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Pedestrians pass by the Scotiabank location near Yonge and Bloor Streets in Toronto.

Early in his era, Brian Porter laid out exactly where investors should expect Bank of Nova Scotia to expand. At the top of his list: Latin America and credit cards.

Late Friday, Mr. Porter, Scotiabank's recently minted chief executive officer, announced plans to acquire 51 per cent of Cencosud S.A.'s financial services business in Chile – a purchase that ticks both boxes.

Cencosud, one of South America's largest retailers, currently has 2.5 million credit cards and roughly $1.2-billion (U.S.) of outstanding balances in Chile. The deal amounts to roughly $300-million (Canadian.)

The acquisition comes after Scotiabank stuck a similar deal in Canada, partnering with Canadian Tire to buy 20 per cent of the retailer's financial services division early this year. Scotiabank is making a big purchase into credit cards after decades of favouring other businesses – particularly in Canada.

At home, the initiative is largely driven by plans to get in on a growing revenue stream provided by credit cards. Historically, banks offered these products because they provided lenders with big margins – financial institutions could borrow money at low rates and then lend it out to credit card clients who paid roughly 20 per cent interest.

While that business is still the driving force behind the credit card business, financial institutions now also reap interchange fees. Every time a credit holder pays for something with his or her card, the card provider earns a small fee – sometimes two to three per cent of the total purchase price – for processing the transaction. As loyalty cards become more widely used, the banks have realized these fees are rather easy to collect.

Wendy Hannam, Scotiabank's Latin America head, said such fees certainly factor into the latest acquisition, but added taht they aren't as big of a lure in Chile, because the credit card market isn't as mature as Canada's.

To Canadians, the deal may sound unique for Scotiabank, but the lender already has similar partnerships in Latin America -- one of which is also with Cencosud, only in Colombia. The deal's structure is "very familiar to us," Ms. Hannam said.

Before the acquisition, Scotiabank ranked as the sixth largest credit card provider in Chile, but the deal vaults it into third place. Scotiabank is also the largest credit card provider in Colombia and the third-largest in Peru.

The new partnership will also see Scotiabank take over as lead manager of Cencosud's credit card business in Chile, handling day-to-day operations.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:10pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.21%51.78
BNS-T
Bank of Nova Scotia
+0.94%70.07

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