Bank of Nova Scotia will cut 3% of its employees and take a writedown on its investment in a Chinese bank, leading to a C$590 million ($432 million) hit to earnings in the fourth quarter.
(Bloomberg) — Bank of Nova Scotia will cut 3% of its employees and take a writedown on its investment in a Chinese bank, leading to a C$590 million ($432 million) hit to earnings in the fourth quarter.
The reductions amount to about 2,700 jobs, based on the Canadian bank’s total staff of 91,013 employees as of July 31. Scotiabank said Wednesday the impact on its common equity tier 1 ratio will be about 10 basis points.
The restructuring charges also include the cost of exiting real estate and other contracts. The impact on earnings equals about 49 Canadian cents per share in the quarter ending Oct. 31.
New Chief Executive Officer Scott Thomson has promised to unveil an updated strategy soon, and the bank has scheduled an investor day for Dec. 13.
Included in Wednesday’s announcement are impairment charges of C$280 million, after taxes, related to the bank’s investment in Bank of Xi’an Co. Ltd., “whose market value has remained below the bank’s carrying value for a prolonged period,” as well as impairment of intangible assets including software.
“The move is consistent with our expectations for more restructurings at Canadian banks in an effort to speed cost cuts and achieve operating leverage,” Bloomberg Intelligence analyst Paul Gulberg said in a note.
(Updates with additional information from the second paragraph)
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