Bank Nova Scotia To Take C$595 Million In 4Q Writedowns
Tuesday November 18th, 2008 / 23h27
DOW JONES NEWSWIRES Bank of Nova Scotia (BNS) will take after-tax writedowns totalling C$595 million relating to "certain trading activities and valuation adjustments." The bank said in a press release that the charges arose "as a result of recent challenging market conditions and unprecedented volatility in global financial markets." It said a charge of about C$115 million in trading revenue is related to the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ) in September. It said this loss occurred mainly as a result of a failed settlement and the unwinding of trades in rapidly declining equity markets shortly after the bankruptcy. The bank said it has submitted a bankruptcy claim for losses. It will also take valuation adjustments of about C$370 million. This total amount includes writedowns of about C$105 million in available-for-sale securities based on current estimates of fair value, largely reflecting ongoing deterioration of economic conditions and volatility in debt and equity markets. It said the other C$265 million relates to mark-to-market adjustments on collateralized debt obligations. Included in the C$265 million will be a net fair-value loss of about C$135 million on the purchase of certain CDOs from the bank's U.S. multi-seller conduit, pursuant to the terms of a liquidity asset-purchase agreement. It said the widening of credit spreads coupled with recent credit events in certain previously highly-rated reference assets have resulted in a substantial decline in the market value of structured instruments. If these spreads improve, a portion of the valuation adjustments would reverse and be recorded as income. The bank said its remaining exposure to CDOs will now be about US$348 million. The bank said it will take a mark-to-market loss of about C$110 million relating to derivatives used for asset/liability management purposes that don't qualify for hedge accounting. This was driven by continuing declines in interest rates and is expected to reverse over the average three-year life of the hedges such that no economic loss should occur, it said. The bank said about C$305 million relates to Scotia Capital, about C$90 million to International Banking and about C$200 million to the Other business segment, which includes Group Treasury and Executive Offices. -John Moritsugu, 416-306-2100; AskNewswires@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=ca%2BNpgo7zosg6xjniF472A%3D%3D. You can use this link on the day this article is published and the following day.
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