Scotia's Commercial Bank Unit Excels where the Sun Shines

After U.S. banks and securities firms lost tens of thousands of jobs at the hands of the financial crisis, better-situated Canadian banks were happy to step in to purchase U.S. bank assets and recruit professionals.

So it was curious to see the Globe and Mail speculating just days ago that "The best place for a Canadian bank to be right now is somewhere other than North America."

What it all comes down to of course, is that Scotia is another Canadian banking institution that's finding it tougher to make a buck with traditional retail operations at home and in the United States.

Recruiter Richard Lipstein of New York Based Boyden Global Executive Search told eFinancialCareers that Scotia has not been terribly acquisitive in U.S. commercial banking, but has been a long-time player in Latin America "and got in fairly early." Also, whereas Scotia is more mature than other banks in Chile and Peru, Lipstein says, the bank continues to hire for those Latin American operations.

Some Canadian superstars are clearly making good with investment banking and wealth management businesses south of the border. One obvious case in point is RBC, which build the sixth-largest U.S. brokerage over the past decade, rolling up specialty regional advisory firms like Sutro & Co, Tucker Anthony and Dain Rauscher, and recruiting over 300 advisors between 2009 and 2010 alone.

RBC also continues to build out its investment bank operation in the U.S., but after repeated losses and unprofitable loans, it is widely anticipated that U.S. retailer RBC Bank is now on the auction block.

As Canadian banks face shrinking margins at home and in the U.S. and undercut each other on mortgages and commercial lending to win market share, the trend has begun eating into profits," the Globe and Mail reported on May 31. "But outside North America, in places like Peru, Mexico and Chile, Bank of Nova Scotia international operations are basking in fatter margins and growing loan volumes, with none of its closest rivals to fend off."

Scotiabank, which does business in 50 countries, said international banking surged 68 percent to a record C$402 million for the second quarter because of increased lending in Asia, Peru, Chile and the Caribbean. But domestic consumer-banking profit declined 1.6 percent to C$444 million on lower revenue and compressed net interest margin, the difference between what the bank charges for loans and pays in deposits. Its net interest margin was also negatively impacted by consumer preference for lower yielding variable rate mortgages and maturing of older higher yield fixed rate mortgages, the company stated.

Scotia "continues to be rewarded from its international diversification," John Aikenan analyst at Barclays Capital, said recently in a note to clients, Bloomberg Businessweek reported. The international bank results "helped take much of the attention away from the disappointing results in its Canadian banking segment," said Aiken, who has an "underweight/positive" rating on the stock.

Thus, from a retailing and commercial banking perspective, if Scotia' experience is any gauge, it may make more sense for would-be Canadian employees to seek out new territory in the southern hemisphere going forward.

And to bring their sunscreen.