The Bank of Nova Scotia

Ladies and gentlemen, this conference is being recorded.

Good morning and welcome to Scotiabank's Q2 26 earnings call. My name is Manny Grauman and I'm head of investor relations here at the bank. Presenting to you this morning are Scott Thompson, Scotiabank's president and chief executive officer, Raj Viswanathan, our chief financial officer, and Shannon McGinnis, 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 Aristiguieta from International Banking, and Travis Machen 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. With that, I will now turn the call over to Scott.

Thank you, Manny, and good morning, everyone. Scotia bankers should be proud of this quarter as we continue to drive our business forward and deliver for shareholders, even in the face of unexpected geopolitical developments. We remain focused on the needs of our clients as we work to deepen client relationships across our bank. Adjusted earnings came in at $2.7 billion, or $2.02 per share. Pre-tax, pre-provision earnings were up 16% year-over-year as we continue to drive revenue growth and manage our expenses effectively. Our SETI 1 ratio was 13.3% even after repurchasing 6.4 million shares in the quarter, and today we announced a quarterly dividend increase of $0.04 per share, reflecting confidence in our earnings growth. Over the past 12 months, we have returned $7.5 billion in capital to our shareholders through share buybacks and dividends, and looking ahead, we expect to keep this pace while maintaining strong capital ratios. Our capital deployment priority continues to be organic growth, followed by share buybacks and strategic tuck-in acquisitions that fit a well-defined need. Return on equity for the quarter was 13.2% and remains on track to hit 14% plus in fiscal 2027, one year ahead of our investor day target. Our business mix is shifting, which is resulting in strong revenue growth and higher returns, and we expect those trends to continue into fiscal 2027. In Canadian banking, the momentum is building, and we are delivering better results quarter after quarter after quarter. Pre-tax, pre-provision earnings were up 13% year-over-year, help for the fourth consecutive quarter of margin expansion, and continued strength in our fee income line as we maintain our focus on growing wealth management, credit card, and insurance revenues. At the same time, we are managing expenses effectively, even as we continue to make substantial investments in frontline sales capacity and technology. As a result, Canadian banking's productivity ratio was down 230 basis points year-over-year, contributing to positive operating leverage for the third consecutive quarter. Industry-wide, term deposit balances continued to contract during the quarter, but we've been able to consistently retain over 90% of retail GIC maturities, despite intensifying deposit competition. These flows are either staying in Canadian banking, where savings and deposits were up 3% year over year, or are moving into retail mutual funds, where net sales were up significantly year over year. A key pillar of our strategy is to grow high-quality sticky deposits, and earlier this month we announced the launch of the Scotia High Interest Savings Account, which is one of Canada's first relationship-based accounts that offers tiered regular interest rates based on a client's total relationship balance across eligible Scotiabank accounts. Average loan growth remains in the low single digits, but by the end of the year, we expect to catch up to the broader market, thanks in large part to an acceleration in commercial loan growth. Commercial loans were up 2% sequentially this quarter, and we expect that pace to increase given our robust pipeline growth. Overall loan growth will also be supported by our small business portfolio, which continues to grow in the high single digits. Spot credit card growth is expected to reach mid-single digits by the end of the year, while our mortgage volume should keep pace with peers. In international banking, pre-tax, pre-provision earnings were up 12% year over year, helped by revenue growth of 7%. This, combined with strong expense discipline, delivered year-to-date positive operating leverage of 3.2%. Performance in Mexico was particularly strong this quarter, with revenue up 8% year-over-year and earnings up 25% year-over-year. Retail loans continued to grow across our footprint by 4% year-over-year, with non-mortgages growing by a strong 7%, especially in Mexico and the Caribbean. Commercial loan growth was up 2% quarter over quarter and should continue to modestly improve in the second half of the year as we pursue growth thoughtfully and employing a cash management first strategy. Our focus on deposits is also gaining traction, climbing 3% quarter over quarter and 5% year over year. Earlier this month, we were proud to sponsor Chili Day 2026, which brought together government and business leaders in New York and Toronto to strengthen Canada-Chile ties and advance investment in this important market. Scotiabank also hosted Mexico's official trade mission to Canada, convening senior government leaders, business executives, and clients. This event was a significant milestone and reinforced Scotiabank's role as a connector across the North American corridor. In global wealth management, we are continuing to drive our underlying business forward. Net sales for the quarter were at $4.7 billion, four times what we had in Q2 2025, and marking our seventh consecutive quarter of positive net flows. ROE came in at 17.9%, up 210 basis points year over year. Canadian wealth management is continuing to benefit from deeper connectivity with Canadian