2011-10-27

Strong fundamentals help Scotia Bank invest more in South America

Common wisdom tells us that a strong foundation will always lead to growth. A look at the banking sector in America and Europe tells us what will happen if this rule is ignored. Despite the fact that the Canadian economy is smaller as compared to the American economy, Canadian banks are in a position to expand their footprint all over the world in a much better manner as compared to American banks. Better regulations and a conservative approach ensured that the top five banks in Canada escaped the debt crisis that affected America.

Hence, it is not surprising that Scotia Bank has announced the purchase of 51% stake in Banco Colpatria for $1 billion. The deal is to be finalized by the end of the year and will mark a major foray of the bank in the Colombian market. The bank that has been purchased has a very strong presence in the credit card market. It is surprising that a bank is actually purchasing another foreign bank in South America for its performance in the credit card market when other banks in United States of America are regretting the fact that they dabbled in the personal loan and credit card market.
This underlines the importance of strong fundamentals. If education of teachers is treated as a formality, the students will automatically suffer. If inferior patient handling train the trainer courses become popular, it is obvious that the finished product that enters the market will not be suitable for the growth and betterment of the segment.

In the same way, relaxing on traditional rules of conservatism and safeguards in the banking sector was always going to lead to complications. The worst part is that your mistake will become an opportunity for a complicating a competing country to earn more profits at your cost.

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