The Bank of Nova Scotia

This conference is being recorded. Cette conférence est enregistrée.

Good morning and welcome to Scotiabank's Q3 results presentation. My name is Manny Gromit and I'm head of IR 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 questions are the following Scotiabank experts. Eric Bontanaris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Arceguieta from International Banking, and Travis Manchin 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.

Good morning, everyone. Our strong Q3 results highlight the steady progress we are making towards our Investor Day commitments. We continue to focus on what we can control as we drive profitable to sustainable growth. And we are doing this through the disciplined execution of our strategy, which includes building deeper client relationships, driving efficiency gains while making the necessary investments to the future, and maintaining strong balance sheet metrics to deal with unexpected challenges. For Q3, we delivered adjusted earnings of $2.5 billion, or $1.88 per share. This is up 15% year-over-year, while pre-tax, pre-provision earnings were up 17% year-over-year. We also delivered a return on equity of 12.4%, up 110 basis points compared to the same quarter last year. After taking a conservative stance on credit last quarter that featured an 18 basis point performing provision driven by U.S. tariff uncertainty, our performing bill this quarter is back down to four basis points. Meanwhile, our impaired PCL ratio came in at 51 basis points, down six basis points quarter over quarter. We are pleased with this outcome, but remain committed to managing our business conservatively. Moving to our operating segments, this quarter we reported improved results in Canadian banking, helped by better credit performance versus Q2, but also improved revenue growth, boosted by two basis points of sequential margin expansion. In Canada, we are focused on building deeper and more profitable multi-product relationships with our clients, and I'm very pleased with the progress we are making. Importantly, retail savings and day-to-day deposits are up 6% year-over-year. Our mortgage solution continues to help drive multi-product banking relationships by providing preferred mortgage rates for customers with a day-to-day account and at least one other eligible product. Year-to-date Mortgage Plus has accounted for approximately 90% of our new mortgage originations, including in the independent broker channel. Since the launch of this product, 95% of new clients have retained their day-to-day accounts after one year, and the average balance per client is one and a half times our standard day-to-day acquisitions. Year-to-date, 30% of new Mortgage Plus clients opened a credit card with average credit card balances higher than our standard card acquisitions. We are also seeing strong portfolio retention rates of 90% plus. Our renewals typically happen in our branches and therefore do not incur additional commission-related costs. Our focus on primacy is also driving strong cooperation between Canadian banking and wealth, with combined referrals between retail, commercial, and wealth at $11 billion year-to-date, which is up 13% versus the same period last year. In commercial, we have largely completed our balance sheet optimization, and in small business, we are acquiring clients at approximately two times the market rate, with around 50% of those new clients being primary by month three, and we continue to see above-market growth of our core deposits. Although the Canadian business performance is steadily improving, we do see the opportunity to continue to address expense efficiency with our ultimate objective of delivering positive operating leverage while also making the required investments to drive the business makeshift we see as necessary to deliver our return on equity objectives. The modest quarter-over-quarter expense growth is a step in the right direction. Global wealth management continued its positive momentum with strength across all of its businesses. In the quarter, we had strong results in asset management, private banking, and international wealth management. Our net fund inflows across our retail and advisory businesses demonstrates that our strategy is working. Year-to-date net sales on our collective wealth channels is $6.2 billion versus $5 billion in net redemptions in the same period last year, an $11.2 billion improvement in net sales. In Canadian wealth management, we are seeing strong momentum in our private bank with double-digit loan and deposit growth, along with all-time high fee-based assets within Scotia McLeod. In our global asset management business, we remain focused on delivering investment advice for our branch network, with year-to-date net sales trending positively at $1.7 billion. Notably, we've increased our percentage of retail buyers over mutual fund products over the last 18 months, making strong progress towards the best in class. And in our international wealth business, earnings are up 21% year over year, with 18% asset growth in