Is Scotiabank About to Fail?

With Canada and countries around the globe suffering a deep recession months into the coronavirus shutdown, one Canadian bank that is causing controversy in the headlines is Scotiabank. Known for being a financial institution with the largest international exposure of any bank within Canada, Scotiabank has many business arms in Latin American and Asian countries that have been hit hard by this global recession. Since CEO Brian Porter took over the realms from his previously growth oriented predecessor Rick Waugh, the two have taken the Bank far from it’s conservative days of CEO Peter Godsoe. Rob Pittfield who seemed to be the more appropriate and conservative fit to replace Waugh when he retired but was overlooked by current CEO Brian Porter and has since retired. The leadership has moved the organization far to the right compared to it’s previous era in Canadian Banking.

Recently Scotiabank was ordered to pay $127.5 million fine for manipulating the metals market by the US Department of Justice and the Commodity Futures Commission. Shortly before that they had announced they were getting out of the Precious Metals business and shutting down one of it’s oldest arms in the banking business. Since then gold and silver prices have soared. With a surge in deferrals of mortgages payments (blamed on the coronavirus outbreak) Scotiabank leads the country with the most number of customers who have stopped making mortgage payments at over 300,000. With clients over leveraged due to lax lending standards, this makes the 2008 US subprime meltdown look like a walk in the park. With divisions in highly unstable Latin American countries know for their troubles with the Illicit Drug Trade and Drug Lords, Scotiabank is a far cry from their steady as she goes days by making stable acquisitions like good old National Trust and so forth. Known to be a laggard in their Wealth Management and Mutual Funds division, they have missed out on the biggest rally in history of the stock market over the recent decade to be a leader in that part of the banking business.

Scotiabank has been a leader (among the Big Canadian Banks) in scaling back hours of operation at their branches, closing branches, reducing employee hours, layoffs as well as drastically raising services fees to boost profits. Head Office employees have been ordered to work from home until 2021 due to the coronavirus. With such a high employee count and fat management structure, how can the bank afford to maintain such a large payroll if the economy get’s worse with the current credit bubble the country is in? With their credit loss provisions soaring and very high risk portfolio is Scotiabank at risk of being Canada’s largest bank in history to fail?