worked in both consumer and institutional-focused divisions, and managed the digitization of the banks cards, retail and wealth management businesses in Asia and the Middle East. After an assessment analysis, which is pretty rigorous, the board decided Mr. Thomson would be a great leader and a great CEO for the bank, Mr. Regent said. A third deal in retail banking, worth $2.9-billion, was for a majority stake in BBVA Chile. Bill C-18, which got royal assent last week, was designed to support the Canadian news industry, which has . The shares Scotiabank is purchasing are owned . Scotiabank to pay $1-million in fines in - The Globe and Mail More than a dozen banks and their affiliates agreed to pay a total of US$1.8-billion to the SEC and the CFTC for such violations in September. And profit in the wealth management division fell 7 per cent to $385-million. Mr. Regent, the board chair, said in an interview this week that the bank benchmarked our internal options against externals and we had some great choices.. He made the jump to the banks executive ranks after seven years leading Scotiabanks equity research coverage of Canadas biggest bank stocks. Mr. Thomson told shareholders he plans to grow Scotiabanks commercial and wealth banking businesses in the region by grabbing market share in industries that benefit from Mexicos export agreements. The bank said in a statement Monday that Mr. Deschamps is retiring at the end of April after seven years at the lender. Scotiabank appoints new head of real estate and secured lending The move marks the Liberal governments second major shift in taxation for the financial sector in the past year. Still, we see more damage beneath the surface. Its price-to-earnings ratio is the lowest among the Big Six, at just eight times estimated earnings, according to RBC Dominion Securities. Follow James Bradshaw on Twitter: @jembradshawOpens in a new window. So many executives were sent packing for who knows what reason, and others seemed to leave on their own out of utter frustration. Weve always been known as growing through the loan book, and my focus is trying to bring more customer orientation where we can provide more value to customers beyond just the loan, Mr. Thomson said in an interview with The Globe and Mail. Maybe hes exactly what the bank needs. Until his retirement at the end of the year, Mr. Webster will continue to lead the team to support Mr. Malhotra as he ramps up in his new position. This year, the share price is down nearly 25 per cent, making it the worst performer among the biggest six Canadian banks. Maybe Mr. Thomson has the magic touch. Under his tenure, the bank restructured its international unit, selling off its operations in Antigua and Barbuda, and increasing its stake in its Chilean division. Scotiabank receives low shareholder support for executive compensation plan. The staff conducted more than 8,700 changes to their sales targets during a three-year period, but Scotiabank said that it was unable to determine how many of those were done for illegitimate reasons. In an internal company presentation obtained by The Globe at the time, Scotiabanks culture was described as overly collegial.. In the second quarter, the bank may see some margin pressure, but that should ease in the latter half of the year as customers adjust to higher costs and central banks pause rates hikes, chief financial officer Raj Viswanathan said during the conference call. Two staff members were fired. The TSX pullback is even milder at 3.2%. A new CEO doesn't make Scotiabank a buy - but this does Finning's problems over the years go beyond its inventory management . Meanwhile, over at Finning International Inc., where Mr. Thomson has been CEO for the past nine years, a separate succession plan was set in motion. Copyright 2023 The Globe and Mail Inc. All rights reserved. Some directors on Scotiabanks board were uneasy about the banks succession plan, according to three sources familiar with the boards thinking. The MSCI Emerging Market Index, which tracks stocks in 24 countries including China, India and Brazil, has produced an annualized gain of just 2.9 per cent over the past 10 years (to the end of August). Copyright 2023 The Globe and Mail Inc. All rights reserved. This large exposure has been a tough sell to investors who have witnessed the halting performance of emerging markets since BRICS Brazil, Russia, India, China and South Africa failed to live up to economic expectations in recent years. Copyright 2023 The Globe and Mail Inc. All rights reserved. Before joining Scotiabank, Mr. Deschamps served as CEO of Mexicos largest bank, Grupo Financiero BBVA Bancomer. Redirecting to /i/flow/login?redirect_after_login=%2Fscotiabank Copyright 2023 The Globe and Mail Inc. All rights reserved. In the best cases, it is a good thing. But whats transpired at Scotiabank is something else. But the beaten-up share price and low valuation are hard to ignore. Scotiabanks board recently topped up the paycheques of Mr. Lawrence and Mr. Rees with retention bonuses. The budget also proposed bolstering the powers of Canadas banking regulator, the Office of the Superintendent of Financial Institutions. Scotiabanks share price slumped 5.7 per cent in Toronto on Tuesday on news of the decline in the banks net interest margin the difference between what it earns on loans and pays on deposits. In the worst, it breeds a culture built on fear, because everyone is terrified of the consequences if they dont toe the line. Need help signing in? In his first three years, Mr. Porter replaced eight of the banks top 10 executives, as well as two regional leaders one for Mexico, the other for Latin America. Lenders are facing slowing loan growth as high interest rates boost borrowing costs on lending products such as mortgages. But the more time passed, the more investors grew confused by what