This article first appeared in Corporate, The Edge Malaysia Weekly, on June 20 - 26, 2016.

BANK of Nova Scotia, Canada’s third largest bank by assets, is exploring the sale of its Malaysian banking subsidiary as part of a wider plan to scale back in Asia, sources say.

The wholly-owned subsidiary, The Bank of Nova Scotia Bhd (Scotiabank), has a 43-year history in Malaysia. It commenced operations in 1973 and became a locally incorporated entity in 1994. The low-key but profitable Scotiabank does mainly corporate banking these days. 

(Scotiabank), has a 43-year history in Malaysia. It commenced operations in 1973 and became a locally incorporated entity in 1994. The low-key but profitable Scotiabank does mainly corporate banking these days.

Bank of Nova Scotia has been reported to be rethinking its strategy in Asia, with plans to sell non-core assets in the region to focus on more profitable markets, even as it goes on a cost-cutting drive as things get tougher at home.

In Thailand, it has been looking for buyers for its 49% stake in one of the larger lenders, Thanachart. It has reportedly hired Morgan Stanley to advise on the sale of its stake.

“It is a refocus of strategy away from Asia and into South America,” says another source familiar with the matter.

Interestingly, it is the second foreign bank with a full banking services licence looking to exit Malaysia after The Royal Bank of Scotland (RBS) earlier this year.

In April, UK-based RBS agreed to sell its Malaysian operations, The Royal Bank of Scotland Malaysia Bhd (RBS Malaysia), to one of Taiwan’s top financial services groups, CTBC Financial Holding Co Ltd, for US$189.7 million. The deal, done at 0.95 times RBS Malaysia’s book value, is currently pending approval from Malaysian and Taiwanese regulators. Loss-making for the last eight years, RBS chose to sell the Malaysian assets to cut costs and reduce its global footprint.

Industry observers say they would not be surprised if a few major foreign lenders showed interest in acquiring Scotiabank as a means to secure a commercial banking licence in Malaysia. Such licences are hard to come by. Bank Negara Malaysia has not issued new licences since 2010.

“It could be much like the CTBC-RBS deal, where CTBC was willing to pay a decent price to snag a banking licence in Malaysia,” says one observer.

Banks that might show interest in Scotiabank include Chinese lenders such as Bank of Communications, which does not yet have a presence in Malaysia, and Taiwanese lender Fubon Financial Holding Co, which has been eyeing acquisitions in Asean.

Bank of Nova Scotia had approached a unit of Bank of China, Malayan Banking Bhd and two Japanese banks to gauge their interest in Thai lender Thanachart, Reuters reported in February.

“Scotiabank is a much cleaner asset compared to RBS Malaysia, and slightly bigger too,” a source tells The Edge.

Scotiabank reported a net profit of RM26.77 million for the half year ended April 30, 2015, according to the last quarterly financial statements posted on its website. This was a slight decrease from the RM28.69 million it made in the same period a year earlier.

The last full year results it posted were for the period ended Oct 31, 2014, in which it made a net profit of RM54.05 million, compared with RM55.75 million a year earlier. Its total assets then stood at RM4.75 billion. This had come down to RM3.77 billion as at April 30 last year.

Scotiabank had as many as five branches in Malaysia in 2007, when it had a stronger focus on retail banking. Today, it has just one branch in Menara Hap Seng (Jalan P Ramlee) in Kuala Lumpur, a corporate sales offices each in Johor Baru and Penang, as well as an offshore branch in Labuan.

Scotiabank did not respond to requests for comment for this story.

Bank of Nova Scotia’s total investment in Malaysia was stated at C$288 million, according to its 2015 annual report. Its largest investment in the region is Thailand, at C$2.415 billion.

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