The Bank of Nova Scotia

Good morning and welcome to Scotiabank's 2024 fourth quarter results presentation and apologies for our late start this morning. My name is John McCartney and I am 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 your questions are the following Scotiabank executives. Aris Pogdenaris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Aristegueta from International Banking, and Travis Machin from Global Banking and Markets. 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. And with that, I will now turn the call over to Scott.

Thank you, John, and good morning, everyone. 2024 was a foundational year for the bank. Nearly one year ago, we held our investor day and shared with you our new enterprise strategy to deliver sustainable, profitable growth and maximize shareholder value. We also committed to transparently sharing our progress as we entered into our first year of execution against our plans. Our results reflect a year of transition as we focused on our enterprise-wide priorities, aligned our capital allocation to each of our business lines, and started our shift to a value over volume strategy. Our results demonstrate both early progress and areas where more work needs to be done. Overall, earnings grew marginally in 2024, consistent with our expectations and investor day guidance. Recapping our areas of focus. First, our North Star, increasing the number of primary clients. We continue to focus on growth in client segments where we have the scale and product capability to compete and win lead relationships. In our global wealth business, we are relentlessly focused on growing our advice channels and providing holistic wealth solutions to attract high-value primary clients to the bank. This is driving strong growth in the business. We are ranked number two amongst peers in earnings growth in the most recent five-year period and delivered record net income in 2024. We have increased personal and commercial deposits by 7% year over year. In Canadian banking, 30% of our clients now meet our primacy definition of 1.5 percentage points year over year. And across our retail markets, we've increased total primary clients by 280,000. While this progress is meaningful, in order to meet our 2 million incremental primary client target by 2028, we need to accelerate our progress in 2025 and beyond. Next, we have focused on capital allocation to grow and scale across North America. Today, all incremental capital is being allocated to our priority businesses. This has been an example of enterprise-wide thinking at work as our business lines have made trade-offs to support the all-bank strategy. One of the most rewarding outcomes of this past year has been witnessing the international banking team deliver better results with less capital and generating impressive earnings growth with improved returns. We are delivering on our commitment to remix our portfolio to accelerate growth in fee income. We are de-emphasizing our indirect lending-only channels in domestic mortgage and auto. And in our global banking and markets business in the US, we are optimizing capital and building out our ancillary business capabilities. We have embarked on select inorganic initiatives to support our North American strategy, including our agreement to sell Credit Scotia in Peru and our investment in Key Corp, which is an opportunity to profitably deploy capital into the U.S. market. Finally, and importantly, we have strengthened our balance sheet. We have a solid Tier 1 capital ratio of 13.1%, and we have grown our allowance for credit losses on the balance sheet by approximately 22% since the end of fiscal 2022, including a performing allowance bill of approximately $800 million. We are well-positioned to fund our growth agenda in 2025 and beyond. Turning to our business line results and fiscal 2025 priorities, our wealth business had a very strong finish to the year, delivering net income of $426 million this quarter and record annual earnings of $1.6 billion in 2024, as well as continued ROE expansion to 15.7%. Our Canadian wealth management business delivered double-digit earnings growth led by a 25% increase in Scotia McLeod, which is a strong source of recurring fee-based earnings, as well as 15% growth from the private banks. We continue to invest in developing talent, as well as adding established teams to our Scotia McLeod MD Financial and Private Investment Council advice channels. Our wealth management businesses in Canada reached an all-time high in client satisfaction scores, and delivered 30% more financial plans. We saw growth in our asset management business as overall assets under management grew to over $370 billion, up 18% this year. Importantly, we have seen a strong rebound in fund sales with a particular focus on distribution through our own bank channel. Gross retail mutual fund sales increased 54% on a year-over-year basis with strong momentum expected in 2025. Growth in our international wealth business is very strategic for us in terms of delivering highly ROE accretive growth. International wealth earnings were a record $261 million in 2024, up 17% year over year. Our Canadian bank delivered solid revenue-led earnings growth