Mexico. We also demonstrated continued progress in our international banking segment, with results continuing to trend ahead of our investor day commitments. Performance continues to be driven by solid execution, including another quarter of a strong expense discipline, and improved possibility metrics, including a June 3 return year-over-year. We are delivering on our regionalization strategy and laying the groundwork to segment our retail client base with the aim of improving customer experience, boosting revenue growth, and lowering the cost to serve. Finally, global banking and markets delivered another great quarter as we once again reported strong trading revenues and advisory fees. In Canada, year-to-date, GBM is number two in lead table ranking for debt capital markets, and in the United States, GBM continues to reach new highs in its investment-grade VCM market share. Overall, the U.S. contributed 42% of GBM earnings in Q3, and we continue to invest in our U.S. capabilities to drive future growth. We also launched a pilot of our modern U.S. cash management offering, a pivotal step in connecting our North American footprint and strengthening our ability to achieve primacy with our clients. Moving to a brief review of our strategic priorities. We remain committed to optimizing our capital and liquidity to drive increased shareholder returns. One key strategy for achieving this is focusing on value over volume and enhancing the velocity of our balance sheet. While loan growth is important and a key indicator of economic and finance activity, it is not our sole focus. help drive improved client primacy. This approach has resulted in lower loan growth compared to historical levels, but has significantly helped improve our return on equity, capital capacity, and liquidity, which in turn is driving share buybacks. We believe we have effectively repositioned a notable portion of our balance sheet and anticipate that key areas and new initiatives within the bank will reflect increased yet profitable loan growth next year. Let me give you a few key examples of our strategy results, along with key insights into our new initiatives. In Canadian commercial, loan growth Thank you. year-to-date growth in underrated advisory fees, as well as very robust trading-related revenues, which are up 50% for the year-to-date. Our GDM business is needing its growth adjusted, and this quarter we successfully launched our first mortgage capital markets funding transaction in the U.S. We have more investments to make and additional capabilities, but records high M&A fees in 2025 give us confidence we're heading in the right direction. In international banking, we've enhanced profitability by optimizing our balance improvement in return on equity. And in our international global banking and markets business, loans are down almost $9 billion over that same timeframe, while earnings have risen by approximately 76 million or 32%. At the all bank level, our balance sheet optimization efforts have also led to better funding metrics. The loan to deposit ratio has improved to 104% in Q3 2025, down from 116% in Q4 2022. And the wholesale funding to total assets ratio has decreased by 280 basis points to 18.8% from 21.6% in Q4 2022. Beyond balance sheet optimization, we also continue to focus on productivity initiatives to improve our effectiveness. At the all bank level, we delivered positive operating leverage for the sixth straight quarter. And while we remain focused on accelerating top line growth as we demonstrated this quarter, We are also very committed to managing the expense line carefully with an eye to doing things better, faster, safer, and at a lower cost. At the same time, we remain committed to investing in our businesses to deliver improved client experiences and capabilities to drive sustainable future growth. A key area of investment is AI, where we are focused on getting this technology directly into the hands of our frontline staff. This past quarter, we completed the rollout of our Ask AI internal chatbot to all of our Canadian Bank retail branches and client experience centers. Developed using large language models, this platform is designed to assist frontline employees with a whole range of client inquiries. Additionally, our external AI chatbot handles over 125,000 inquiries monthly. Finally, we continue to focus on maintaining strong capital levels and a disciplined approach to capital allocation. We ended the quarter with a steady one ratio of 13.3% after repurchasing 3.2 million shares under current NCIB. This highlights our confidence in the trajectory of our internal capital generation, which we are focused on continuing to improve. In closing, we expect to deliver strong earnings growth in 2025 that will position us well heading into 2026. We will provide a more detailed outlook on our fourth quarter call. We are on track to meet our medium-term financial objectives and our laser focus on execution both at home and across our diversified international footprint. I will now turn it to Raj for more detailed financial review of the quarter.