Scotiabank is acquiring a 14.9% stake in American regional lender KeyCorp for $2.8 billion, as the Canadian bank seeks growth outside its saturated home market. The deal, priced at $17.17 per share, represents a 17.5% premium to KeyCorp’s last closing price and gives Scotiabank the ability to appoint two directors to KeyCorp’s board. This move comes as smaller U.S. regional banks struggle with rising deposit costs and weak loan demand.
This investment marks Scotiabank as the latest Canadian bank to expand into the U.S. amid slowing growth in Canada’s banking industry. The move follows similar strategies by its rivals, including Bank of Montreal and TD, which have made significant acquisitions in the U.S. in recent years. Scotiabank’s focus is shifting toward North American markets, particularly on the $1.6 trillion annual trade in the region.
CEO Scott Thomson emphasized that the investment in KeyCorp aligns with Scotiabank’s strategy to move capital from developing markets to more stable developed markets. Thomson described the investment as “low risk, low cost optionality” in North America, expected to yield strong returns. The decision surprised some analysts, who had anticipated that Scotiabank would initially focus on expanding its wealth management or capital markets businesses.
