The Edmonton Journal; with files from Reuters and Canwest News Service
Wednesday, March 05, 2008
EDMONTON - The head of Scotiabank came face to face Tuesday with the
financial turmoil that has hit his bank harder than expected in recent
One of more than 1,400 investors who lost money in non-bank asset-backed
commercial paper that Scotiabank sold to intermediary dealers confronted
president and CEO Rick Waugh at the bank's annual meeting in Edmonton
"Scotiabank has the duty and the expertise to know that it was selling a
flawed savings product to unknowing retail investors like myself," said
Reid Moseley, during a question-and-answer session for shareholders and
proxy representatives at the Shaw Conference Centre.
Moseley said he bought commercial paper investments from Vancouver-based
Canaccord Capital Corp.
"Most of us were shocked when our cash was not there to buy our houses
or our businesses or to care for our loved ones, or to pay simply for
Candace Elliott, The Journal
CEO Rick Waugh speaks to
Scotiabank's general meeting in Edmonton on Tuesday.
"Some of us had parked our money for as little as 60 days and now our
plans are destroyed and our life savings from our jobs and businesses
... are literally hanging somewhere in the Internet."
Investors are suing Canaccord, which has named Scotiabank as a third
party in the lawsuits, citing negligent misrepresentations, negligent
failure to warn investors and breach of fiduciary duty.
Canaccord alleges that Scotia Capital, the group's investment banking
and capital markets unit, received materially relevant information last
July on the risk associated with the third-party paper's U.S. subprime
exposure, which it didn't pass on to Canaccord.
It claimed the bank began to drop its own holdings in the ABCP
Structured Investment Trust III, while continuing to promote the paper.
THE MAJOR BANKS AND INVESTORS
involved in the market are developing a plan to restructure the ABCP
into longer-term investments.
But Moseley said many investors can't afford to wait. He wanted
Scotiabank to join the retailers to buy back the commercial paper at par
value or higher.
"It's a very tragic event that your investments are not made available
to you," Waugh replied, adding that the lawsuit limited what he could
"We are still trying to co-operate and help with the solution," he said.
"Our involvement was not in selling to the individual investors, but
rather to the dealer itself, and I think that is important."
Scotiabank said on Tuesday its first-quarter earnings dropped 18 per
cent, due mainly to substantial volatility in global financial markets.
Bank of Nova Scotia's first-quarter profit fell 18 per cent to $835
million, or 82 cents a share, from a year earlier, the bank said.
"While we had anticipated the first quarter to be difficult, results
were weaker than expected," Waugh said. "This was due primarily to
substantial volatility in global financial markets. Our exposure to
these stressed markets is modest and well-diversified, but our
portfolios did experience some valuation writedowns."
The bank said it took charges of $158 million on its structured credit
portfolio and $80 million on its swap exposure to a monoline insurer.
Provisions for credit losses, which are rising across Canada's bank
sector after years of record lows, increased 23 per cent to $91 million.
Scotiabank said net income at its domestic banking unit rose 1.7 per
cent to $367 million. Profit at Scotiabank's international operations,
including the Caribbean, South America and Mexico, fell 10.7 per cent to
Profit at Scotia Capital slumped 36 per cent to $187 million from a year
earlier as trading revenue fell.
Scotiabank has targeted earnings-per-share growth of seven per cent to
12 per cent in 2008.
"Crises do end and this one will," Waugh said to shareholders. "We are
well-positioned, as this particular crisis plays to our strengths of
risk management, liquidity, strong capital and diversification."
In other business, shareholders at the country's third-largest bank
voted 39 per cent in favour of having a non-binding say on what
"That's a very high percentage, much more than you would ordinarily get
on a shareholder proposal and we will consider it very seriously," said
board chairman Arthur Scace.
Last week CIBC shareholders voted 45 per cent in favour of the same
say-on-pay proposal, and RBC shareholders voted 42 per cent in favour.
© The Edmonton Journal 2008
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CanWest Interactive, a division of CanWest MediaWorks Publications,
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