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Scotiabank Gets Aggressive
Bank targets local venture capital, credit cards, and export trade funding
BY LIDA ESTELA RUAÑO
March 1, 2001
Scotiabank de Puerto Rico wants the local business communitys attention and its making major moves to get it. The Canada-based bank is launching a new subsidiary to offer venture capital funds to purchase and operate existing businesses, while retaining a percentage of shares in the new company.
Through a strategic alliance with the mainlands largest card processor, First Data Merchants Service (FDMS), Scotiabank also intends to challenge the two banks which dominate local credit card transactions.
Scotia Merchant de Puerto Rico, a new subsidiary specializing in merchant banking, will serve as the financial vehicle to provide purchasing and operating capital, and to buy stocks, to enable clients to buy a family business or participate in a management buyout of a closing manufacturing plant.
Scotiabank de Puerto Rico President Ivan Mendez said there is a growing need to facilitate the purchase of family companies when the founder of the company wants to retire and a member of the family wants to buy the business. "We want to be facilitators so the company can be purchased and keep operating. After three to five years, when the new management has stabilized the business or they decide to go public, we would sell back our shares."
Targeting companies in need of $500,000 to $5 million, Mendez said Scotiabank has not set specific loan limits. Nor has it set aside a certain amount. If the response is big, whatever money is needed would be made available through Scotiabanks parent company in Toronto. Mendez anticipates doing two to three deals a year for $15 million to $20 million in total investments.
Mendez said that Scotiabank is the only commercial bank doing merchant banking "because others have investment banking subsidiaries but they dont purchase stocks as we will."
Scotiabanks strategic alliance commences this month with Florida-based FDMS, which specializes in marketing, servicing, and processing credit cards. This alignment with the largest stateside credit card service provider will allow Scotiabank to offer competitive prices in the local market, which is totally dominated by Banco Popular and Banco Santander.
"This will allow us to attract small and medium-size merchants to whom we will be able to offer expert service and pass on the economies of scale garnered by our association with the mainlands largest credit card processor," Mendez said. His goal is to attract more clients to whom he will then do cross-selling of other products. FDMS has trained six local persons, based in Scotiabanks Roberto H. Todd facility in Santurce, who will work under an FDMS manager from Miami, who happens to be Puerto Rican.
Another important corporate banking division expected to expand is trade financing. The banks corporate division, headed by Roberto E. Cordova, senior vice president, is currently earning some $800,000 in annual, non-interest revenues, which Cordova anticipates will increase to $1.2 million this year. A large portion of the foreign trade is from Japan and China, "cars from Japan and everything else that is made in China, which is a lot these days," Cordova said. Scotiabank is targeting growth in financing export trade to the Caribbean and Latin America.
This Caribbean Business article appears courtesy of Casiano Communications.