Bank of Nova Scotia BNS-T is cutting 3 per cent of its global workforce, adding to a string of layoffs on Bay Street this year.
Some of Canada’s largest banks are cutting teams as lenders face rising costs, higher provisions for potential loan defaults and stricter capital requirements. Scotiabank joins Royal Bank of Canada RY-T and Bank of Montreal BMO-T in announcing wide-ranging cuts across the organization.
Scotiabank said in a statement that the job cuts are a result of the bank’s digitalization and automation efforts, as well as changes in the way customers access banking products and services. The company also continues to streamline its operations to reallocate resources to key areas where it believes it can grow the business. The total number of jobs affected was not disclosed.
Royal Bank of Canada has become the first major financial institution to signal job cuts. In its third quarter results announcement at the end of August, the bank announced that the number of full-time employees decreased by 1% from the previous quarter due to employee retirements. The company said it expects to reduce its workforce by another 1-2% next quarter.
Bank of Montreal also implemented job cuts, reducing the number of employees by 2.5%. The costs associated with the layoffs were across the bank, but were primarily incurred by the bank’s Canadian Personal and Commercial Banking, Corporate and Capital Markets businesses.
Scotiabank’s workforce reductions will result in approximately $247 million in restructuring charges and severance provisions.
Canada’s fourth-largest lender is in the midst of a turnaround strategy in which new CEO Scott Thomson aims to revive the struggling lender’s stock price. He said the plan, expected to be announced in December, will focus on improving employee culture to improve the customer experience, growing the company’s Canadian business and realigning its international division in Latin America.
The job cuts were part of a broader announcement about costs that Scotiabank expects to impact its fourth-quarter results ending in October.
The bank is consolidating its real estate footprint. In the fourth quarter, he expects to incur charges of $63 million due to the surrender of some facility and service contracts.
Scotiabank expects to realize cost savings from these reductions by 2025. In the fourth quarter, it said fees would impact earnings per share by about 0.49 cents and its Common Equity Tier 1 (CET1) ratio, a measure of lender capacity. It absorbs losses by about 10 basis points. (A basis point is one-hundredth of a percentage point.)
Additionally, the bank will record an impairment charge of $280 million related to its investment in Bank of Xi’an. The Chinese-based lender’s market value has consistently been lower than Scotiabank’s book value, the Canadian bank said.
RBC analyst Darko Mihelic said the move marks a “small step in the right direction” and expects the stock to rise as a result. Scotiabank shares were down 1.1% as of 10:10 a.m. in Toronto.