Newspaper article The Canadian Press

Scotiabank's Second-Quarter Profit Down on Restructuring, Loan Loss Provisions

Newspaper article The Canadian Press

Scotiabank's Second-Quarter Profit Down on Restructuring, Loan Loss Provisions

Article excerpt

Scotiabank's Q2 profit down on restructuring

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TORONTO - Scotiabank saw its second-quarter profit fall 12 per cent as it set aside more money for bad loans and took a restructuring charge related to the bank's efforts to whittle down expenses.

"The restructuring charge we took this quarter reflects a widespread series of initiatives across the bank to improve our efficiency and become low cost by design," Scotiabank president and CEO Brian Porter said during a conference Tuesday call to discuss the bank's results.

"Many of these initiatives are anchored in our digital transformation."

For example, more than 80 per cent of transactions are taking place outside of the branch network, said Porter. To respond to this shift, Scotiabank is revamping its branches to focus more on providing advice to customers rather than carrying out routine transactions that can be done online.

The bank is also planning to shrink its Canadian retail footprint -- which currently consists of 1,006 branches -- by about four or five per cent over the next two years.

"But I do want to be clear -- branch transformation for us is about much more than just openings and consolidations," said James O'Sullivan, Scotiabank's group head of Canadian banking.

"It's about a new branch format, it's about more technology and it's about new and better roles for our employees that involve less paper."

Scotiabank (TSX:BNS) also boosted its provisions for credit losses to $752 million during the quarter, up from $448 million in the same period last year.

The company downgraded roughly 10 per cent of the companies in its energy loan book, adding nine names to its watch list.

Porter said loan losses in the energy sector are expected to decline next quarter.

Setting aside more money for bad loans, particularly to energy companies and consumers in oil-producing provinces, has been a common theme amongst Canada's biggest banks in the second quarter.

The Bank of Montreal (TSX:BMO), CIBC (TSX:CM), TD Bank (TSX:TD) and Royal Bank (TSX:RY) -- which reported their quarterly earnings last week -- all saw their provisions for credit losses rise in the quarter. …

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