RBC, Scotiabank take charges for U.S. mortgage problems
Last Updated: Tuesday, November 13, 2007 | 4:26 PM ET
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The Royal Bank of Canada will take a fourth-quarter pre-tax charge of $360 million related to fallout from the credit crunch and the shaky U.S. housing market, while Scotiabank said it will record a charge of $190 million.
The banks said the charge is associated with valuation of subprime residential mortgage-backed securities.
RBC and Scotiabank are the latest banks to book charges related to exposure to the U.S. subprime mortgage market. On Nov. 9, CIBC said it will take a charge of $463 million in the fourth quarter.
RBC also said it will record a fourth-quarter gain of $325 million related to the restructuring of Visa Inc. The bank is exchanging its membership in Visa Canada Association for shares of Visa Inc. The bank will also take a $120 million charge to cover a liability increase in its credit card customer loyalty program.
"RBC expects its fourth-quarter earnings to be only modestly affected by these items due to largely offsetting impacts," the bank said.
Scotiabank said it will record a gain of $200 million from the restructuring of Visa.
Royal Bank shares rose $1.58 to close at $52.12 on the TSX, while Scotiabank shares gained 68 cents at $51.09.
Royal Bank is due to report its fourth-quarter financial results on Nov. 30; Scotiabank will report on Dec. 6.
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