Bank of Nova Scotia (Symbol-BNS)

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Peculiar_Investor
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Peculiar_Investor »

brad911 wrote:Not a huge surprise for many shareholders of BNS since this was the likely direction the company would take. A bit surprised they're announcing this now rather than after Q4 but they obviously saw value in the transaction now rather than later.
I would agree on the "not a surprise". I'm left to contemplate what this means for BNS's stake in CI Financial? I would expect we may hear more on Dec 3rd when quarterly earnings are released.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by OptsyEagle »

Actually, I was quite surprised, since I thought the Goodmans had a controlling stake and when CI took a run at them a while back, ISTM that Dundee was "not for sale".

So I was a little surprised at this. I guess Ned Goodman might want to retire and perhaps he decided to set himself up with a big honking pension. lol.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by optionable68 »

OptsyEagle wrote: I guess Ned Goodman might want to retire and perhaps he decided to set himself up with a big honking pension. lol.
I don't think Ned is too worried about a Pension.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by brad911 »

Peculiar_Investor wrote:...I'm left to contemplate what this means for BNS's stake in CI Financial?...
I think it sets a clear target on CI and that BNS will likely take it into the fold completely within the next 12-24 months. This is a big move, IMO, for BNS as they attempt to get into investment management in a much larger way in their domestic and international markets.

I haven't had time to look over the purchase price of the remaining shares but it at first appears appropriate.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by fin0007 »

It would seem that BNS essentially had three investments in Wealth Management. It's Scotia Mutual Funds, Dundee and CI Funds. The size the bite to swallow CI funds is a whole lot bigger than Dundee. Besides Dundee has only one significant shareholder to bring onside. I would think merging Dundee and Scotia makes a tasty treat which CI won't be able to resist.

BNS will wait a couple of years that it will take to get rid of the overhead cost of each operation and present an opportunity for CI to jump up in size. Essentially come into our fold willingly or we can always compete directly with you. Not going to be a lot of fun for each of us, but that the only option if you don't come along willingly.

That said, however I had been following the price of CI thinking it was next in line. It would now seem that it's two to three years away. Until Dundee is effectively merged in, there no point in adding the larger CI. There nothing to be gained. CI isn't going any place else with BNS owning 37%. The only question is timing. It's not a matter of cash as the CI shareholders are going to want BNS shares to achieve a tax free rollover.

Probably my largest holding is BNS shares. Management has always had a good game plan and they never fail to meet reasonable expectations. :) :) :)
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by kcowan »

fin0007 wrote:...Probably my largest holding is BNS shares. Management has always had a good game plan and they never fail to meet reasonable expectations. :) :) :)
Waugh was interviewed by Amanda Lang yesterday. He came across as confident that this was a natural transition. They advertised iTrade on this program. Amanda uses Dundee personally and there were not questions about CI.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Peculiar_Investor »

kcowan wrote:
fin0007 wrote:...Probably my largest holding is BNS shares. Management has always had a good game plan and they never fail to meet reasonable expectations. :) :) :)
Waugh was interviewed by Amanda Lang yesterday. He came across as confident that this was a natural transition. They advertised iTrade on this program. Amanda uses Dundee personally and there were not questions about CI.
I watched the video last night. For those interested, the link to the video is: Rick Waugh, the president and CEO of Scotiabank, talks to the CBC's Amanda Lang about the acquisition of investment firm DundeeWealth
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by JaydoubleU »

Probably my largest holding is BNS shares. Management has always had a good game plan and they never fail to meet reasonable expectations.
By far my largest holding. Still a bit out of whack because I haven't yet pulled it back, believing that BNS can and should go much higher. Anyway, let's hope they do have a game plan beyond the recent acquisition binge: Thailand, Latin America, rumours of a big play in China, and now Dundee.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Peculiar_Investor »

Another viewpoint on the whole matter from Barry Critchley, Financial Post, Was BNS pushed into deal?. During the Rick Waugh interview with Amanda Lang, he certainly tried to portray it as planned, but I was left with the view that it was somewhat not fully thought out, particularly since they own a bigger stake in CI Financial.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by fin0007 »

Probably my largest holding is BNS shares. Management has always had a good game plan and they never fail to meet reasonable expectations.

