Q4 2021 Bank of Nova Scotia Earnings Call

November 30, 2021

Okay.

This conference is being recorded.

This conference is being recorded so it's going to stay home if they don't go as you see.

Okay.

Good morning, and welcome to Scotia Bank's 2021 fourth-quarter results presentation. My name is John Mccartney. I'm head of Investor Relations here at Scotia Bank. Presenting to you this morning are Brian Porter, Scotia Bank's President and Chief Executive Officer, Raj Viswanathan, our Chief Financial Officer, and Phil Thomas, Chief Risk Officer. Following our comments, we'll be glad to take your questions. Also present to take questions are the following Scotia Bank executives, Dan Rees from Canadian banking, Grant Gallon from Global Wealth Management, [inaudible] from International banking and Jake Lawrence from global capital markets.

My name is John Mccartney I'm head of Investor Relations here at Scotiabank.

Presenting to you. This morning are Brian Porter <unk>.

President and Chief Executive Officer Raj.

Raj Viswanathan, our Chief Financial Officer, and Phil Thomas Chief Risk Officer.

Following our comments, we'll be glad to take your questions.

So present to take questions are the following Scotiabank executives, Dan Rees from Canadian banking.

Gallon for global wealth management.

[inaudible] from International banking and Jake Lawrence from global capital markets.

National banking and <unk>.

Jake Lawrence from global capital markets.

Before we start and on behalf of those speaking today, I refer you to slide two of our presentation. Which contains Scotia Bank caution regarding forward-looking statements. With that, I will now turn the call over to Brian.

Chris.

Which contains scotiabank caution regarding forward looking statements.

With that I will now turn the call over to Brian.

Thank you, John and good morning, everyone. I will begin with a review of the bank's performance and progress over the course of fiscal 2021. After which, Raj will review the financial year in more detail, including our outlook for fiscal 2022. Bill Thomas, our Chief risk Officer will follow Raj with commentary on risk performance. We will be pleased to take your questions following my closing remarks. The 2021 fiscal year was indeed, a transition year to the full earnings power of the bank we anticipate.

After which Raj will review the financial year in more detail, including our outlook for fiscal 2022.

Bill Thomas our Chief risk Officer will follow with commentary on risk performance.

We will be pleased to take your questions. Following my closing remarks.

The 2021 fiscal year was indeed, a transition year to the full earnings power of the bank we anticipate.

In fact, at the all bank level and adjusted for divestitures earnings were 18% higher than fiscal 2019. And pre-tax pre-provision earnings were 8% higher. Our business lines have returned to or exceeded pre-pandemic earnings levels. Loan growth has been strong in line with customer preferences. Our loan growth is focused on secured lending, higher quality unsecured retail lending and maintaining a high quality corporate and commercial loan book. This will generate consistent revenue growth while keeping PCL ratios well below historic levels. Our ability to deliver strong pre-tax pre-provision earnings in fiscal 2020 one despite the realities of transition and many of our markets speaks to our high asset quality and diversified platform.

And pre tax pre provision earnings were 8% higher are.

Our business lines have returned to or exceeded pre pandemic earnings levels loan growth has been strong in line with customer preferences.

Our loan growth is focused on secured lending higher quality unsecured retail lending and maintaining a high quality corporate and commercial loan book.

This will generate consistent revenue growth, while keeping PCL ratios well below historic levels.

Our ability to deliver strong pre tax pre provision earnings in fiscal 2020 one despite the realities of transition and many of our markets speaks to our high asset quality and diversified platform.

The pandemic period has been a comprehensive test of both customer behavior, and our ability to deliver a superior digital offering across our footprint. JD Power recently recognized Scotiabank as number one in online banking and satisfaction. We were also named Best Digital Bank in Mexico, as a global retail banking and innovation Awards. The pace of digital adoption and a lack of migration back to traditional channels. As the pandemic receipts has given us confidence to further accelerate our platform transformation towards digital channels and international banking. Digital transformation is a top-line growth engine across efficiency lever and a driver of enhanced customer experience. Bryan will speak in more detail to this quarter's restructuring charge and related benefits driven by this accelerated adoption of digital channels and international banking.

J D power recently recognized Scotiabank as number one.

Online banking and satisfaction.

We were also named best Digital Bank in Mexico, as a global retail banking and innovation Awards.

Pace of digital adoption and a lack of migration back to traditional channels.

Pandemic receipts has given us confidence further accelerate our platform transformation.

Awards digital channels and international banking.

Digital transformation is a top line growth engine.

Cost efficiency lever.

Driver of enhanced customer experience Bryan will speak in more detail to this quarter's restructuring charge and related benefits driven by this accelerated adoption of digital channels and international banking.

Credit quality in the bank remains very strong. Gross impaired loans are now below pre-pandemic levels with formations in the quarter substantially below pre-pandemic levels. Loan growth has accelerated and we expect PCLs to continue to trend lower. Phill Thomas will have more to say on this shortly. Our common equity tier one ratio remains strong at 12.3%. Driven by strong internal capital generation. With Aussie lifting capital restrictions and our confidence in future earnings growth, we have increased our quarterly dividend by 10 cents this quarter and we will recommence our normal course issuer bid program immediately. As we have indicated prior to the pandemic, we will review our annual dividend in the second quarter.

Or to say on this shortly.

Our common equity tier one ratio remains strong at 12, 3%.

Driven by strong internal capital generation.

With Aussie lifting capital restrictions and our confidence in future earnings growth, we have increased our quarterly dividend by 10 cents this quarter and we will recommence our normal course issuer bid program immediately.

As we have indicated prior to the pandemic, we will review our annual dividend.

In the second quarter.

The bank has successfully exceeded our four medium-term financial objectives of EPS growth ROE target, positive operating leverage and strong capital ratios. We are proud of our performance. Great progress on our commitments to strengthen the communities in which we operate was also evident through various social and sustainability efforts in fiscal 2021. As we were recognized by global finance for outstanding leadership, and sustainability transparency and recognized by Refinitiv as being among the top 25, most diverse and inclusive global companies.

Progress on our commitments to strengthen the communities in which we operate was also evident through various social and sustainability efforts in fiscal 2021.

As we were recognized by global finance for outstanding leadership, and sustainability transparency and recognized by <unk> as being among the top 25, most diverse and inclusive global companies.

Before I turn the call over to Raj, I want to take a moment to acknowledge the severe weather-related events in British Columbia. Like many Canadians we've been following the news with real concern. And our thoughts are with our customers our colleagues and their families and we will continue to stand by them over the coming weeks and months. With that, I'll turn the call over to Raj for the financial review.

Like many Canadians we've been following the news with real concern.

And our thoughts are with our customers our colleagues and their families and we will continue to stand by them over the coming weeks and months with that I'll turn the call over to Raj for the financial review.

Thank you, Brian and good morning, everyone. Before I begin, I'd like to note that all my comments on the bank and business line results are on an adjusted basis. As I did in the past few quarters, I will reflect the quarter over quarter performance in some sections given the economic impact of the pandemic during most of 2020. I will also refer to numbers, excluding the impact of FX in many areas. As this has an important impact on the year over year comparisons. You will recall last quarter, we added slide 40, which discloses the impact of foreign currency to key income lines. This remains relevant this quarter.

Before I begin I'd like to note that all my comments on the bank and business line the results on an adjusted basis.

As I did in the past few quarters I will reflect the quarter over quarter performance in some sections given the economic impact of the pandemic during most of 2020.

I will also refer to numbers, excluding the impact of FX in many areas. As this has an important impact of the year over year comparisons.

You will recall last quarter, we added slide 40, which discloses the impact of foreign currency to key income lines. This remains relevant this quarter.

Starting on slide five with fiscal 2021 performance. The bank ended the year with adjusted diluted earnings per share of $7.87. And a return on equity of 15%. Pre-tax pre-provision income was up 2%, up 5%, excluding the impact of foreign exchange. Revenue was flat or up 3%, excluding the impact of FX and expenses were down 1% or up 1%, excluding the impact of foreign exchange. Resulting in a positive operating leverage for the year. From a business line perspective, earnings from our P&C businesses, which were impacted by higher provisions for credit losses last year recovered significantly in 2021. Canadian banking earnings increased 60% and international banking earnings increased 83% on a full-year basis compared to 2020. Global banking and markets maintained momentum in fiscal 2021 reporting earnings of $2.1 billion. Driven by good contributions from capital markets, and corporate and investment banking. Global wealth management earnings of $1.6 billion was up 23% year over year, driven by record results across both advisory and asset management businesses.

The bank ended the year with adjusted diluted earnings per share of $7 87.

And our return on equity of 15%.

The tax pre provision income was up 2%.

5%, excluding the impact of foreign exchange.

Revenue was flat or up 3%, excluding the impact of FX and expenses were down 1% or up 1%, excluding the impact of foreign exchange.

Resulting in a positive operating leverage for the year.

From a business line perspective earnings from our P&C businesses, which were impacted by higher provisions for credit losses last year recovered significantly in 2021.

Canadian banking earnings increased 60% and international banking earnings increased 83% on a full year basis.

2020.

Global banking and markets maintained momentum in fiscal 2021 reporting earnings of $2 1 billion.

Driven by good contributions from capital markets, and corporate and investment banking.

Global wealth management earnings of $1 6 billion.

It's up 23% year over year, driven by record results across both advisory and asset management businesses.

In 2022, all bank revenue is expected to benefit from good mid-single-digit loan growth, modest margin expansion and higher noninterest income benefiting from improving economic conditions. The provision for credit losses ratio is expected to be below fiscal 2021 levels. The bank is focused on prudent management of expense growth to generate positive operating leverage. I'll review the performance for the quarter starting on slide six. Let me address a couple of key expense items that I've had that add up to $188 million this quarter. It was recorded in the other segment and disclosed in slides 20 and 21. This impacted the reported net income to common shareholders by $129 million after-tax and earnings per share by approximately 10 cents.

The provision for credit losses ratio is expected to be below fiscal 2021 levels.

Bank is focused on prudent management of expense growth to generate positive operating leverage.

I'll review the performance for the quarter starting on slide six.

Let me address a couple of key expense items that I've had that add up to $188 million this quarter.

Call it in the other segment and disclosed in slides 20 and 21.

This impacted the reported net income to common shareholders by $129 million after tax and earnings per share by approximately <unk> 10.

The bank record of a restructuring charge of 126 million primarily related to the cost of producing approximately 10% of the branches and approximately 7% of full-time employees, mainly in the middle and back offices, driven by the accelerated customer adoption of digital channels and process automation with an international banking. These efficiencies are a result of our commitment to simplify processes and optimize distribution channels to run businesses more effectively while meeting changing customer needs. We expect the charge will result in expense savings of a similar amount in 2022 in international banking. In addition, the bank recorded a settlement and litigation provision of $62 million pre-tax in connection with the bank's pharma metals business. All my comments that follow will exclude the impact of these two items.

Patients with an international banking.

These efficiencies out of result of our commitment to simplify processes and optimize distribution channels to run businesses more effectively.

Meetings changing customer needs.

We expect the charge will result in expense savings of a similar amount in 2022 and international banking.

In addition, the bank recorded a settlement and litigation provision of $62 million pre tax in connection with the bank's pharma metals business.

All my comments that follow will exclude the impact of these two items.

The bank reported another strong quarter with earnings of $2.7 billion and diluted earnings per share of $2.10, an increase in EPS of 45% year over year and 4% quarter over quarter. All operating segments reported strong results again this quarter reinforcing the strength of our diversified platform. Return on equity improved to 15.6% this quarter, while pretax pre-provision earnings increased 4% year over year. Revenues were up 2% year over year or up 4%, excluding the impact of foreign currency translation. Revenue was down a modest 1% compared to last quarter, mainly due to lower trading-related revenues. Net interest income was down 1% or up 2%, excluding the impact of FX. This increase was driven by strong loan growth in our Canadian banking and global wealth management businesses as well as higher margins achieved in GBM offset by slightly lower margins in international banking. The all bank net interest margin declined 6 basis points quarter over quarter to 2.17% driven by business mix changes in Canadian banking and international banking and lower contributions from asset liability management activities.

All operating segments reported strong results again this quarter reinforcing the strength of our diversified platform.

Return on equity improved to 15, 6% this quarter, while pretax pre provision earnings increased 4% year over year.

Revenues were up 2% year over year or up 4%, excluding the impact of foreign currency translation.

Revenue was down a modest 1% compared to last quarter, mainly due to lower trading related revenues.

Net interest income was down 1% or up 2%, excluding the impact of FX.

This increase was driven by strong loan growth in our Canadian banking and global wealth management businesses as well as higher margins achieved in GBM.

Asset by slightly lower margins in international banking.

The all bank net interest margin declined six basis points quarter over quarter.

To to one 7% driven by business mix changes in Canadian banking and international banking and lower contributions from asset liability management activities.

Noninterest income increased 7% driven by higher banking fees, wealth management revenues, income from associated corporations and investment gains. Quarter over quarter noninterest income was down 2% due mainly to lower trading revenues and underwriting and advisory fees. The PCL ratio continued to decrease falling to 10 basis points for the quarter, representing a decline of 63 basis points year over year, and 14 basis points quarter over quarter. The improvement reflects changes in business mix, and a more favorable credit and macroeconomic outlook across our footprint. Year over year, adjusted expenses increased a modest 1% driven by higher performance-based compensation professional fees advertising and technology-related costs to support business growth. These were partially offset by the impact of foreign currency translation novel personnel and premises costs.

Quarter over quarter noninterest income was down 2% due mainly to lower trading revenues and underwriting and advisory fees.

The PCL ratio continued to decrease falling to 10 basis points for the quarter, representing a decline of 63 basis points year over year, and 14 basis points quarter over quarter.

The improvement reflects changes in business mix, and a more favorable credit and macroeconomic outlook.

Across our footprint.

Year over year adjusted expenses increased a modest 1% driven by higher performance based compensation professional fees advertising and technology related costs to support business growth.

These were partially offset by the impact of foreign currency translation novel personnel and premises costs.

On an adjusted basis, our productivity ratio was 52.8% this quarter compared to 53.3% a year ago, but operating leverage was a positive 1.5% for the fiscal year. Turning now to slide seven. We provide an evolution of our common equity tier one ratio with a quota. The bank reported a strong common equity tier one ratio of 12.3%. Up 10 basis points compared to the prior quarter. And 50 basis points from one year ago. The bank's capital ratio benefited from strong earnings high organic risk-weighted asset growth of approximately $7 billion across all the businesses. In 2020, the bank will continue to maintain strong capital ratios, while deploying capital to grow organic risk-weighted assets across the whole of the business lines buying back stock and keeping dividend within our target payout range of 40% to 50%.

Turning now to slide seven we provide an evolution of our common equity tier one ratio with a quota.

The bank reported a strong common equity tier one ratio of 12, 3%.

Up 10 basis points compared to the prior quarter and.

And 50 basis points from one year ago.

Bank's capital ratio benefited from strong earnings quarter.

Organic risk weighted asset growth of approximately $7 billion.

Across all the businesses.

In 2020 due the bank will continue to maintain strong capital ratios, while deploying capital to grow organic risk weighted assets across the whole of the business lines buying back stock and keeping dividend within our target payout range of 40% to 50%.

Turning now to the business line results beginning on slide eight. Canadian banking reported very strong earnings of $1.2 billion, up significantly year over year and 15% quarter over quarter. Pretax pre-provision earnings grew 14% year over year, and 3% quarter over quarter to $1.6 billion. The increase was underpinned by strong revenue growth offset by modest margin compression. Revenue increased 10% year over year as net interest income and noninterest income grew by 7% and 22% respectively. Net interest income grew 3% quarter over quarter, driven by a strong 5% growth in mortgages, 2% growth in business loans. And higher deposit margins. Net interest margin declined modestly by three basis points quarter over quarter, driven by the shift in the loan portfolio mix towards mortgages. Loan growth accelerated to 10% year over year led by residential mortgages, which grew 13% and business lending, which increased 11% year over year. In line with the strategic priorities of the business.

Canadian banking reported very strong earnings of $1 2 billion up significantly year over year, and 15% quarter over quarter.

Pretax pre provision earnings grew 14% year over year, and 3% quarter over quarter to $1 $6 billion.

The increase was underpinned by strong revenue growth offset by modest margin compression.

Revenue increased 10% year over year as net interest income and noninterest income grew by 7% and 22% respectively.

Net interest income grew 3% quarter over quarter, driven by a strong 5% growth in mortgages, 2% growth in business loans.

And higher deposit margins.

Net interest margin declined modestly by three basis points quarter over quarter, driven by the shift in the loan portfolio mix towards mortgages.

Okay.

Loan growth accelerated to 10% year over year led by residential mortgages, which grew 13% and business lending, which increased 11% year over year.

In line with the strategic priorities of the business.

It is notable that credit card balances grew 4% quarter over quarter. Noninterest income declined 2% quarter over quarter, due primarily to lower business banking fees and income from associated corporations. Expenses increased 6% year over year, largely due to technology and business development costs to support growth. Noninterest expenses declined 1% quarter over quarter, driven by lower personnel costs, partially offset by higher advertising and business development costs. The whole year operating leverage was strong at 2.9%. The PCL ratio decrease from negative 10 basis points, driven by an improving credit and macroeconomic outlook. In 2022, Canadian Banking's earnings growth is expected to be driven by strong loan growth, higher fee income supported by improving economic conditions and the rising rate environment.

Noninterest income declined 2% quarter over quarter, due primarily to lower business banking fees and income from associated corporations.

Expenses increased 6% year over year, largely due to technology and business development costs to support growth.

Noninterest expenses declined 1% quarter over quarter, driven by lower personnel costs, partially offset by higher advertising and business development costs.

The whole year operating leverage was strong at two 9%.

The PCL ratio decrease from negative 10 basis points, driven by an improving credit and macroeconomic outlook.

In 2022 Canadian Banking's earnings growth is expected to be driven by strong loan growth higher fee income.

Voted by improving economic conditions.

And the rising rate environment.

Turning now to global wealth management on slide nine. Earnings of $392 million were off a strong 18% year over year. The performance has been underpinned by strong net sales momentum and market appreciation across business lines and record earnings in Canadian asset management. Revenue grew a strong 16% underpinned by higher mutual fund fees brokerage revenues and private banking loan growth where non-interest expenses grew 14%. Global wealth management delivered its eighth consecutive quarter of positive operating leverage. The operating leverage for the year was a positive 3.1%. Canadian wealth management's continued its strong growth once again up 18% year over year with broad-based growth across all business lines.

Earnings of $392 million were off a strong 18% year over year.

The performance has been underpinned by strong net sales momentum and market appreciation across business lines and record earnings in Canadian asset management.

Revenue grew a strong 16% underpinned by higher mutual fund fees brokerage revenues and private banking loan growth was non interest expenses grew 14%.

Global wealth management delivered its eighth consecutive quarter of positive operating leverage.

The operating leverage for the year.

It was a positive three 1%.

Canadian wealth management's continued its strong growth once again up 18% year over year with broad based growth across all business lines.

We have now had 11 consecutive quarters of double-digit year over year earnings growth in wealth Canada. International wealth also grew a strong 24% year over year on a constant dollar basis. Assets under management and assets under administration, both increased 19% to $346 billion, and $597 million, respectively, driven by positive net sales and market appreciation. In 2022, global wealth management earnings are expected to grow to a strong asset management and private banking volume growth along with continued momentum across advisory businesses. Moving to slide 10, global banking and markets. Global banking and markets generated earnings of $502 million this quarter up 9% year over year, its fourth consecutive quarter of earnings in excess of $500 million. Revenue declined 6% from Q3, primarily driven by lower capital markets revenues, while net interest income increased 1%. Loans grew 2% quarter over quarter and deposits were up a strong 3%. Expenses in the quarter, but down 5% and the productivity ratio remained strong at 53% for Q4. GBM Latam, which is reported as part of international banking generated earnings of $180 million this quarter in line with the prior quarter.

International wealth also grew a strong 24% year over year on a constant dollar basis.

Assets under management and assets under administration, both increased 19%.

346 billion, and 597 million, respectively, driven by positive net sales and market appreciation.

In 2022 global wealth management earnings are expected to grow to a strong asset management and private banking volume growth along with continued momentum across advisory businesses.

Moving to slide 10, global banking and markets.

Global banking and markets generated earnings of $502 million this quarter up 9% year over year, its fourth consecutive quarter of earnings in excess of $500 million.

Revenue declined 6% from Q3, primarily driven by lower capital markets revenues, while net interest income increased 1%.

Loans grew 2% quarter over quarter and deposits were up a strong 3%.

Expenses in the quarter, but down 5% and the productivity ratio remained strong at 53% for Q4.

GBM Latam, which is reported as part of international banking generated earnings of $180 million this quarter in line with the prior quarter on.

On a full-year basis, GBM Latam earnings increased 11%. Global banking markets expects to continue to Delaware earnings growth in 2020, driven by capital markets revenue and loan volume growth and disciplined expense management. Turning to the next slide on International banking. My comments that follow are on an adjusted and constant dollar basis. International banking reported a net income of $545 million up 10% quarter over quarter. The earnings are now well above the target we had set for the end of fiscal 2021. The pace of economic recovery and improvement in business conditions continue to accelerate through the quarter. Quarter over quarter, our loan book growth accelerated to pre-COVID-19 levels with commercial up 4% in mortgages up 3%. While unsecured retail loan balances remain flat after six quarters of decline. Pretax pre-provision earnings for the business line increased 1% from the prior quarter. We're seeing a positive trend in net interest income up 1% quarter over quarter. And 2% in Pacific Alliance countries, despite a modest net interest margin compression.

Global banking markets expects to continue to Delaware earnings growth in 2020, due driven by capital markets revenue and loan volume growth and disciplined expense management.

Turning to the next slide on International banking My comments that follow are on an adjusted and constant dollar basis.

International banking reported net income of $545 million up 10% quarter over quarter.

The earnings are now well above the target we had set for the end of fiscal 2021.

The pace of economic recovery and improvement in business conditions continue to accelerate through the quarter.

Quarter over quarter, our loan book loan book growth accelerated to pre COVID-19 levels with commercial up 4% in mortgages up 3%.

While unsecured retail loan balances remain flat after six quarters of decline.

Pretax pre provision earnings for the business line increased 1% from the prior quarter.

We're seeing a positive trend in net interest income up 1% quarter over quarter.

And 2% in Pacific Alliance countries, despite a modest net interest margin compression.

Yeah.

Revenue declined by 1% quarter over quarter as these positive trends in net interest income was more than offset by a $35 million decline in capital markets revenue that was elevated last quarter. The provisions for credit losses ratio declined quarter over quarter by 9 basis points to 91 basis points. Noninterest expenses declined 6% year over year, or 3% quarter over quarter, driven by lower salaries and employee benefits, technology cost and other expenses. The tax rate was low this quarter at 19% compared with 22% in the prior quarter driven by benefits from high inflation in Chile and Mexico. On a constant dollar basis in 2022 international banking revenue growth will be driven by good loan growth and expanding net interest margin benefited from interest rate increases. And improvement in fee revenue. Combined with prudent expense management, including the benefits from the digital investments and the restructuring charge. The business is expected to generate positive operating leverage in 2022. The provision for loan loss is expected to remain low the business is expected to generate good earnings growth in 2022.

The provisions for credit losses ratio declined quarter over quarter by nine basis points to 91 basis points.

Noninterest expenses declined 6% year over year, or 3% quarter over quarter, driven by lower salaries and employee benefits technology cost and other expenses.

The tax rate was low this quarter at 19% compared with 22% in the prior quarter driven by benefits from high inflation in Chile and Mexico.

On a constant dollar basis in 2022 international banking revenue growth will be driven by good loan growth and expanding net interest margin benefited from interest rate increases.

And improvement in fee revenue.

Combined with prudent expense management, including the benefits from the digital investments and the restructuring charge.

The business is expected to generate positive operating leverage in 2022.

The provision for loan loss is expected to remain low the business is expected to generate good earnings growth in 2022.

Now turning to the auto segment, we reported an adjusted net loss of $35 million, down $43 million from last year due to higher corporate expenses. Looking forward to 2022, the auto segment earnings is expected to be impacted by lower investment gains that's what elevated in 2020 and 2021. With that, I'll now turn the call over to Phil to discuss it for us.

Looking forward to 2022, the auto segment earnings is expected to be impacted by lower investment gains that's what elevated in 2020 and 2021.

I'll now turn the call over to Phil to discuss for us.

Thanks, Raj and good morning, everyone. Before I get into the details of the quarter, I'd like to highlight the key themes from a credit perspective. Credit performance is expected to remain strong as portfolio performance and economic drivers continue to improve. Reflected in early-stage delinquency rates being well below pre-pandemic levels. Under this backdrop, we expect the PCL ratio of 25 basis points range for fiscal 2022. And for International banking, we expect a PCL ratio of approximately 95 basis points, well below pre-pandemic levels of approximately 140 basis points. Our asset quality remains high driven by customer demand for retail secured borrowing in Canada and in international banking secured lending in our retail portfolio remains higher than pre-pandemic levels at 95 in Canada, and 71 international banking driven by higher mortgage volumes. Credit card spending and unsecured loan balances have started to grow in both Canadian banking and international banking.

Before I get into the details of the quarter I'd like to highlight the key themes from a credit perspective.

Performance is expected to remain strong as portfolio performance and economic drivers continue to improve.

<unk>, an early stage delinquency rates being well below pre pandemic levels.

Under this backdrop, we expect the PCL ratio of 25 basis points range for fiscal 2022.

And for International banking, we expect PCL ratio of approximately 95 basis points, well below pre pandemic levels of approximately 140 basis points.

Our asset quality remains high driven by customer demand for retail secured borrowing in Canada and in international banking secured lending in our retail portfolio remains higher than pre pandemic levels at 95 in Canada, and 71 international banking driven by higher mortgage volumes.

Credit card spending an unsecured loan balances have started to grow in both Canadian banking and international banking.

We have seen strong corporate and commercial demand across our footprint and most of our portfolios continue to be investment grade. Together, these factors have contributed and will continue to maintain the bank's high asset quality and low PCL. As mentioned, the overall credit quality of our portfolios continues to trend higher due to business mix changes driven by strong growth in retail secured lending and high corporate and commercial lending. As you can see on the slide, our Gil in net write off ratios continued to decline. The Gil ratio improved six basis points to 67 basis points. Net write off ratio improved to 34 basis points in Q4, down 54 basis points pre COVID-19 driven by lower retail write-offs in both Canadian and international banking.

Together. These factors have contributed and will continue to maintain the bank's high asset quality and low PCL.

As mentioned the <unk>.

For all credit quality of our portfolios continues to trend higher due to business mix changes driven by strong growth in retail secured lending.

<unk> corporate and commercial lending.

As you can see on the slide are Gil in net write off ratios continued to decline the Gil ratio <unk> six basis points to 67 basis points.

Net write off ratio improved to 34 basis points in Q4 down 54 basis points.

Pre COVID-19 driven by lower retail write offs in both Canadian and international banking.

The bank is also expecting write-offs to remain lower than pre-pandemic levels through fiscal '22. We ended the year with allowances for credit losses of $5.7 billion, which is higher than pre-pandemic levels of $5.1 billion. The ACL ratio is now 86 basis points compared to two basis points prior to the pandemic. The ACL ratio will continue to trend lower through fiscal '22 due to our expectation of lower write-offs compared to historical trends. In particular, the quality of our retail portfolios remains strong and the macroeconomic outlook in Canada and in international continues to be favorable. In addition, we would note that allowances for credit losses for the international banking retail portfolio are more than sufficient. During the quarter performing ACL's declined to $340 million, excluding the impact of foreign currency. Of this approximately $320 million was released this quarter due to improving credit performance and better macroeconomic outlook or the remaining moving to impaired Acs. Impaired ACL declined $104 million from last quarter, primarily due to lower delinquency trends and lower impairment across all markets and our retail portfolios.

We ended the year with allowances for credit losses of $5 7 billion, which is higher than pre pandemic levels of $5 1 billion.

The ACL ratio is now 86 basis points compared to two basis points prior to the pandemic.

The ACL ratio will continue to trend lower through fiscal 'twenty, two due to our expectation of lower write offs compared to historical trends.

In particular, the quality of our retail portfolios remains strong and the macroeconomic outlook in Canada and in international continues to be favorable.

In addition, we would note that allowances for credit losses for the international banking retail portfolio are more than sufficient.

During the quarter performing acl's declined to $340 million, excluding the impact of foreign currency.

Of this approximately $320 million was released this quarter due to improving credit performance and better macroeconomic outlook or the remaining moving to impaired Acs.

Impaired ACL declined $104 million from last quarter, primarily due to lower delinquency trends and lower impairment across all markets and our retail portfolios.

Let me now turn to slide 16 and PCL. Our total PCL declined $168 million and the total PCL ratio was 10 basis points, down 14 basis points from the prior quarter. Impaired PCLs were $511 million in Q4, down $330 million from last quarter. The decrease was driven by international retail mainly in the credit card portfolio. Impaired PCLs for Canadian in retail banking declined sequentially as well mainly in the auto portfolio. Turning to perform PCLs, we had a net reversal of $343 million in Q4. As I previously mentioned, approximately $320 million was released this quarter due to improving credit performance and a better macroeconomic outlook. This reflects better credit quality and the benefits from an improved macroeconomic outlook. I would now like to provide some comments on fiscal 2022 and 2023 outlook. We expect strong credit performance to continue with improved credit metrics, driven by higher credit quality originations as well as a favorable macroeconomic environment.

Our total PCL declined $168 million and the total PCL ratio was 10 basis points down 14 basis points from the prior quarter.

Impaired PCL were $511 million in Q4 down $330 million from last quarter.

The decrease was driven by international retail mainly in the credit card portfolio.

Impaired PCL for for Canadian retail banking declined sequentially as well mainly in the auto portfolio.

Turning to performing Tcs and a net reversal of $343 million in Q4.

As I previously mentioned approximately $320 million was released this quarter due to improving credit performance and the better macroeconomic outlook.

This reflects better credit quality and the benefits from an improved macroeconomic outlook.

I would now like to provide some comments on fiscal 2022 and 2023 outlook.

We expect strong credit performance to continue with improved credit metrics, driven by higher credit quality originations as well as a favorable macroeconomic environment.

We are mindful of reports of a new variant of concern termed Omnicom but remain comfortable with our allowances, which provide for pessimistic COVID-19 scenarios. Including both a sharp rise in cases and a longer duration. We expect the ACL ratio to trend lower than pre-pandemic levels, reflecting a higher credit quality portfolio. The all bank total PCL ratio will remain low through fiscal '22 in the 25 basis point range with impaired PCLs expected to be in line with Q4 2021. Specifically in international banking, the total PCL ratio is expected to be approximately 95 basis points for fiscal 2022. As recoveries continue to moderate next year, we believe 2023 will reflect more normalized PCL levels ratios for the bank, we expect these to be in the mid 30 basis point range. Again, reflecting the improved credit quality and business mix shifts as we emerge stronger from the pandemic. I will now turn the call over to Brian for closing remarks.

Including both a sharp rise in cases and a longer duration.

We expect the ACL ratio to trend lower than pre pandemic levels, reflecting a higher credit quality portfolio.

The total PCL ratio will remain low through fiscal 'twenty, two and the 25 basis point range with impaired PCL loss expected to be in line with Q4 2021.

Specifically in international banking, the total PCL ratio is expected to be approximately 95 basis points for fiscal 2022.

As recoveries continue to moderate next year, we believe 2023 will reflect more normalized PCL levels.

Ratios for the bank, we expect these to be in the mid 30 basis point range again, reflecting the improved credit quality and business mix shifts as we emerge stronger from the pandemic I will now turn the call over to Brian for closing remarks.

Thank you, Phil. We had a strong finish to the year and are confident in our ability to deliver for all our stakeholders in 2022. As outlined by Phil, our credit portfolio profile has significantly improved compared to pre-pandemic. It is more secured and combined with the higher credit quality of the new bookings. We expect the 2022 PCL ratio will be approximately 25 basis points and mid 30 basis points for 2023. We fully expect strong momentum in our Canadian banking business to continue, aided by strong loan growth and a higher interest rate environment. The recovery in our international banking business is evidence. This will be further supported by interest rate increases continued asset growth as well as a strong economic rebound. Global wealth is benefiting from both strong investment management capability. The business performance has been strong with significant growth achieved in both AUM and AUA is anticipating growth this year, taking full advantage of our unique America's client franchise.

As outlined by Phil our credit portfolio or profile has significantly improved compared to pre pandemic. It is more secured and combined with the higher credit quality of the new bookings. We expect the 2022 PCL ratio will be approximately 25 basis points.

And mid 30 basis points for 2023.

We fully expect our strong momentum in our Canadian banking business to continue aided by strong loan growth and a higher interest rate environment.

The recovery in our in our international banking business as evidenced this will be further supported by interest rate increases continued asset growth as well as a strong economic rebound.

Global wealth is benefiting from both strong investment management capability. The business performance has been strong with with significant growth achieved in both AUM and <unk>.

GBM is anticipating growth this year, taking full advantage of our unique America's client franchise the.

The business is expected to generate earnings growth driven by solid loan growth and capital markets activity supported by an advisory pipeline that remains strong. In short, we are optimistic that fiscal 2022 will be a year of solid earnings growth across each of our operating businesses. With that, I'll turn the call over to John for Q&A.

<unk> strong.

In short we are optimistic that fiscal 2022 will be a year of solid earnings growth across each of our operating businesses with that I'll turn the call over to John for Q&A.

Thank you, Brian. We'll now be pleased to take your questions. Please limit yourself to one question and then rejoin the queue to allow everyone the opportunity to participate in the call. The operator can we have the first question on the phone, please? Thank you. The first question is from Ebrahim [inaudible] from Bank of America. Please go ahead.

Operator can we have the first question on the phone please.

Thank you. The first question is from Ebrahim <unk> from Bank of America. Please go ahead.

Hey, good morning. I guess, Roger, maybe if we could just touch upon the margin outlook, both in Canada, and ID we saw about 50 basis points of compression. Give us some clarity on what you expect particularly in Latam, we've seen rate hikes sequentially, how we should expect the margin and NII to trend in ID as well as if the Boc bank of Canada moves in April with a hike what that means for the Canadian margin. and remind us if there's anything around hedging at the on the top of the house that could mitigate the benefits from margin expansion and higher rates. Thank you.

I guess.

Roger maybe if we could just touch upon the margin outlook, both in Canada, and we saw about 50 basis points of compression.

Some clarity on what you expect particularly in Latam, we've seen <unk> sequentially, how we should expect the margin and NII to trend in.

As well as if the Boc bank of Canada moves in April with a hike what that means for the Canadian margin and remind us if theres anything around hedging at the on the top of the house that could mitigate the benefits from margin expansion and higher rates. Thank you.

Sure. Thanks for your question. So I'll start at the all Bank and then I'll work my way through the business lines if that's helpful. We absolutely expect margin expansion sequentially quarter over quarter throughout 2022 from the 217 basis points that we reported this quarter. It was going to be driven by multiple factors and I'll now jump into the business lines. The Canadian banking margin expansion, we have conservative assumptions at this time, although we do believe that rate increases will happen earlier than our assumptions. So you should see some modest margin expansion throughout 2022 in that business, which is at 220 basis points now as you think about it quarter over quarter. Some of it is impacted by business mix. Mortgages have been growing significantly faster than other businesses. Likewise business banking. We love it but except that it does impact the margin expansion and once credit card balances as we noted you know 4% up quarter over quarter will start helping the margin expansion through '22 but modestly.

But.

We absolutely expect margin expansion sequentially quarter over quarter throughout 2022 from the 217 basis points that we reported this quarter.

I was going to be driven by multiple factors and I'll now jump into the business lines.

Canadian banking margin expansion, we have conservative assumptions at this time, although we do believe that rate increases will happen earlier than our assumptions. So you should see some modest margin expansion throughout 2022 in that business, which is at 220 basis points now as you think about it quarter over quarter.

Some of it is impacted by business mix mortgages have been growing significantly faster than other businesses. Likewise business banking, we love it but except that it does impact the margin expansion and once credit card balances as we noted you know 4% up quarter over quarter will start helping the margin expansion through 'twenty two.

Modestly.

International Banking's margin is absolutely at the lowest point at this time at 369 basis points. It is going to grow sequentially. Multiple reasons you talked about. Rate increases have already started happening in that footprint. The full quarter benefit of which we should start seeing from Q1 onwards until 2022, and we believe there are more rate increases coming across our footprint based in Chile, Mexico, or Peru. Although Chilean Mexico, probably has the most impact to the margin from rate decreases that happened in that region.

Margin Saudi rate increases that have already started happening in that footprint the full quarter benefit of which we should start seeing from Q1 onwards until 2022, and we believe there are more rate increases coming across our footprint based in Chile, Mexico, Our Peru, Although Chilean Mexico, probably has the most impact to the margin from.

The decreases that happened in that region.

So if you put all these things together, we believe that there will be margin expansion. And like I mentioned in my previous calls, we are positioned for rate increases even from a hedging perspective. So the hedges will not be a headwind, Ebrahim. It won't be a tailwind because we've had a lot of benefits in '21 which would be probably comparable in '22 from [inaudible] the balance sheet has been hedged. So I don't see it as a headwind, but I do believe that the business and margin expansion should be you don't ship, Florida, the banks margin expansion for 2022. And just as a follow-up, Raj, if I can structurally IB margin. It was around high fours back in 2018, 2019, because of the portfolio mix is that like a low floors number. I know it's dependent on where to go. But should we think about that margin going back at least into like the 425 range or the course over the next four to six quarters?

You know in the balance sheet has been hedged so I don't see it as a headwind, but I do believe that the business and margin expansion should be you don't ship, Florida, the banks margin expansion for 2022.

And just as a follow up Raj if I can structurally margin.

It was around four.

Hi for US back in 2018 19, because of the portfolio mix is that like a low floors number.

No it's dependent on where to go.

But should we think about that margin going back at least into like the 425 range or the course over the next four to six quarters?

Yes, I think as we look through '22, you should definitely see margin expansion like I said from the 369 that we reported this quarter. It is that's a likely cause of 380 to 390 level I think Ebrahim based on all the assumptions that I detailed earlier. And then we will see a whole 23, the loan mix changes it does more unsecured lending growth in the markets over there. And even in Q4, we really grew in line with the market in all segments, whether it's mortgages commercial or unsecured lending that should help with the margin. But what I can say with almost certainty as you know the 450 is a number that might take a very long time to get to because our business makes us shifted.

And even in Q4, we really grew in line with the market in all segments, whether it's mortgages promotion or unsecured lending that should help with the margin, but what I can say with almost certainty as you know the 450 is a it is a number that might take a very long time to get to because our business makes us shifted.

But I'd also tell you something. International banking margin is very complicated. So many countries inflation is a big factor, lots of rate changes, we have cap rates across that entire you know footprint over there so it's a little hard to predict margin, but what I can tell you is you will see a sequential margin expansion towards '22 and into '23 as well. That's helpful. Thank you.

Commercial banking margin is very complicated. So many countries inflation is a big factor lots of rate changes, we have cap rates across that entire.

You know footprint over there so it's a little hard to predict margin, but what I can tell you is you will see a sequential margin expansion towards 'twenty going into 'twenty three as well.

That's helpful. Thank you.

Thank you. The next question is from Gabriel [inaudible] from National Bank Financial. Please go ahead. Good morning, a couple of questions. One on the restructuring charge and the international I know you're. You've got the rationale makes a lot of sense, but how you handle any political specifically that there might be around these types of charges. The climate found there. If that's the consideration and if so to what do you do about it. How do you downplay that concern?

Good morning, a couple of questions one on the restructuring charge and the international I know you're.

You've got the rationale makes a lot of sense, but.

And how you handle any political specifically that there might be around these types of charges.

The climate found there.

The consideration and if so to what do you do about it.

How do you don't play that concern.

Good morning, Gabriel. This is natural. And really we are we have been at least a trend of optimizing our distribution for the past few years and we have been reducing our branches in line with the market. I would like to remind everyone that the labor markets there are much more flexible and so we can adapt to higher demand and lower demand and the rationale really for the restructuring charge as you say is really to accelerate cost reduction initiatives because digitally continues to expand at a very accelerated pace. Since Covid started, we have seen a tremendous growth of digital adoption that has gone from 35% to close to 50% in AOI in most of the countries, Chile, and Colombia above 65% and the Ito sale, so retail products have almost doubled from 13% to 60%. So we are very we're very confident that this restructuring chart will generate savings in 2022 similar to the charge.

And really we are we have been at least a trend of optimizing our distribution for the past few years and we have been reducing our branches in line with the market I would like to remind everyone that the labor markets. There are much more flexible and so we can adapt to higher demand and lower demand and the rationale really.

For the restructuring charge as you say is really to accelerate cost reduction initiatives because digitally continues to expand at a very accelerated pace.

Since Covid started and we have seen a tremendous growth of digital adoption that has gone from 35% to close to 50% and AOI in most of the countries, Chile, and Colombia above 65% and the Ito sale, so retail products hub.

Almost doubled from 13% to 60%. So we are very we're very confident that these restructuring chart will generate savings in 2022 similar to the charge.

Raj mentioned by reducing 10% of their branches and 7% of full-time FTEs. We are also investing in the middle and middle and back office in terms of machine learning robotics that will also generate additional efficiencies. So in summary, we don't expect any reputation of problems and this is a cost reduction opportunity driven by accelerated digital adoption and expansion of process automation. My other question. I guess it ties into some of the credit performance guidance items like the lower PCL ratio you've been the pre-pandemic than you expect in the coming year and presumably 2023 the lower loan loss rate. Next year and then 23, then then you had pre-Covid. Is there also a statement in there that you're just not expecting the unsecured lending categories to come back until much later than some people expect? And that's also reflected in that guidance in Canada, and international where you know a lot of these balances are way below pre COVID-19 levels.

We are also investing in the middle and Middle and back office in terms of machine learning robotics that will also generate additional efficiencies so in summary.

We don't expect any reputation of problems and this is a cost reduction opportunity driven by accelerated digital adoption and expansion of process automation.

My other question I guess it ties in to the.

Some of the credit performance guidance items like the.

Lower PCL ratio you've been the pre pandemic than you expect.

<unk> and presumably 2023 the lower.

Loan loss rate.

Next year and then 23, then then you had pre <unk>.

Covid.

Is there also a statement in there.

You're just not expecting the unsecured lending categories to come back until much later than some people expect though.

And that's also reflected in that guidance in Canada, and international where you know a lot of these balances are way below pre COVID-19 levels.

Hey, Gabriel. It's Thomas, nice too nice to hear your voice and thanks for the question. As we lookout for the next two years, we've seen significant growth in our retail portfolio in the in the secured lending business, we've gone from 6% to 71% in real estate secured lending. We've also looked at how do we deepen the customer relationship through the acquisition of mortgages. So we're seeing a lot of great opportunity deepening through the mortgage acquisition through the, and then providing more products and services through their like unsecured lending.

Yes.

As we look out for the next the next two years, we've seen significant growth in our retail portfolio in the in the secured lending business, we've gone from 6% to 71% and real estate secured lending.

We've also looked at how do we deepen the customer relationship through the.

<unk> of mortgages. So we're seeing a lot of great opportunity deepening through the mortgage acquisition through.

Through the and then providing more products and services through their like unsecured lending.

We also have been investing heavily in international and that data and analytics as well as digital. And we've been seeing some great uptick through this and through that we know our customers better. We're able to get and understand their profiles and their behaviors and it's allowing us to have even higher quality of originations. And the normal course of business too. We look at how we're managing our portfolios. There's always going to be times, where we're going to exit some higher risk portfolios that we don't like. And we're going to buildup portfolios that are that we think have a higher risk-adjusted return for the bank. So if I may. Maybe to follow up. We're seeing, of course, that's a few mentioned there has been a balanced mix adjustments in our business. Business mix adjustment sorry, in our balance sheet, but we are seeing right now is strong growth in all segments.

We're able to get and understand their profiles and their behaviors and it's allowing us to have even higher quality of originations and the normal course of business too. We look at how we're managing our portfolios and Theres always going to be times, where we're going to exit some higher risk portfolios that we don't like and where.

Buildup portfolios that are that we think have a higher risk adjusted return for our for.

For the bank.

So if I if I may.

Maybe to follow up.

We're seeing of course, that's a few mentioned there has been a balanced mix adjustments in our business.

Business mix adjustment story in our balance sheet, but we are seeing right now is strong growth in all segments.

I think that's the highlight for international banking the last two quarters, we grew .5% per quarter, we're growing 3%, 4% in commercial, 3% in mortgages. And unsecured was flat after six consecutive quarters declining. We are seeing unsecured loan growth each quarter in Colombia and in Chile. So we are expecting strong balanced loan growth in all segments in 2022. So if I summarize, the denominator effect more secured loans pushing those ratios down. And some blending activities that you're no longer doing. Yes. Okay, that's fair. Great way to look at it. I don't want to size those at some point, but we'll leave that for another call. Thanks.

We are seeing unsecured loan growth each quarter in Colombia and in Chile. So we are expecting strong balanced loan growth in all segments in 2022.

So if I summarize denominator effect more secured loans pushing those ratios down.

And some blending activities that you're no longer doing yes, okay.

Okay, that's fair.

Great way to look at it.

I don't want to size those at some point, but we'll leave that for another call. Thanks.

Thank you. The next question is from John Aiken from Barclays. Please go ahead. Good morning, Dan. I wanted to dive into the increase in the card balances that we saw in the quarter. Obviously, a positive all around. Do you think that this was just the general economic activity recovering or do you think that you were actually able to gain some market share over the quarter?

Good morning, Dan I wanted to dive into the increase in the card balances that we saw in the quarter.

Obviously, a positive all around do you think that this was just the general economic activity recovering where do you think that you were actually able to gain some market share over the quarter.

Good morning, John down here I think we gained market share during Q4. We're certainly pleased with the average balanced growth I would underline spot growth in the quarter in cards grew month on month, all three quarters. We are seeing the revenue pick up in Q3 and in Q4 show up through the fee line as opposed to the interest income line. So as the prior question went on unsecured revolving credit in Canada, we are hopeful to see signs of revolving balances reemerge, particularly through the big holiday spending season, but on share gains in the quarter in cards. We're pleased with how we took share in purchase volume in particular. Great. Thank you. I'll requeue.

Interest income line so as.

On the prior question went on unsecured revolving credit in Canada, we are hopeful to see signs of revolving balances reemerge, particularly through the big holiday spending season, but on share gains in the quarter in cards. We're pleased with how we took share in purchase volume in particular.

Great. Thank you I'll requeue.

Thank you. The next question is from Doug Young from [inaudible] Capital markets. Please go ahead. Hi, Good morning, Brian, you've been very vocal about not wanting to take restructuring charges in the past. So I'm just curious like I understand the rationale behind this but I'm just curious is what's changed from your perspective. And are you more willing to look at taking restructuring charges in other business lines like Canadian banking to adjust to a more digital world?

Hi, Good morning, Brian you've been very vocal about not wanting to take restructuring charges in the past. So I'm just curious like I understand the rationale behind this but I'm. Just curious is what's changed from your perspective and are you more willing to go.

Look at taking restructuring charges in other business lines like Canadian banking to adjust to a more digital world.

So look, thank you for the question, Doug. I think that comment of mine in terms of restructuring charge dates back to 2016 or 2017. So we've covered a lot of ground since then including a pandemic. And what became evident to Raj and I and others around the table is obviously the pandemic changed a lot of things in terms of customer preference, we've talked earlier about secured lending and clearly digital is picked up internationally is that our digital sales in our international business have doubled since 2019. That's a big number. So when you look at our business. Looking out over the next two or three years and wanting to perform for our shareholders, we felt that this was, we're respectful of our shareholders. So it's not a big restructuring charge, but it's in keeping with us wanting to deliver for our shareholders. So you're not going to see any further restructuring charges. That I can assure you. We don't take this lightly but we thought it was the best thing for the business and I think the big takeaway for the street and the analyst community is that the acceleration and adoption of digital internationally is at a much faster rate than here in Canada in terms of customer preference. And we have to be aware of that cognizant of that and you'll see that in our numbers in terms of profitability and efficiency.

<unk> changed a lot of things in terms of customer preference, we've talked earlier about <unk>.

Secured lending and and.

Clearly digital is picked up internationally is that our digital sales in our international business have doubled since 2019, that's a big number.

So when you look at our business.

Looking out over the next two or three years.

Wanting to perform for our shareholders. We felt that this was.

No we're respectful of our shareholders. So it's not a big restructuring charge, but it's in keeping with us wanting to deliver for our shareholders. So youre not going to see any further restructuring charges that I can assure you. We don't take this lightly but we thought it was the best thing for the business and <unk>.

I think the big takeaway for the street and the analyst community is that.

The acceleration and adoption of digital internationally.

It is at a much faster rate than here in Canada in terms of customer preference and we have to be aware of that cognizant of that and you'll see that in our numbers in terms of profitability and efficiency.

And if I could just follow up on the cost saves. I know this is for Raj here, but on the cost saves from the international banking charge, what regions will mostly flow through. And so what I'm getting at is when I look at your pretax pre-provision earnings. It's down really materially in Peru, and I think you've talked about and most of this is due to lower revenues. You've got FX has been a pressure there. You talked about the unsecured loan book mix changing. What I'm trying to get a sense of is more of this directed at you know, Peru, and Colombia, where you've seen more pressures or can you kind of talk about just where the changes in the cost saves will be starting to flow through by region?

Nacho, but on the cost saves from the international banking charge, what regions will mostly flow through and so what I'm getting at is when I look at your pretax pre provision earnings.

It's down really materially in Peru, and I think you've talked about and most of this is due to lower revenues.

You've got FX has been a pressure there you talked about the unsecured loan book mix changing.

What I'm trying to get a sense of is more of this directed at you know, Peru, and Colombia, where you've seen more pressures or can you kind of talk about just where the changes in the cost saves will be starting to flow through by region.

