Noah Zivitz

Managing Editor, BNN Bloomberg

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The Bank of Nova Scotia announced Monday that Brian Porter, its president and chief executive officer, is retiring next year — and the choice for his successor caught Bay Street by surprise. 
In a press release, the bank said Porter’s last day in the roles will be Jan. 31, 2023.

He will be succeeded by Scott Thomson, who is currently the president and chief executive officer of Finning International Inc., and a member of Scotia’s board of directors. He isn’t a stranger to the finance industry, having served as a vice-president at Goldman Sachs earlier in his career.

“I was surprised that the Bank of Nova Scotia actually went outside its own executive ranks to choose a new CEO. … I was surprised as well that they had actually gone outside, which shows that the potential CEOs, the people that had been groomed internally to be potential successors, weren't the same quality as they were able to find outside,” said Anish Chopra, a partner and portfolio manager at Toronto-based Portfolio Management Corp. — which owns Scotia shares, in an interview.

Thomson will initially move into Bank of Nova Scotia’s management ranks as president on Dec. 1. Shortly before Scotia’s announcement Monday, Finning announced Thomson’s pending exit, while naming Kevin Parkes, the Vancouver-based heavy equipment-dealer’s chief operating officer, as its next president and CEO.
“Scott is an exceptional leader and a seasoned CEO with a history of delivering results across the Americas and in international markets through a strong focus on operational excellence, talent development, and digital transformation, and a proven track record in effective capital allocation and investments in strategic capabilities,” said Aaron Regent, Bank of Nova Scotia’s chair, in the release.

Porter took the helm as Scotia’s president and chief executive on Nov. 1, 2013, after succeeding Rick Waugh, who led the bank through the global financial crisis. 
Under Porter’s leadership, Scotia made an aggressive push in 2018 to expand its wealth management line of business. In that calendar year, the bank first announced it was buying Jarislowsky Fraser for $950 million; it later acquired MD Financial Management for $2.59 billion in cash, the bulk of which was financed in a share issuance.

While Porter helped to reshape Scotia, the bank has underperformed in the market during his reign.

Through the close of trading Friday, Bank of Nova Scotia’s shares rose 8.9 per cent since Porter became the bank’s CEO. The TSX’s banks industry subgroup (which includes the Big Six, as well as Laurentian Bank of Canada, Canadian Western Bank, Home Capital Group, and the parent company of Equitable Bank) rose 55.2 per cent over that same span. On a total return basis, which includes dividends, Scotia rose 62.5 per cent under Porter, and the banks subgroup more than doubled for investors with a return of 122.6 per cent.

Scotia’s sprawling international banking operations have been a persistent source of concern for Bay Street. Most recently, a slight deterioration in that unit’s profitability in the fiscal third quarter prompted a single-day drop of 5.25 per cent for Scotia’s common shares and a slew of analyst downgrades.

“While the broad strategy is likely to stay intact, we believe the new CEO will look to improve the bank's execution, particularly with [Scotia’s] share price having materially underperformed its Big Six peer group over the past five-year period,” stated Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, in a note to clients Monday that also called Thomson’s selection “a surprise leadership change.”

Although the investing community was taken aback by the succession, Bank of Nova Scotia’s next chief executive was lauded by one of the country’s best-known business leaders.

“I think they made an excellent choice,” billionaire entrepreneur Jimmy Pattison, the chair and chief executive officer of The Jim Pattison Group, told BNN Bloomberg in a phone interview. “I’ve known him for years. He’s got a lot of good, common sense,” Pattison added. 

Thomson currently serves as a director on The Jim Pattison Group’s board of directors. Pattison first met Thomson when he was serving as a director of Bell Canada, where Thomson previously worked as an executive vice-president.

With a file from Jon Erlichman

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