A falling oil price and news from Scotiabank pulled down the Toronto Stock Exchange on Tuesday. It slipped 153.59 points, hitting 14,379.66 points.
The energy sector was down nearly 3 percent on Tuesday, while base metals slipped down 2 percent. Copper dipped 5 cents to US$3.01 per pound. Meanwhile, gold still hasn’t recouped any losses, and sank another 1.8 percent. The yellow metal for December delivery was down $3.20, trading at US$1,166.60 per ounce.
On the energy front, oil sank to a multi-year low after top exporter Saudi Arabia slashed prices to its US customers. As the Financial Post notes, December crude contracts in New York dropped $2.02, to US$76.76 a barrel, following the price cut. Robert Kavcic, an analyst with BMO Capital Markets, commented that the move has added to “speculation that the Middle East producers are working to defend market share amid surging US output.”
Tuesday’s big story, however, was that Scotiabank, Canada’s third-largest bank, will be cutting 1,500 jobs, two-thirds of which will be in Canada. The move is primarily due to bets that have “soured” in the Caribbean and South America.
As a result of the cutbacks, the company will be taking a $451-million pre-tax charge ($396 million after tax), which will see its earnings shrink by 28 cents per share. Part of that is for severance costs, but the lender will also be taking several measures, including an extra $109 million in loan-loss provisions in the Caribbean. The bank will also be writing down the value of its investment in a Venezuelan bank by $129 million, and taking a $47-million charge relating to unremitted dividends from Banco del Caribe in Venezuela. Mid-afternoon on Tuesday, the bank was down 1.79 percent, trading at $67.54.
In a note to investors, Barclays (LSE:BARC) analyst John Aiken comments, “[t]he charges come at a time when the Canadian banks have seen an almost wholesale changing of the guard at the top of the house.”
The analyst also states that many of Canada’s big banks have changed CEOs in the past year, therefore “a move to fire people early in the tenure of the new CEO by Scotiabank could be a sign that others are planning similar moves.”
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.