Scotiabank to buy online stock brokerage E-Trade Canada for C$444 million

By Kristine Owram, The Canadian Press

TORONTO - Scotiabank (TSX: BNS.TO) is beefing up its presence in the online brokerage business with the purchase of E-Trade Canada for C$444 million, the bank's latest move to expand the range and depth of services that it offers in its retail customers in Canada.

E-Trade Canada has 190 employees and administers $4.7 billion in assets for its clients. It has been one of the leading non-bank systems in Canada for individual investors to trade stocks over the Internet.

The move to buy the Canadian subsidiary of E-Trade Financial Corp. (NASDAQ: ETFC) will bolster Scotiabank's position against its peers, particularly Toronto-Dominion (TSX: TD.TO), Bank of Montreal (TSX: BMO.TO) and Royal Bank (TSX: RY.TO).

The proposed deal still requires requlatory approvals.

The deal builds on the bank's 2007 acquisition of TradeFreedom Securities Inc., a Canadian online brokerage boutique, and its purchase of a significant minority stake in DundeeWealth Inc. (TSX: DW.TO), a Toronto-based wealth management company offers mutual funds and other investment services through an extensive network of independent financial advisors.

Scotiabank is relatively weak in the area of wealth management and this acquisition will bolster the bank's portion of the market, said Morningstar analyst Chris Blumas.

"It's very difficult to actually find something to buy because (wealth management) is such a mature market here," said Blumas.

"I think from a strategic or a bank capabilities point of view, it would be a good acquisition because it gets them into an area that has good growth potential and where they've been historically lagging the pack."

Scotiabank says that the purchase of E-Trade Canada will double its presence in the Canadian online investing market.

"Scotiabank's agreement to purchase E-Trade Canada demonstrates our commitment to pursuing opportunities to grow our wealth management business and drive revenue growth," said Rick Waugh, Scotiabank's president and chief executive.

"This is an excellent growth opportunity that will build on Scotiabank's strong position as a leading online investing solution."

Duncan Hannay, the president of E-Trade Canada, said th transaction will marks a new chapter for the business and the industry.

"We anticipate a smooth transition for our customers," Hannay said.