Bank of Nova Scotia says it will exceed the $150-million cost-cutting target it set for its Canadian operations, adding to rumblings of significant year-end job losses at the big banks.
Scotiabank has engaged McKinsey & Co. as an outside consultant as it follows through on its goal of reducing structural costs, identified as one of its three priorities about 18 months ago, in its drive to reduce duplication and achieve greater efficiency globally over the next four years.
Sean McGuckin, the chief financial officer, said the bank has revisited its cost-savings targets and now believes the number will be higher than $150-million.
"As we spend more time on this and do a deeper dive, and look at the various technologies that are out there, we're coming up with greater opportunities than we thought 18 months ago," he said in an interview.
Scotiabank is not alone among Canadian banks in addressing its expenses. The sector's restructuring efforts come as the big banks have been reporting steady profit growth in recent quarters despite weak economic activity, indebted consumers and a depressed energy sector. However, some analysts believe it is only a matter of time before the full impact of low commodity prices shows up in financial results.
The market, too, is rattled by the banks' challenging operating conditions and concerns the winning streak is about to end: The S&P/TSX consumer banks index has fallen nearly 14 per cent over the past 13 months in a downturn that preceded weakness in the broader market.
Mr. McGuckin would not provide details on the number of jobs affected by Scotiabank's cost-cutting, saying the information is not yet available. He emphasized, though, that the changes are combined with efforts to boost the bank's resources in areas such as technology and where workers interact directly with customers.
Last year, the bank announced 1,500 job cuts that included two regional heads.
"We've grown a lot over the last number of years, through organic growth and acquisitions, and over time that creates some opportunities to look at how you're organized, how you can leverage certain processes and reduce duplications," Mr. McGuckin said.
He said that McKinsey, the outside consultancy, has a "limited engagement" with Scotiabank, bringing knowledge of other banks and industries that could prove helpful in identifying where costs can be shaved.
"We may think that we're going far enough, but they'll give us some benchmarks of what other companies have achieved," Mr. McGuckin said. "When their engagement is done, we'll continue to drive and invest in the business to become more efficient and more customer-friendly."
It has been an anxious year for many in the banking sector. Earlier this year, Canadian Imperial Bank of Commerce cut about 1 per cent of its work force even as it boosted hires in areas such as technology.
Toronto-Dominion Bank's chief executive Bharat Masrani has stressed the need to "increase efficiency and streamline our cost base." TD is also reported to have engaged an outside consultancy to help identify cost-cutting opportunities, and the bank's relatively new focus on expenses has attracted the attention of some analysts.
"We believe most investors do not view TD as a 'cost conscious' bank, and, as this view changes, we believe the valuation should improve," Darko Mihelic, an analyst at RBC Dominion Securities, said in a recent note.