of 7% in a year of modest loan growth and higher loan losses, as the realities of a slowing economy and the impact of peak interest rates made for a challenging operating environment. Expense discipline in the Canadian bank contributed to positive operating leverage for the year, and deposit growth outpaced loan growth. Segments where we saw asset growth include commercial, small business, and credit cards through focused initiatives like Seen Plus and Mortgage Plus, which target deeper, more solutions-based relationships with our clients. Primary client growth, diversification of our portfolio mix, and growth in our fee income remain high priorities for fiscal 2025 as stronger profitability in our domestic P&C business is essential to achieving our financial objectives. Looking ahead, we have initiatives in place to accelerate primacy, including focusing on core day-to-day retail deposits and deepening relationships through personalized value propositions and marketing programs. Optimizing assets like ScenePlus, which in our view remains a very large and underexploited opportunity for us to deepen primary data-rich relationships. ScenePlus membership continues to expand rapidly with over 15 million members and is on pace for record point issuance. Over 37% of ScenePlus members have a Scotiabank relationship and we believe further penetration of the ScenePlus member base can meaningfully contribute to our primacy objectives. We are also delivering on our Canadian real estate secured lending strategic repositioning. Our Mortgage Plus offering, a customizable offering with an everyday account, preferred mortgage rate, and other retail products, continues to drive strong growth and primary relationships, with penetration of greater than 75% among our new mortgage originations in 2024. The early results of these initiatives suggest improved relationship depth with our clients. The number of clients holding three or more products with us increased to 46%, up two points from last year, and our annual client attrition rate was lower by 40 basis points. 44% of our clients with term deposits are now primary clients, which is up 4.4 points this year. Importantly, 85% of clients with term deposits renewals this year stayed with the bank as a direct renewal or redeployment to investments or other products. We continue our positive momentum in Tangerine. Net primary client growth of 19% year over year with our new acquisition offers driving two times higher payroll penetration. Sales through the mobile channel reached a record high at the end of 2024 at 49%, which is an increase of seven full percentage points year over year. Turning to our international banking business. Considering the portfolio repositioning and capital reallocation activity, we were pleased with the performance of this business, which delivered solid 7% year-over-year earnings growth. We meaningfully reduced our overall capital deployed to the region in line with our capital optimization strategy as risk-weighted assets in the international business were lowered by 6% or over $9 billion in 2024. Importantly, we saw margin expansion throughout the year to 442 basis points and an improvement in risk-adjusted margins to over 325 basis points. The international banking productivity ratio improved over 200 basis points to 50.9% on the path to our objective of 45% over the medium term as we realized the benefits of a more regional operating model. Operating leverage was an impressive 5% for the full year. Fiscal 2024 return on equity in international banking improved to 14.4% from 13.1% the year prior. We will remain focused on deploying capital prudently to improve the profitability of this segment over the medium term as communicated at our investor day. In global banking and markets, our results this year reflect the impact of continued balance sheet optimization as we redeploy capital and resources into the product and client segments where we envision more optimal returns on our capital over time. Fiscal 2024 earnings of $1.7 billion were a modest 5% below last year, or up 9%, excluding the substantial impact of the elimination of the Canadian dividend received tax deduction. Our GBM loan balances are lower year-over-year, the result of lower utilization rates as corporate clients paid down bank lines from free cash flow and financed in the capital markets given the more constructive market environment. Our underwriting and advisory fees increased by 27%, suggesting franchise growth and the benefits of our balance sheet optimization efforts and product capability builds. We have added specialized teams within the CLO, private credit, and mortgage capital markets businesses to participate in higher capital velocity segments of the U.S. structured credit markets. Enhancing our cash management capabilities is essential to growing our share of primacy with commercial, corporate, and multinational clients. In 2024, we continue to invest in talent, products, and client servicing, including in our cash management portal, Scotia Connect. Our investment in enhancing our cash management capabilities, including in the United States, will allow us to better support clients throughout the North American corridor. In