June 10 (Bloomberg) -- Canada’s biggest banks, ranked tops in the world last year by the World Economic Forum, cut almost 4,000 jobs last quarter after soaring loan losses led to a sixth straight profit decline.

Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal made reductions that swept away managers, mortgage sellers and senior executives as banks made their first round of cuts since the financial crisis began in 2007. The lost jobs equal as much as 3 percent of the banks’ workforce, according to company filings.

Staying profitable wasn’t enough to immunize Canadian banks from the global credit crunch, which triggered more than $1 trillion in losses and writedowns worldwide and cost more than 300,000 people their jobs, data compiled by Bloomberg show. Canadian lenders are trying to halt a slide in profit as rising defaults in the most recent quarter forced them to more than double the amount set aside to cover bad loans to C$2.93 billion ($2.65 billion).

“We are managing costs very carefully,” Royal Bank’s Canadian banking head David McKay said in a May 29 call with analysts. “We’re looking at performance management and attrition and managing down our employee base, and we’ll continue that.”

Companies in the finance, insurance and real estate industries cut a combined 9,200 jobs last month as the country’s unemployment rate rose to an 11-year high, Statistics Canada reported on June 5.

The banks made no specific references to job cuts in their earnings releases last month. A tally of the headcounts at the end of April compared with Jan. 31 showed that Royal Bank, the country’s biggest lender, cut 1,109 jobs in Canada during the fiscal second quarter, or 1.5 percent of total staff.

Quarterly Loss

Royal Bank, which reported its first quarterly loss since 1993, had 72,479 employees as of April 30. Canada was the only area where the Toronto-based lender reduced its workforce, according to its filing.

“That’s been very deliberate,” Barbara Stymiest, Royal Bank’s head of strategy, treasury and corporate services, said in a May 29 interview. “We have a lot of attrition in our Canadian banking roles and a lot of part-time staff.”

Royal Bank trimmed costs for salaries, compensation and benefits by 4.4 percent to C$2.19 billion in the quarter from the previous period.

Royal Bank also fired “a small number of senior employees, including four market presidents” under a reorganization of its U.S. consumer-banking business based in Raleigh, North Carolina, said spokeswoman Katherine Gay.

Scotiabank Cuts

Scotiabank, the country’s third-biggest lender, cut 1,753 jobs, or 2.5 percent of its staff, after saying profit fell 11 percent. The bulk of the job cuts were at consumer-lending units in Chile and Costa Rica, and were “planned redundancies,” spokesman Frank Switzer said. Canadian job cuts were “highly dependent on changes in the market,” Switzer said, including people who processed mortgages during a housing slump.

Bank of Montreal, the fourth-largest lender, is cutting about 1,100 jobs, or 3 percent of its workforce, the bank said. The bank started trimming in the second quarter, when 299 positions were eliminated.

“This is a focus on organizational simplification,” interim Chief Financial Officer Russel Robertson said in a May 26 call with analysts. “It’s focused on the management areas of the bank; it’s focused on all groups within the bank.”

Toronto-Dominion Bank, the second-biggest bank, cut 182 positions from its Canadian consumer bank, leaving 32,442 in the country.

Bank Hires

Until last quarter, Canadian lenders had been hiring amid the first recession in the country since 1992. Royal Bank added 9,150 employees while Scotiabank added nearly 11,800 workers in the past two years, according to filings. The additional staff came in part from acquisitions, such as Royal Bank’s purchase of money manager Phillips, Hager & North Investment Management Ltd.

“When things are good, you expand the business and hire people, and when things turn poorly, you look for ways to cut costs,” said John Kinsey, who helps manage about C$1 billion including bank shares at Caldwell Securities Ltd. in Toronto.

Canadian banks have remained profitable amid the crisis, outperforming their global peers, because of tighter government restrictions on lending and capital requirements.

Royal Bank rose 10 cents to C$45.60 at 4:10 p.m. in Toronto Stock Exchange composite trading. Scotiabank climbed 14 cents to C$40.40 and Bank of Montreal rose 16 cents to C$45.23.

The six biggest lenders posted about C$22.5 billion in writedowns since the credit crisis began in 2007, about 2 percent of the $1.04 trillion recorded by banks and brokerages worldwide. Canada’s financial system has gained praise from U.S. President Barack Obama, World Bank President Robert Zoellick and the World Economic Forum, which in October ranked it as the soundest financial system.

U.S. Losses

The Canadian job losses are dwarfed by cutbacks at U.S. rivals such as Bank of America Corp., which cut 46,150 jobs or 22 percent of its workforce since the third quarter of 2007. Citigroup Inc. cut staff by 10 percent, according to Bloomberg data.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are among 10 lenders that won U.S. Treasury approval yesterday to buy back $68 billion of government shares, freeing them from added oversight that curbed lending. By contrast, Canadian lenders required no government aid.

The worst of the Canadian job cuts may be over, said Bill Vlaad, president of Vlaad and Co. His Toronto-based recruiting firm is getting more job placements in the financial-services industry, suggesting hiring has returned.

“The banks have felt, from our perspective, that they’ve hit a low from the end of the quarter, and have started to build up from that,” Vlaad said in an interview. “There’s some hiring going on.”

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net; Sean B. Pasternak in Toronto at +1- spasternak@bloomberg.net

Last Updated: June 10, 2009 16:28 EDT