The Bank of Nova Scotia

Good morning and welcome to Scotiabank's 2024 third 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'll be glad to take your questions. Also present to take your questions are the following Scotiabank executives, Eris Bogdaneris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Aristigueta from International Banking, and Travis Machin from Global Banking and Markets. Before we start, and on behalf of our both 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 are pleased to share our Q3 results, which demonstrate another quarter of achieved quarter-over-quarter EPS growth and continued positive operating leverage. Our results reflect the strength of our balance sheet while demonstrating revenue acceleration led by performance in our Canadian banking business and ongoing positive momentum in global wealth. Importantly, we are seeing the profitability benefits of our shifting focus from volume to value. Let me take a moment to recap a few key enterprise initiatives. Personal and commercial deposit growth. We remain laser-focused on developing primary client relationships, and while we expect this to be an ongoing and incremental journey, we are well underway with P&C deposit growth across our Canadian and international retail businesses up 7% on a year-over-year basis. Since we started this journey 18 months ago, deposits in our Canadian banking business are up $43 billion. Capital discipline. We are deploying our incremental capital to our priority businesses in line with our medium-term objectives. We are starting to see the benefits of this repositioning with strong revenue and earnings growth in Canadian banking and wealth, and a sharpened focus on returns in GBM and international banking. Today's results demonstrate our ability to generate earnings growth while focusing on disciplined capital deployment to priority client segments. Cost and process efficiencies. Our efforts to increase our productivity will be an important All bank positive operating leverage driven by cost discipline in Canadian international banking will be an important driver of results going forward. And finally, maintaining a strong balance sheet remains a high priority. Through the challenging rate environment over the past 18 months, we have strengthened our balance sheet with SETI 1 capital, ACL coverage, and liquidity metrics all at significantly improved levels. Turning to our Q3 results, the bank reported adjusted earnings of $2.2 billion or $1.63 per share in the quarter. The bank delivered solid top-line revenue growth again this quarter, driven by higher net interest income and non-interest revenue. We are realizing on the productivity initiatives that are already underway at the bank. Specifically, in our international and Canadian retail businesses, our productivity ratios Credit costs are at the high end of our previously communicated range as we see the impact of sustained higher rates on our retail portfolios. In our international markets, we expect to see credit conditions begin to stabilize in response to the monetary easing over the past few quarters, and we remain focused on delivering favorable risk-adjusted margins and returns. Despite higher credit costs, Loans grew sequentially in the Canadian bank, in line with our strategic objective to deploy capital to our priority businesses and with our profitable primary relationships. Loan balances trended lower in international banking and GBM. This lending discipline, coupled with early success in what will be a relentless, ongoing effort to strengthen our deposit franchise, is already showing clear progress. Our wholesale funding requirement has been reduced over the past year by $33 billion, resulting in a 250 basis point reduction A few performance highlights across each of our businesses. We were pleased with the strong performance of our Canadian banking business, which delivered $1.1 billion of earnings in the quarter, up 6%. Pre-tax, pre-provision earnings grew 11% year-over-year. We're making good progress towards our medium-term $1 million new primary client growth objective in domestic retail and Year-to-date, we've added 143,000 net new primary clients in our Canadian retail and Tangerine franchises. Although balances in the Canadian residential mortgage portfolio are down slightly year-over-year, we have clearly reached an inflection point as we've seen the success of our multi-product Mortgage Plus offerings result in sequential residential mortgage growth. Specifically, 82% of mortgage originations in Q3 were Mortgage Plus offerings with new one products. Mortgage portfolio retention rates have also improved 190 basis points year-over-year to over 90%. Enhancing the profitability of our Canadian banking franchise will be a key driver of shareholder value creation. I was encouraged by the sequential 150 basis point improvement in Canadian banking return on equity this quarter. Global Wealth delivered a very strong contribution of $415 million this quarter as a result of continued franchise momentum in our Canadian wealth business, led by growth in our advice channels as well as double-digit growth from international wealth. Our Canadian wealth management advisory businesses saw a 19% increase in earnings year-over-year, led by very strong performance from Scotia MacLeod and private banking. We continue to invest in advisor growth and technology within Scotia MacLeod Our total wealth approach to providing full client solutions is