Scotiabank sets aside $168 million for metals closure and investigations

LONDON (Reuters) - Bank of Nova Scotia (Scotiabank) has set aside C$232 million ($168 million) to cover costs relating to the closure of its metals business and investigations of its metals trading practices by U.S. regulators, it said on Tuesday.

The disclosure was made as Scotiabank announced a 41% profit fall in its second quarter to April 30.

Scotiabank, Canada’s third-biggest lender, had said in February that the U.S. Department of Justice and Commodity Futures Trading Commission (CFTC) were investigating its metals trading activities.

The bank’s management last month told staff it would close the metals operation, one of the most venerable names in bullion trading with a history stretching back to the 17th century.

Scotiabank said on Tuesday that it “continues to respond to requests for information related to these investigations and is engaging in settlement discussions with the applicable authorities”.

“The bank has reserved C$232 million in respect of these matters as well as certain costs related to the wind-down of the metals business,” it said.

Scotiabank was for years the world’s biggest lender to the physical precious metals industry, but it downsized the business in 2018 after failing to sell the operation.

It remains one of the five banks that settle gold trades and one of 12 marketmakers that provide liquidity in the London market. It is also a participant in daily auctions that set a globally used gold benchmark price.

($1 = 1.3814 Canadian dollars)

Reporting by Peter Hobson; Editing by David Goodman