U.S. Federal Reserve Approves Scotiabank's Stake in KeyCorp

By Pete Schroeder and Nivedita Balu

WASHINGTON/TORONTO (Reuters) – The U.S. Federal Reserve announced on Thursday the approval of Scotiabank's application to purchase up to 14.99% of the voting shares in U.S. regional lender KeyCorp, a move aimed at increasing the Canadian bank's exposure to developed markets.

Scotiabank revealed a $2.8 billion deal in August, which includes the ability to appoint two directors to KeyCorp's board.

Both banks' representatives have not yet provided comments on the development.

Scotiabank CEO Scott Thomson’s initiative to invest in KeyCorp aligns with the bank's strategy to concentrate on the North American trade corridor while considering exiting some unprofitable sectors in South America.

Thomson, who assumed leadership of the bank last year, emphasized the importance of reallocating capital from developing to developed markets as a core aspect of their strategy, describing the KeyCorp investment as "a low risk, low cost optionality in North America" offering strong returns.

Historically, Canadian banks have pursued growth through acquisitions in the U.S., often facing high costs.