Talking point: BMO’s and Scotiabank’s reports of strong investment-banking and trading operations follow RBC announcing the same last week. The results are driven by all three banks enjoying a more stable macroeconomic environment compared to the same quarter last year. Also today, BMO named Cam Fowler chief strategy and operations officer, a newly created role for the bank’s digital services and innovation strategy. BMO is making a cross-bank digital push, including investing in venture capital funds and launching a U.S. digital bank. In December 2019, the bank said it would cut five per cent of staff while ramping up the delivery of its digital services. Though it’s trying to expand its U.S. operations, the bank’s personal and commercial division in the country dropped 21 per cent, bucking a growth trend from the past two years. Scotiabank’s domestic banking decreased one per cent this quarter compared with last year, despite announcing in January that it wanted to get 40 per cent of its earnings from Canadian banking. Wealth management increased 12 per cent $309 million, now accounting for 13 per cent of overall earnings—Scotiabank is hoping it’ll hit 15 per cent of overall earnings.
The funding will be used to build fraud-detection and speech-to-text analytics tools in the school’s computer science department. (The Logic)
Talking point: This investment gives Scotiabank access to Edmonton’s growing AI talent pool at a time when competition in Canada’s other two major cities for AI research—Toronto and Montreal—is reaching a fever pitch. The University of Toronto, McGill University and the Université de Montréal have announced partnerships with some of the largest companies in the world, including Uber, Facebook and Samsung. Scotiabank has been an early mover in AI company-university partnerships before. It made a $1.75-million donation to U of T in September 2016, well before those Big Tech companies signed their deals. RBC and Mitsubishi have research facilities in Edmonton and Google’s DeepMind chose Edmonton for its first-ever international AI research facility.
The plan commits the bank to “robust” climate-related governance and reporting. It says it will integrate climate risk assessments more in lending, financing and investing, decarbonize its operations and create a “Climate Change Centre of Excellence.” (The Logic)
Talking point: The pressure to shift toward sustainable financing has increased since May, when the Bank of Canada first listed climate change as one of six vulnerabilities in the Canadian financial system. The central bank recognized that investors are not seeing prices that factor increasingly serious climate risks (due to a lack of transparency around carbon exposure), which could lead to “fire sales” that may destabilize the economy. Scotiabank, which manages more than $1 trillion in assets, issued its first green bond in July at US$500 million that invested in renewable energy, clean transportation and green buildings.
Glen Gowland, executive vice-president of global wealth management, said the bank is looking to build an investment-handling division in the U.S., or buy an existing firm, to bring more assets under management and attract ultra-high-net-worth clients. (Bloomberg)
Talking point: Scotiabank has used such acquisitions to grow its Canadian wealth management client base, like the institutional investors and high-net-worth families brought in via the $950-million deal for Jarislowsky Fraser in February 2018 and the $2.6 billion acquisition of doctor-serving MD Financial in May 2018. Other Canadian financial institutions like Manulife have also started expanding their services for the super-wealthy. Wealth management brought in 12 per cent of Scotiabank’s earnings in each of the last two fiscal years, and it wants to raise that to 15 per cent. Gowland expects that part of its business to grow faster outside Canada, in markets like Chile, Peru, Columbia and Mexico. A big buy in the U.S.—a country with a large ultra-wealthy class—would help.
Blueprints for phone applications and logins for internal Scotiabank services were posted on the online repository. Some have been taken down since The Register broke the news on Wednesday. As of Friday afternoon, however, the bank had yet to remove all the internal data. “Our technical teams are working to remove the information,” Scotiabank reputation manager Doug Johnson told The Logic. Johnson said the posted information does not “contain information that would put our customers, employees and partners at risk.” (The Logic)
Talking point: Some of the leaked information is potentially sensitive, including data on foreign exchange rates and details on payment integrations with Samsung and Google. This leak comes over a year after Scotiabank announced its first open source contribution to GitHub, making it the first Canadian bank to release open code software. At the time, Scotiabank billed the initiative as part of a larger strategy of making it a tech-focused financial institution. For now, although much of Scotiabank’s GitHub repository has been pulled, there are still six repositories up.
Cineplex said it will only screen films from distributors who “understand and appreciate the importance of the theatrical release model.” Seven Amazon titles and eight Netflix titles will be shown at the TIFF Bell Lightbox, instead. (IndieWire)
Talking point: Cineplex is leveraging its power to dictate which movies can play at its theatres in its ongoing feud with Netflix and Amazon. The firm has done this before—including by refusing to screen Netflix’s The Irishman, along with other chains like AMC, Regal and Cinemark—but never during TIFF. Netflix and Amazon disagree with Cineplex about how long films should remain in theatres before becoming available on streaming platforms; Netflix has pushed for theatrical-screening windows as low as 30 days, instead of the traditional 90 days. Netflix has also been absent from the Festival de Cannes since 2017, due to its unwillingness to abide by theatrical screening windows in France.
Scotiabank raised dividends by three cents to 90 cents per share and saw two per cent overall profit growth, driven by a $262-million rise in international banking profit from 2018. BMO reported one per cent profit growth, did not adjust its dividend rate and put aside $306 million for credit losses, up from $186 million in 2018. (The Logic)
Talking point: Scotiabank has the biggest overseas presence of the big six banks, and has recently focused on international expansion in four Latin American countries—Mexico, Chile, Colombia and Peru—including a $2.9-billion majority stake purchase of Banco Bilbao Vizcaya Argentaria in Chile, and a $130-million controlling stake acquisition in the Banco Cencosud in Peru. This focus seems to have paid off—international banking earnings are up 90 per cent from a year ago. Meanwhile, the bank is selling operations in nine Caribbean countries, and is engaged in a standoff with the prime minister of Antigua and Barbuda over the sale in the country. Meanwhile, BMO has focused on the U.S. for international growth: earnings in this division saw 1.1 per cent growth—that’s the slowest since the fourth quarter of 2017, and is largely driven by increased loan loss provisions. BMO CEO Darryl White also cited escalating trade tensions as a factor in the tepid results.
The Bank of Nova Scotia is leading a $13-million round in the startup fund for women-led companies. Disruption Ventures, backed by Relay Ventures, aims to raise $30 million, which would make it the largest private, independent, women-focused venture fund in Canada. (Globe and Mail)
Talking point: In the past five years, Relay has participated in 64 investments, just six of which went to companies with at least one female founder, according to Crunchbase data. Disruption’s raise comes amid heightened urgency for VCs to boost their perennially low investments in women-founded companies. Last month, the Billion Dollar Fund for Women launched in Canada, to which six local funds pledged investments in women-led companies. The Business Development Bank of Canada has a $200-million Women in Technology Fund, and MaRS IAF’s StandUp Ventures has invested an undisclosed sum in women-led companies since launching in 2017.