The Bank of Nova Scotia

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Good morning and welcome to Scotiabank's 2023 first quarter results presentation. My name is John McCartney. I'm Head of Investor Relations here at Scotiabank. Presenting you this morning are Scott Thompson, Scotiabank's President and Chief Executive Officer, Raj Viswanathan, our Chief Financial Officer, and Phil Thomas, our Chief Risk Officer. Following our comments, we will be glad to take your questions. Also present to take questions are the following Scotiabank executives. Dan Rees from Canadian Banking, Glenn Gowland from Global Wealth Management, Nacho Deschamps from International Banking, and Jake Lawrence from Global Banking and Markets. Before we start, and on behalf of those speaking today, I'll refer you to slide two of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to Scott.

Thank you, John, and good morning, everyone. We appreciate you joining us today. Given this is my first quarterly investor call, I would like to begin with sharing some early observations on the bank after four weeks in the CEO role. My approach has always been about transparency and partnership, and I'm committed to working with the investment community in this manner. I've had the opportunity to spend time with the leadership team as well as to meet with many employees and customers across Canada and in Mexico, Chile, Peru, and Colombia. I have been energized by meeting our teams across the bank. Our people are highly engaged, proud, and committed Scotiabankers. In addition to a rock-solid foundation, a diversified revenue base last year of approximately $32 billion, and net profits of over $10 billion, we have many competitive advantages, unique areas of strength, and opportunities for growth in the bank, including the credit quality of our loan book, our Seen Plus loyalty program, which will be a key enabler in diversifying our Canadian P&C business mix, the long-term commercial banking growth opportunity across our platform, an outstanding wealth management franchise, the GBM platform across the Americas, and our performance in Mexico and the upside potential by improving the connectivity across Canada, the US, and Mexico. But we have not delivered the level of total shareholder return that our shareholders should expect of us. To drive better shareholder returns, my focus will be on delivering profitable and sustainable growth through an even stronger customer orientation by building our solid foundation, aligning on enterprise-wide focus areas, and consistently executing with operational excellence. And I really do want to underscore the words consistent execution, as that is what we expect to measure ourselves on with established milestones and targets. To do this, I'm aligning our leadership teams around three areas of focus. First, purposely allocating capital. We need to build more discipline in our approach to capital allocation, and we need to view this through an enterprise-wide lens. Second is focusing on long-term deposit growth. Increasing our core deposits is critical. The current environment of rapidly rising rates and an inverted yield curve highlights the challenges with the structure of our balance sheet. Increasing deposits not only reduces funding costs, but it deepens our relationships with our customers, allowing for a more detailed understanding of their needs, thereby enhancing the multi-product opportunity. Payroll and cash management capabilities, as an example, could be an area that becomes a higher priority across the platform. Third, we will improve our business mix and profitability. Building towards profitable and sustainable growth means leading less with the balance sheet alone but also a focus on prioritizing long-lasting, multi-product, mutually beneficial relationships that enable our customers to succeed. This journey will take time and will require a shift in orientation from the way we reward our people to how we collaborate among our business lines to how we allocate our capital to customers and segments. Encouragingly, we have a great foundation to build upon as our customer relationships are strong and our leadership team recognizes the opportunity in front of us I am convinced that with an enterprise-wide focus, combined with our continued lean and agile approach to expense management, we will strengthen our results and deliver the performance our shareholders deserve. Turning to our Q1 results, the bank's financial performance in the first quarter of 2023 reflects both the merits of a diversified platform, but also the continued relative pressure on our profitability given our funding profile. Going forward, we must be consistent and deliberate in our long-term deposit strategies to continue our journey to reduce our reliance on wholesale funding. Rapid loan growth coupled with high-cost funding sources has adversely impacted profitability. And going forward, we will be cognizant of the need to pace loan growth, particularly in less profitable product segments. The negative operating leverage in the bank certainly warrants attention. Higher personnel costs and spend on certain technology projects primarily drove the expense growth in the quarter. We will be even more thoughtful about expense control across the bank for the remainder of the year. In the Canadian business, I was pleased to see the continued progress with our commercial customers and encouragingly, deposit growth of 10% outpaced 9% year-over-year loan growth. Dan's vision of diversifying Canada's revenue mix beyond mortgages and autos is the right one and will pay dividends over time. Turning to international banking, I was encouraged by the performance this past quarter driven by strong results in retail, commercial and our GBM business as well as positive operating leverage. Nacho, Jake and I were in the region recently and the businesses we have built in LATAM are impressive with a digital-first mindset that will increasingly facilitate better customer and employee experience at a lower productivity ratio. However, while we've allocated significant capital to our international bank in the last few years, the returns are not commensurate with our expectations in certain countries. I see areas of strength, and I also see segments where we are underpenetrated, like commercial, affluent retail, and other high-value segments that have a good profitability and risk profile. We are in the process of assessing our international business mix so that going forward we allocate our capital to customer segments where we can get appropriate returns for our shareholders. Global wealth management saw resilient results in the face of volatile markets and continued industry-wide funds flow challenges in the asset management segment. Glenn and the team have built a very strong franchise and it is nice to see the quarter-over-quarter uptick in net income and strong operating leverage performance. I am also pleased to see the continued momentum in the international wealth management business. GBM also delivered a solid quarter. I was particularly pleased to see the contribution from capital markets revenue with a close to equal split between business banking and capital markets. Record GBM contribution inclusive of GBM LATAM demonstrates the continued progress in our efforts to build an America's wholesale platform. Lastly, we continue to observe strong credit metrics across our portfolios. I will now turn the call over to Raj for a more detailed presentation on the financial results.