The Bank of Nova Scotia

Good morning and welcome to Scotiabank's Q4 results presentation. My name is Manny Grauman and I'm Head of Investor Relations. 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 executives. Eris Bogdaneris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Aristeguieta from International Banking and Travis Manchin 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. All the remarks today will be on an adjusted basis. With that, I will now turn the call over to Scott.

Thank you, Manny, and good morning, everyone. Our Q4 results tap off a year of strong and consistent We've entered into fiscal 2026 from a position of strength. 2025 was a year of execution. We did what we said we were going to do, despite the emergence of unexpected trade-related economic challenges. We accomplished this by focusing on what we can control and delivering our strategic plan. Overall, EPS grew by 10% for the full year. We also ended Q4 with an ROE of 12.5%, up 190 basis points year over year, and an efficiency ratio of 54.3%, an improvement of 180 basis points versus the prior period. These results demonstrate clear and measurable progress against our medium term financial targets. Recapping our strategic objectives, our focus on client primacy is yielding results as we drive strong cooperation across the bank. Closed referrals between Canadian retail, commercial, and wealth were $15 billion for the year, up 18% over last year. And our emphasis on deposit gathering is also paying off as we increased our mix of P&C deposits for the second year in a row. We've added 400,000 primary clients since we launched our new strategy, and I am confident we will continue to accelerate client acquisition as we enhance our client experience and build out our data and personalization capabilities. We also remain disciplined in our approach to reallocating capital to key growth areas and continue to strengthen our balance sheet and maintain a strong capital position. We reduced our wholesale funding ratio by 60 basis points this past year, while our loan to deposit ratio closed the year at 104%. On capital, we ended the year with a SETI 1 ratio of 13.2% after repurchasing 10.8 million shares in fiscal 2025. Turning to our Q4 results, we delivered earnings of $2.6 billion, or $1.93 per share, up 23% year-over-year. Our quarterly results exclude a restructuring charge with the majority related to actions taken to simplify our Canadian operations. While these types of decisions are always difficult, they are nevertheless necessary as we work to boost the value of the Canadian bank. The actions simplify and streamline our organizational setup, which will free up capacity to further invest in technology and revenue generating sales staff to propel future revenue growth. We do not anticipate additional charges, but will remain focused on running our bank as efficiently as possible, including taking full advantage of emerging technologies. Our technology spend in 2026 will be concentrated in the following key areas. further building out our global transaction banking platform, enhancing our technology platforms, including AI investments, balancing security and client experience with a continued focus on fraud and transaction monitoring, and adding new product capabilities to drive client primacy. Moving to our operating segments, fiscal 2025 stands as a pivotal year for our Canadian banking unit as we laid the groundwork to drive stronger earnings growth in the years ahead. We did this by improving client primacy through growth in core deposits and increased in-branch sales of mutual funds, improving our channel mix with a focus on increasing our sales capacity, and improving efficiency. Performance in Canada has improved sequentially over the past two quarters, setting this business up for strong earnings growth in 2026. Our Mortgage Plus program remains a key contributor to the growth we are seeing in multi-product banking relationships, with over 90% of all mortgage originations, including a product bundle, helping drive both deposits and cards growth. We are capturing an increasing share of money in motion, especially in the retail bank, where day-to-day and savings deposits rose by 6% year over year, and closed referrals between retail banking and wealth management came in at $8.1 billion, or up 20% from fiscal 2024. In commercial banking, full-year pre-tax, pre-provision earnings were up 21%, even as average loan balances declined by 1%, evidence that our focus on value over volume is delivering tangible results. Our commercial bank is an important and growing source of referrals with our global wealth management unit, with closed referrals up 35% this year, and a growing source of revenue for our global banking and markets unit, especially in the FX business. Global wealth management continued its positive momentum with record earnings across global asset management, Canadian wealth management, private banking, and Scotia McLeod. Rising markets are helping drive assets under management higher, and we are also seeing strong underlying performance as full-year net sales improved by $11.5 billion versus fiscal 2024. In Canadian wealth management, we're seeing strong momentum in our differentiated private bank offering, including double-digit loan and deposit growth. At the same time, we onboarded 5,000 households to our recently launched signature bank offering, and our full-service Scotia McLeod brokerage unit saw double-digit growth in fee-based assets, helped by net sales of approximately $6 billion in fiscal 2025. In our global asset management business, retail net sales improved by almost $7 billion in fiscal 2025, led by our own branch channel. And this past year, we launched four new private asset funds delivering compelling private asset solutions tailored for our wealth and institutional investors. We continue to see strong growth within the liquid alternatives asset class and remain a market leader in this space. And in our international wealth business, earnings are up 14% for the year with 20% growth in Mexico. We also delivered continued progress in our international banking segment with results