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Early Tuesday morning Scotiabank’s chief executive officer announced a litany of changes to its operations in Canada and abroad, including restructuring charges, layoffs and loan losses. The news comes during the first week of the lender’s new fiscal year, which started November 1.
In total, the charges amount to $451-million before tax, or $351-million after tax. The job losses, to be felt everywhere from head office to the branches, are expected to total 1,500 positions, and two-thirds of the cuts will be made in Canada.
Restructuring Scotiabank’s operations will cost $148-million, an expense that will be incurred when the lender reports fourth quarter earnings in December, and the changes will shrink the number of jobs in multiple divisions, ranging from wealth management to capital markets.
However, the majority of the severance costs will be tied to positions in personal and commercial banking in Canada and abroad.
At home, Scotiabank has been trying to centralize and automate a number of mid-office functions. Outside Canada, the lender will shut or shrink 120 branches to focus on high-growth markets such as Chile and Colombia. Once made, these changes are expected to save the bank $120-million annually.
Mr. Porter, who took over as CEO in November 2013, has long stressed the need to clamp down on costs, even though the bank made a record annual profit of $6.7-billion in 2013.
Beyond this restructuring, Scotiabank’s additional charges range from a writedown on the value of the bank’s investment in Banco del Caribe in Venezuela to $109-million worth of loan losses in the Caribbean, where the regional economy continues to suffer in the aftermath of the global financial crisis.
Other charges stem from: bankruptcy writedowns related to retail banking accounts in Canada; legal claims spread across different business lines; changes to derivative valuations; and amendments to the methodology used when estimating Canadian loan losses.
Scotiabank’s Caribbean charges come on the heels of similar writedowns from Royal Bank of Canada and Canadian Imperial Bank of Commerce, the two other Canadian banks with large operations in the region. Earlier this year CIBC announced a $420-million after-tax goodwill writedown on its Caribbean operations.
“Today’s announcement is a result of making some difficult but necessary decisions to support our long-term goals,” Mr. Porter said in a statement. “Everyone impacted by these changes will be treated with fairness and respect and deserves our thanks for their important contributions to Scotiabank. We are confident that these initiatives will allow us to continue investing in high-growth areas of the Bank. Notwithstanding these unusual charges, we remain confident that our 2014 reported results will be within our financial objectives for the full year.”
Scotiabank will hold a conference call at 8 a.m. to discuss the changes.