* Scotiabank paying C$2.3 bln for DundeeWealth
* Acquisition means it may sell CI stake -analyst
* CIBC seen as likely buyer if CI stake put on block
TORONTO, Jan 27 It is increasingly likely Bank of Nova Scotia (BNS.TO) will sell its stake in asset manager CI Financial (CIX.TO), and the most logical buyer is Canadian Imperial Bank of Commerce [CM.TO], bank analyst Robert Sedran said in a note.
Sedran, who works for CIBC's World Markets unit, said Scotiabank's pending purchase of Canadian wealth manager and investment firm DundeeWealth (DW.TO) means it may not want to keep its 36 percent stake in CI, which is Canada's No. 3 wealth manager.
Scotiabank bought the CI stake from insurer Sun Life Financial (SLF.TO) in 2008, and many had assumed the bank would take out the rest of CI.
But Sedran argues the DundeeWealth takeover -- Scotiabank said in November it would buy the 82 percent of Dundee it did not already own for C$2.3 billion ($2.32 billion) -- means the bank will be busy integrating the new business and may no longer feel it needs the added scale of CI.
As well, Scotiabank has demonstrated it is committed to expanding its international presence, particularly in Latin America, and adding to its CI stake would take away from its ability to make foreign acquisitions, Sedran said.
"In our view, this makes a transformational acquisition like CI unlikely over the next year, and indeed reduces the need to do the deal at all," he said.
If Scotiabank does decide to sell off its CI stake, Sedran points to CIBC as the most likely buyer as the bank is domestically focused, has a strong balance sheet, and a vast distribution network through its Canadian retail bank.
"In our view, a CI acquisition would be the most strategically compelling for this bank," Sedran said.
CIBC is Canada's No. 5 bank, while Scotiabank is the country's third-largest bank.
Shares of CI were up 24 Canadian cents at C$21.72 on Thursday afternoon on the Toronto Stock Exchange, while CIBC was up 18 Canadian cents at C$76.29, and Scotiabank was up 68 Canadian cents at C$56.83.
($1=$0.99 Canadian) (Reporting by Cameron French; editing by Peter Galloway)