I guess I was pretty well bang on. I do think that concentrating on Mexico, Central and South America where there is a higher growth rate than the US, is paying off. My understanding the average age of the population is somewhat lower than the US and Canada. I seem to recall when I was younger, as additional children appeared in my household, one had no choice but work as much as you can. If you needed to borrow a few dollars, there was no time to negotiate terms, take the funds and make everyone happy at home.
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Re: Bank of Nova Scotia (Symbol-BNS)

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Shares of Bank of Nova Scotia BNS-T jumped Thursday morning and analysts lauded the bank after the Globe and Mail broke the story that the company is looking at selling its headquarters tower to raise capital.

The market is happy because a sale could alleviate the need for the bank to raise money in more painful ways, such as a stock sale that dilutes current shareholders or divesting a strategic asset like a stake in a foreign bank.

The bank tower could fetch $1-billion, some real estate sources told the Globe.
That answers a key question for the bank: How is it going to meet Basel III capital targets by year end without diluting shareholders with an equity raise or having to sell strategic assets like its stake in asset manager CI Financial CIX-T
Scotiabank building sale answers capital questions
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Re: Bank of Nova Scotia (Symbol-BNS)

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By the same token I go out and tell everyone I am selling my primary residence, all of a sudden I am worth more?
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Bylo Selhi »

max88 wrote:By the same token I go out and tell everyone I am selling my primary residence, all of a sudden I am worth more?
Does Basel III dictate your capital requirements?
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Re: Bank of Nova Scotia (Symbol-BNS)

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Bylo Selhi wrote: Does Basel III dictate your capital requirements?
When I sell primary residence I will have to pay rent. Issuing $1B worth of common shares equivalent to selling its HQ building for $1B, it either pays dividend, or rent. I don't know how paying rent makes BNS more valuable.

Unless consensus is that RE is overvalue, and BNS is believed to be able to sell it HQ building to a sucker, and later buys back at a lower price. But how's that different than issuing shares, and later buys back shares at a lower price?
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Shakespeare »

The property value is a capital expense. The rent is operating expenses. Selling the property boosts capital, which is what is needed under Basel.
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Re: Bank of Nova Scotia (Symbol-BNS)

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I know nothing about Basel or Basel III, so I will accept what you are saying is fact. What I don't understand is, while issuing common shares satisfies Basel cap requirements, why the market favors selling HQ building over share issuance.
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Bank of Nova Scotia (Symbol-BNS)

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Share issuance is dilutive. A building sale is not.
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Re: Bank of Nova Scotia (Symbol-BNS)

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Yeah but after selling, BNS loses the rental income from the building, plus it pays rent to future landlord. The two combined reduce earnings, to the extent that EPS is reduced by dilution.
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Bank of Nova Scotia (Symbol-BNS)

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The issue is not diluting shareholders while the stock price is weak due to all the concerns about European recession and defaults. It is better to dilute when the stock price is very high as you then get fair value for selling a chunk of the operation.

Since they need to raise Tier I capital to meet the new capital requirements of Basel III it makes more sense to sell the real estate which is fairly valued then a portion of the company through a new stock issue while the stock is undervalued.
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Re: Bank of Nova Scotia (Symbol-BNS)

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pmredmonton wrote: The issue is not diluting shareholders while the stock price is weak due to all the concerns about European recession and defaults. It is better to dilute when the stock price is very high as you then get fair value for selling a chunk of the operation.

