Scotia Bank Expanding into Latin American Market

Daniel Hui

http://www.cbc.ca/money/story/2010/09/16/scotiabank-brazil.html

Summary:

On Thursday, September 16^th, 2010 Scotia bank announced to purchase a Brazilian bank, Dresdner Bank Brazil, located at Sao Paulo. The Scotia Bank is branching out to the South American Market and establishing a presence first at Brazil. Dresdner Bank owns several banking license which allows the user to provide ranges of banking services around the community. They expect to be the only Canadian Bank in Brazil owning several banking licenses. It was reported at the end of 2009 the Dresdner Bank holds an asset of about $400 million US and approximately 50 employees. They decide to expand its power in key oil and gas, power and mining sectors. However, Mike Durland, co-CEO of Scotia Bank, announced the purchase “was not financially material.” The Scotia bank sees huge potential growth in the Latin American markets and looks forward about the future progress in Brazil. 

Connection:

This article connects to the concept of materiality. According to Chapter 1, the materiality concept allows information to be omitted if the information excluded wouldn’t mislead readers or affect the results significantly. In this article Scotia Bank stated it will purchase Dresdner Bank which holds an asset of $400 million. However, Mike Durland, co- CEO of Scotia Bank announced the purchase “was not financially material.” This article also connects to another major idea in Chapter 1 such as investing activities. Investing activities are company activities which involve the purchase and sales of properties, equipments and shares. Scotia Bank decided to expand into the Latin American markets by trying to acquire Dresdner Bank Brazil. The expansion of Scotia Bank is considered an investing activity since revenues could be established from this long-term investment. Financial statements are also an important factor in this article since they are essential information during an investment. Scotia Bank must provide shareholders with financial statements on whether they are capable of expansion in the Latin American market.

Reflection:

In my opinion I think Scotia Bank deciding to purchase Dresdner Bank, a Brazilian bank, and branching out to the Latin American markets is a good decision. Banking is very competitive around the world especially in Asia, Europe and Northern America. It’s a great opportunity for Scotia Bank to establish their power in Brazil, Sao Paolo, where Banking is less competitive and have great potential growth in the future. I believe Scotia Bank to be the only Canadian bank holding several banking licenses will give it a great advantage over other banks in Brazil, such as their reputation and image. However I argue about one thing. How is the purchase of Dresdner Bank not going to be considered financially material? Dresdner Bank owns an asset of $400 million which is significant enough to affect decisions. If financial statements were created after the purchase of Dresdner Bank, then the information produced would lack credibility since information can be omitted. Potential investors would be affected from the information they were informed from Scotia Bank. For example, informing investors that Scotia Bank has sufficient amount of cash left in the company would attract many investors. Then there would be a possible of potential growth in the shares of Scotia Bank.