Scotiabank taps board member Thomson as CEO in surprise move

A person walks on a sign for the Bank of Nova Scotia, which operates as Scotiabank, in Toronto, Ontario, Canada December 13, 2021. REUTERS/Carlos Osorio

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September 26 (Reuters) – The Bank of Nova Scotia (BNS.TO) announced on Monday that it had appointed Scott Thomson, a six-year board member, to succeed chief executive officer Brian Porter, a move made due to the new CEOs were surprised by a lack of familiarity among bank investors.

Thomson, 52, comes to Scotiabank from Finning International Inc (FTT.TO), the largest dealer of Caterpillar Inc (CAT.N) services and equipment, where he was chief executive officer for nine years. Thomson rises to lead a company that has a market cap of CA$83 billion (US$60.3 billion), compared to Finning’s CA$3.7 billion market value.

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At Finning, Thomson helped increase return on invested capital across all businesses, particularly in Latin America, Scotia said in a statement. Scotia’s exposure to Latin America stands out among Canada’s top banks, which have expanded primarily into the United States as part of a diversification effort.

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The change at the helm of Canada’s third-largest lender comes at a time when the country’s banking sector is grappling with market turmoil and rising interest rates.

Scotiabank shares fell 3% on the TSX on Monday following the announcement, beating the 0.2% decline in the banking sub-index (.GSPTXBA).

“The market was surprised,” said Robert Wessel, co-founder of Toronto-based Hamilton ETFs, one of Scotiabank’s shareholders. “The share price movement is likely due to the bank’s investors’ unfamiliarity with the successor and possible uncertainties surrounding a possible change in senior management.”

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Thomson will begin initially as President on December 1, overseeing Canadian banking, global banking and markets, global wealth management and international banking at the bank before becoming CEO on February 1.

Wessel said that given the long transition period, the market has had time to get to know the new CEO and where he wants to take the bank.

Outgoing CEO Porter, whose annual salary for 2021 was CA$11.36 million, according to the company’s proxy report, will serve as a strategic advisor to Thomson from February 1 to April 30 next year.

Under Porter, Scotia’s net worth has grown from $744 billion to $1.3 trillion since he took on the role in 2013.

Scotiabank shares are up 14.6% since Porter took over as CEO and the close on Friday, underperforming a 57% gain recorded by the TSX Bank sub-index (.GSPTXBA) over the same period.

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Scotiabank last month reported third-quarter earnings that were slightly below estimates as a sharp decline in revenues from its capital markets division overshadowed strong loan growth in its international business. Continue reading

Last month, several brokerage firms aggressively downgraded Canada’s largest bank as earnings at its international banking segment fell below estimates and risks increased on modest net interest margin expectations.

($1 = 1.3760 Canadian Dollars)

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Reporting by Mehnaz Yasmin in Bengaluru and Divya Rajagopal in Toronto; Edited by Savio D’Souza, Shounak Dasgupta, Shinjini Ganguli and Marguerita Choy

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