Rating agency DBRS says that it does not expect Bank of Nova Scotia’s restructuring plans to negatively impact operations, or the bank’s credit position.
On Tuesday the bank announced that its fourth quarter results will include a series of charges totaling approximately $451 million pre-tax, or $341 million after tax; including costs associated with cutting an estimated 1,500 jobs within the bank, both in Canada and around the world. DBRS estimates that the charges will reduce the bank’s common equity Tier 1 capital ratio by about 10 basis points; although, it says that the ratio may still increase versus last quarter “since the charges are easily covered by typical quarterly income”.
Following the announcement, DBRS says that there is no change in its ratings or trends for Scotiabank (TSX:BNS) as a result of the planned charges.
From a strategic point of view, DBRS says that some of the charges announced today are consistent with its opinion that Scotia’s exposure in emerging markets and corporate lending is higher than the other major Canadian banks; and, as a result, it views Scotia’s credit risk as the highest among the big five banks — although it is also the most geographically diverse, the rating agency adds.
DBRS says it does not expect the restructuring efforts to negatively impact the bank’s operations in any material way. “In Canada, the efforts are expected to improve customer service and efficiency of non-customer-facing functions,” it says. “In international banking, Scotiabank indicates they are attempting to right-size the branch networks in various countries in light of the economic realities.”