02:09 PM EDT, 08/12/2024 (MT Newswires) -- Scotiabank announced a US$2.8 billion investment in a large U.S. regional bank, KeyCorp, notes National Bank.

The transaction is expected to be financially accretive and also represents a larger commitment to the bank's "North American Corridor" strategy, writes National Bank's Gabriel Dechaine. He also believes most investors were expecting Scotiabank to be less acquisitive than it has been historically, a strategy that has yielded lower ROEs and relatively lower EPS growth.

"Moreover, we believe most investors will view the ~15% initial stake as a stepping stone to eventually acquire 100% of KEY. As a result, BNS could be perceived as being in capital conservation mode over the next few years, which will likely curb alternative capital deployment strategies (e.g., buybacks)."

Scotiabank is rated Sector Perform, with a $66 target at National Bank.

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