TEXT-Fitch: Bank of Nova Scotia to buy ING Bank of Canada-no rating impact

Thu Aug 30, 2012 2:10pm EDT

Aug 30 - Fitch Ratings views Bank of Nova Scotia's ing(BNS)
announced agreement to purchase ING Bank of Canada (ING Direct) from
Netherlands-based ING Group as neutral to the ratings of BNS (rated
'AA-/F1+' by Fitch).

BNS will pay $3.12 billion in cash for ING Direct. Excess capital at ING Direct
of approximately $1.2 billion reduces BNS's net investment in this transaction
to approximately $1.9 billion. Additionally, BNS has also announced a fully
subscribed deal for $1.5 billion of common shares to finance this acquisition.

BNS has been the most active acquirer amongst the six largest Canadian banks.
The bank has completed a number of acquisitions in Latin America and Asia over
the past few periods. In Canada, prior to this deal, acquisitions had been
focused primarily in the wealth management space, including the purchase of a
stake in CI Financial Corp. and the acquisition of DundeeWealth, Inc.

With approximately $40 billion in assets, including $29 billion of residential
mortgages, ING Direct is the 8th largest Canadian bank, but is significantly
smaller than BNS ($670 billion in assets). However, the transaction will benefit
BNS's funding mix as ING Direct's $30 billion retail deposit base will allow the
bank to diversify away from comparatively higher cost and more volatile
wholesale funds.

ING Direct's 1.8 million customer base consists of relatively higher net worth
households served via Internet, mobile banking and call centers. BNS intends to
maintain this self-direct channel as a distinct unit. BNS will initially keep
the ING Direct branding for a transition period of up to 18 months. Future
branding will be distinct from BNS and will reflect the self-service nature of
this unit. Looking ahead, BNS intends to grow earnings in part by offering
additional loan products and services to ING Direct's customer base.

The transaction is anticipated to close by this December subject to customary
regulatory approvals. The acquisition is expected to be modestly accretive a
year after closing. Retained earnings and the equity offering to finance the
transaction should allow BNS to maintain sound capital levels, including a Basel
III common equity Tier I ratio in the 7% to 7.5% range.

The ING Direct acquisition came a day after BNS announced stronger than expected
third quarter (3Q'12) results. The bank reported record quarter earnings of
$2.05 billion for 3Q'12, up over 40% sequentially. Results were supported by
strong volume growth in the domestic banking franchise, advances in the global
banking and markets segment, and a solid performance in other business lines.
Earnings were also boosted by a $614 million after-tax gain from the sale of
Scotia Plaza in Toronto.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Global Financial Institutions Criteria' (Aug. 15, 2012).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria