BANKs OF THE YEAR awards
Scotiabank Chile shows how mergers are done
Scotiabank Chile made history at the start of 2020 by completing its merger with a rival bank. It was not the size or scope of the transaction to take over the local operations of Spain’s BBVA, but that it was done in record time and without losing any customers. In fact, Scotiabank actually came out of the process with more market share than it expected.
“The integration of the two banks was an important achievement. It was the fastest ever accomplished in Chile, where the process usually takes around four years,” said Francisco Sardón de Taboada, executive vice president and country head of Scotiabank Chile.
He said the success rested on four pillars: communication, operation integration, management stability and synergies. The combination helped Scotiabank meet its goal of the acquisition – zero attrition – and gave it the edge needed to be selected Bank of the Year for Chile.
Previous mergers in Chile’s financial sector ended up with the combined banks losing between 1% and 2% of market share. Sardón de Taboada said Scotiabank went into the process with a laser focus to avoid this, because 2% in Chile’s $260 billion loan portfolio translates into $5.2 billion.
“It you lose 2% of market here, you losing the equivalent of a medium-sized bank in another country. That was totally unacceptable,” he said.
The plan came down to offering all customers double their current credit line, plus 10% as a way of ensuring their loyalty. It worked. Scotiabank had 6.7% of the market and BBVA 6.5% going into the acquisition. The goal was to maintain the combined 13.2%, but by June 2020 they were up to 14.2%.
Its other numbers are also strong, with net profit up 18% in the 12 months ending in June. Loans were up by 12% and deposits by 20% in the same period.
The merger also prepared the bank, in a way, for the coronavirus pandemic. Scotiabank started a three-year digital transformation when it began the integration with BBVA and that accelerated when the pandemic hit.
“The pandemic showed us that it was easier to digitize than we thought. Prior to the pandemic many customers thought that in order to cash a check, get a loan or sign a document they had to go to a branch office. With the pandemic, they have seen that even signing documents, can be done digitally,” said Sardón de Taboada. The numbers prove his point. Digital adoption by Scotiabank Chile’s account holders is now 70%, up from 5% three years ago. It runs the gamut from customers who use digital operations only to check a balance and for some who are now fully digital.
“The process has accelerated enormously and will continue. It is a paradigm shift,” said Sardón de Taboada.