Sure. This is natural, it is really across the board all of the countries. We are seeing opportunities to accelerate the optimization of our distribution network offered the same experience to our customers in branch and through retail assets in our web and mobile. So this is across international banking, including the Caribbean. And in terms of revenue. While this is going to of course, having a significant impact as Raj mentioned in our operating leverage and we will expect to be positive next year and a significant improving productivity index. We are very positive about our revenue outlook in 2022 based on a high single-digit loan growth in all segments NIM expansion, as Raj mentioned, and consistency recovery next year. Sure. Thank you.

Arabia.

And in terms of revenue.

While this is going to of course, having a significant impact as Raj mentioned in.

Our operating leverage and we will expect to be positive next year and a significant improving productivity index. We are very positive about our revenue outlook in 2022 based on a high single digit loan growth in all segments NIM expansion as Raj mentioned and consistency recovery next year.

Sure.

Thank you.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Thank you. Good morning. I wanted to try to tie together a couple of the fee discussions around international banking with respect to this shift in loan mix. So what you've told us. There is we should probably expect a lower NIM, but also lower PCLs because of that loan mix shift. I guess, what we're trying to get out is. What does that mean in terms of the earnings power for international banking/ Is it net neutral or one would assume that those secured loans require less IWA, so maybe you can put on a higher leverage in. And therefore, offset the lower NIM I think some thoughts around that might be it might be helpful.

Thank you good morning wanted to try to tie together a couple of the fee discussions around international banking with respect to this shift in loan mix. So what you've told US. There is we should probably expect a lower NIM, but also lower PCL loss because of that loan mix shift I guess, what we're trying to get out is.

What does that mean in terms of the earnings power for international banking is it net neutral or one would assume that those secured loans require less.

Lesser IWA, so maybe you can put on.

A higher.

The higher leverage in.

And therefore, offset the lower NIM I think some thoughts around that might be it might be helpful.

Sure, Paul. This right John, I'll start and then I'll hand, it over to Nacho he might have a more granular perspective. I think you hit on a few things I think the level of capital that international will go down and that should include the ROI in general of the business and that's a key factor for us. But we also we don't think about NIM in isolation as you mentioned, we look at NIM and PCL ratios our risk-adjusted margin. And if you went back a few years if you make 440 450 basis points, we gave up 140 basis points on PCL. Both are going to trend lower. Yes, a slight dip probably on those such as margin in the short term like through 2022. But as the business mix continues to evolve, we believe from a risk-adjusted margin perspective, we will be close to where we started if not better. And it also gives us a lot of comfort when we can have consistency in earnings and less volatility in the numbers that we had across the international banking business. So lots of factors, but it is capital whether it's volatility in earnings a good quality book, which will drive consistent growth in earnings number of factors. We look at it as we did them and hope to shift our risk appetite. Brian is there a comment you'd like to add? Sure. As the audience knows, we've done a lot of work in the past few years in terms of repositioning the international business.

A more granular perspective, I think you hit on a few things I think the level of capital that international adult will go down and that should include the auto in general of the business and that's a key factor for us, but we also we don't think about NIM in isolation as you mentioned, we look at NIM and PCL ratios our risk adjusted margin.

And if you went back a few years if you make 440 450 basis points, we gave up a 140 basis points on PCL.

Both are going to trend lower.

Yes, a slight dip probably on those such as margin in the short term like through 2022, but as the business mix continues to evolve we believe from a risk adjusted margin perspective, we will be close to where we started if not better and it also gives us a lot of comfort when we can have consistency in earnings and less volatility in the numbers that we had.

Across the international banking business, so lots of factors, but it is capital whether it's volatility in earnings a good quality book, which will drive consistent growth in earnings number of factors. We look at it as we did them and hope to shift our risk appetite, Brian is that a comment you'd like to I'm sure is.

S. The audience knows we've done a lot of work in the past few years in terms of repositioning the international business.

Uh huh.

Part of that included less than 20 plus countries selling five businesses in the pension-related businesses et cetera, and consumer finance, which is a small very specialized business. We exited or downsize the business in Chile. The DR and we were about to do it in Peru. And unfortunately, the pandemic hit. Small business about $1 billion of outstandings, it's smaller than that today. But business did not perform as well as we would've liked. In terms of what we had in our stress testing. So we did what we do and we're exiting that business, downsizing the business and moving on. So we've taken that through write offs and you know the rest of our unsecured businesses in Chile and Mexico, the Caribbean performed well within our expectations and we're pleased with their performance.

And unfortunately.

Unfortunately, the pandemic hit small business about $1 billion of Outstandings, it's smaller than that today the business did not perform as well as we would've liked.

In terms of what we had in our in our stress testing.

We did what we do and we're exiting that business downsizing their business and moving on so we've taken that through write offs and.

You know the rest of our unsecured businesses in Chile and Mexico.

Caribbean performed well within our expectations and we're pleased with their performance so.

This would be, I would describe it more as housekeeping that's taken care of and it's done it's written off. And as Raj said, we're focused on producing consistent and predictable results for our shareholders. And so you know what comes off the PCL line comes off the margin line. So if you take 40 basis points off the PCL line that comes off the margin line, but I want to stress there are ample levers for us to grow our business internationally you are seeing that. And as Nacho said in the commercial loan growth this quarter was four behind that corporate loan growth was 8% and international quarter over quarter. So there's lots of opportunity for us in the division. This was a tweak to risk appetite is I'd call it falling out of the pandemic. And we're optimistic about our prospects for growth going forward.

And as Raj said we're.

We're focused on producing consistent and predictable results for our shareholders.

And so you know.

What what comes off the PCL line comes off the margin line.

So if you take 40 basis points off the PCL line that comes off the margin line, but I want to stress there are ample levers for us to grow our business internationally you are seeing that.

And as Nacho said in the commercial loan growth. This quarter was four behind that corporate loan growth was 8% and international quarter over quarter. So there's lots of opportunity for us and the division. This was a a tweak to risk appetite is I'd call. It a falling out of the pandemic.

And we're optimistic about our prospects for growth going forward.

We're optimistic about our prospects for growth going forward.

Second quick one if you don't mind and that's just. Do you have any indicators around the prospects short term prospects for the Caribbean business? It looks like it's continuing to lag here, but the data points I'm seeing suggests that travel is expected to improve at least sequentially still below pre-pandemic, clearly, but starting to see a nice uptick in travel. Any comments there would be helpful. Thanks.

Do you have any indicators around the prospects short term prospects for the Caribbean business its looks like its continuing to lag here, but the data points I'm seeing suggests that.

Travel is expected to improve at least sequentially still below pre pandemic, clearly, but starting to see a nice uptick in travel any comments there would be would be helpful. Thanks.

No. It's absolutely. We are following very closely, tourist arrivals are significantly increasing into the Caribbean and markets also bookings are very high for the winter. So definitely we expect an improvement in the performance of the Caribbean, where we still have around $20 million opportunity in terms of fee income. We have large market share participation in terms of credit debit cards. So [inaudible] tourists and we expect a significant improvement in 2022.

Our opportunity in terms of fee income, we have large market share participation in terms of credit David cards, So weak tourists and we expect a significant improvement in 2022.

Thank you, thanks for all that. Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Good morning, probably for Nacho. What's the bank's decision. And I think you've telegraphed to well over the last few quarters to maybe pull out of them some unsecured lending lines. I can't tell them sitting IC here in Toronto, or whether that could have a knock-on effect for loan growth and just business growth generally in investment in IV. What im getting out specifically is if you pull out of that area, does it have impact loan growth elsewhere simply because of any kind of bundling mechanisms that maybe are a little more prevalent in North America, sorry in Canada. Does that phenomenon exists in international banking?

Thank you. The next question is from.

Mario Mendonca from TD Securities. Please go ahead.

Good morning, probably for Nacho.

What's the bank's decision.

You've telegraphed to well over the last few quarters too.

Maybe pull out of them.

Some unsecured lending lines.

I can't tell them sitting IC here in Toronto, or whether that could have a knock on effect.

For loan growth and just business growth generally in investment in IV, what im getting out specifically is if you pull out of that area does it have impact loan growth elsewhere simply because of any kind of bundling mechanisms that maybe are a little more prevalent North America, sorry in Canada.

Does that will that phenomenon exists in international banking.

Good morning, Mario. No, definitely as Brian mentioned, these are very small portfolios that we exited because they were high risk. But I can tell you that we are seeing very strong growth in international banking in the Pacific Alliance countries. [It lines] better than the market actually our loan growth this quarter was better than the market in the four Pacific Alliance countries. So we expect to have growth in commercial in mortgages and personal and credit cards next year. Like in Canada, credit cards have been a delay because there's still a lot of liquidity. Consumers have a strong balance sheet. But this is fading away and we expect these we are already seeing stronger credit demand. But we are well positioned within our risk appetite to have strong loan growth in all of the segments next year. Okay. Somewhat different type of question, moving to Canada, I try not to get too fussed by some of these charts that I look at, where I look at mortgage growth relative to income growth in Canada. And I know you can make a lot of mistakes getting too nervous about mortgages in Canada, there's plenty of people that have.

Your line or better than the market actually our loan growth this quarter was better than the market in the four Pacific Alliance countries.

So we will we expect to have growth in commercial in mortgages and personal and credit cards next year.

Like in Canada.

Credit cards have been a delay because there's still a lot of liquidity consumers have a strong balance sheet. So this is fading away and we expect these we are already seeing stronger credit demand, but we are well position within our risk appetite to Hudson to have strong loan growth in all of the segments next year.

Okay.

Somewhat different type of question that moving to Canada, I try not to get too.

by some of these charts that I look at, where I look at mortgage growth relative to income growth in Canada. And I know you can make a lot of mistakes getting too nervous about mortgages in Canada, there's plenty of people that have.

Thus by some of these charts that I look at where I look at mortgage growth relative to income growth in Canada and I know.

You can make a lot of mistakes getting too nervous about mortgages in Canada, there's plenty of people that have.

But it really is starting to stand out the kind of growth in housing prices in Canada relative to income growth. Those charges are starting to look awfully troublesome. From the bank's position, you're very close to the mortgage market. Is this not an area where we should become a little more concerned? Just seeing how much housing prices are starting to outstrip [growth in Canada.] Does it concern you that we're setting up ourselves for some grief down the road?

Those charges are starting to look.

Awfully troublesome.

From from the bank's position, you're very close to the mortgage market.

Is this not an area, where we should become a little more concern.

Just seeing how much housing prices are starting to outstrip.

Growth in kind of does it concern you that we're setting up ourselves for some grief down the road.

It's Dan Rees here. I'll start and if others want to add in. You know first of all we were very pleased with the mortgage performance in the quarter. Originations were stronger than we expected as well as retention, which is an item we've been reengineering through the business for the last number of quarters and so that's supported the substantial quarter over quarter growth. Our outlook for mortgage growth next year is to begin to slow. We do believe that supply underpins price appreciation and while that persists should rates rise sooner in the year as I think many of us were expecting. We expect that to soften demand. When we think about the importance of what's happening around the household table, it's worth mentioning that what we saw throughout the entire COVID-19 period as individuals' were working from home. They gained a greater appreciation for their number one asset which is the home. And so the growth in upsizing, the purchases second properties entering the market was in some fashion supported by gifts inter-generationally through families. And that's an important source of equity movement, which we think supports mortgage growth from here, including through the risk lens. And to underline, in our quarter and all year long, we did not see a HELOC book growth, which I know is an area of concern. And the final point I would make on the subject of risk metrics, both at origination and it refi and renewal FICO scores continue to be high in the order of eight hundreds and they were higher in the broker channel than our proprietary channel.

growth. Our outlook for mortgage growth next year is to begin to slow. We do believe that supply underpins price appreciation and while that persists should rates rise sooner in the year as I think many of us were expecting. We expect that to soften demand. When we think about the importance of what'

what's happening around the household table, it's worth mentioning that what we saw throughout the entire COVID-19 period as individuals' were working from home. They gained a greater appreciation for their number one asset which is the home. And so the growth in upsizing, the purchases second properties entering the market was in some fashion supported by gifts

inter-generationally through families. And that's an important source of equity movement, which we think supports mortgage growth from here, including through the risk lens. And to underline, in our quarter and all year long, we did not see a HELOC book growth, which I know is an area of concern.

<unk> and the final point I would make on the subject of risk metrics, both at origination and it refi and renewal FICO scores continue to be high in the order of eight hundreds and they were higher in the broker channel than our proprietary channel.

Thank you. One final thought on this one. The normal course issuer bid before the restrictions on buybacks [NCIBs] were announced but often not used. Maybe Brian or Raj, how do you look at this NCIB? Is it the bank's intention to actually buy 2% of the shares or its just another tool in the tool kit? Mario Thank you for the question. As I said in my remarks, we're going to be activating our NCIB immediately and just by way of background. If you go back a few years ago to our acquisition of MD and Jarislowsky we issued 37, 34 million shares we repurchased at about $77. We repurchased 27, so we've got a delta of seven there, which we intend to buy back. And obviously, our average cost is lower on those buybacks. So we'll be prudent around the price, but it's our intention to be very active in the market.

One final thought on this on the normal course issuer bid before the restrictions on buybacks and Cib's were announced but often not used.

Maybe Brian or Raj, how do you look at this and CIB is is it the bank's intention to actually by 2% of the shares or its just another tool the tool kit.

Mario Thank you for the question as I said in my.

Marks were going to be activating our NCI immediately and just by way of background. If you go back a few years ago to our acquisition of empty and Jarislowsky we issue.

37, 34 million shares we repurchased about $77. We repurchase 27, so we've got a delta of seven there, which we intend to buyback.

And obviously, our average cost is lower on those buybacks. So we'll be prudent around the price, but it's our intention to be very active in the market.

Our average cost is lower on those buybacks. So we'll be prudent around the price, but it's our intention to be very active in the market.

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. Good morning, I just wanted to focus on your other main secured book in Canada Auto. It seems like rose. It has been very strong relative to the market compared to what I see. Perhaps gaining market share if you could comment on that. And then in terms of the credit side. It seems that it's been a very strong indicator in this quarter and past subsequent quarters and maybe kind of speaks to the outlook there in terms of the clientele. Sure. Thank you for the question. I'm glad you raised as we sometimes speak here internally, but the imports are seeing cards come back online, which you saw in the quarter. But as the market-leading position in cars and auto loans, we were especially pleased with how we performed through the revenue line this year. Notwithstanding all of the media attention. Appropriately so on supply chain, we saw revenues grow in the full year up 5% year over year, notwithstanding difficulty of getting product to dealer lots. We were pleased with the risk metrics, both at origination and right through to account management and collections in the auto business.

Yes.

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead.

Oh, good morning, I just wanted to focus on your other main secured book in Canada Auto It seems like rose.

No very strong relative to the market compared to what I see.

Perhaps gaining market share if you could.

Comment on that.

And then in terms of the credit side. It seems that it's been a very strong indicator in this quarter and past subsequent quarters in and maybe kind of speaks to the outlook there in terms of the clientele.

Sure. Thank you for the question I'm glad you raised as we sometimes speak here internally, but the imports are seeing cards come back online, which you saw in the quarter, but as the market leading position in cars and auto loans, we were especially pleased with how we performed through the revenue line. This year notwithstanding all of the media attention.

Appropriately so on supply chain, we saw revenues grow in the full year up 5% year over year, notwithstanding difficulty of getting product to dealer lots. We were pleased with the risk metrics, both at origination and right through to account management and collections in the auto business. We're at.

We're active, becoming more active in the used car market selectively, whereas you can imagine margins are higher. And what's perhaps most important to underpin is as supply comes back online. We know customer demand is substantial. Preorder bookings for vehicles are the highest that they have ever been and direct to consumer channels are roaring. And I think as new Canadians arrive in Canada and bear in mind close to half a million did this year with another 500000 in F'22, the first thing they want to purchase beyond opening a bank account with Scotia is a vehicle. And so as population grows, we're optimistic about the size of that market growing. And with our market-leading position and a great performance on margin management, we think that's got more upside for us than the peer group.

Consumer channels are Roaring, and I think as new Canadians arrive in Canada and bear in mind close to half a million did this year with another 500000 in F. 'twenty two the first thing they want to purchase beyond opening a bank account with Scotia is a vehicle and so as population grew.

optimistic about the size of that market growing. And with our market-leading position and a great performance on margin management, we think that's got more upside for us than the peer group.

Great and just one clarification question. Raj, in your opening remarks, you talked about expanded savings international is a result of the restructuring charges in fiscal 2022. I didn't catch what you referred to or could you quantify that, please. Yeah, look I think the charge was approximately $126 million stock this quarter. We expect that to completely fall to the bottom line as expense savings within the international banking in 2022.

Yeah, look I think the charge was approximately $126 million stock this quarter. We expect that to completely fall to the bottom line as expense savings within the international banking in 2022.

This quarter, we expect that to completely fall to the bottom line as expense savings within the international banking in 2022.

Okay, got it. Thank you very much. Thank you. The next question is from Lemar Persaud from Cormark Securities. Please go ahead. Thank you. So my question is probably for Raj. It sounds like the margin guidance's at the top of the house incorporates the benefit of some rate hikes in Canada and international. And if that's correct, if there are any further rate international or we don't see anything play out domestically. That's the higher-margin guidance for 2020 still standard or is it really dependent on those rate hikes?

Thank you. The next question is from Lamar Prasad from <unk> Securities. Please go ahead.

Thank you. So my question is probably for arrives it sounds like the.

Margin guidance at the top of the house incorporates the benefit.

Of some rate hikes in Canada, and international and if Thats correct.

If there are any further rate international or we don't see anything play out domestically.

That's the higher margin guidance for 2020, do still stand or is it really dependent on those rate hikes.

Thanks, Lamar. I think the rate hikes that have already happened in the international banking segment will definitely flow through in 2022. So that's definitely a positive when you think about Q4 '21 numbers. The Canadian margin assumptions that we have had is really towards the latter half of the other than most economists believe it could be much earlier. But if it didn't happen, I'll give you a little bit of perspective. 25 basis points of rate increases in the Canadian bank is about $50 million of annualized [NIAT]. So really if you think about margin expansion or the contribution to NII based on the assumptions we made, it's probably not material at all. It's nice to have but I still think there'll be margin expansion is driven by the international banking segment as compared to Q4 '21.

The Canadian margin assumptions that we have had is really towards the latter half of the other than most economists believe it could be much earlier, but if it didn't happen I'll give you a little bit of perspective 25 basis points of rate increases in the Canadian bank is about $50 million of annualized NIE at.

So really if you think about margin expansion or the contribution to NII based on the assumptions we made, it's probably not material at all. It's nice to have but I still think there'll be margin expansion is driven by the international banking segment as compared to Q4 '21.

Okay, great. Thanks. And then my next question is are you really concerned about the level of inflation? It's garnering a lot of these these headlines that we've seen over the past couple of months now. Is it the bank's view that this inflation we're seeing right now is transitory, so it's not really a concern? And if it is a concern, are you guys taking actions to protect the bank against runaway inflation?

My next question is are you really concerned about the level of inflation. It's it's it's garnering a lot of these these headlines that we've seen over the past couple of months now or is it is it the banks view that this inflation, we're seeing right now.

So it's not really a concern that if it is a concern are you guys taking actions to protect the bank against a runaway inflation.

Yeah, I'll try. I think all the economists' view is there is some level of transitory inflation in the numbers that we're seeing, be it here or across the footprint. And that we believe will normalize once you see some of the supply chain issues normalized and that could be in a quarter or two away from our perspective. So we don't think inflation will be higher and if you look at some of the forecasts, I think we haven't been on analyst deck, too. Inflation is expected to be about 2% versus the bank of Canada target right from our perspective. Does it worry us? Yes, from the expense line. Because expenses are going to be higher, simply driven by inflation. But as a bank, I think we've always done very well on the expense line. We know how to prioritize. We know how to take the expense queue or the growth queue from the revenue growth expectations that we have. So it will likely result in higher expenses in 2022 but will get normalized in other lines as we look across the expense lines. So that's how I would characterize it, but a lot more to happen. I think there's some sort of conversations across low around inflation, and we'll see what central bank actions are taken to court those.

And that we believe will normalize once you see some of the supply chain issues normalized and that could be in a quarter or two away from our perspective. So we don't think inflation will be higher and if you look at some of the forecasts I think we haven't been on analyst day to inflation is expected to be about 2% versus the bank of Canada target right from our perspective.

