Scotiabank looks to divest all or part of its $3.8B stake in CI Financial

TORONTO – Scotiabank (TSX:BNS) wants to sell some or all of $3.8 billion worth of shares in asset manager CI Financial Corp. (TSX:CIX), indicating it believes it can more profitably deploy the capital elsewhere.

Scotiabank, which first acquired its position in CI in 2008 and currently holds 37 per cent of its stock, said in a release Wednesday that it “intends to explore all options with respect to the monetization . . . over time.”

“This may include partial or full monetization of its investment in CI in one or a series of transactions,” it said.

While Scotiabank said it has been pleased with its investment in CI, vice-chairman and chief operating officer Sabi Marwah noted that bank has had “a very good track record on deploying capital” and that opportunities for further deployments exit in each of our four business lines —Canadian banking, international banking, global banking and markets as well as in other parts or wealth management.

“We have a fairly active pipeline and given that active pipeline we believe that we’ll be able to profitably redeploy that capital,” Marwah said in a telephone interview.

He said several factors “played into” the decision, among them the “very strong momentum in our existing 100 per cent owned wealth management platform.

“We are much bigger today then were at that time (2008) by owning 100 per cent of Dundee,” he said, referring to DundeeWealth Inc., which the bank acquired in early 2011 and renamed HollisWeath last year.

“Our own performance in our own wealth management business, including our own distribution, has been very, very good and overall we remain positive about everything we’ve built. So I think we’re in a good place.”

CI issued a statement in response saying it is “now considering the implications of the announcement and the impact it may have on CI’s other shareholders.”

“As part of this, CI intends to review its capital structure and dividend policy to ensure that it has the appropriate resources available to respond to any monetization plan Scotiabank seeks to implement.”

Meanwhile, it said the company’s clients, business partners and shareholders “can be assured that the bank’s decision has no impact on the management of CI or the strong fundamentals of its business,” noting that it has been posting “record gross sales and its best net sales in over a decade, with strong results across all distribution channels.”

Scotiabank, which describes itself as Canada’s most international bank, provides financial services in more than 55 countries through a team of more than 83,000 employees serving some 21 million customers.

CI Financial, with $126 billion of assets and $97.3 billion of assets under management, is a diversified wealth management and investment fund company involved in the management, marketing, distribution and administration of mutual funds, segregated funds, structured products and other fee-earning investment products for Canadian investors.

On the Toronto Stock Exchange, Scotiabank shares closed down at penny at $66.97 on Wednesday, while CI shares were down 17 cents at $36.13.