driving growth in assets and relationship depth with new and existing clients. Financial plans in place, for example, which we know reflect stronger relationships and, importantly, better outcomes for our clients, are up 29% year over year. Stronger collaboration and client cross-sell were highlighted as a clear priority for our domestic businesses at our investor day. We've seen good success in terms of the partnership between our businesses, driving a 21% year-to-date increase in closed referrals from the Canadian retail bank to our wealth business. These are tangible, measurable metrics that confirm our advisors are working more successfully with their clients and with partners across our organization to bring more value to those clients. We expect to see similar significant benefits from the partnership between global wealth and our commercial banking business going forward. In our global banking and markets business, we reported solid earnings of $418 million this quarter, despite lesser activity in the capital markets business, offset by stronger corporate banking and U.S. business results. I have been impressed by GBM's ability to substantially earn through the headwind created by the elimination of the dividend received deduction this year. We were encouraged by strong growth in our fee businesses. Underwriting and advisory fees were up over 30% on both a year-over-year and year-to-date basis, benefiting from the continued build-out of our product capabilities in the U.S. capital markets business. A critical component of our client primacy strategy is a more connected transaction banking capability across our primary markets to generate higher deposit growth. Scotia Connect, our new cash management platform, will elevate our capabilities in both Mexico and Canada, with our focus now squarely on enhancing capabilities in the U.S. to make it easier for our multinational, corporate, and commercial clients to do business with us. In our international banking business, we delivered strong earnings up 6% or 9% PTTT growth year-over-year, representing a solid 14% return on equity, despite elevated credit costs and more normalized GBM LATAM results compared to prior quarters. We continue to reposition capital deployed within our international footprint. Customer deposits grew 4% year-over-year, while loans were managed 2% lower. The resulting loan-to-deposit ratio in international banking was down nine points to 126% over the period. We are pleased with the early results of our productivity efforts, expense control, and capital repositioning in this business. We are confident that the retail client segmentation initiatives underway and our plans to develop a more regional, standardized operating model will position our international banking business well for improved efficiency and greater profitability going forward. Our international banking business is doing more with less, generating impressive earnings growth with lower capital deployed. Since the beginning of the year, risk-weighted assets deployed by the region are lower by $6.7 billion. Turning to the current economic environment, interest rate increases over the past two years are now weighing on consumers and, to a lesser extent, on our commercial and corporate clients. In Canada, we expect the economy to improve modestly in response to further monetary easing remain below average historical growth rates for the foreseeable future. We do expect policy rates in Canada to trend gradually lower into mid-next year, providing welcome early relief to the Canadian consumer and driving a likely rebound in home and vehicle sales activity. U.S. data in recent weeks has resulted in a repricing of the entire yield curve, suggesting much lower policy rates in the near term than were expected a few months ago. This will be a benefit to our earnings in 2025. The larger economies in our Latin American footprint are all now well into a period of monetary accommodation. Central bank policy rates in Chile at 5.75% and Peru at 5.5% have continued lower from double-digit levels last year, and Mexico and Colombia have more recently lowered policy rates as well. The LATAM region has experienced relative political stability and stronger growth than anticipated this year because of proactive policy action this cycle and should benefit further going forward from a strengthening global economy. We are not anticipating recessionary conditions in any of our key operating geographies in the foreseeable future. In closing, I would like to provide a few additional thoughts on the recent announcement of our agreement to purchase an approximately 14.9% interest in KeyCorp, a leading U.S. regional commercial-focused banking franchise. This investment is consistent with our commitment to reallocate capital from developing to developed markets with a focus on the North American corridor. Our investment in KeyCorp represents a low-cost, low-risk approach to deploying capital in the U.S. and as the regulatory and competitive environment evolves. The additional primary capital will allow Key Corp to optimize their balance sheet and be more front-footed in growing their business, which will also result in increased income to Scotiabank over time. This capital-efficient transaction is expected to add greater than 25 cents to EPS in the first full year of ownership and approximately 45 basis points to Scotiabank's return on equity. Given both confidence in our capital plan and greater clarity on