The Bank of Nova Scotia

Good morning and welcome to Scotiabank's 2024 first quarter results presentation. My name is John McCartney and I'm Head of Investor Relations here at Scotiabank. Presenting to 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, Eris Bogdaneris from Canadian Banking, Jackie Allard from Global Wealth Management, and Francisco Aristegueta from International Banking. Before we start, and on behalf of those speaking today, I will 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. Welcome to our first call of 2024, and importantly, our first set of results since we shared our refreshed strategy at our Investor Day in December. We are off to an encouraging start to the year, and our results are consistent with our expectations. It is still early in the execution of our strategy, but we are realizing benefits of our enterprise-wide efforts by way of disciplined capital allocation, focusing on investments that deliver returns, maintaining a strong balance sheet, a focus on deposit growth and building primary client relationships that enhance profitability and cost efficiency. The bank reported adjusted earnings of $2.2 billion, or $1.69 per share in the quarter. Strong revenue growth coupled with disciplined cost performance across our businesses allowed us to improve profitability quarter over quarter despite higher credit provisions. We further strengthened our balance sheet and liquidity profile in keeping with our commitment to build capital over time. Our 71 ratio at 12.9% reflects our efforts to extend our balance sheet thoughtfully to business segments and clients where we see the opportunity to build holistic and profitable long-term relationships. Our liquidity coverage ratio strengthened to 132% year-over-year, lessening our reliance on market source funding with a reduction in our wholesale funding ratio to 20.3%. Assets across the bank grew up marginally year-over-year, reflecting our disciplined approach to growth in a more muted Canadian residential mortgage market environment. The impact of our ongoing portfolio repositioning in the global banking and markets business was offset by growth in other personal and commercial lines of business. We continue to execute on risk-weighted asset optimization opportunities by reducing our exposure to less profitable relationships where we don't see the opportunity for acceptable risk-adjusted returns on our shareholders' capital. Our risk-weighted assets have been managed lower by 4% year-over-year as a result of portfolio repositioning and optimization efforts. However, we did see growth sequentially in conjunction with a significant improvement in our return on risk-weighted assets, which we believe to be an important metric in driving shareholder value. Our organizational focus on core deposits continues to show progress with deposits up on an all-bank basis and strong growth in the P&C businesses with 9% deposit growth in Canadian banking and 5% deposit growth in international banking. The result of our efforts to thoughtfully manage growth on both sides of the balance sheet has resulted in a loan to deposit ratio that is down over 600 basis points to 110% on a year-over-year basis. Turning to the economic outlook. Although the Canadian economy has shown more resilience in response to the significant monetary policy tightening over the past two years, interest rates are having the desired impact on consumer sentiment and spending, which should allow for rate cuts later this year. This quarter's results reflect an increase in credit provisioning, given the incremental financial strain that sustained higher interest rates are having on our clients. We expect the Canadian economy to underperform both the U.S. and or key Latin American countries early this year, but show some growth reacceleration in response to policy easing and more active residential real estate markets in the back half of the year. We are expecting Mexico to show the strongest growth among the larger economies in the Americas in 2024, with some volatility expected leading into this summer's presidential election. Our official forecasts are no longer calling for recessionary conditions in any of our operating geographies over the next few years. However, we remain well positioned to manage through more difficult economic scenarios, should they unfold. A few highlights in terms of performance and strategic progress within each of our business lines. Our Canadian banking business had a strong start to the year, delivering 7% revenue growth and 3% expense growth, resulting in positive operating leverage. Loan growth in our domestic business reflects a less active residential mortgage market, as well as our own deliberate actions to focus on primary clients. Lower growth in mortgages has been offset by continued growth in business banking and strong credit card momentum, which allows us to continue to diversify our business mix. Deposit growth continues to track well at 9% in the period, contributing to margin expansion and favorable trends in terms of our loan to deposit ratios. In our retail business, Aris and his team are focused on client primacy, deposit growth, client acquisition, and relationship deepening across the portfolio. The continued strength of the ScenePlus loyalty program, now 15 million members strong, provides a significant opportunity to acquire new payment clients, an important step to a longer-term primary relationship with the bank. Over 40% of new-to-bank clients through the ScenePlus partnership already have a multi-product relationship with the bank. As mentioned, our approach to the mortgage business has evolved. We are having good success with our bundled offerings. Our MortgagePlus product represented 70% of deals done in the quarter, resulting in