Goldman, Citi final bidders for Scotiabank's metals business – sources

24th January 2018 By: Reuters

LONDON – The field of prospective bidders for ScotiaMocatta, the metals trading arm of Canada's Bank of Nova Scotia, has narrowed to two, three banking and industry sources said on Wednesday.

The two - Goldman Sachs Group and Citi - are undertaking due diligence checks, the sources said.

The sources said Japanese trading house Sumitomo and Australian bank ANZ (Australia and New Zealand Banking Group), which had also expressed interest, were not taking their offers forward and there was no certainty a deal would be reached.

Scotiabank did not immediately respond to a request for comment. Goldman and Citi declined to comment.

Scotiabank hired JPMorgan to help with the sale after conducting a review of its metals business in 2016 following a string of lawsuits related to the manipulation of gold and silver price benchmarks and due to dissatisfaction over its performance, sources said.

It aims to complete the process by the end of March 2018.

The sources said that Scotiabank's price tag of up to $1-billion for ScotiaMocatta was unlikely to be met by the suitors.

"I think the process will see the great majority of the business move to a new owner but would definitely expect there to be subsequent trimming, either by sale or closure," one said.

The bulk of ScotiaMocatta's business is in precious metals and it is one of five banks that clear bullion in London's $5 trillion a year gold market, the world's biggest.

Citi trades precious metals and does some hedging and financing business for some of Canada's gold producers. Buying Scotia's business would give them a much larger precious metals trading book, one of the sources said.

Goldman Sachs has been seeking to turn around its commodities business by hiring a number of executives after reporting weak revenues in 2017.

Goldman was one of five banks that invested several million dollars in designing and building gold and silver contracts launched by the London Metal Exchange in July.

A fourth source said Goldman would be mostly interested in Scotia's mine finance business.

ScotiaMocatta is one of London's main gold trading banks with a history dating back to the 17th century. It was acquired by Scotiabank from Standard Chartered in 1997 and employs more than 160 people in ten offices around the world, according to its website.

Market sources put Scotiabank's annual revenues from the precious metals unit at $100-million to $180-million with operating margins of around 25%.