Scotiabank cutting 3% of global workforce, will take $590M Q4 charge after tax
The Canadian Press
Published Wednesday, October 18, 2023 9:00AM EDT
Last Updated Wednesday, October 18, 2023 3:40PM EDT
TORONTO - Scotiabank said Wednesday that it is cutting about three per cent of its global workforce, becoming the latest Canadian bank to trim staff amid continued economic uncertainty.
The bank said the cuts, which work out to around 2,700 staff, come as a result of bank digitization and automation, as well as streamlining efforts and shifting consumer preferences.
Scotiabank is moving to reduce costs as it looks to restore positive operating leverage, as well as work toward a strategic refresh initiated by CEO Scott Thomson after he stepped into the role in February.
Chief financial officer Raj Viswanathan noted on the bank's last earnings conference call in August that expense management is a cornerstone of the bank, and that managing staffing numbers is part of that approach as the bank looks to improve its finances.
“Our expectation is always to generate positive operating leverage every year, and we hope to start doing that again in 2024,” he said.
The bank had already started trimming its head count at the time, reporting that its total employees stood at 91,013 employees in its third quarter, down from a peak of 91,264 in the first quarter this year.
Scotiabank said Wednesday that it would also take several charges that total $590 million after-tax, or about 49 cents per share, for its fourth quarter related to the cuts and other changes it is making.
The charges include $247 million after-tax for restructuring and severance provisions and $63 million after-tax related to the consolidation and exit of certain real estate premises and service contracts.
They also include an impairment charge of $280 million after-tax related to its investment in Bank of Xi'an Co. Ltd. as well as the impairment of certain intangible assets including software.
Scotiabank noted that the market value of Bank of Xi'an has remained below the bank's carrying value for a prolonged period.
“We expect the savings on the above items to be achieved throughout fiscal 2024 and anticipate full run-rate benefits in fiscal 2025,” the bank said in a statement.
RBC analyst Darko Mihelic said in a note that the bank's announcements were “a small step in the right direction” as the bank works through a review of its strategic direction.
He said the writedowns were a “cleanup” of the balance sheet and the impact on capital is small.
Canada's big banks have been working to manage costs given the continued economic uncertainty ahead after an unprecedented interest rate cycle.
When it reported its third-quarter results earlier this year, Royal Bank of Canada said it was working to cut its employee numbers after it said it had over-hired by thousands. RBC said in August that it had already cut about one per cent of staff and it expected to cut another one to two per cent this year.
CIBC also reported in August that it had 48,718 employees in its third quarter, down 1,709 from the fourth quarter of 2022, while BMO reported it had taken a $223 million pre-tax charge in the last quarter related to layoffs, though the bank did not disclose the number of employees let go.
Scotiabank declined to provide further details on its cuts, saying it will release more in its fourth-quarter results on Nov. 28.
This report by The Canadian Press was first published Oct. 18, 2023.