an average of 3.2 additional products per new-to-bank client. Primary client count was up by 42,000 in the quarter on the back of Better Cross-Sell, and proactive engagement. We are closely tracking client relationship depth and saw progress as the number of clients with three plus banking products has seen a 50 basis point increase since the start of the fiscal year. Loan growth in our commercial and small business lines continues in the mid to high single digit range, with our teams focused on balancing loans and deposits, targeting growth in lead bank relationships, and expanding returns on risk-weighted assets. Tangerine delivered its highest quarterly earnings ever of $107 million, up 9% year-over-year. Tangerine's differentiated digital offering and expanded product capability continues to be a unique driver of additional primary clients. Tangerine continues to lead the market in mobile adoption, with mobile onboarding up 12 points to 62% of all signups, and with overall mobile adoption up 4 points to 73% in the quarter. Global wealth earnings of $374 million reflect the strength of our asset management franchise, the power of our diversified domestic client advisory channels, rebounding market performance in recent months, and strong momentum in our international wealth business. In domestic wealth, our well-established advice channels are integrated with our industry-leading private banking business and are designed to deliver the type of complete solutions that define primary client relationships. In our asset management business, I will reiterate our opportunity to penetrate our own branch network as well as Tangerine more effectively. Only 10% of our Scotiabank retail banking clients have purchased our mutual fund products. This penetration lags peers. A stronger partnership between our award-winning fund business and our retail networks will deliver meaningful upside to our current results. Jackie and Eris are partnering to actively implement action plans to address this sizable upside opportunity. Our international wealth business contributed $65 million in the quarter, up 18% year over year, an increasingly meaningful contributor to our wealth results. Mexico specifically represents the largest opportunity as positive mutual fund inflows and strong fund performance are driving highly accretive growth in this business. Our global banking and markets business reported a solid quarter with earnings of $439 million. The business remains focused on maintaining top-tier status in key Canadian wholesale products and continues to organically build U.S. capabilities. Our U.S. GBM business delivered 13% earnings growth on 3% revenue growth year-over-year, reflecting our focus on return discipline and fee income through a rigorous client selection and profitability evaluation process. In GBM, our upside opportunity is based on return optimization by driving more ancillary fee revenue as a percentage of loan exposure through deliberate client selection and relationship deepening, aligning our capabilities with client needs. It is important to note that our wholesale business in Canada will face a profitability headwind going forward because of a pending change in Canadian tax legislation related to the elimination of the corporate dividend deduction. Our international banking business delivered exceptionally strong results this quarter, with earnings contribution of $752 million. Solid revenue growth across segments, good expense discipline, and a particularly strong performance by our GBM LATAM business drove the result. The business delivered a substantial overall improvement in profitability, up 35% from the prior quarter, supported by almost 400 basis points of improvement in the productivity ratio, with no increase in capital deployed. We believe we have more than sufficient capital and product capabilities in place to capitalize on the opportunities in these markets when favorable market conditions and client activity allow, as evidenced by our results in this past quarter. On the retail side of the business, we remain overly reliant on the secured residential mortgage business and we are too often a single product provider to the client, which is the opportunity ahead. We are closely monitoring primacy as a percentage of overall relationships in each of international banking retail, commercial, and wholesale with a focus on product penetration and deposit growth. We have already seen a modest uptick from early actions taken. The retail repositioning will require a sustained effort over the next few years to show meaningful results. The growth agenda in commercial banking and our plan to deliver stronger cross-border coverage to multinational clients operating throughout the region will require further investment in support infrastructure and enhanced cash management capability. I look forward to the evolution of this business under Francisco's leadership as we build a more coordinated regional operating model and orient the business towards the sizeable North American corridor opportunity we believe we are so well positioned to capitalize on. In summary, the first quarter was an encouraging start to the year. We are now in the early stages of execution against plans to deliver on our key strategic objectives. earning client primacy, growing and scaling and identified priority markets, making it easier to do business with us, and winning as one team. We've been through an exhaustive and collaborative exercise to establish the key performance indicators for each business, many of which were shared at our Investor Day. And we will provide progress updates to you on the most impactful KPIs in future financial reporting periods. With that, I will turn it over to Raj for a more detailed financial review of the quarter.

Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition-related costs. The 2023 competitive figures have been restated to reflect the adoption of IFRS 17. Moving to slide six for a review of the first quarter results. The bank reported quarterly adjusted earnings of $2.2 billion and diluted earnings per share of $1.69. Return on equity was 11.9% and return on tangible common equity was 14.6%. Revenues were up 6% year-over-year driven by increases in both net interest income that was up 5% and non-interest income that was up 8%. All banked interest margin expanded eight basis points year-over-year and four basis points quarter-over-quarter from higher margins in international and Canadian banking partly offset by lower contribution from asset liability management activities and increased levels of lower margin, high quality liquid assets. Non-interest income was 3.7 billion, up 13% quarter over quarter, mainly due to higher trading revenues, banking fees, and wealth management revenues. Provision for credit losses were 962 million, and the BCL ratio was 50 basis points, up 17 basis points year over year. Quarter over quarter, expenses were flat as seasonally higher share-based compensation and increased employee benefit costs were offset by lower professional fees and other staffing-related costs. Expenses grew 6% year over year, or 4% excluding the unfavorable impact of foreign currency translation, reflecting higher share-based compensation, technology costs, and business access. The productivity ratio was 56% this quarter, a decrease of 370 basis points quarter over quarter, while operating leverage was flat. Moving to slide seven, that shows the evolution of the common equity tier one ratio and risk-weighted assets during the quarter. The bank's 81 capital ratio was 12.9% as of January 31st, 2024, a decrease of approximately 10 basis points from the prior quarter. The CET1 ratio benefited 45 basis points from earnings, share issuances from the bank's shareholder dividend and share purchase plan, and fair value through OCI gains driven by stronger debt and equity markets during the quarter, offset by higher risk-weighted assets of 48 basis points. The RWA increase was primarily driven by the adoption impacts of the revised Basel III FRTB market and CVA capital requirements, and the 2.5% increase in the capital floor, adding to approximately 70 basis points. The RWA optimization initiatives taken during the quarter, including flying deselection, reduced the impact to 48 basis points. We expect the RWA optimization efforts to continue during the year in line with our capital allocation strategy to reduce the impact of the floor. Turning now to the Q1 business line results beginning on slide eight. Canadian banking reported earnings of 1096 million, an increase of 1% year over year as a result of higher revenue, partly offset by higher provision for credit losses and expenses. Year-over-year revenues grew a strong 7%, while expense growth was a modest 3%, resulting in positive operating leverage of approximately 4%. While average loans and acceptances were down about 1% from the prior year, the portfolio mix has changed. We saw continued growth in our high-yielding portfolios as business loans grew 9%, credit cards increased 18%, and personal loans grew 2%. This was offset by a decline of 5% in residential mortgage balances. We continue to see deposit growth primarily in term products, with average deposits up 2% quarter-over-quarter. Year-over-year deposits grew 9%, and the loan-to-deposit ratio improved to 123% from 136% last year. Non-interest income was down 5% year-over-year due to elevated private equity gains in the prior year and loss of income from the sale of our equity interest in Canadian Tire Financial Services. Net interest income increased 11% year-over-year, primarily from solid deposit growth and margin expansion. The net interest margin expanded 30 basis points year-over-year and nine basis points quarter-over-quarter benefiting from high loan and deposit margins and changes in business mix. The PCL ratio was 34 basis points, primarily from in-paid loan provisions, and risk-adjusted margin was 2.2%, up 15 basis points year over year. Expenses increased 3% year over year, primarily due to higher technology, personal costs, and costs to support business growth. Quarter over quarter expenses declined 1%. Turning now to global wealth management on slide nine. Earnings of $374 million declined 4% year-over-year, as strong 18% growth within international wealth was offset by Canadian results declining 8%, largely due to higher expenses, lower