Scotiabank announced on Wednesday plans to reduce its global workforce by approximately 2,700 jobs, or about three percent. The move is due to operational changes, shifting customer preferences, and a strategic review aimed at streamlining operations.
The restructuring will result in a $590 million hit to the bank's fourth-quarter earnings. This includes severance provisions, a write-down on its consistently underperforming investment in Bank of Xi'an Co. Ltd., and impairment of intangible assets such as software. The bank also faces additional costs from exiting real estate and other contracts, which will impact the bank's common equity tier 1 ratio by about 10 basis points.
Darko Mihelic, an analyst from the Royal Bank of Canada, interpreted these charges as a balance sheet cleanup and expected them following Scotiabank’s strategic shift.
The bank has earmarked $247 million for restructuring and severance, $63 million for consolidating real estate and service contracts, plus a $280 million impairment charge linked to the Bank of Xi'an Co. Ltd investment. This investment has consistently stayed below Scotiabank's carrying value, leading to prolonged undervalued status and subsequent impairment charges.
Scotiabank's decision follows the trend set by RBC's prior staff cut announcement. More details regarding the scale and impact of these workforce reductions will accompany Scotiabank's Q4 results, scheduled to be released on Nov. 28.
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