exactly Scotiabank was up to. Follow Stefanie Marotta on Twitter: @StefanieMarottaOpens in a new window. A bet on Scotiabank hasnt paid off in recent years. Gurbir Grewal, the director of the SECs enforcement division, told a legal conference in Denver Thursday morning that the Scotiabank action is an example of one of the SECs current enforcement priorities. To fill the executive seat, Mr. Thomson is bringing in a new hire, Francisco Aristeguieta, currently executive vice-president and CEO of Boston-based bank State Street Corp.s institutional services unit. The failure of Californias Silicon Valley Bank, rising interest rates and fears of a recession are all weighing on the economy. CEO and President of Scotiabank Brian Porter in Toronto on April 18, 2019.Christopher Katsarov/The Globe and Mail. Those included whether the board and outgoing CEO Brian Porter failed in their duty to identify and prepare suitable candidates from within the banks management, or to land a leader with sufficient external banking experience. The whole Street talked about it. Who knows how many fresh faces hell bring into the organization to build his leadership team. The Globe is not identifying the six sources who described the banks succession process because they were not authorized to discuss it. Inside Scotiabank's succession saga that stunned - The Globe and Mail Subscribe Now Cancel anytime. New Scotiabank CEO Scott Thomson had spotty track - The Globe and Mail Johns contributions to the Bank have been invaluable and on a personal level I want to thank John for his partnership and wise counsel since I joined this team.. When Mr. Thomson starts on Jan. 31, Mr. Porter will have led the bank for more than nine years. He added that Mr. Aristeguieta brings impressive experience to the role as the bank looks to shake up its presence in its core international markets. All market data (will open in new tab) is provided by Barchart Solutions. Its likely that theyre going to lose some high-caliber talent, Mr. The better approach: Worry less about changes in the C-suite and take a closer look at the stocks compelling valuation. CEO and President of Scotiabank Brian Porter in Toronto on April 18, 2019. grew confused by what exactly Scotiabank was up to. On average, the Big Six are down 14 per cent in 2022. With previous roles at Macquarie Capital Markets and Merrill Lynch Canada, Mr. Malhotra has an in-depth understanding of bank financials. In some cases, that was because of misgivings about whether Mr. Lawrence and Mr. Rees were seasoned enough to take over. Bank of Nova Scotia BNS-T has agreed to pay penalties totalling US$22.5-million to settle with two U.S. regulators over record-keeping violations that resulted from the bank's employees avoiding. Scotiabank is the third major Canadian bank to report earnings for the fiscal first quarter. The Globe and Mail - Mon Jun 26, 8:44AM CDT, A look at equities with price momentum in both directions, Scotiabank appoints new head of real estate and secured lending, The most oversold and overbought stocks on the TSX, Why this money manager thinks investors should get off the sidelines but still be defensive, Canadas banking regulator boosts capital buffer as debt levels, borrowing costs climb, Eight Canadian stocks with sustainable dividend yields above 6 per cent, Canadian housing affordability likely past the point of no return: RBC analyst, Ahead of the summer doldrums, heres 18 Canadian stocks that offer safety and value, National Bank profit slides as economic gloom weighs on second-quarter earnings, Big bank earnings wrap up as results disappoint and interest rates, recessionary fears bite, Heres a breakdown of the Big Six banks second-quarter earnings, TD to miss profit targets on cancelled First Horizon deal, economic gloom, Thursdays analyst upgrades and downgrades. Today theyre worth roughly $13.50 apiece. Remember my username or card number. BMO and Scotiabank earnings disappoint as economic hurdles weigh on growth, Canadian banks bent on international expansion lag those that stay home, Veritas report argues, U.S. Federal Reserve ends action against Scotiabank over anti-money laundering controls. Its a stretch, but fine, board chair Aaron Regent can have that one. Three months later, Mr. Thomson himself was announced as the banks next chief executive officer. Bank of Nova Scotia has a more specific challenge with its exposure: While rising interest rates are supposed to add a significant tailwind to a banks loan profitability, Scotiabank has seen its international net interest margins which compares interest it is making on loans to payments it is making on deposits decline slightly. BMO and CIBC also set aside more money for potentially bad loans. Since joining Scotiabank in 2016, Mr. Deschamps oversaw the bank's personal, small business and commercial banking operations globally outside of Canada, and he led Scotiabank's digital . He added that banks are the lifeblood of the economy.. It is rare for Canadian banks to reach outside their own executive ranks to choose CEOs, partly because of the financial and regulatory complexity of running these massive companies. They felt it was an acceptable level of risk. An SEC order said the violations by Scotia employees went up to senior levels at the bank. Scotiabank names Finning chief Scott Thomson as - The Globe and Mail Can new leadership make Scotiabanks Pacific Alliance exposure a reason to embrace the stock? An investigation conducted by Scotiabank found that some of its employees had inappropriately processed clients requests to switch their mutual fund holdings. I know that we have not delivered the level of total shareholder return that you should expect of us, Mr. Thomson said. Box 4100 Station A Toronto, ON M5W 1T1: ScotiaCard Customer Service P.O. The decline was serious enough for Mr. Mihelic to trim