in fiscal 2025 coming in ahead of what we committed to at our investor day. This happened in what is still a challenging economic environment as we demonstrated the benefits of our geographic diversification and executed to our plan. Performance in our international banking segment continues to be driven by solid execution, including strong expense management and improved profitability metrics as we shift our business mix to deeper and more profitable client relationships. We recently launched our singular retail brand and value proposition across Mexico, Peru, and Chile, which highlights the work we are doing around both regionalization and client segmentation. For the year, expenses were flat and ROE came in at almost 15%, up 110 basis points versus the prior year. We look to maximize shareholder value across all the markets we operate in. The Devin Vienda transaction that closed yesterday is a prime example of that. This deal creates additional scale in Columbia and is immediately accretive, with further upside from the benefits of scale and diversification, as well as from future collaboration. Finally, global banking and markets delivered another strong quarter as we continue to benefit from constructive markets, but also from our organic investments in new capabilities, particularly in the U.S. Our prime services business, where we believe we have a competitive advantage relative to our Canadian bank peers, is a growing contributor to GVM's earnings, and we will continue to build on our relationships with top-tier U.S. managers. Fiscal 2025 was the best year for underwriting advisory fees in our history, rising 35%. Looking ahead, we have a strong pipeline to execute in 2026, and the federal government's Grow Canada initiative, with a focus on energy and mining, is well-suited to our core capabilities. The U.S. contributed 50% of GBM earnings in fiscal 2025, and we will continue to invest in our U.S. capabilities in fiscal 2026, to increase this contribution over time. Part of that investment is going to the build out of our US cash management business. After a successful pilot, we officially launched this fall. Across all business lines, we increased the number of enterprise-wide cash management clients by 15,000 in fiscal 2025, exceeding our own internal targets. Success here will help us grow primary client relationships further reduce our reliance on wholesale funding and drive fee income. Our focus on accelerating the velocity of our balance sheet and growing fee income is delivering results. For the year as a whole, GBM loan balances were down 13%, but earnings in this division were up 30% and ROE increased by 320 basis points. Looking ahead to our strategic priorities for fiscal 2026. We will continue to improve our business mix as we further deepen our client relationships. In Canada, mortgage growth is outpacing growth in commercial loans and cards, but nevertheless, we are making progress in deepening client relationships thanks to our success in growing core deposits and investments. Looking ahead, we aim to accelerate card growth by further tapping into our ScenePlus loyalty program and building on the momentum of our MortgagePlus propositions. And in commercial, the pipeline is growing as we target markets and regions that we've historically been less focused on, which should gradually improve loan growth in 2026. We will continue to build on the strengths of our business lines. In Canadian banking and international banking, this means building a more efficient, digitally forward bank that seamlessly integrates our branch network with mobile customer service capabilities, meeting our clients where it is most convenient for them. In global wealth management, we will continue to build on our strong sales momentum as well as grow the number of relationship managers in both our private bank and Scotia McLeod. And in global banking and markets, we will focus on accelerating our balance sheet velocity as we further optimize our use of capital. In the U.S., this includes pursuing a thoughtful organic growth strategy by expanding our product offering while avoiding areas where we do not have scale to compete. Finally, we are focused on further improving productivity across the North American corridor. We are pursuing deeper connectivity as we continue to build out our global transaction banking business and optimize the value of our international footprint. In closing, we feel good about our earnings momentum heading into 2026 and the ability to continue to execute on our strategic priorities and deliver our medium-term financial objectives including achieving an ROE of 14% plus. Improved revenue growth coupled with positive operating leverage should help us deliver double-digit annual EPS growth in fiscal 2026, despite what remains an uncertain operating environment. Canada's renewed focus on natural resource development will drive higher GDP growth and improve national prosperity over the medium term. The recent memorandum of understanding on energy between the Canadian federal government and the province of Alberta is a very significant development in our view and proof that Canada truly is on a new economic trajectory. This renewed focus also plays into our bank's strengths as a trusted provider of capital and advice to key sectors such as mining, energy, and critical infrastructure. We are well positioned to contribute to the ambitious plans of the Major Projects Office by helping our clients drive forward large-scale infrastructure projects. This includes pipelines that will enable Canadian oil and gas producers to access global markets, strengthen export opportunities, and support Canada's energy competitiveness. And we will continue to advocate for those measures that will unlock greater economic prosperity within our markets. Our results this year have truly been an enterprise-wide team effort And I would like to thank our entire Scotiabank team for their many contributions in 2025. Two years into our strategic journey, we head into 2026 with momentum and excitement about all that we will accomplish in the year ahead. I will now turn it to Raj for a more detailed financial review.

