Bank of Nova Scotia (BNS.TO) said on Monday it appointed Scott Thomson, a board member for six years, to succeed Chief Executive Officer Brian Porter, a move that came as a surprise due to the new CEO’s lack of familiarity among bank investors.
Thomson, 52, is joining Scotiabank from Finning International Inc (FTT.TO), the largest dealer of Caterpillar Inc (CAT.N) services and equipments, where he was the top boss for nine years. Thomson is stepping up to lead a company that has a market cap to C$83 billion ($60.3 billion), compared with Finning’s C$3.7 billion market value.
At Finning, Thomson helped boost return on invested capital in all business units, particularly in Latin America, Scotia said in a statement. Scotia’s Latin American exposure stands out among Canada’s top banks that have mostly expanded into the United States as part of diversification.
The change at the top of Canada’s third-biggest lender comes at time when the country’ banking sector is struggling with market turmoil and rising interest rates.
Shares of Scotiabank fell by 3% at the TSX on Monday following the announcement, outpacing the 0.2% fall in the banking sub-index (.GSPTXBA).
“The market was surprised,” said Robert Wessel, co-founder of Toronto-based Hamilton ETFs, one of the shareholders of Scotiabank. “The stock price movement can likely be attributed to a lack of familiarity of bank investors with the successor, and possible uncertainty regarding potential senior management turnover.”
Thomson will initially start as president from Dec. 1, overseeing Canadian banking, global banking and markets, global wealth management and international banking at the bank, before becoming CEO on Feb. 1.
Wessel said that given the long transition period, the market has time to get to know the new CEO and get more comfortable with where he wants to take the bank.
Outgoing CEO Porter, whose annual salary was C$11.36 million as per the company’s proxy report for 2021, will act as a strategic advisor to Thomson from Feb. 1 to April 30 next year.
Under Porter, Scotia’s assets swelled to $1.3 trillion from $744 billion since he took over the role in 2013.
Scotiabank shares have gained 14.6% since Porter took over as CEO and Friday’s close, underperforming a 57% gain notched by TSX bank sub index (.GSPTXBA) in the same period.
Scotiabank reported third-quarter profit a touch below estimates last month as a sharp drop in income from its capital markets unit overshadowed strong loan growth in its international business.
Last month several brokerages aggressively downgraded the largest Canadian bank as profits at its international banking segment fell below estimates and risks rose from modest net interest margin expectations.
($1 = 1.3760 Canadian dollars)