Appointment of next Scotia CEO raises questions

The appointment of Scotiabank’s next boss is causing some surprise on Bay Street and raising a number of questions that are fueling uncertainty surrounding the future directions that will be given to the financial institution.

Scotia announced Monday that Brian Porter, 63, will retire at the end of January. His successor will be Scott Thompson, 52, the current CEO of Finning International, the world’s largest Caterpillar equipment dealer. He will leave this position in mid-November.

While Scott Thompson has been a Scotia Board member for six years, it’s unusual for a major bank to bring in an outside candidate for the CEO position.

Laurentian Bank is the latest Canadian bank to have adopted this voice. Laurentian chose two years ago to appoint Rania Llewellyn as President and Chief Executive Officer. She had just spent 26 years at … Scotia.

“After 41 at Scotia and almost 10 years as CEO, it is not surprising to see Brian Porter retiring,” said analyst Darko Mihelic at RBC.

“What surprises me is that the person taking over is not a bank executive. »

Darko Mihelic speaks of a “historic” decision by the board of directors of Scotia. “It clearly suggests that significant changes are to be anticipated at Scotia. »

“It’s unclear what changes will be made since Scott Thompson won’t become CEO for several more months. This will cause short-term uncertainty,” said CIBC’s Paul Holden.

His colleague Doug Young, at Desjardins Securities, affirms that Scott Thompson enjoys a good reputation in the business community and that he has a good track record in various industries. He has notably worked at Bell Canada and Talisman Energy over the years.

Doug Young also points out that Scott Thompson also has international experience and international represents a significant portion of Scotia’s activities (in Latin America in particular).

Doug Young emphasizes on the other hand that Scott Thompson does not however have experience as a banker. “I appreciate that the bank is thinking outside the box in a very conventional industry, but isn’t this board decision too atypical? »

This announced appointment has reason to worry investors, according to Doug Young. He wonders if the internal candidates who have been considered for the position of CEO will remain within the bank. These senior leaders could leave in the coming months.

In a reaction that may reflect the sentiment of investors, Scotiabank’s stock fell 3% Monday in Toronto as shares of other major Canadian banks posted gains or remained flat.

Scotia’s stock also hit its lowest level in 52 weeks during the first trading session of the week.

Brian Porter has been CEO of Scotia since 2013. He will act as a strategic advisor to his successor for a few months once Scott Thompson officially takes over as CEO of Scotia in early February.