Scotiabank's Strategic Move: A 14.99% Stake in KeyCorp

Scotiabank has received approval from the U.S. Federal Reserve to acquire up to 14.99% of the voting shares in KeyCorp. This move aligns with Scotiabank's strategy to focus on developed markets, particularly in North America, and includes plans to appoint two directors to KeyCorp's board.

The U.S. Federal Reserve announced on Thursday that it has granted Scotiabank approval to acquire up to 14.99% of voting shares in the U.S. regional lender, KeyCorp. The Canadian banking giant made public its intention to bolster its presence in developed markets with this $2.8 billion deal first disclosed in August.

The acquisition will afford Scotiabank the opportunity to nominate two directors to the board of KeyCorp, an Ohio-based institution. The strategic decision, spearheaded by Scotiabank CEO Scott Thomson, highlights a shift towards strengthening ties within the North American trade corridor amid potential exit strategies from less profitable South American markets.

Thomson, who took the helm at Scotiabank last year, emphasized the significance of reallocating capital from developing to developed markets, identifying the KeyCorp investment as a "low risk, low cost optionality in North America" capable of yielding robust returns. Historically, Canadian banks have pursued growth through costly acquisitions in the United States.

(With inputs from agencies.)