Scotiabank to cut 1,500 jobs amid restructuring charges
Bank taking $451M in pre-tax charges
Scotiabank will cut 1,500 jobs, including about 1,000 in Canada, as it reduces head-office staff and eliminates some of its international branches.
The bank said Tuesday it will take a total of $451 million in pre-tax charges in the fourth quarter.
The bank plans to centralize and automate some of its Canadian branch functions, and reduce some of its wealth-management operational support.
Scotiabank will also close or downsize approximately 120 branches in its international banking division.
Analysts said the move is probably the right one in the long run, but expected some weakness in the stock as a result of the dour job news on Tuesday.
"The charges come at a time when the Canadian banks have seen an almost wholesale changing of the guard at the top of the house," Barclays analyst John Aiken said in a note to investors. Many of Canada's big banks have changed CEOs in the past year, so a move to fire people early in the tenure of the new CEO by Scotiabank could be a sign that others are planning similar moves.
"This is the close of his first fiscal year at the helm," Aiken said. "Investors may rightfully be concerned that Scotia’s announcement may signal a greater than usual house cleaning in the fourth quarter, in order to set the stage for the new class of CEOs."
The bank said it will book a restructuring provision of approximately $148 million in the fourth quarter, mainly to cover employee severance costs.
The bank expects to save $120 million annually as a result of the restructuring, but the full benefits won't be seen until 2016.
As of the end of the bank's third quarter, it had almost 87,000 employees worldwide, including more than 36,700 in Canada.
CEO confident about reaching objectives
Scotiabank said it will also take a number of charges related to its investments in Venezuela and the Caribbean. A revised exchange rate means Scotiabank will take charges and writedowns totalling $176 million on its 26.6 per cent interest in Banco del Caribe in Venezuela.
The bank also expects to record a loan loss provision of approximately $109 million, primarily due to three impaired loans in the Caribbean region's hospitality portfolio.
The bank will also take a $62-million charge for unsecured bankrupt retail accounts in Canada, plus a $55- million charge for ongoing legal claims.
In total, the charges will cut bank's fourth-quarter diluted earnings by 28 cents per share.
"We are confident that these initiatives will allow us to continue investing in high-growth areas of the bank," president and CEO Brian Porter said in a statement. "Notwithstanding these unusual charges, we remain confident that our 2014 reported results will be within our financial objectives for the full year."
Scotiabank made a record $6.7 billion in net profit in the fiscal year that concluded on Oct. 31, 2013.
The bank will announce its 2014 annual fiscal results on Dec. 5.