Scotiabank makes surprise choice for new CEO
Kevin Orland
other
Big name announces plans to step down
Bank of Nova Scotia chief executive officer Brian Porter is stepping down and handing the reins to Finning International Inc. CEO Scott Thomson, a rare selection of an outside executive to run one of Canada’s largest banks.
Thomson, 52, will become Scotiabank’s president on Dec. 1, then take the helm on Feb. 1, the Toronto-based bank said Monday. Thomson has been a Scotiabank board member since 2016.
As CEO, Porter overhauled the bank’s Latin America-focused international business and pulled off major acquisitions in its wealth-management business. The selection of Thomson as his successor ends his tenure with a surprise twist, with Canadian banks tending to pick their CEOs from among their top executives. The current heads of the country’s other five large lenders spent much of their careers inside those banks before rising to the top job.
“Our initial reaction to this announcement is one of surprise followed by anticipation,” Darko Mihelic, an analyst at Royal Bank of Canada, said in a note to clients. “The landmark decision from the board of directors to bring in someone from the outside to run a large Canadian bank clearly suggests to us that perhaps some significant changes may be on the way.”
Thomson has an investment-banking background and experience in Latin America, Mihelic said. Combined with his experience on the board, “he is clearly coming into the role with eyes wide open,” Mihelic said.
Thomson will exit Finning on Nov. 15. The company, based in Vancouver, sells, finances and services equipment from Caterpillar Inc.
Porter’s main task after taking over Scotiabank was reorganizing its sprawling international business by pulling it out of markets such as South Korea, Dubai and Puerto Rico, where it was either underperforming or saw little long-term value, and doubling down in countries where it had thrived, such as Mexico, Chile, Peru and Colombia.
Porter, 64, also transformed Scotiabank’s wealth-management business from a relative weak position among its peers into a sizable player with the acquisitions of MD Financial and Jarislowsky Fraser Ltd. for a combined CA$3.5 billion ($2.6 billion).
The sudden changes in the company’s business mix made it difficult at times for analysts to predict earnings and for investors to value the company, weighing on its shares.
Scotiabank’s stock had risen 9.2% from when Porter became CEO in November 2013 through last week, the worst performance among Canada’s six largest banks for the period.
Scotiabank shares fell 2.5% to CA$67.60 at 9:37 a.m. in Toronto, making it the worst performer in the S&P/TSX Commercial Banks Index, which slipped 0.5%.
Porter said in an interview with Bloomberg in December that the work to reposition the international division was largely done and that the market would see the benefits over this year. At the time, he declined to say how much longer he planned to stay but said that the bank had identified as many as four internal candidates, whom he declined to name, as potential successors.
While the choice of new CEO from outside the industry is surprising, Thomson’s experience in Latin America was likely attractive to the board’s search committee, according to John Aiken, an analyst at Barclays Plc. Thomson led Finning through challenging market conditions and improved its earnings capacity, particularly in Latin America, during his nine years as CEO there, Aiken said.
“We do not expect the transition to be jarring,” Aiken said in a note to clients, “and the move leads us to believe that there should not be an immediate shift in Scotia’s strategy as Mr. Thomson has been involved in developing it at the board level.”
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