Federal approval granted to Scotiabank for expanding KeyBank equity ownership
Scotiabank Completes Minority Stake Acquisition in KeyBank
In a significant move, Scotiabank has completed the acquisition of a 14.9% minority stake in KeyBank, a leading U.S. financial institution, in December 2024. The investment, worth approximately $2.0 billion, was approved by the Federal Reserve earlier than expected, and it has proven to be beneficial for KeyBank's financial strength and growth outlook during 2025.
The Federal Reserve's approval was a crucial regulatory milestone that enabled Scotiabank to acquire this substantial minority ownership stake. The transaction complied with U.S. banking regulations, as confirmed by the Federal Reserve, and the appropriate banking agencies did not object to the investment.
Since the acquisition, KeyBank has shown positive financial momentum, reporting strong earnings growth and capital metrics through the first two quarters of 2025. The investment by Scotiabank has helped bolster KeyBank’s capital adequacy ratios and facilitated its strategic initiatives in lending, wealth management, and fee-based businesses.
Scotiabank's CEO, Scott Thomson, considers the KeyBank investment as a "low-risk, low-cost optionality in North America" with strong returns. The deal may also pave the way for Scotiabank to cement growth in the U.S. without the retail footprint that has appeared to serve as a thorn in the side to its Canadian competitors.
As part of the deal, Scotiabank will be able to nominate two directors to KeyBank's board. Additionally, there is a possibility that Scotiabank may purchase licensing rights to offer certain products to KeyBank clients or vice versa.
This investment marks a strategic move for Scotiabank, as it aims to prioritize moving capital from developing markets to developed ones and exit some unprofitable markets in South America. Meanwhile, Scotiabank's Canadian counterpart, Royal Bank of Canada, infused $2.95 billion into its U.S. subsidiary, City National, in 2023 to boost its capital.
However, not all Canadian banks have had smooth sailing in the U.S. market. TD's proposed $13.4 billion acquisition of Memphis, Tennessee-based First Horizon was derailed in 2023, and TD agreed to pay more than $3 billion in penalties after a multiagency investigation on suspicion that millions of dollars tied to the illicit drug fentanyl funneled through the bank.
In contrast, the Office of the Comptroller of the Currency fined City National $65 million in January for deficiencies in reporting events that pose operational risks and other compliance issues.
In conclusion, Scotiabank's investment in KeyBank is a positive move that has contributed to the financial strength and growth outlook of the U.S. institution. The deal, now completed and effective, is expected to further boost Scotiabank's presence in the U.S. market.
- Scotiabank's investment in KeyBank, a leading U.S. financial institution, has been beneficial for its business growth and investing strategies, as it has facilitated its strategic initiatives in lending, wealth management, and fee-based businesses.
- The strategic move by Scotiabank to invest in KeyBank, worth approximately $2.0 billion, has proven to be a low-risk, low-cost optionality in North America, according to its CEO, Scott Thomson, as it aims to prioritize moving capital from developing markets to developed ones and exit some unprofitable markets in South America.