Since they need to raise Tier I capital to meet the new capital requirements of Basel III it makes more sense to sell the real estate which is fairly valued then a portion of the company through a new stock issue while the stock is undervalued.
Fair enough. The big 5 all have their own HQ tower. They can, like a wealthy person in difficult time, turn to their hidden treasure to save the day.
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Bank of Nova Scotia (Symbol-BNS)

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max88 wrote:
pmredmonton wrote: The issue is not diluting shareholders while the stock price is weak due to all the concerns about European recession and defaults. It is better to dilute when the stock price is very high as you then get fair value for selling a chunk of the operation.

Since they need to raise Tier I capital to meet the new capital requirements of Basel III it makes more sense to sell the real estate which is fairly valued then a portion of the company through a new stock issue while the stock is undervalued.
Fair enough. The big 5 all have their own HQ tower. They can, like a wealthy person in difficult time, turn to their hidden treasure to save the day.
In fact, they don't. The other banks have already sold their towers.
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Re: Bank of Nova Scotia (Symbol-BNS)

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Pickles wrote:
max88 wrote: ...... Fair enough. The big 5 all have their own HQ tower. They can, like a wealthy person in difficult time, turn to their hidden treasure to save the day.
In fact, they don't. The other banks have already sold their towers.
I'm curious. Who are the buyers of this "tower" real estate?
CPP?
OTPP?
My pension plan?
Hedge funds?
Who?
Why don't the banks see them as good investments? What might this be telling us?
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by Nemo2 »

George$ wrote: I'm curious. Who are the buyers of this "tower" real estate?
AFAIK Brookfield Properties now owns First Canadian Place......similar companies/consortiums probably own the other complexes.
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Re: Bank of Nova Scotia (Symbol-BNS)

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George$ wrote:
Pickles wrote: The other banks have already sold their towers.
I'm curious. Who are the buyers of this "tower" real estate?
CPP?
OTPP?
My pension plan?
Hedge funds?
Who?
Maybe Rickson9? He's always extolling the virtues of real estate as an investment :lol:

Actually, your guesses are pretty close. From the Star:
TD Bank: Sold TD Centre to real estate management company Cadillac Fairview in 2001 for $510.9 million.

• Royal Bank Plaza: Royal sold this complex to Oxford Properties Group, the real estate arm of OMERS pension fund, in 1999 for $485.5 million. Oxford sold a 50 per cent stake to the Canada Pension Plan Investment Board in 2005 for $299.3

• CIBC: Sold its Commerce Court complex to institutional investment company British Columbia Investment Management Corp. for $618 million in 2000, which remains the record pricetag for an office tower. GWL Realty Advisors manages the building for BCIMC.

• BMO: The bank never owned its First Canadian Place headquarters which was built by developer Olympia & York and transferred to the current owners, Brookfield Properties (along with the Canada Pension Plan Investment Board and Arca Investments) as part of a $2 billion deal for bankrupt O & Y in the early 1990s.

Information provided by commercial brokerage CB Richard Ellis
So BNS held on longer than the other banks.
Why don't the banks see them as good investments? What might this be telling us?
The same as most of the posters in the Housing Bubble thread are telling us: there are better investments than real estate, especially in a "down" market; buying a house should be a lifestyle choice.
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Re: Bank of Nova Scotia (Symbol-BNS)

Post by George$ »

Thanks Pickles. Very helpful.
Not sure but I think Cadillac is owned by OTPP.

This presents an interesting question about defined benefit pension plans. Many have notional deficits - so they need to be concerned about getting good returns - and at the same time long term safety is an issue - short term volatility should not be a major issue as they are not vulnerably to a money "run" - like mutual funds (or other funds, like Madoff) are prone to.

The other problem for defined benefit plans (CPP, OTPP, OMERS, etc) is HOW DO THEY VALUE SUCH ILLIQUID ASSETS ON THEIR BOOKS? There is no compelling valid answer that I can see - but the evaluation process can be manipulated - for example, to help fund managers earn compensation bonuses for outstanding "performance". The process seems to be rife with agency conflicts of interest.
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