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Riots, state of emergency in Chile force Scotiabank to postpone investor day

A Scotiabank branch in Santiago, Chile, in 2014.
A Scotiabank branch in Santiago, Chile, in 2014.

Eleven people have died and about 1,500 have been arrested since the protests, sparked by a hike to subway fares, began on Friday

Bank of Nova Scotia is postponing an investor day it intended to hold in Chile this week after protests and rioting broke out in the South American country.

Scotiabank had planned to give investors a “comprehensive overview” of its strategy and outlook on Thursday and Friday in Santiago, the capital of Chile, where a state of emergency has been declared and where 11 people have died and about 1,500 have been arrested since the protests, sparked by a hike to subway fares, began on Friday.

“Unfortunately, at this time we are unable to ensure the level of logistical support required to host the event, particularly due to the current transportation challenges in and out of the city,” a spokesperson for the bank told the Financial Post in an email on Monday. “Scotiabank has made the decision to reschedule the Bank’s Investor Day in Santiago to a date early in the New Year.”

Scotiabank, Canada’s third-biggest lender, said it was “hopeful” the situation in Santiago would soon be resolved and that “our thoughts are with our employees and customers in the impacted area.”

“In the meantime, we remain committed to hosting Scotiabank’s Investor Day in Santiago in early 2020 to showcase our growing operations in Chile and our commitment to the Pacific Alliance region,” they added. “More details on this will follow.”

Scotiabank’s strategy is unique among Canada’s big banks, as the lender has pushed to increase its presence in Latin America, and in particular, the Pacific Alliance countries of Chile, Colombia, Mexico and Peru.

In Chile, Scotiabank closed a $2.9-billion deal last year for a majority stake in lender BBVA Chile. For its third quarter, Scotiabank also reported $2.2 billion in revenue from the Pacific Alliance, up 26 per cent from the same period a year earlier and 29 per cent of total bank revenue.

“While the near-term outlook differs among the four countries (we are particularly concerned about macroeconomic challenges in Mexico and ongoing protests in Chile that began this past Friday), we continue to see strong upside growth potential for BNS (Scotiabank) in what remains an under-banked developing market,” analysts from Credit Suisse wrote on Monday.

However, the Pacific Alliance countries have recently been hit by some economic, social and political problems. For instance, the metro fare-hike has been suspended in Chile, but the dispute has reportedly spread to broader concerns about rising living costs and inequality.

As of Monday afternoon, the Canadian government was warning travellers to exercise “a high degree of caution” in Santiago and several other areas of Chile where the state of emergency is in effect.

“Incidents of violence have occurred, including arson and looting,” the government noted. “Some have led to deaths and injuries.”

Peru, meanwhile, has recently been faced with a constitutional crisis and Colombia was recently jolted by a former commander of the Revolutionary Armed Forces vowing to resume fighting following a 2016 peace deal between the group and the government.

Mexico has seen a spike in violence and slower economic growth of late. The latter helped prompt Mexico’s central bank to cut interest rates, which can put pressure on a bank’s net interest margin, the measure of the difference between what it charges for loans and pays out savers.

“With several interest rate cuts by the central bank expected through 2020, we believe Mexico could be a modest drag for BNS in the near-term as net interest margins compress,” the Credit Suisse analysts wrote. “Recent developments in (Chile) are concerning, although we believe any short-term setback is manageable as even a severe 15 per cent to 20 per cent earnings hit for BNS in Chile would impact (earnings per share) by only approximately 1 per cent.”

Scotiabank’s spokesperson noted they had been operating in the Pacific Alliance countries for more than 20 years.

“These markets are highly-resilient to political and economic cycles, with strong macroeconomic fundamentals,” they added.

Financial Post

• Email: gzochodne@nationalpost.com | Twitter: GeoffZochodne

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