Thank you, Scott, and good morning, everyone. This quarter's net income was impacted by $299 million of adjusting items after tax and non-controlling interest, or $0.28 of earnings per share, and approximately seven basis points on the common equity tier one ratio. The adjusting items include a $268 million after-tax charge to simplify the Canadian banking organization, right-size global banking and market operations in Asia, and regionalized activities in international banking. in line with the bank's strategy. Legal provisions of $54 million, a $43 million credit related to the Columbia and Central America transaction, and our usual amortization of acquisition-related intangibles. All my comments that follow will be on an adjusted basis and on a constant dollar basis for the International Bank. Starting on slide seven for a review of the fiscal 2025 results, The bank ended the year with adjusted diluted earnings per share of $7.09, up 10% compared to the prior year, and a return on equity of 11.8%, top 50 basis points, and a return on tangible common equity of 14.3%, that was up 60 basis points. Revenue was up 12% year-over-year, while expenses grew 9%, resulting in positive operating average of 3% for the year. The provision for credit losses were $4.7 billion, driven mainly by higher-performing PCLs. Canadian banking earnings were $3.4 billion, down 9%, impacted by higher PCLs of approximately $600 million and lower margins due to rate cuts. Revenue grew 3%, driven by solid asset and deposit growth, while expenses were up 5%. Global wealth management earnings of $1.7 billion were up 17% year over year, benefiting from strong AUM growth of 16%. Revenues were up 15%, driven by higher fee revenue and net interest income across the Canadian and international businesses. Global banking and markets reported earnings of $1.9 billion, up 30%, driven by higher trading-related revenues, fees and commissions, underwriting and advisory revenues, and higher net interest income. International banking earnings were $2.7 billion, up 1% year-over-year. Revenues were up 2%, while expenses were up 1% year-over-year, resulting in positive operating leverage. The other segment reported a loss of $347 million compared to a loss of $815 million in 2024, benefiting from significantly lower funding costs. As disclosed on slide 25, excluding the foregone income from the sale of Columbia, Central America, and Credit Scotia in Peru, 2025 adjusted earnings were $9.3 billion, up 9% year-over-year. Now a few comments on the outlook for 2026. Our outlook commentary normalizes fiscal 2025 to exclude the contribution of the now-devastated operations. The bank expects to generate strong earnings growth in 2026, underpinned by growth in both net interest income and non-interest revenue. The earnings are also expected to benefit from lower provision from credit losses, mainly performing, partially offset by a higher tax rate that is expected to be around 25%. Net interest income is expected to grow from both loan and deposit growth and benefit from margin expansion. Non-interest revenue is expected to grow across all business segments. Expenses are expected to grow from increased technology spend to strengthen and strategically grow the bank. The bank is expected to generate positive operating leverage in 2026. From a business line perspective, Canadian banking is expected to generate double digit earnings growth driven by good revenue growth and moderating loan losses. The business will continue to maintain strong expense discipline with a focus on generating positive full-year operating leverage. International banking earnings are expected to be modestly higher, adjusting for the impact of divestitures. Good growth in pre-tax pre-provision earnings is expected to be offset by slightly elevated loan loss provisions and a higher tax rate. Global wealth management is expected to generate strong earnings growth in 2026. Global banking and markets earnings are expected to grow modestly after a very strong fiscal 2025. Moving to slide eight for a review of the fourth quarter results. The bank reported quarterly earnings of $2.6 billion, which is up 21%, and diluted earnings per share of $1.93, an increase of $0.36 compared to last year. Return on equity was 12.5%, up 190 basis points year-over-year, driven by strong pre-tax pre-provision growth of 19%. Net interest income grew 13% year-over-year from higher net interest margin and loan growth. The all-bank NIM expanded significantly, up 25 basis points year-over-year, mainly from lower funding costs. Quarter over quarter, NIM expanded four basis points from business line margin expansion. Non-interest income was $4.2 billion, up 16% year over year, from higher wealth management and underwriting and advisory fees and the contribution from the key corp investment. Expenses grew 11% year over year and 4% quarter over quarter, driven by higher personal costs including performance-based compensation and technology costs. The PCLs were approximately $1.1 billion, mostly impaired, and the PCL ratio was 58 basis points. The bank's effective tax rate increased to 23.6% from 21.8% last year, due primarily to lower income and lower tax jurisdictions and the implementation of the global minimum tax. Moving to slide