future capital requirements, we evaluated a range of capital deployment options, including share buybacks. The investment in Key is 65% more EPS accretive than the buyback alternative and 20 basis points better from an ROE perspective. The capital impact of a full transaction will be approximately 50 to 55 basis points. We believe that in the current environment, a 12.5% SETI-1 ratio represents an appropriate capital level at which to run the bank, 100 basis points above the regulatory minimum. Therefore, shareholders need not be concerned about Scotiabank holding excess capital as we continue to execute on our North American corridor strategy. Our investment in Key is financially attractive to our shareholders in the near term and adds strategic value in terms of optionality on future U.S. platform growth in the long term. It is also important to note that our organic growth plans within our well-established U.S. global banking and markets business remain unchanged. We continue to enhance our U.S. capital markets product offering in highly rated market segments. Our recent mortgage capital market team In summary, I am pleased with the bank's results this quarter in terms of delivering positive earnings progression while at the same time building balance sheet strength despite a challenging economic backdrop. We are making measurable progress against our strategic plan and our performance in 2024 sets a strong foundation for the resumption of organic earnings growth in 2025 in line with our investor day commitments. 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, which exclude the following items. The loss, mostly relating to goodwill associated with the sale of Credit Scotia, a consumer finance business in Peru, which the bank expects to receive regulatory approval in fiscal 2025. A legal provision related to certain value-added tax-assessed amounts relating to certain client transactions, that occurred prior to the bank acquiring the Peruvian subsidiary and the usual acquisition-related intangible amortization amounts. Moving to slide six for a review of the third quarter results. The banks reported quarterly earnings of $2.2 billion and diluted earnings per share of $1.63. Return on equity was 11.3% and return on tangible common equity was 13.7%. Revenues were up 5% year-over-year, as net interest income grew 6%, driven by net interest margin expansion, while non-interest income grew 4% year-over-year. The all-bank net interest margin expanded four basis points year-over-year. Margin was down three basis points quarter-over-quarter, driven mainly by lower margins in international banking and Canadian banking, as well as higher levels of low-yielding liquid assets. and expand beyond Q4 as the benefits of the rate cuts are fully realized. Non-interest income was $3.6 billion, up 4% year-over-year, primarily from higher wealth management revenues, underwriting and advisory fees, and the positive impact of foreign exchange. The provision for credit losses was approximately $1.1 billion. Expenses grew 5% year-over-year, driven by higher personal costs from inflationary adjustments and amortization and other technology-related costs that support business growth. Quarter-over-quarter, expenses were up a modest 1%, driven by amortization and other technology-related costs and professional fees. The productivity ratio is 56% this quarter, in line with the prior quarter, and year-to-date operating leverage was a positive 0.9 percent. Moving to slide seven, which shows the evolution of the CET1 capital ratio and risk-weighted assets during the quarter. The bank's CET1 ratio was 13.3 percent, an increase of 10 basis points quarter over quarter and 60 basis points year over year. Total risk-weighted assets was $454 billion, up from $450 billion in the prior quarter driven by growth in balance sheet assets and undrawn commitments, book quality changes that were partly offset by lower market risk. Earnings contributed 16 basis points, the DRIP contributed 11 basis points, and the revaluation of securities through OCI contributed a further seven basis points. This was offset partly by higher risk weighted assets consuming 11 basis points and effects and other impacts of another 11 basis points. As a reminder, the Q3 dividend that the bank announced this morning will be the last dividend eligible for the direct discount. Turning now to the business plan results beginning on Flight 8. Canadian banking reported earnings of $1.1 billion, an increase of 6% year-over-year, as higher revenues were partly offset by higher loan loss provisions and expenses. The business generated another quarter of positive operating leverage resulting in year-to-date positive operating leverage of 3.1%. Average loans and acceptances were up 1% quarter-over-quarter and roughly in line with the prior year. Business loans grew 7% year-over-year, credit card balances grew 16%, while residential mortgage balances declined 2%. We continue to see deposit growth. The loan-to-deposit ratio improved to 120% compared to 129% in Q3 2023. Net interest income increased 11% year-over-year, primarily from solid deposit growth, margin expansion, and the benefit from conversion of bankers' acceptances due to the cessation of CDOR. Net interest margin expanded 16 basis points year-over-year, driven by higher loan margins and favorable changes to business mix. Margin was down four basis points quarter over quarter, as asset margin expansion was more than offset by lower