Scotiabank Acquires 14.9% Stake in KeyCorp

Canadian bank Scotiabank is set to acquire a 14.9% ownership stake in KeyCorp, an American banking group, through a strategic minority investment valued at $2.8 billion.

The investment will be completed in two stages: an initial investment of 4.9% for $800 million, followed by an additional investment of approximately 10% for $2 billion.

Following the completion of the additional investment, Scotiabank will have the right to designate two individuals to serve on KeyCorp’s board of directors.

The acquisition is intended to improve Scotiabank’s future options within the North American corridor, enabling the bank to strengthen its existing presence in Canada, the US and Mexico.

The transaction also aims to boost KeyCorp’s growth potential by enabling targeted investments to expand its franchise, while also enhancing its strategic agility in an uncertain environment.

Chris Gorman, chairman and CEO of KeyCorp, said:  "Scotiabank approached us with a unique opportunity to raise capital on attractive terms. While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position."

The banks expect the initial purchase to be completed by the end of August. The additional purchase and approval from the Federal Reserve is expected to occur in the first quarter of 2025.

Scotiabank is the latest of the big five Canadian banks to invest in the US as growth in the domestic banking industry slows, with these banks already dominating a significant portion of the market.

Last year, Scotiabank’s rival Bank of Montreal bought Bank of the West for $16.3 billion, while TD acquired New York-based investment bank Cowen for $1.3 billion and Royal Bank of Canada bought Hollywood bank City National.