The rumoured sale of a 47% stake in Thailand-based Siam City Bank, is an opportunity that Bank of Nova Scotia should not pass up, says Blackmont Capital analyst Brad Smith.
"While not material from a consolidated bank perspective, the opportunity to have a front row seat in the formation of what could be Thailand's fifth largest bank sets BNS apart from its North American focused peers," said Mr. Smith in a note to clients.
The analyst said the favoured bidder for Siam City is Thanachart Bank, which is 49% owned by Scotiabank, however other players are expected at the table, including Korea Development Bank. It is speculated that a winning bid will cost the purchaser roughly US$1-billion.
Mr. Smith said a succesful bid would provide Bank of Nova Scotia earnings growth and regional diversification plus attractive risk adjusted returns on capital.
"Based on Thanchart Bank's nine month published results, BNS has earned an 11% annualized return on its invested capital which compares very favourably to negative to low single digit return levels achieved by its domestic peers on their US retail banking initiatives," he said.