That's a bloody US yes on the expense line because the expenses are going to be higher some cases by inflation.

But as a bank, I think we've always done very well on the expense line. We know how to prioritize. We know how to take the expense queue or the growth queue from the revenue growth expectations that we have. So it will likely result in higher expenses in 2022 but will get normalized in other lines as we look across the expense lines. So that's how I would characterize it, but a lot more to happen. I think there's some sort of conversations across low around inflation, and we'll see what central bank actions are taken to court those.

No.

Likelihood pulse and higher expenses in 2020, do but when you get normalized in other lines as we look across the expense lines. So that's how I would characterize it but a lot more to happen I think I think there's lots of conversations that relatively low but on the inflation and we will see what central bank actions that take into Cocos.

Thanks. Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Thanks, just wanted to quickly go back to Nacho. Nacho, the restructuring charge of $126 million pre-tax, let's call it I don't know $18 million after-tax. Is it as simple as if this initiative had been in place than the segment earnings, for example, this quarter could have been $20 million higher?

Thank you. The next question is from Sohrab <unk> from BMO capital markets. Please go ahead.

Yeah. Thanks, just wanted to quickly go back to Nacho Nacho, the restructuring charge of $126 million.

Tax, let's call it I don't know $18 million after tax.

Is it as simple as if this initiative had been in place than the segment earnings for example, this quarter could have been $20 million higher.

Let me start, Sohrab, and then I'll pass it on to Nacho. I think, as you know, International Banking or any other business and lots of puts and takes. But the restructuring chart specifically, yes, you're right. It should fall complete to the bottom line. So it will be about $20 million after tax per quarter. But International Banking has other, we think PCL is going to be a tailwind for sure. We know revenue is going to be higher. But there's two items I'd call out that we want to be cautious about. One is foreign currency. Now, this year, we had a huge impact on FX. You heard me say FX more time than I've ever done on previous calls because it's a huge headwind that we had in '21. We'll see how '22 plays out. So that could be a headwind. The other one is the Q4 2021 tax rate. We benefited because of the high inflation and how it plays out from a tax perspective in international banking. So depending on the inflation, it could be a non-factor. It could be a headwind. It could be a tailwind. It could be any one of these three things. But directly to answer your question, yes, the expenses should fall to the bottom line and impact the quarterly results positively.

As you know international banking on any of the business and lots of puts and takes but because the restructuring charge, specifically, yes, youre right. It should fall compared to the bottom line. So it would be about $20 million opex per quarter.

He comes from banking as others, we think PCM is going to be a tailwind push or we know revenue is going to be higher but there are two items I'd call out that we wanted to be cautious about one is foreign currency now this year, we had a huge impact on FX you heard me say FX more times than I've ever done on previous calls because it's a huge headwind that we had in 'twenty. One we will see how 22 play.

So that could be a headwind. The other one is the Q4 2021 tax rate. We benefited because of the high inflation and how it plays out from a tax perspective in international banking. So depending on the inflation, it could be a non-factor. It could be a headwind. It could be a tailwind. It could be any one of these three things. But directly to answer your question, yes, the expenses should fall to the bottom line and impact the quarterly results positively.

Benefited because of the high inflation and how it plays out from a tax perspective in international banking, so depending on the inflation it could be a non factor it could be a headwind it could be a tailwind it could be any one of these three things like.

But directly to answer your question, yes, the expenses should fall to the bottom line and impact a bucket is always positive.

Okay, and then so Nacho, when you think about the international segment, I guess across the specific Alliance region in the Caribbean. If you're going to focus us on maybe one or two geographies. Which two would you say you're most excited about over the coming year that you want us to pay particular attention to and not get distracted necessarily by headlines that may come out of elsewhere outside of those two jurisdictions? Thank you, Sohrab. Good morning. Look very excited about Mexico, and Chile. Mexico and Chile are well above pre-COVID levels in terms of PTPP earnings. And we are seeing and expecting a recovery in Peru next year. And as I mentioned before, we also expect a recovery in CCU. So overall I'm definitely positive about the momentum in loan growth in international banking. And I think you will see the full power of earnings of IB during 2022.

I guess across the Pacific Alliance region in the Caribbean.

We're going to focus us on maybe one or two geographies.

Which two would you say you're most excited about over the coming year that you want us to pay particular attention to and not get distracted necessarily by headlines that may come out of that.

Elsewhere outside of those two jurisdictions.

Thank you Sarah.

Morning look very excited about Mexico, and Chile, Mexico, and Chile are aware levels pre COVID-19 levels in terms of a PTP earnings.

And we are seeing and expecting in recording a recovery on prime Peru, a next year and as I mentioned before we also expect the recovery in <unk>. So overall I'm definitely positive about the momentum in loan growth in the international banking on I think you will see the full power of earnings of IV during <unk>.

1022.

Thank you. Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead. Hi, thank you. Just a very quick question for Nacho with respect to the deposit growth. Your deposit growth is rather lackluster. And just wondering is that a reflection, I mean, when you look at, for example, your Canada business your deposit growth exceeds loan growth right. And in your instance is like 1%. So does that have an impact on revenues going forward specifically, I'm just thinking about fee income and whether or not you've closed the fee income gap? And more importantly. Is there an underlying issue here? And what I mean by issue, and I'm hoping you can help me understand this better. We know the Canadian consumer on the other side of this pandemic has really saved quite a bit. The government response perhaps may have been overdone. And we're looking at labor shortages in Canada, and everyone's really on very solid footing. I'm not as certain about that with respect to the international banking business. And I kind of sense that the deposit growth being so weak, may be a bit of an underlying reflection of that. So can you maybe talk to what the low deposit growth means for your business? And am I correct in assuming that the consumer just has not, on the other side of this pandemic, is nowhere near as solid as the Canadian or US consumer?

Thank you.

Thank you. The next question is from Darko <unk> from RBC capital markets. Please go ahead.

Hi, Thank you just a very quick question for Nacho with respect to the deposit growth.

On your deposit growth is rather lackluster.

And just wondering is that a reflection.

When you look at for example, your Canada business your deposit growth exceeds loan growth right.

And you were instances like 1% so does that have an impact on revenues.

Revenues going forward specifically.

Just thinking about fee income and whether or not you've closed the fee income gap.

And more importantly.

Is there an underlying issue here and what I mean by issue.

I'm, hoping you can help me help me understand this better.

The Canadian consumer.

The other side of this pandemic has really see quite a bit.

The government response, perhaps may have been.

Overdone.

And we're looking at.

Labor shortages in Canada, and everyone's really on very solid footing.

Not as certain about that.

With respect to the international banking business, and I kind of sense that the deposit growth being so weak maybe a bit of an underlying reflection of that so can you maybe talk to what the low deposit growth means for your business and be am I correct in assuming that the consumer just has not.

On the other side of this pandemic is nowhere near as solid as the Canadian or U S consumer.

Thank you for your question. Well, the reason we are seeing a decline in deposits are relatively flat this quarter. It's basically due to corporate deposits. And this is because we have been managing liquidity. We have access liquidity, and we are managing also net interest margin. But the behavior of the consumer is very similar to Canada. In the quarter, we saw 2% growth Q over Q. And especially, in savings and checking accounts, we have seen an increase of 18% year over year. So it's a very strong quarter in terms of personal deposits across the Pacific Alliance countries, especially in Peru and Chile. And I expect that will continue. We have a lot of opportunities to grow deposits, particularly saving checking accounts through digital, small business, and of course, corporate, and commercial.

But the behavior of the consumer is very similar to Canada in the quarter, we saw 2% growth Q on Q and especially in savings and checking accounts, we have seen an increase of 18% year over year. So it's a very strong growth in terms of personal.

Deposits across the Pacific Alliance countries, especially in Peru, and Chile, and I expect that will continue we have a lot of opportunities to grow deposits, particularly shaving checking accounts through digital small business and of course corporate and commercial.

And just a quick follow up Nacho. I mean, some of the programs that were instituted for the pandemic and in many countries actually involve dipping into your pension funds and so on. Does that mean on the other side that rather than being free to spend, people will focus their efforts on replenishing pension funds and so on? Is there any impact there that I should be thinking about?

Rather than being free to spend people will focus their efforts on replenishing.

Pension funds and so on is there any impact there that I should be thinking about.

No, the liquidity of the pension funds, I think a lot of that has been channeled to mortgages. There's a, mortgage growth has been very strong 9% growth year over year, and we expect that to continue also to repay loans. Part of that liquidity is also reflected in billings of credit cards that are still below pre-COVID-19 levels, low in revolving levels. But the expectation in the market is that during 2020, this liquidity will gradually fade away. There are not significant disbursement of pension funds expected in the next year compared to what has happened during COVID. And that's not concerning or an issue? No, it is not. Okay, great. Thank you.

The bold precut pre COVID-19 levels, low and revolving leather levels, but the expectation in the markets you've got during 2020 towards these liquidity will gradually fade away. There are not significant the disbursement of pension funds expected in the next year compared to what has coffee drinking coffee.

And that's not concerning over an issue.

No it is not okay.

Okay, great. Thank you.

Thank you. There are no further questions registered at this time. Thank you everyone for participating in our call today. On behalf of the entire management team, I want to thank everyone for participating in our call. We look forward to speaking to you again at our Q1 2022 call in March. And this concludes our fourth-quarter results call. Have a great day.

No further questions registered at this time.

Okay. Thank you everyone for participating in our call today on behalf of same time management team I want to thank everyone for participating in our call. We look forward to speaking to you again at our Q1 2020 still call in March.

And this concludes our fourth quarter results call have a great day.

Yes.

Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.

Yeah.

This conference is no longer being recorded.

<unk> please.

[music].

Please standby your conference will begin momentarily to ask a question. Please wait for the moderator to start the conference then press Star one system, Tony will be heard when you request has been accepted to cancel your question Press Star two.

You bet CMT.

Couple of questions.

There's still a piece of it.

Hi, Good Ahmedabad does it debuted data.

And then Ed you did eastern Gulf Yamaha.

Monday, they exited the Covid new days looks like as steel at pizza at one.

Yeah.

Okay.

[music].

Yes.

Okay.

Yes.

Q4 2021 Bank of Nova Scotia Earnings Call

Request a DemoDemo

BNS

Scotiabank

Earnings