Bank of Nova Scotia announced Monday that it will purchase E*Trade Canada from U.S.-based parent E*Trade Financial Corp. Under the agreement, Scotiabank will purchase E*Trade Canada for US$442 million ($444 million), subject to regulatory approvals.

The deal will double Scotiabank’s footprint in the Canadian online investing market.

“Scotiabank’s agreement to purchase E*Trade Canada demonstrates our commitment to pursuing opportunities to grow our wealth management business and drive revenue growth,” said Rick Waugh, President and CEO, Scotiabank, in a release. “This is an excellent growth opportunity that will build on Scotiabank’s strong position as a leading online investing solution.”

With approximately $4.7 billion in assets under administration and 190 employees, E*Trade Canada offers a variety of products and services to retail and institutional investors buying and selling securities via electronic trading platforms.

“Through this acquisition, Scotiabank has demonstrated its commitment to growing its online investing business,” said Duncan Hannay, president, E*Trade Canada. “The E*Trade Canada team will help Scotiabank achieve its goals by continuing to deliver exceptional value to the self-directed investor. This acquisition marks a new chapter for our business and the industry, and represents an exciting growth opportunity for all. We anticipate a smooth transition for our customers.”

The announcement builds on Scotiabank’s 2007 completion of the acquisition of Trade Freedom Securities Inc., a Canadian online brokerage boutique.

“Online brokerage is playing an increasingly significant role in wealth management as more Canadians are using online investment solutions, and many are becoming more active traders,” said Chris Hodgson, executive vp, head of domestic personal banking, Scotiabank.

“In addition to retail services, E*Trade Canada’s institutional business is included in the transaction,” said Hodgson. “E*Trade Canada will continue to provide full support for all of their institutional technology product offerings.”

“For the immediate term as we seek regulatory approvals, it will continue to be business as usual,” added Barbara Mason, executive vp, wealth management, Scotiabank. “E*Trade Canada clients can be assured that they will continue to receive the benefits that they currently enjoy, and employees will continue to have a great place to work. We are committed to bringing together the best of E*Trade Canada and Scotiabank to provide a seamless transition to a highly competitive online investing solution for all Canadians.”

No ratings implications for deal

DBRS says that Scotiabank’s plans to acquire E*Trade Canada is consistent with the firm’s growth strategy.

The rating agency said that there are no rating implications for Scotiabank in the deal. “The transaction is consistent with Scotiabank’s strategy of growing its wealth management businesses,” it notes.

“The acquisition doubles the bank’s market share in direct investing, thereby increasing scale and functionality,” DBRS adds, noting that Scotia believes the direct investing market offers attractive growth opportunities. “Additionally the bank has the opportunity to provide online banking products to enhance revenue synergies.”

DBRS says it views Scotiabank’s wealth management businesses as a key component of the bank’s growth strategy, and notes that the transaction is expected to be modestly accretive to earnings in year one, and will reduce its Tier 1 capital ratio by 20 basis points.