4 Min Read
(Adds executives' comments on cuts, analyst comment, updates market reaction)
By Jeffrey Hodgson and Euan Rocha
TORONTO, Nov 4 (Reuters) - Bank of Nova Scotia will cut about 1,500 jobs and book a pretax charge of C$451 million ($396 million), Canada's No. 3 lender said on Tuesday, as it took a hit on soured bets in the Caribbean and Latin America.
Scotiabank said the moves will reduce earnings by about 28 Canadian cents a share in the quarter ended Oct. 31.
The profit warning knocked its stock down 1.9 percent to C$67.48. It also stoked fears about the prospects for other Canadian banks ahead of fourth-quarter results due next month.
Scotiabank said it will close, or reduce staff, at about 120 branches, primarily in Mexico and the Caribbean. The changes affect about 10 percent of its international operations, Chief Executive Brian Porter told analysts.
"The frustration for us is across the international footprint 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," he said on a conference call. "We continue to look at initiatives to reduce our structural costs."
Porter, who took over as CEO a year ago, said the bank's international operation was "absolutely" still in growth mode. Scotiabank has focused on Latin America, the Caribbean and Asia.
Acquisitions in countries such as Mexico have often resulted in overlap in data and call centers as well as branch networks, the bank said.
"In the Caribbean ... in some of these countries, we're just over branched and we have to size it to the economic reality of each of those countries," Porter said.
About C$109 million of the charge is for loan-loss provisions, primarily for three existing net impaired loans in its Caribbean hospitality portfolio. Scotiabank did not specify who the borrowers were. Porter said its total Caribbean portfolio is now less than C$1 billion.
Slow growth and a decline in tourism since the 2008 financial crisis have hurt Canadian banks with operations in the Caribbean. In May, Canadian Imperial Bank of Commerce booked a noncash goodwill impairment charge of C$420 million on its Caribbean unit.
The CIBC move came after Canada's No. 1 bank, Royal Bank of Canada, agreed to sell its Jamaican banking operations and book a C$60 million goodwill writedown on the sale.
Scotiabank also booked a C$129 million writedown on its 26.6 percent stake in Venezuela's Banco del Caribe and took a C$47 million charge to income against a revaluation of unremitted dividends.
Its remaining net investment in Venezuela is about C$50 million, its chief financial officer said.
Barclays banking analyst John Aiken said investors are now concerned whether growth in markets such as Colombia, Chile and Peru will meet expectations.
Of Scotiabank's total charge, about C$148 million is related to the job cuts, mostly for severance costs. About two-thirds of the job cuts will be in Canada, with the remainder at its international operations.
Scotiabank reports quarterly results Dec. 5. Analysts, on average, had expected adjusted quarterly earnings of C$1.40 per share, according to Thomson Reuters I/B/E/S.
The bank said it expects to save about C$120 million as a result of the restructuring. It said savings will be modest in 2015 and fully realized in financial year 2016.
$1=$1.14 Canadian With additional reporting by Ashutosh Pandey in Bangalore; Editing by Maju Samuel, Chizu Nomiyama and Peter Galloway