nine, which shows the evolution of the CET1 ratio and risk weighted assets during the quarter. The bank CET1 capital ratio was 13.2% down approximately 10 basis points quarter over quarter. Internal capital generation was nine basis points while gains from higher fair values of OCI securities contributed five basis points. This was offset by the allocation of capital to share repurchases of approximately 12 basis points and seven basis points from the impact of adjusting items. Risk-weighted assets grew $6 billion, excluding the impact of FX, to $474 billion, from book size and book quality changes of $4 billion, the impact of model updates, and higher operational risk, partly offset by lower market risk. The bank remains committed to maintaining strong capital and liquidity ratios in 2026. Turning now to the business plan results beginning on slide 10, Canadian banking reported earnings of $942 million, up 1% year-over-year, as pre-tax, pre-provision profit growth of 3% was mostly offset by substantial increase in loan loss provisions. The average loans were up 2% year-over-year, as mortgages grew 4% and credit cards 1%, partly offset by lower personal and commercial loans. Although deposits were down 1% year-over-year, retail savings deposits grew 7% and the retail day-to-day balances grew 6%. This was offset by an 8% reduction in retail term deposits and a 2% decline in non-personal deposits that improved the deposit mix in line with our strategic objectives. Net interest income grew 1% year-over-year due primarily to loan growth, while year-over-year net interest margin was down two basis points due to business mix changes. Quarter-over-quarter net interest margin expanded one basis point from higher asset and deposit margins, partly offset by the impact of changes in business mix. Non-interest income was up 8% compared to the prior year due to elevated private equity gains, higher mutual fund distribution fees, and insurance income. The PCL ratio was 43 basis points. Expenses grew a modest 2% year over year and 1% quarter over quarter from higher investments in technology that support our strategic initiatives. The fiscal 2025 operating leverage was negative 1.6%. Turning now to global wealth management on slide 11, earnings of $453 million were up 17%. Canadian earnings grew 16% year-over-year to $390 million, driven by higher brokerage revenues, net interest income from private banking, and strong mutual fund fee growth, driven by assets under management growth of 15%. International wealth generated earnings of $63 million, up 30% year-over-year, driven by higher net interest income and higher mutual fund fees, as AUM grew 25%. The full-year operating leverage was positive 1.6 percent. The spot AUM increased 16 percent year-over-year to $430 billion, and AUA grew 13 percent year-over-year to almost $800 billion, driven by market appreciation and higher net sales. Turning to slide 12, global banking and markets delivered earnings of $519 million, up 50 percent year-over-year. Revenue increased 24% year over year as capital markets revenues were up 43%, driven by strong growth across both FICC and global equities. Quarter over quarter revenues were up 3%, driven by higher business banking revenues. Year over year, net interest income was up 29% from higher lending margins and deposit volumes. Quarter over quarter net interest income was up 4% from higher deposit margins, and volume growth. Loan balances declined 8% year over year and were in line with last quarter. However, deposits were up 4% quarter over quarter and year over year. The non-interest income was up 23% year over year driven by higher fee and commission revenues and underwriting and advisory fees. Expenses were up 11% year over year, mainly due to higher personal costs including performance-based compensation and higher technology costs. Offering leverage was a strong 7.7% in fiscal 2025. Moving to slide 13 for a review of international banking. The segment delivered earnings of $638 million, up 3% year over year, but down 7% quarter over quarter. Revenue was up 3% year over year, as non-interest income grew 7% from higher capital markets revenues, while net interest income increased 2% year-over-year from margin expansion of 12 basis points, mainly from lower funding costs. Deposits were up 4% year-over-year, with personal deposits growing at 1% and non-personal up 5%. Loans were down 2% year-over-year as business loans declined 7%, while retail loans grew 4%. The provision for credit losses was 144 basis points, up five basis points quarter over quarter. Expenses were up a modest 2% compared to the prior year and prior quarter from continued disciplined expense management, resulting in full-year operating leverage of positive 1.6%. The effective tax rate increased to 22.9% from 20.7% in the prior year due to global minimum tax implementation and earnings mix changes. The GBM business in international banking generated earnings of 295 million, up 19% year-over-year, or up 13% on a constant FX basis, driven by good performance in Brazil and Mexico. Turning to slide 14, the other segment reported an adjusted net loss of 34 million, an improvement of 22 million compared to the prior quarter. With that, I'll now turn the call over to Phil to discuss risk.

