Scotiabank (BNS) owns 37% of CI Financial (CIFAF) - Canada's largest independent wealth manager - and is looking to "monetize" its investment after a 44% run for CI's stock since the start of 2013 puts the value of its holdings at $3.8B.
The move seems counter to the bank's emphasis on wealth management - it accounts for 20% of earnings, up from 3% a decade ago - but management says it can sustain that growth with its own AUM, and notes the purchase of the rest of DundeeWealth for $2.3B in 2011.
There should be plenty of interest among Canadian banks and life insurers who are eager for more wealth management assets. CIBC (CM) is in the running to buy Russell Investments, and SunLife (SLF) and Manulife (MFC) have devoted more of their resources to asset management. One hitch: Scotiabank needs to find more than one buyer as its agreement with CI states it cannot sell more than 20% of the business to one purchaser.
"This is a crippling decision they made," says CI chairman Bill Holland, calling himself shocked by the move.