TORONTO - Scotiabank (TSX:BNS) warns that it's cutting the equivalent of 1,500 jobs companywide — about two-thirds of them in Canada — and taking a number of accounting measures that will cut about $341 million from its profit for the fourth quarter.
Despite the magnitude of the announcement, the bank said it remains on track to meet its 2014 financial objectives. Like Canada's other major banks, Scotiabank has been extremely profitable — with a total $5.57 billion of net profit in the first three quarters of 2014.
"Today's announcement is a result of making some difficult but necessary decisions to support our long-term goals," said Brian Porter, Scotiabank's president and chief executive officer.
"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."
In total, Scotiabank expects to recognize $341 million of items in the fourth quarter ended Oct. 31 that will reduce its diluted earnings by 28 cents per share. The full financial report will be issued in December but the company scheduled a morning conference call on Tuesday to discuss the announcement.
About $148 million of the fourth-quarter provisions will be related to severance or restructuring costs.
Porter, who has been Scotiabank's top executive since Rich Waugh retired last November after a decade in the role, said that "everyone impacted by these changes will be treated with fairness and respect and deserves our thanks for their important contributions to Scotiabank."
Scotiabank says the downsizing will affect people at all levels of the organization and include the closure of about 120 branches at its international division.
In Canada, no closures were announced but Scotiabank will centralize and automate several branch functions and reduce operational support for its wealth management activities — which typically assist clients with investment and savings.
It expects to reduce annual costs by $120 million through the exercise but the full benefits won't be seen until its 2016 financial year, which begins next November.
Scotiabank is also taking a number of other steps that will reduce profit in the fourth quarter of its 2014 financial year, which ended Oct. 31, including an additional $109 million of loan loss provisions related to loans in the Caribbean region.
It will also 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.
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