Source: The Canadian Press

Bank of Nova Scotia is expanding its presence in Latin America through the purchase of a private bank and a separate financial services firm, both in Uruguay, for an undisclosed amount from the Advent private equity group.

The Canadian bank (TSX:BNS) said Monday it will acquire Nuevo Banco Comercial, Uruguay’s fourth-largest bank by assets along with Pronto!, the country’s third-largest consumer finance company.

The deal, which makes Scotiabank the first Canadian bank with a retail network in Uruguay, adds to its already extensive footprint in Latin America.

Scotiabank’s other holdings include Grupo Financiero Scotiabank in Mexico, Scotiabank El Salvador, Scotiabank de Costa Rica, Scotiabank Sud Americano in Chile and Scotiabank Peru, as well as affiliate Banco del Caribe in Venezuela.

Dieter Jentsch, executive vice-president for Latin America at Scotiabank, said the Canadian bank likes Uruguay as a place to invest.

“We see it as a stable economy with a stable political climate,” Jentsch said.

“The opportunity is that we will bring expertise and leverage our worldwide ability to enhance earnings.”

The deal also gives Scotiabank a toehold in Brazil as Nuevo Banco Comercial has a three-branch, full-banking subsidiary in that country.

Advent International, which describes itself as the largest private equity investor in Latin America, bought Nuevo Banco Comercial in 2006 as part of an investment group that included Morgan Stanley and two European development banks in a deal valued at US$167 million.

The private equity firm followed up in 2007 with the acquisition of Pronto!, which provides consumer loans through 36 branches across Uruguay, from a group of local investors. Terms of that deal were not released.

“In just a few years, we have worked with management to transform the businesses into successful, market-leading companies,” said Juan Pablo Zucchini, a managing director at Advent.

“Both are well-positioned for continued growth as part of Scotiabank, a world-class financial institution.”

Nuevo Banco Comercial has 49 branches, 710 employees and 85 automated banking machines.

It also has an 11% share of Uruguay’s loan and deposits market, with a particularly significant portion of the $1.2 billion in total deposits being stable core funding.

The investment by Scotibank came as the Ontario Teachers’ Pension Plan Board announced it was part of an investment group putting US$1.8 billion in BTG Pactual, a Brazilian investment bank and money manager.

Teachers’ said Monday it has partnered with several big investment funds in including the Government of Singapore Investment Corp., China Investment Corp. and the Abu Dhabi Investment Council in its deal.

Barclays Capital analyst John Aiken said Scotiabank’s deal fits well with its existing investments in Latin America.

“Although very small, we believe that this fits in very well with Scotia’s stated strategy in its international banking operations,” Aiken wrote in a note to clients.

“As for Brazil, we do not believe that this is the signal of broader plans to ramp up retail banking operations, but it does give it a flavour for the market in one of the few significant Latin American economies it does not have a presence in.”

Terms of the agreement with an investor group, led by Advent, weren’t disclosed, but Scotiabank said they were not financially material to the bank.

Last week, Scotiabank reported an increase in its quarterly profit compared with a year ago and hinted that it may look to raise its dividend.

Scotiabank earned just under $1.1 billion or $1 per diluted share for the quarter ended Oct. 31 compared with a profit of $902 million or 83 cents per share a year ago.

Overall revenue for the three months ended Oct. 31 was $3.94 billion, up from $3.74 billion in the fourth quarter of fiscal 2009.

In November, the bank signed a deal to buy the rest of money manager DundeeWealth (TSX:DW) that it did not already own for $2.3 billion. DundeeWealth runs the Dynamic family of mutual funds in Canada.

Scotiabank shares gained 49 cents to close at $56.12 on the Toronto Stock Exchange on Monday.