Bucking a trend among Canadian banks, Bank of Nova Scotia is going global with a chain of outposts stretching from Argentina to the Philippines.

But after spending $700 million to acquire minority and majority stakes in banks across Latin America and tens of millions more on banks in Southeast Asia, earnings have been slow to materialize for the Halifax- based company.

And because Scotiabank's expansion strategy is to take minority positions in foreign banks and subsequently increase its share, the process is inordinately slow.

Charles Coltman 3d, former vice chairman for international operations at First Union Corp., said such a strategy "is hard to manage because it takes time to build a common culture."

"On the other hand, it's less risky," Mr. Coltman said. "You get a chance to understand the other bank's culture and determine the extent to which they will accept what you bring to the table."

Despite its cautious approach, Scotiabank was hurt by recent financial turmoil away from home.

The company took a $50 million hit in Indonesia last year when it wrote off its equity stake in Djakarta-based PT Bank Ayra. And it set aside $67 million in provisions for souring emerging-market loans. The result: Its international earnings plunged 41%, to $178 million, in 1998.

Peter C. Godsoe, the bank's unassuming 61-year-old chairman and chief executive, said in a recent interview that he is looking at the long term. He predicted that Scotiabank's investments in emerging markets will pay off handsomely.

He acknowledged that Scotiabank's earnings to date from recent investments in Latin America and Asia "have not been sterling."

Yet $158 billion-asset Scotiabank sees huge opportunity in developing- country markets, where interest margins often are more than 1,000 basis points - and where foreign-owned banks and branches often thrive even in periods of crisis, when local banks are in danger of failing and money seeks safe havens.

Mr. Godsoe predicted that within three years, return on equity from Scotiabank's international franchise will jump to 20%, from the current 10%, and that the bank will be earning $100 million to $150 million from its operations in emerging markets.

That may not seem like big bucks in the world of megabanking, but "it's still a significant amount for us," Mr. Godsoe said.

Ultimately, he wants to make Scotiabank's foreign business as big as its domestic one. To Mr. Godsoe, Canada is overbanked and underpopulated.

"We're a large Canadian bank in a small market, and the box is only so big," Mr. Godsoe said. "Canada is one of the most concentrated banking markets in the world, and that means we have to go abroad to grow."

The population of the Latin American countries in which Scotiabank operates is nearly 340 million, compared with barely 30 million in Canada, Mr. Godsoe noted.

And there is plenty of room for growth. Only 15% of the population in Latin America has bank accounts, compared with 80% in the Caribbean and 90% in Canada.

But Mr. Godsoe has a long way to go in achieving his foreign-business goals. Of $103 billion of loans issued by Scotiabank, less than 6% are in the Caribbean, 4% are in Asia, and slightly more than 3% are in Latin America. Close to 18% of its loans are to U.S. borrowers, and 6% to Europeans.

Scotiabank's modest current international exposure limits its risks.

Though the company was bruised last year by economic strife in Asia and Latin America, its profitability remained good compared with that of Canada's other leading banks-Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, and Toronto-Dominion Bank. Its 15.7% return on common equity last year was a tad better than the 15% average for big Canadian banks, according to the rating agency Fitch IBCA.

Scotiabank actually capitalized on recent financial woes abroad. It paid $31 million for a 10% stake in Mexico's Grupo Inverlat after the once- troubled bank was bailed out by the Mexican government in 1995. As part of the deal, Scotiabank bought $144 million of Inverlat bonds that can be converted into an additional 45% stake in the company. It plans to increase its ownership of the bank to 55% this year.

In Chile, Scotiabank took a 24% stake in Banco Sud Americano for $20.7 million-financed by converting a portion of a dollar loan to Chile into local currency. Scotiabank subsequently purchased an additional 4%, and this month reached agreement to buy 32.6% more, bringing its stake to just under 61%.

In several cases-such as Banco del Caribe in Venezuela, Peru's Banco Sudamericano SA (not the same as Banco Sud Americano in Chile) in Peru, and Banco Ahorromet Scotiabank SA in El Salvador-Scotiabank acquired minority stakes as a result of long-standing relationships.

"We came to the conclusion in the early '90s that Latin America was opening its banking markets (to foreigners) after having kept them closed for more than a decade, and we decided it would be a good time to invest," Mr. Godsoe said.

Scotiabank also is looking at Asia. Last month it added a fifth branch in India and formed a joint venture with an Indian commercial finance company. It also recently opened branches in Bangladesh, Sri Lanka, Thailand, and China.

Regardless of the size of the bank's stake, Scotiabank takes an active role, including representation on the board, veto rights, and audit rights.

"The risk of running a commercial bank is not very large if you have good training, have good country officers, and put a high premium on controlling risk," Mr. Godsoe said. "The real risk is running with a herd of elephants into cross-border lending."

International is nothing new for Scotiabank. The bank started its globe- trotting in the late 19th century, when it opened branches in Havana and in Kingston, Jamaica. It also opened branches in Boston, Chicago, and Minneapolis. These offices were established even before Halifax-based Scotiabank had opened a branch in Toronto.

"They have a long history of operating in those markets," said Brenda Lum, a banking analyst with Canadian Imperial's CIBC World Markets in Toronto. "Although their strategy is not without risk, it's a calculated risk.

Scotiabank still is the largest foreign bank in Trinidad, Jamaica, and Curacao.

Its clout in the Caribbean brought dividends in 1961, when Fidel Castro seized foreign banks. Only Scotiabank got paid for its seized property.

"We had the Cuban national gold reserves in our vaults," Mr. Godsoe noted dryly. "We kept them until we felt we'd reached a fair price."

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