Scotiabank CEO Says Stake in KeyCorp Creates Future ‘Options’

Canadian bank Scotiabank plans to acquire a 14.9% stake in Cleveland-based KeyCorp, which operates about 1,000 KeyBank branches in 15 U.S. states and provides corporate and investment banking products.

Pending regulatory approval, Scotiabank expects to close the initial investment of 4.9% in the fourth quarter of fiscal 2024 and an additional investment of 10% in fiscal 2025, the bank said in a Monday (Aug. 12) press release. The total cash consideration amounts to $2.8 billion.

“We believe that this transaction provides attractive near-term returns to our shareholders and creates future optionality for Scotiabank in the North American corridor, given our unique position as the only Canadian bank with a presence across Canada, the U.S. and Mexico,” Scott Thomson, president and CEO of Scotiabank, said in the release. “We look forward to exploring mutually beneficial strategic connections in the future.”

KeyCorp’s U.S. business focused on commercial clients is complementary to the offerings of Scotiabank, which is one of the top 10 foreign banking organizations in the U.S. and has a well-established Global Banking and Markets business, Scotiabank said in the release.

In its own press release issued Monday, KeyCorp said the minority investment from Scotiabank will provide KeyCorp with an opportunistic capital raise on attractive terms, accelerated capital and earnings improvement, and a strengthening of its capacity for growth.

“While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position,” Chris Gorman, chairman and CEO of KeyCorp, said in the release. “Further, this transaction creates greater capacity for growth by enabling additional investments in targeted scale across our franchise and increases Key’s strategic agility as we navigate an uncertain environment from a position of strength.”

Gorman added that KeyCorp will leverage its strengthened financial position to more aggressively pursue opportunities in investment banking, payments and wealth management, per the release.

In an April earnings report, Gorman presented a solid balance sheet and a cautious take on the current economic tailwinds, adding that his company can finally “play offense.”

“Key is back to playing offense and I remain excited about our future and our ability to generate sound profitable growth,” Gorman said.