his target price on the stock or where he expects the share price to be within the next 12 months to $83, from $94 previously. That late shift has raised awkward questions about the accelerated process that chose Mr. Thomson over the summer. In global markets, where Mr. Porter spent most of his career, the executive turnover has been even more frenetic. Mr. Porter was smart to invest in wealth management, because its become a hot sector, yet its been tough to tell whether anything special has come from either transaction. He also lowered his recommendation to sector perform from outperform.. Sign in | Scotiabank Published April 14, 2021. The CEO said the strategy is aimed at improving investor returns and growing customer portfolios. The Globe and Mail offers the most authoritative news in Canada, featuring national and international news Past performance is no guarantee of future results. But even as the bank looks at shifting its capital allocation strategy, Mr. Viswanathan said Scotiabank is first looking at how it can grow organically rather than leaving certain businesses. We do not believe that expectations were high for Scotia in the first quarter but the miss will likely be viewed as a disappointment as margins declined in international banking and were flat domestically, Barclays analyst John Aiken said in a note to clients. Canadian Imperial Bank of Commerce released results last Friday, followed by Bank of Montreal early Tuesday, with both banks posting lower profit that still beat analyst expectations. Because the bank was starting to stall, and because its shares were struggling again, everyone assumed there would be a new CEO soon. The clumsy board of directors. She still doesnt know why, Bank CEOs say cash reserves are ready ahead of potential slowdown, Scotiabank to pay $1-million in fines in settlement with regulator, 34 employees terminated for egregious misconduct, Scotiabanks cash-back conundrum, gifting stocks and behind the FTX collapse: Must-read business and investing stories, Laurentian Bank posts $55.7-million in earnings in fourth quarter, revenue up slightly from year ago, Canadian dollar tracks oil higher; speech by central bank deputy governor awaited, Ottawas COVID-19 spending had small impact on inflation, larger effect on interest rates: report, Scotiabanks fourth-quarter profit slips on higher costs, increased loan-loss provisions, Why this money manager is selling Magna stock - and buying Amazon. Welcome to. The bank also admitted that it failed to prevent employees from setting up preauthorized contribution plans which count toward sales goals without approval from clients. Some information may no longer be current. Through an investigation, Scotia found that 46 employees were involved in processing more than 750 transactions as redemptions and purchases instead of switches from November, 2017, to January, 2020. Bank of Nova Scotia BNS-T has agreed to pay penalties totalling US$22.5-million to settle with two U.S. regulators over record-keeping violations that resulted from the banks employees avoiding corporate communications systems and instead using personal devices, apps and accounts for work purposes. Opinion: Who's to blame for Scotiabank's CEO - The Globe and Mail Analysts expect earnings per share at the banks to take a modest hit of about 1 per cent this year. The comparable figure for the S&P 500 Index is 9.7 per cent (to Sept. 23). Copyright 2023 The Globe and Mail Inc. All rights reserved. Inside Scotiabank's succession saga that stunned Canada's corporate elite. Scotiabanks net interest margin slumped to 2.11 per cent from 2.16 per cent in the same quarter last year, even as rates rose. Mr. Regent, the banks board chair, appears to be betting that the board has made the correct choice. Bank of Nova Scotias BNS-T share price has underperformed its peers this year by a wide margin, raising the question of whether investors should embrace the upcoming leadership change at Canadas third-largest bank. Nacho is an outstanding global banker with a deep knowledge of Latin America, Mr. Thomson said in a statement. The update would require banks and insurers to count those dividends as business income. Mr. Malhotra is among the ranks of analysts covering Canadian banks who have moved up into executive positions in the industry. In an interview with The Globe and Mail ahead of the meeting, Mr. Dodig said that while two-thirds of Canadas gross domestic product growth is generated by population increases, the country needs to catch up on building the infrastructure needed to support hundreds of thousands of newcomers each year, as well as the Canadians already building their lives here. Scotiabank declined a request for comment and instead pointed to the settlement. In the federal budget last week, Ottawa said it plans to generate billions of dollars from banks and insurers by amending tax treatment on dividends of Canadian shares held by financial institutions. Opinion: Whos to blame for Scotiabanks CEO succession mess? But a better reason to take a closer look at the stock is its low valuation. The settlement deal with Canadas mutual fund industry regulator, published on Wednesday, also requires Scotia Securities Inc. to return $10.8-million to clients. Scotiabanks board may also have felt a sense of urgency to find a successor. It appears that the bank is having difficulty managing interest rates in the Pacific Alliance, Darko Mihelic, an analyst at RBC Dominion Securities, said in a note in August, after Scotiabank released its fiscal third-quarter financial results. In April, Kevin Parkes who will succeed Mr. Thomson as Finnings CEO in mid-November returned from an absence for health reasons and was appointed the companys chief operating officer, putting him squarely in line for Finnings top job.

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