TORONTO – Scotiabank (TSX:BNS) plans to cut 1,500 jobs — about two-thirds of them in Canada — as it restructures its operations and closes 120 branches at its international banking arm.
The bank said Tuesday it will take a $341-million hit after taxes to its fourth-quarter earnings as a result of the changes, but expected to remain on track to meet its 2014 financial objectives.
No branch closures were announced in Canada, but the bank said some of the job cuts will be at its head office.
Scotiabank said it will also centralize and automate some branch functions and make changes to its wealth management business.
“We’re comfortable with our footprint here in Canada, so I wouldn’t anticipate any branch closings here,” Porter told analysts in a conference call.
The situation is different internationally. Scotiabank plans to close about 10 per cent of its branches outside of Canada, including in Mexico and the Caribbean region.
Shares of Scotiabank fell 82 cents, or 1.2 per cent, to $67.96 on the Toronto Stock Exchange in mid-morning trading.
However, Porter, who has been Scotiabank’s top executive since Rich Waugh retired last November after a decade in the role, said the bank continues to invest in its international business.
“We’re putting a new core banking system in Mexico and we continue to invest in other channels like mobile banking,” Porter said.
“The frustration for us, across the international footprint, is that we’ve had very solid asset growth over the past three or four years and not all of that has dropped to the bottom line.”
Scotiabank said it expects to reduce annual costs by $120 million through the measures, but the full benefits won’t be seen until its 2016 financial year, which begins next November.
In addition to $148 million in restructuring charges, Scotiabank said it will take a number of other one-time items that will hit its bottom line including an additional $109 million of loan loss provisions related to the Caribbean region.
It will write down the value of its investment in a Venezuelan bank by $129 million and take a $47-million charge related to unremitted dividends from Banco del Caribe in Venezuela, due to a change in currency exchange rates.
Scotiabank said it will also take a $62-million charge related to an adjustment to its write-off policy on unsecured bankrupt retail accounts in Canada and a $55 million charge related to ongoing legal claims.
The bank also said it expected a $30-million charge as a funding valuation adjustment related to uncollateralized derivative receivables.
Such a varied group of charges typically occur at a Canadian bank when its headed into a crisis, said Robert Sedran, an analyst at CIBC World Markets.
“Although we do not think Scotiabank is in crisis, the charges do make it obvious to us that it is facing a challenging operating environment in several jurisdictions,” he said in a note.
“The outlook implied by these charges should weigh on them in the near term.”
Macquarie Securities analyst Jason Bilodeau outlined a number of elements he believes contributed to Scotiabank’s decision, including difficult operating conditions, changing business practices and an effort to reduce costs across its operations.
“It is not a positive that the bank finds itself in the position to require these charges, but the transitory impact is manageable,” wrote Bilodeau in a note.
“It looks like this is an effort to clean up a wide range of issues.”