Thank you, Raj, and good morning, everyone. This quarter, we continue to operate in what remains a highly uncertain macroeconomic environment. Shifting tariff policy and unclear path forward on trade negotiations are muting economic activity, even as some indicators are showing signs of resilience. Looking at this quarter's results, all bank PCLs were approximately $1.1 billion, or 58 basis points, up $72 million, or three basis points, quarter over quarter. Impaired PCLs were approximately $1 billion, or 54 basis points, up three basis points, quarter over quarter, and in line with the outlook we provided in Q3. The increase in impaired was mainly driven by our retail portfolios across both Canadian and international banking. Now turning to the business lines. In Canadian banking, PCLs were $494 million, 43 basis points, up three basis points, quarter over quarter. In retail, PCLs were $354 million, up $34 million, quarter over quarter. Performing retail PCLs were $21 million, primarily driven by negative migration that was partially offset by improvements in prime auto and releases as performing mortgage allowances migrated to impaired. Impaired retail PCLs were 36 basis points, up two basis points quarter-by-quarter, driven primarily by unsecured lines and Canadian mortgages. Although clients are showing some signs of stress, partially due to elevated unemployment, these remain isolated and not systemic. Overall, 94% of our Canadian retail exposure is secured with an average FICO score above 790. 90-day plus mortgage delinquency ticked up four basis points quarter over quarter. Increased delinquency was seen across both fixed rate and variable rate clients, driven primarily from weakness in Ontario and more specifically in the GTA. On unsecured, we continue to see some weakness with delinquency driven mainly by non-primary and younger clients. In our Canadian commercial portfolio, PCLs totaled $140 million, up $4 million from Q3. Notably, new formations slowed quarter over quarter. Moving international banking, the PCL ratio was 144 basis points, up 5 basis points quarter over quarter, driven primarily by impaired PCLs. In international retail, total PCLs were 239 basis points, up $21 million quarter-by-quarter, excluding FX. Performing retail PCLs were $32 million, driven by portfolio growth and continued credit quality deterioration, primarily in Chile consumer finance. Impaired PCLs were $468 million, up $17 million, excluding FX, driven by Chile consumer finance and increased net write-offs in Mexico. On a full-year basis, our all-bank PCL ratio was 62 basis points, of which 54 was impaired. The significant performing build in Q2 contributed to an increase of performing allowances by $630 million in fiscal 2025. That helped increase the total ACL ratio by 10 basis points year over year to 98 basis points. Looking ahead to fiscal 2026, we expect the full-year impaired ratio to be in the high 40s to mid 50s basis point range. The outlook reflects the expectation that we will continue to operate in an environment of elevated global macroeconomic uncertainty in fiscal 2026. In Canada, the absence of a trade deal with the US and elevated unemployment continue to weigh on sentiment. However, we are cautiously optimistic that the federal budget will contribute to greater economic growth and improved consumer and business sentiment that will benefit the performance in the latter half of the year. In international banking, the outlook across the region remains mixed, characterized generally by subdued economic activity and evolving political dynamics in Peru and Chile. Looking across our markets, in Mexico, trade negotiations continued away on overall sentiment, but GDP forecasts are being revised upwards, suggesting some resilience amid ongoing uncertainty. Chile's forecast remains stable, supported by strong commodity prices. However, unemployment remains elevated, and as a result, we are seeing continued softness in our consumer finance portfolio. Peru's GDP outlook remains stable. However, the benefit of the pension fund withdrawals and client liquidity is tapering, and political uncertainty will linger until we get past next year's presidential and parliamentary elections. It is important to note that we are seeing the early signs of our primacy strategy in international banking, driving improved credit outcomes across the region. All these benefits are observable in the behavior of our newer vintages since 2023. Overall credit performance is still being impacted by older vintages. In closing, the credit picture remains stable. The trade uncertainty continues to be a factor across our markets. We remain comfortable with the adequacy of our allowances and the overall quality of our portfolio. With that, I will pass it back to Manny for Q&A.