trading volumes, offset by growth in asset management. However, net income grew a strong 12% quarter-over-quarter, reflecting improving market conditions. Revenue grew 3% year over year due primarily to higher mutual fund fees across the international businesses and higher brokerage revenues in Canada. Expenses were up 8% year over year due primarily to the expansion of the sales force, volume related expenses and cost to support business growth. Spot AUM increased 5% year over year to $340 billion as market appreciation was partly offset by net redemptions. AUA increased 8% over the same period to $655 billion from higher net sales and market appreciation. Investment fund sales in Canada continue to be under pressure, with approximately $13 billion in net redemptions this quarter. However, the majority of Scotia global asset management funds remain in the top two quartiles over a five-year period. International wealth management generated earnings of $65 million, up 18%, driven by higher mutual fund revenues in Mexico and strong loan and deposit growth across our footprint. AUA and AUM grew 15% and 18% respectively year over year. Turning to slide 10, global banking and markets. Global marketing markets generated earnings of $439 million, down 15% year-over-year, but improved 6% quarter-over-quarter. The U.S. business generated strong earnings of $237 million, up 13% year-over-year. Capital markets revenue was down 12% year-over-year, as fixed income revenues were down 22%. However, quarter-over-quarter capital markets revenue grew 12% while earning through the one-month impact of the proposed Canadian tax rules change to deny the dividend received deduction of approximately $40 million, which is also expected to impact future quarters. Business banking revenues declined 5% both quarter-over-quarter and year-over-year as loans were down 7% year-over-year. Non-interest income decreased 2% year-over-year primarily due to lower fixed income trading-related revenue, partly offset by higher underwriting and advisory fees. However, quarter-over-quarter non-interest rate income grew 7%. Net interest income was down 22% year-over-year and 11% quarter-over-quarter as a result of lower loan and deposit volumes, lower lending margins, and higher trading-related funding costs. Expenses were up a modest 3% quarter-over-quarter, mainly due to seasonally higher share-based compensation. On a year-over-year basis, expenses were only up 4%, due mainly to higher personal costs and technology investments to support business growth. The provision for credit losses decreased $34 million quarter-over-quarter to $5 million. GBM Latin America, which is reported as part of international banking, reported earnings of $372 million, up 24% compared to the prior year, as a result of strong revenue growth in capital markets and fee income from business banking across all countries. Moving to slide 11 for a review of international banking. My comments that follow are on an adjusted and constant dollar basis. The segment delivered earnings of $752 million, up 35%, and $196 million quarter over quarter. Revenue was up 9% year over year, driven primarily by higher revenues from capital markets. Strong retail revenue growth benefited from margin expansion and 8% higher fees and commissions. Year over year, loans were down 2%, primarily in Peru, Chile, and Colombia. Retail loans grew 4%, with mortgages up 6%, while business banking loans decreased 6%. Deposits grew a strong 5% year-over-year, with personal deposits growing 2% and nonpersonal deposits growing 7%. The loan-to-deposit ratio improved to 129% from 140% in the prior year. Net interest margin expanded 19 basis points quarter-over-quarter, driven by higher asset yields and higher deposit margins. The provision for credit losses was 135 basis points or $574 million, up 16 basis points quarter-over-quarter. This translated to a risk-adjusted margin of 3.23%, an improvement of seven basis points year-over-year and quarter-over-quarter. Expenses were up a modest 4% year-over-year, driven by business and capital taxes, technology expenses, and salaries and benefits. Expenses were up 3% quarter-over-quarter driven by seasonally higher business taxes in the Caribbean and communication expenses. Operating leverage was a positive 6%. Turning to slide 12, the other segment. The other segment reported an adjusted net loss attributable to equity holders of $474 million, a slight improvement of $13 million compared to the prior quarter, mainly due to lower expenses. With that, I'll now turn the call over to Phil to discuss with us.