Scotiabank Possible Bidder for HSBC's Mexico Unit Doug Alexander - Bloomberg
go to original April 7, 2015

British HSBC paid nearly $2 billion in penalties in December 2012 to resolve charges that it failed to stop hundreds of millions of dollars in drug money from flowing through the bank from Mexico.

Bank of Nova Scotia, Canada’s third-largest lender, could be a potential buyer if HSBC Holdings Plc sells its Mexico operations, according to Canaccord Genuity Group Inc.’s Gabriel Dechaine.

“Despite challenges associated with this business, we believe BNS would be an interested bidder,” Dechaine, an analyst for Toronto-based Canaccord, said Tuesday in a note to clients, referring to Scotiabank by its ticker symbol.

HSBC Chief Executive Officer Stuart Gulliver is under pressure to break up Europe’s largest bank amid rising capital demands and a sluggish global economy. In a Feb. 23 earnings call, he cited Mexico as one of four potential markets the bank may exit.

Scotiabank, with operations in more than 55 countries in Latin America, the Caribbean and Asia, is targeting Mexico, Peru, Chile and Colombia as countries offering the best growth potential. CEO Brian Porter said in January that he’s getting the Toronto-based bank’s Mexico unit ready to be a player in that country’s “next round of consolidation.”

Scotiabank is the seventh-largest lender in Mexico with a 6 percent market share, Dechaine said in his note. He estimates HSBC Mexico could be worth about C$11.5 billion ($9.2 billion), based on 2.2 times price to tangible book value and a 20 percent takeover premium. That valuation would be 6 percent dilutive to Scotiabank’s estimated per-share earnings for 2016, Dechaine said.

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