banking, the form of higher referral volume total closed referrals were at nine billion dollars year to date largely stemming from our retail and small business segments to wealth closed referrals between commercial banking and wealth were 2.8 billion or double what we reported in the first half of last year in our global asset management business we delivered year-to-date net sales of 3.1 billion and continue to rank third amongst our peers in long-term retail mutual fund sales, up from fifth in the same quarter last year, highlighting the opportunities we have to deepen penetration within our own network. And in our international wealth business, earnings were up 12% year over year and 22% in Mexico. This quarter, we were also recognized with eight EuroMoney private banking awards across our footprint, and Mexico's asset management unit was recognized by Morningstar with six funds ranked in the top 10 among all four and five star funds. Finally, in global banking and markets, revenues were up 9% year over year, driven by a 25% year over year increase in capital markets. Our deal pipeline is strong and Q3 has started off on a strong footing with a number of marquee transactions being announced over the past few weeks. Our mortgage capital markets business is accelerating, which is a good example of our U.S. growth strategy in action. GBM's loans grew 1% quarter over quarter or up 3% excluding our Asia portfolio, which is in runoff. Growth here should accelerate as the year goes on, but will increasingly be driven by our capital market strategy. We will continue to deploy balance sheets through our corporate revolver loan book, but with a focus on customers where we have a broader multi-product relationship. We are focused on improving returns while also growing our loan book and investing in critical technology, including AI. This quarter, Scotiabank announced the launch of Scotia Intelligence and Scotia Navigator. Scotia Intelligence unifies the capabilities, platforms, and governance required to deliver AI securely and at scale for employees and clients globally. And Scotia Navigator puts AI directly into the hands of employees across the bank, including advanced assistance that automates routine tasks and redirects capacity towards more complex, higher value tasks. Our approach to AI is designed to take us from isolated AI use cases to AI that is embedded across our processes, decision-making, and client interactions in a trusted, efficient, and effective manner. Our approach is grounded in four key principles, but at the top of the list is security, which has taken on added importance given the cybersecurity risk posed by advanced AI models. We are embedding security, governance, and controls into the foundation of our AI infrastructure by design, enabling us to scale not just quickly but safely, fully aware of both the opportunities and risks of advanced AI. We are also leveraging AI to strengthen our security posture, including AI-driven scanning and monitoring to proactively identify and mitigate risks. Our second principle is flexibility. The AI landscape is evolving rapidly, and we believe that no single model or vendor will dominate over an extended period of time. We have adopted a model-agnostic approach from day one, selecting models based on performance, security, and cost. This approach gives us maximum flexibility with what is a rapidly evolving technology. Our third principle is data. AI is only as effective as the data it can understand We have deliberately invested in getting our data foundation right, clean, well-governed, and richly described so that AI can deliver meaningful outcomes at scale. This is enabled by our enterprise data platform, which ensures that our data is discoverable, trusted, and ready for AI consumption across the enterprise. And our fourth and final principle is platform-first thinking. Rather than fragmented tools, we are building a unified enterprise AI platform This allows for faster deployment, consistent governance, and repeatable scale across the bank. It also enables the deployment of AI agents and continuous monitoring and improvement of models and production, all with enterprise-grade security guardrails built in from the outset. In closing, as we've committed to, we are delivering growth across product lines that are strategically important to us and work to drive client primacy. In Canadian banking, we delivered sequential commercial loan growth this quarter on top of already strong small business growth, and our growing commercial pipeline gives us confidence that that momentum will continue. Although total deposits are contracting because of industry-wide pressure on GICs, we are consistently growing our higher quality savings and day-to-day deposits, even as deposit dollars increasingly blow into retail mutual funds and our wealth business. The connectivity between Canadian banking and global wealth management continues to strengthen thanks to growing retail fund sales and two-way referrals between the two units. In international banking, retail and commercial loans grew 4% year over year, with non-mortgage loan growth continuing to outpace mortgage growth on the retail side and growth improving on the commercial side as we build deeper client relationships. Finally, in global banking and markets, capital markets loans are growing, even as total loan growth is being impacted by our decision to reduce our exposure in Asia. Overall, despite increased macro volatility, we continue to drive towards delivering on our medium-term financial objectives and building a stronger and more profitable bank for the long term. I will now turn it to Raj for a more detailed financial review.