January 11, 2016
Research firm suggests Scotiabank is actively looking to sell its equipment financing portfolio
TORONTO--The Bank of Nova Scotia is reportedly looking to divest a C$1 billion-vendor and equipment financing portfolio, currently held at the company’s Roynat unit.
According to three sources, Scotiabank is engaged in discussions with various parties, including the Toronto-based rival firm Element Financial Corporation. Notably, both parties cater to small and medium-sized businesses in Canada’s commercial and vendor finance market. Scotiabank’s Roynat unit offers term loans, asset-based lending and leasing to over 1,000 companies across Canada.
Interestingly, Element Financial has been planning the sale of its own Canadian Commercial & Vendor Finance ("C&V") business, which too, has an asset portfolio of C$1 billion. Proceeds from such sale are expected to be utilized for financing acquisitions in its fleet management business. Notably, the company became a market leader in North America’s fleet management business with its acquisition of General Electric Company’s (GE - Analyst Report) fleet arm in 2015.
However, the exit of competitors, including Scotiabank and New Jersey-based CIT Group Inc. (CIT - Analyst Report), will likely make Element Financial reconsider this decision. Based on sources, the company might consider acquiring Scotiabank’s portfolio to enjoy economies of scale in the near term; and eventually sell a larger and more profitable C&V portfolio in the long run.
According to sources, even though talks are on between Scotiabank and Element Financial, materialization of any discussion into a prospective deal remains to be seen.
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