Scotiabank (BNS.TO) said Monday that it will transfer its banking operations in Colombia, Costa Rica and Panama to Latin American bank, Davivienda.

Mercantil Colpatria will also sell its interest in Scotiabank Colpatria in Colombia.

Scotiabank will book an after-tax impairment charge of $1.4 billion in the first quarter, which is also expected to reduce its Common Equity Tier 1 ratio by 10-15 basis points.

As part of the deal, Scotiabank will get a 20% stake in Davienda. Scotiabank will also have the right to designate at least one individual to serve on the board of Davivienda's combined operations, inline with its ownership stake.

The two banks intend to enter into a mutual referral agreement that will allow Scotiabank to continue to support Corporate, Wealth and Global Banking and Markets clients with its services across Davivienda's footprint.

The entire transaction is expected to take 12 months.

"With this agreement, we advance our execution plan towards sustainable and higher returns across our International Banking markets," said Francisco Aristeguieta, Group Head, International Banking, Scotiabank. "Davivienda is a proven operator which, through the combined entity, will deliver more scale and become an important partner in supporting our Global Wealth Management and Global Banking and Markets businesses in Colombia and Central America."

According to a statement, Davivienda is a financial institution with over 50 years of experience and is one of the most recognized banks in Latin America for its innovation and digital capabilities with operations in Colombia, Costa Rica, El Salvador, Honduras, Panama and Miami, serving more than 24.6 million clients.

Scotiabank estimates that additional losses of $0.3 billion will be recorded on closing primarily relating to cumulative foreign currency translation losses.

Scotiabank was last seen up $0.30, to $77.43 on the Toronto Stock Exchange.