Scotiabank CEO Brian Porter discusses the importance of global trade and Canada’s role in developing the digital economy at the bank’s annual meeting.Hand-out
Bank of Nova Scotia's chief executive officer is calling on business and political leaders to speak out about the benefits of free trade, even as he acknowledges certain terms in North America's trade regime could benefit from tweaking.
Brian Porter, who has served as CEO of Canada's third-largest bank by assets since 2013, told shareholders that leaders need to respond to concerns from "citizens who feel that open markets have threatened their livelihoods," in a speech at the company's annual meeting.
And at Bank of Montreal, which also welcomed shareholders to review its 2016 results on Tuesday, CEO Bill Downe agreed that open borders are preferable, even if certain aspects of the North American free-trade agreement could be ripe for improvement.
As U.S. President Donald Trump signals his intent to renegotiate key trading relationships with historical allies, Scotiabank's and BMO's sizeable footprints outside Canada expose both banks to an array of complex risks. Canada's banks have put renewed emphasis on international operations to boost growth and offset a sluggish domestic economy. And executives at both lenders were keen to reassure investors that their respective operations are diverse enough to weather any upheaval in the global trade environment.
Scotiabank, for one, remains bullish on its core international operations in Mexico, Peru, Chile and Colombia. Executives point to a growing middle class in Mexico, where the economy has branched out from automotive manufacturing to make a range of sophisticated equipment. But within the country, companies have taken a grim view of Mr. Trump's vows to tear up parts of NAFTA. Since the U.S. election, as the peso has weakened and growth forecasts have been slashed, some are bracing for the impact from the ensuing uncertainty.
"There's angst out there," Mr. Porter told reporters on Tuesday, acknowledging widespread frustration among workers in affected industries. But he is unequivocal when it comes to the bank's stance against a rising tide of protectionist sentiment in the United States and Europe: "Open markets are good," he said. "You can't give me any number or any measure that says that that's just not the case."
Mr. Porter also believes "it would be timely to update some provisions" in NAFTA. Those could include provisions governing services, e-commerce and intellectual property.
At present, Mexico accounts for about 5 per cent of Scotiabank's earnings. The bank has a sizable portfolio of loans to businesses, and 42 per cent of Mexican gross domestic product comes from the export economy, according to Mr. Porter. But its market share is greatest in auto loans and mortgages. Mexico's average age is just 28, a demographic advantage that means new families are forming, and buying their first homes and cars. Hiccups in trade relationships could dampen growth in either portfolio.
Yet, he is confident that even if the U.S. hikes tariffs or closes its borders, Mexico will eventually find a buyer for its goods. "If they don't get what they want – and I don't know this as a fact – they'll form some sort of agreement with China or other countries that are open to free trade."
While Mr. Trump has talked about getting tough with Mexico over NAFTA, the trade pact that has set the rules of engagement since 1994, he initially suggested only a modest "tweak" would be needed where Canada is concerned. Since then, acting U.S. trade representative Stephen Vaughn has outlined more than 40 negotiating objectives in a draft document.
At BMO's annual meeting, CEO Bill Downe said "it's only positive" to look at potential "improvements to NAFTA that will benefit both" the United States and Canada. He is optimistic that changes to the trade landscape could actually help his bank: BMO has a robust business in global trade finance, including in the United States and China.
"I think it will, in the end, just lead to further growth for us in the amount of trading that we support," he said.