summary, while I am pleased with our financial results in 2024, which demonstrate progress against our strategy, they also reflect our transformation as an organization and the significant work ahead of us in the coming years to increase returns for our shareholders. Looking ahead, The economies in which we are operating in are also in transition from both an economic and geopolitical point of view. The Bank of Canada's policy rate action in recent months should lead to a rebound in economic activity next year. We anticipate additional easing through the first half of the year, which we expect will be stimulative to activity in the domestic housing and mortgage markets and buoy consumer and business confidence after a period of relative restraint. We are closely monitoring policy actions from the new administration in Mexico as well as the incoming U.S. administration. While new governments often bring initial uncertainty with respect to trade policy and relations, we believe policy will ultimately support a cooperative environment that encourages capital investment and continued regional growth. We continue to believe in the long-term economic growth potential of the North American corridor and the strategic value that connectivity among Canada, the U.S., and Mexico will provide to our clients and to the long-term success of the bank. Central banks in Latin America are well along on the easing path to stabilize interest rates, but the pace of interest rate cuts has slowed from first half of 2024 expectations. Growth is expected to remain positive, but more modest than previously forecasted in our larger markets, with less certainty on near-term growth, particularly in Mexico, through the period of presidential transition. As we navigate this period of uncertainty, we will be thoughtful with our capital allocation into the country. I would now like to draw your attention to our enhanced disclosure, which provides performance updates against critical strategic metrics shared last year at our investor day. These select metrics are representative of the many underlying strategic and operating metrics being monitored and measured. Progress in primary client growth, deposits, digital delivery, enterprise-wide cross-sell, and growth in fee income will position us well to achieve our financial goals. Reflecting on the first year of performance and sharing our Investor Day five-year plan, we are confident in and committed to delivering against our stated medium-term financial objectives. Progress towards achieving 14% plus return on equity within our five-year strategy period. A commitment to ongoing positive operating leverage. and operating with Tier 1 capital levels with a sufficient buffer above regulatory minimums. Our earning expectations have not changed. We continue to expect earnings growth between 5% and 7% in 2025 prior to incorporating any benefit from our minority investment in Key Corp. In summary, I am pleased with the progress we have made in our first year of delivery against our strategy. We remain focused on disciplined capital allocation and execution primary client growth, improving productivity, and maintaining a strong balance sheet. Our teams are rallied behind our strategy, execution, and commitments, and are living our core values and key behaviors as part of our cultural transformation to drive high performance and support the execution of our strategy. Importantly, starting this fall, we rolled out Scotia Bond, our new culture framework, which includes refreshed values and behaviors that will help drive our strategy forward Our updated performance management metrics go beyond measuring results and evaluate the how in terms of the leadership behaviors that we believe lead to great outcomes. This new framework is being embedded in all aspects of our organization from goal setting to how we reward performance and recognize our cultural catalysts throughout the bank. I would like to thank our global team of Scotiabankers for their support and commitment to the bank and to our clients this year. Our momentum is a result of their efforts to deliver on our shared vision and collective objectives. I will now turn it over to Raj for a more detailed financial review of the quarter.

Raj Nadella- Thank you, Scott, and good morning, everyone. This quarter's net income was impacted by $430 million of after-tax adjusting items, or 35 cents of earnings per share, and approximately five basis points on the common equity tier one ratio. This consisted of a $379 million after-tax in payment charge related to the write-down of our investment in Bank of Zion and certain intangible assets, including software, and after-tax severance provisions of approximately $38 million, both recorded in the other segment. The Q4 results also reflect our usual adjustment for amortization of acquisition-related intangibles. All my comments that follow will be on an adjusted basis. Starting on slide six for a review of the fiscal 2024 results. The bank ended the year with an adjusted diluted earnings per share of $6.47, a return on equity of 11.3%, and return on tangible common equity of 13.7%. Revenue was up 6% year over year, while expenses grew 4%, resulting in power