The agreement, initially announced on January 6, 2025, provided Scotiabank with an approximate 20% ownership stake in the newly formed holding company, Davivienda Group, in exchange for the transferred operations. The combined operations of both institutions will be managed under the Davivienda Group umbrella.

Scott Thomson, President and CEO of Scotiabank, commented that the completion of the transfer supports the bank’s International Banking strategy, citing the achievement of operational scale across its regional markets and projected improvements in profitability. Thomson also noted that the equity stake provides Scotiabank with exposure to a combined business positioned for scale, potential synergies, and an expanded client base under a single management team.

Javier Suárez, CEO of Davivienda Group, stated that the transaction integrates complementary capabilities and expertise, positioning the group to expand business development opportunities and scale operations by leveraging Scotiabank’s global experience with Davivienda’s regional expertise across Colombia and Central America.

The integration plan dictates that the former Scotiabank operations in Colombia and Costa Rica will operate under a transitional brand, DAVIbank. In Panama, the businesses will fully transition to the Davivienda brand.

Scotiabank and Davivienda are expected to collaborate to strengthen their combined global reach. This cooperation is designed to allow Davivienda to expand its international product offerings as a regional player, while enabling Scotiabank to continue supporting its Corporate, Wealth, and Global Banking and Markets clients throughout Davivienda’s operational footprint.

Financial and Regulatory Impact

Scotiabank forecasts recording an after-tax loss of approximately $300,000,000 CAD in the first quarter of 2026 within its Other segment. This loss is primarily related to the release of cumulative foreign currency translation losses, net of hedges.

For accounting purposes, Scotiabank’s investment in Davivienda will be recorded as an investment in associate. The company anticipates an approximate 10 basis points benefit to its Common Equity Tier 1 (CET1) ratio for Q1 2026, primarily resulting from the reduction in risk-weighted assets net of the Davivienda investment.

The approvals were received from the financial regulatory bodies in the respective jurisdictions, including the Superintendencia Financiera de Colombia (Superfinanciera), the Superintendencia General de Entidades Financieras (SUGEF) of Costa Rica, and the Superintendencia de Bancos de Panamá (SBP). Following the closure of the transaction, the combined operations of both institutions will function under a new holding company, Davivienda Group (BVC: PFDAVIGRP).

The transfer formalizes an agreement initially disclosed by Scotiabank on January 6, 2025. Under the terms, Scotiabank transfers its banking operations in the three Central and South American nations in exchange for an approximate 20% ownership stake in the resulting Davivienda Group on a pro forma basis.

Following the closure of the transaction, the combined operations of both institutions will function under a new holding company, Davivienda Group (BVC: PFDAVIGRP).

The consolidation is structured to achieve greater operational scale for Davivienda across all three markets. Furthermore, as part of the transaction, Mercantil Colpatria is scheduled to sell its residual interest in Scotiabank Colpatria, its joint venture with Scotiabank in Colombia.

For Scotiabank, the divestiture aligns with its five-year strategy focused on enhancing profitability across its international banking portfolio by streamlining operations in non-core markets. The company stated the transaction reduces operational complexity and helps strengthen its capital focus on its primary growth corridor across North America and select Latin American markets. The sale is considered capital neutral overall, with the potential to contribute to future earnings.

The agreement also stipulates that Scotiabank will receive a combination of newly issued common and preferred shares in the new entity, commensurate with its ownership stake. Scotiabank will also retain the right to designate individual(s) to serve on the Board of Directors of the Davivienda Group’s combined operations.

The two institutions intend to establish a mutual referral agreement to ensure Scotiabank can maintain support for its Corporate, Wealth, and Global Banking and Markets clients across the expanded Davivienda service footprint.

Financial Impact and Accounting

The initial announcement in January 2025 indicated that Scotiabank’s operations subject to the transfer would be classified as assets held for sale for accounting purposes. This classification necessitated the recognition of an after-tax impairment loss of approximately $1.4 billion CAD in the first quarter of 2025. The impairment was projected to reduce Scotiabank’s Common Equity Tier 1 (CET1) ratio by an estimated 10 to 15 basis points.

The company further disclosed that an estimated $300 million CAD in additional losses will be recorded upon closing, primarily related to cumulative foreign currency translation losses.

Upon the transaction’s completion, Scotiabank’s 20% equity stake in Davivienda Group will be recorded as an investment in associate. The reduction in risk-weighted assets from the transfer is expected to result in a commensurate benefit to the CET1 ratio, estimated at approximately 10 to 15 basis points.

Davivienda Group, which originated as Corporación de Ahorro y Vivienda in Colombia in 1972, is a regional banking entity serving roughly 25.6 million customers through a network that includes 653 branches and more 2,807 ATMs, with established operations in Colombia, Costa Rica, El Salvador, Honduras, Panama, and the US. The institutions have stated they will collaborate to facilitate a smooth transition for clients and employees in Colombia, Costa Rica, and Panama.