Published On: Mon, Nov 10th, 2014

Scotiabank loans to Caribbean hospitality sector ‘impaired’

ShowcaseScotiabankNASSAU, Bahamas -- Scotiabank's loans to the Caribbean hospitality sector have apparently lost hundreds of millions of dollars in value; a portfolio worth $1.3 billion a year ago fell to a $1 billion before a restructuring that has led to write-downs in the region, and which may mean branch closures and job losses in The Bahamas.

It appears that Scotiabank’s Caribbean write-downs – or adjustment to the value of its business – largely stem from three “net impaired” loans to the hospitality sector in the region. In fact, Canadian financial publications note that “trouble in the Caribbean” is becoming a common refrain. Scotiabank’s write-down follows on the heels of an even bigger one by First Caribbean earlier this year.

After 125 years of operations in the region, Scotiabank’s chief executive officer Brian Porter said during a conference call last week that the bank will close a significant number of branches in the Caribbean (35 branches was the estimate given) as part of the restructuring. The shift is expected to mean layoffs as well, but local representatives could not speak to the extent -- if any -- of closures or job cuts in The Bahamas.

Scotiabank’s spokespeople told Guardian Business on Thursday that the lender’s growth in the region has “created some overlap and duplication of services”.

“As a result, we undertook a review of our operating model and international distribution network and found opportunities to strengthen our retail presence by investing in areas that are going to improve the speed and quality of service for our customers,” the bank said in a statement.

Porter has announced changes including branch closures, restructuring charges totalling more than $450 million, 1,500 layoffs -- mostly in Canada -- and loan losses of $109 million in the Caribbean. He also revealed that Scotiabank will either close or downsize 120 branches, largely in Mexico and the Caribbean, to focus on high-growth markets such as Chile and Colombia.

The Scotiabank Bahamas statement said: “The numbers announced relating to branch closures were across the Bank’s international network.

“The bank is still undergoing its review and while this process will take some time, it will be carefully planned with consideration given to all affected stakeholders including employees and our customers.

By K. Quincy Parker
Nassau Guardian Business Editor 

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