Aug 12 Reuters Scotiabank is buying a 14.9 stake in American regional lender KeyCorp for 2.8 billion, as the Canadian bank taps into the stressed regional U.S. banking sector for growth outside its saturated home market.

KeyCorp shares jumped 14 as Scotiabank priced the offer at 17.17 per share, a nearly 17.5 premium to KeyCorp39;s last closing stock price. It will also be able to appoint two directors to KeyCorp39;s board. Scotiabank39;s shares were down about 3 in Toronto.

Smaller U.S. regional lenders have been struggling with higher cost of holding deposits and weak loan demand due to elevated borrowing costs.

Meanwhile, the Canadian lender is the latest among the big five to invest in the United States as growth slows in the domestic banking industry where the lenders control a majority of the market.

Last year, Scotiabank39;s rival Bank of Montreal bought Bank of the West for 16.3 billion, while TD acquired New Yorkbased boutique investment bank Cowen for 1.3 billion. Royal Bank of Canada owns Hollywood bank City National.

Scotiabank39;s CEO Scott Thomson last year laid out a growth plan to focus on North American markets with an emphasis on the region39;s 1.6 trillion annual trade over its less profitable Latin American operations.

We had thought that it would initially be focused on building out its wealth management andor capital markets businesses in the region, rather than announcing an interest in a US regional bank, Cormark Securities analyst Lemar…