Scotiabank may sell mutual funds group to CI-report

TORONTO (Reuters) - Bank of Nova Scotia (BNS.TO) is in talks to sell its mutual fund division to CI Financial CIX_u.TO in a deal that would give Canada's third largest bank a large stake in CI, the National Post newspaper said.

The paper, citing an unidentified source, said Scotiabank had indicated that it aims to take a stake in CI equal to that of CI's biggest shareholder, Sun Life Financial Inc (SLF.TO), which holds 35 percent.

If each firm's assets were valued on the same basis, CI would need to issue about 25 percent of its float, valued at about C$1.5 billion ($1.43 billion), to Scotiabank to do the deal, the report said.

Scotiabank and CI officials were not immediately available for comment.

Sources cited by the newspaper said the deal had not been completed and there was no guarantee that it would be.

CI is Canada's third-largest investment fund company, with a market capitalization of nearly C$6 billion.

Scotiabank owns the smallest mutual-fund business among the country's five main banks.

Combining the two businesses would give CI about C$85 billion in mutual fund assets to manage, the newspaper said.

A deal would give CI a larger asset base and help it spread its costs as well as give it access to Scotiabank's disribution system.

($1=$1.05 Canadian)

(Reporting by John McCrank; Editing by Ted Kerr)