deposit margins, reflecting the impact of rate cuts and makeshifts. Non-interest income was down 1% year over year, primarily due to lower banking fees impacted by the bankers' acceptances converting to loans, partially offset by higher deposit, and mutual fund fees and insurance revenue. The PCL ratio was 39 basis points down one basis point quarter over quarter. Expenses increased 5% year over year, primarily due to higher technology, professional, and personal costs. Quarter over quarter expenses grew a modest 1%, primarily due to the impact of two more days in the quarter, higher professional fees that were offset by good expense management controls. Turning now to global wealth management on slide nine. Earnings of $415 million were up 11% year-over-year, driven by higher brokerage revenues and net interest income in Canada and higher mutual fund fees across the Canadian and international wealth businesses, partly offset by higher expenses, largely volume-related. Quarter-over-quarter earnings were up 7%, primarily due to higher brokerage revenues and mutual fund fees, and net interest income partly offset by higher expenses. Revenues of $1.5 billion were up 10% year-over-year, driven by higher brokerage revenues and net interest income, as well as higher mutual fund fees driven by AUM growth. Expenses were up 9% year-over-year due to higher volume-related expenses, salesforce expansion, and higher technology costs to support business growth. The spot AUM increased 10% year-over-year to $364 billion, as market appreciation was partly offset by net redemptions. AUA grew 10% over the same period to $694 billion for market appreciation and higher net sales. International wealth management earnings of $68 million were up 11% year-over-year, driven by higher mutual fund fees, primarily from Mexico, and strong deposit and loan growth across Latin America. Turning to slide 10, global banking and markets generated earnings of $418 million, down 4% year-over-year, significantly impacted by the denial of the dividend-received deduction. Capital markets revenue was down 8% year-over-year, primarily from lower fixed income revenues that were partly offset by higher FX. Quarter over quarter, capital markets revenue was down 5% from lower fixed income revenues, partly offset by higher equities and foreign exchange revenues. Business banking revenues grew 8% year over year and 9% quarter over quarter due to higher corporate and investment banking, including higher underwriting and advisory fees. Loans and acceptances were down 5% quarter over quarter to $109 billion, reflecting market conditions and management's continued focus on balance sheet optimization. Net interest income increased 16% year-over-year, primarily due to higher corporate lending and deposit margins and higher loan fees. Non-interest income, however, was down 4% year-over-year due to lower trading-related revenue, including the impact from dividend-received deduction, partly offset by higher fee and commission revenues. Expenses were up 5% year-over-year, due mainly to higher personal costs and technology costs to support business growth, as well as the impact of foreign exchange. Quarter-over-quarter expenses were up a modest 2%, largely driven by higher personal costs. The U.S. business generated strong earnings of $244 million, up 12% year-over-year, driven by higher corporate and investment banking revenue lower funding costs, partly offset by higher expenses. GBM Latin America, which is reported as part of international banking, reported earnings of $285 million, down 9% compared to the prior year and down 2% compared to the prior quarter. Moving to slide 11 for a review of international banking. The segment delivered earnings of $674 million. That was up 6% year-over-year. Revenue was up 6% year-over-year, as net interest income was up 7%, mainly in Chile, Mexico, and Peru. Net interest margin expanded 33 basis points year-over-year. NIM was down 5 basis points quarter-over-quarter, mainly due to lower inflation impact of rate cuts that reduced asset margins in excess of lower cost of funds. Year-over-year, loans were down 2%, primarily in Chile and Peru. Total business loans declined 7%, partly offset by 5% growth in residential mortgages. The deposits grew 4% year-over-year, primarily in Mexico, Chile, and Colombia. Non-personal deposits grew 5%, while personal deposits grew 1% year-over-year, mostly term. The loan-to-deposit ratio improved to 126% from 135% in the prior year. The provision for credit losses was $589 million, translating to 139 basis points, up only one basis point quarter-over-quarter. The expenses were up 4% year-over-year, driven mainly by higher salaries and employee benefits and technology costs. Quarter-over-quarter expenses were flat as the business continues to see the benefits of restructuring, prudent expense management, and the focus on regionalization that offset the challenges of operating in a high inflationary environment. Year-to-date operating leverage was a very strong positive 4.6%. Turning to slide 12, the other segment reported an adjusted net loss attributable to equity holders of $465 million compared to a loss of $421 million in the prior quarter. Net interest income was in line with last quarter and is expected to improve going forward benefiting from rate cuts. The non-interest revenue declined mainly due to lower non-interest revenue and higher expenses. I'll now turn the call over to Phil to discuss risk.