ScotiaBank to buy Discount Bank Latin America

ScotiaBank has signed an agreement to buy Israel Discount Bank’s Uruguay unit for $65 million.

Discount Bank CEO Lilach Asher-Topilsky-GLOBES

Israel Discount Bank (TASE: DSCT) has announced that it has signed an agreement to sell its unit Discount Bank Latin America (DBLA) to Canada’s ScotiaBank. The two banks have signed an agreement, which would see DBLA sold for about $65 million.

This figure is somewhat below DBLA’s equity and will result in Discount Bank reporting a capital gains loss of $16.5 million on the sale in its financial report. However, the sale of DBLA will improve Discount Bank’s capital adequacy by about 0.1% (the ratio between the bank’s equity and asset risk). Foreign reports say that DBLA’s 260 employees will be integrated into ScotiaBank and the deal will be completed within 6-12 months.

DBLA, a subsidiary of Israel Discount Bank unit Discount Bank of New York is based in Uruguay and focuses on retail banking. The bank has deposits of $1.1 billion and a credit portfolio worth $150 million. In the first 11 months of 2014, DBLA recorded profit of $3 million.

In the past, Discount Bank had considered selling Discount Bank of New York, the largest Israeli-held foreign bank, in its entirety and thus solve once and for all, Israel Discount Bank’s capital adequacy problems. But in the end it was decided not to sell Discount Bank of New York but only the Latin American operations.

Discount Bank has been trying to sell DBLA for more than a year. Among those interested were Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA) (Madrid; NYSE: BBVA) and the Colombian Jewish billionaire banker Jaime Galinski. There were even advanced talks with Galinski, who was prepared to acquire DBLA for the price of its equity but ultimately the deal fell through, because he was unable to obtain regulatory approval.

ScotiaBank already holds a license to operate in Uruguay meaning that regulatory approval won’t be an obstacle to the deal. The acquisition is part of ScotiaBank’s strategy of expanding Latin American operations.

The sale is part of Discount Bank CEO Lilach Asher-Topilsky’s streamlining strategy of focusing mainly on retail banking in Israel. Discount recently decided to sell its London branch and is mulling selling its Swiss activities, which would leave Discount Bank of New York as its only overseas operations.

Published by Globes [online], Israel business news – www.globes-online.com

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