Scotiabank CEO Says Boosting Credit-Card Business a Priority

Apr 08, 2014 4:45 pm ET

(Updates with Canadian banking head’s comments from fifth paragraph.)

April 8 (Bloomberg) -- Bank of Nova Scotia has historically underperformed when it comes to credit cards and expanding that business in Canada is a priority, Chief Executive Officer Brian Porter said.

“In an increasingly competitive environment, credit cards allow us to better serve existing customers -- and attract new ones,” Porter said at the Toronto-based firm’s annual investors’ meeting in Kelowna, British Columbia. “They also provide us with an attractive risk-adjusted return.”

Canadian banks have been increasing their credit-card businesses through acquisitions and partnerships as lending for mortgages slowed. Toronto-Dominion Bank has led lenders on a C$20 billion ($18.3 billion) buying spree for card portfolios since 2009, including a deal with Target Corp. and its December purchase of half of Canadian Imperial Bank of Commerce’s Aerogold Visa portfolio.

Scotiabank began offering a travel-rewards card with American Express Co. in September 2012. The lender has issued 250,000 of the AmEx cards in the last 18 months for its most successful introduction ever, Porter said.

Anatol von Hahn, Scotiabank’s group head of Canadian banking, sees more opportunities to go beyond the lender’s “me too” card strategy of the past.

“We’re really smaller than we should be,” von Hahn said in an interview at the investors’ meeting. “My objective is not just to sell you a credit card -- that wouldn’t get us very far. We want to be your primary bank, that’s the draw.”

‘Less Penetration’

Scotiabank is putting credit cards front-and-center to attract customers and draw them into the lender’s payments system with rewards and cash-back products, von Hahn said. That’s a shift from when the bank focused more on clients seeking mortgages and car loans and offered cards as an afterthought, he said.

“We have less penetration of credit cards with our existing customers than the other banks do, and that’s because we were so strong on the secured side versus looking at the other part,” von Hahn said.

Scotiabank, which also plans to introduce a credit card through its online banking unit Tangerine, will look at card loyalty programs to expand, von Hahn said. The bank already has partnerships with theater-chain owner Cineplex Entertainment LP through its Scene Visa card and the National Hockey League with the ScotiaHockey NHL Visa card.

Credit-card revenue increased 6 percent in the year ended Oct. 31 to C$816 million, Scotiabank said in its annual report.

“This is a business we’re focused on and you should expect to see meaningful growth in our Canadian credit-card business over the next several years,” Porter said today.

Latin America

Porter said Scotiabank, which has operations in more than 55 countries, will continue to look overseas for growth, especially in Peru, Colombia, Mexico and Chile.

“Despite some volatility over the past few months, not all emerging markets are equal,” he said. “Each of these chosen markets have similar macro-economic fundamentals and disciplined fiscal management.”

The Latin American countries where Scotiabank operates also have growing middle classes, which will require financial services, he said.

“As this middle class grows, more people will require financing for their homes and auto purchases,” Porter said. “They will save more and want to make prudent investments.”

Scotiabank gained 0.4 percent to C$64.89 at 4 p.m. in Toronto. The shares have slid 2.3 percent this year, compared with the 2.3 percent advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index.