The Bank of Nova Scotia BNS aims to become the third-largest private bank in Chile with the acquisition of Banco Bilbao Vizcaya Argentaria, S.A.'s BBVA 68.19% stake in BBVA Chile for about $2.2 billion (CAD$ 2.9 billion).
BBVA will accept the binding offer submitted by Scotiabank if the Said family — BBVA's minority partner with the remaining stake — chooses not to exercise its Right of First Refusal. On completion of the deal, Scotiabank's Common Equity Tier (AMEX:CET) 1 capital ratio is expected to be impacted by nearly 1%.
Notably, the Said family has the right to sell its stake in BBVA Chile on the same terms to Scotiabank, per the tag-along rights it has under the shareholders agreement of BBVA Chile. Scotiabank's CET 1 ratio would be impacted by about 1.35% if the bank is successful in purchasing all the shares of BBVA Chile.
The transaction is likely to raise Scotiabank's market share in Chile to nearly 14%, almost double of what is had before. BBVA Chile with assets and more branches than Scotiabank will deepen latter's reach in Latin America. This is in line with the bank's aim to expand operations in the region.
Though the stock was down nearly 2.5% in the last trading session, the Canadian Bank reported strong results for the fiscal 2017.
Adjusted earnings per share were up 8% on a year-over-year basis. Also, it recorded improved revenues, which were partially offset by a fall in trading revenues due to low volatility in the markets compared to the last fiscal year.
Further, its CET 1 ratio rose five basis points to 11.5%. This indicates the bank's sound financial position and leaves no doubts for the impending acquisition.
Shares of Bank of Nova Scotia have gained 14.6% year to date, underperforming the 18.4% rally for the industry it belongs to.
Currently, the stock carries a Zacks Rank #4 (Sell).
A couple of better-ranked foreign bank stocks are Bank of N.T. Butterfield & Son Limited NTB and Credicorp Ltd BAP. Both these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Bank of N.T. Butterfield & Son's Zacks Consensus Estimate for current-year earnings has been revised 2.2% upward in the last 60 days. The company's share price has risen almost 24.6% year to date.
Credicorp's current-year earnings estimates have been revised slightly upward over the last 60 days. Also, its shares have gained 35.7% so far this year.
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Bank of Nova Scotia (The) (NYSE: BNS): Free Stock Analysis Report
Banco Bilbao Viscaya Argentaria S.A. (NYSE: BBVA): Free Stock Analysis Report
Credicorp Ltd. (NYSE: BAP): Free Stock Analysis Report
Bank of N.T. Butterfield & Son Limited (The) (NTB): Free Stock Analysis Report
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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.