Bank of Nova Scotia (BNS) increased its domestic wealth management platform Tuesday, after agreeing to buy an 18% stake in DundeeWealth (DW/TSX) with a right to acquire 20% for C$348-million. The "big six" bank also agreed to buy Dundee Bank for C$260-million.
DundeeWealth stock jumped more than 8% following the news. Scotiabank shares, meanwhile, were up only slightly in morning trading.
Blackmont analyst Brad Smith said the acquisition is a positive strategic fit for the bank, telling clients in a note "it aligns Bank of Nova Scotia with a highly regarded domestic wealth platform in Dundee."
He added that with three board seats and right of first refusal on any future sale of the controlling interest in DundeeWealth, Scotiabank is in a great position to expand its wealth interest, should it choose to go down that road in the future.
In the near term, Mr. Smith said he expects limited impact on Scotiabank's earnings per share and left his "buy" rating and C$62 price target unchanged.