Q1 2022 Bank of Nova Scotia Earnings Call
Mhm.
Okay.
This conference is being recorded so it calls for homes that don't go as you see.
Good morning, and welcome to Scotia Bank's 2022.
First quarter results presentation. My name is John Mccartney I'm head of Investor Relations here at Scotiabank.
Presenting to you. This morning are Brian Porter Scotia, banks, President and Chief Executive Officer.
Raj Viswanathan, our Chief Financial Officer, Phil Thomas our Chief Risk Officer.
Our comments, we'll be glad to take your questions.
We'll present to take questions are the following Scotiabank executives, Dan Rees from Scotia for Canadian banking Glen Gowland from global wealth management, Nacho Vishal from international banking and Jake Lawrence for global banking markets before.
Before we start and on behalf of those speaking today I'll refer you to slide two of our presentation, which contains scotiabank caution regarding forward looking statements.
I will now turn the call over to Brian .
You John and good morning, everyone before I speak to our first quarter results I would be remiss, if I didn't take a moment to acknowledge the recent invasion of Ukraine.
On a sovereign nation.
At this scale is serious and far reaching implications for people everywhere.
We stand with the people of Ukraine, and with our large and vibrant Ukrainian community.
Canada.
Turning to our Q1 results we are very pleased with our start to fiscal 2022.
Our strong loan growth and fee income resulted in solid earnings contributions from each of our four business segments strong Q1 earnings of $2 7 billion, representing a 14% year over year increase in our return on equity of 15, 9%.
We are delivering on all of our commitments in terms of earnings growth return on equity expense control and balance sheet management.
While deploying capital in support of future earnings growth and executing on our share repurchase program.
Double digit loan growth continued in Canadian banking International banking and global banking and markets also delivered accelerating loan growth in conjunction with improving margin performance.
Credit trends remained favorable.
All of our high quality portfolio.
Our common equity tier one capital ratio remained strong at 12% representing excess capital of approximately $4 billion relative to a common equity tier one ratio of 11%, providing us with significant optionality.
Internally generated capital was approximately 60 basis points in the quarter.
29 basis points of which was deployed in support of organic growth.
We also returned approximately $2 3 billion or 53 basis points to our shareholders, who are mostly Canadian based institutions, where retail shareholders through dividends and the repurchase of 12 4 million shares.
Our results and continued growth has been led by organic initiatives that enhance our service levels.
Envious and connectivity for our customers.
In Canadian banking, we created seen plus the merger Fr Scotia rewards and loyalty programs.
And the two months.
We have seen approximately 2 million members log onto the news seeing digital site of whom $1 5 million did so from their mobile.
Activity levels in terms of both.
Point transactions and redemptions are up substantially since the mid December launch and we've added an additional 95000 new members to the combined program.
In Canadian wealth, we have continued to build momentum.
And advice delivery in investment sales and partnership with six Inc. A U S based enterprise financial technology firm, We recently launched a new hybrid digital advice platform Scotia Smart investor.
This platform provides a digitally enabled investment option for customers and will empower them to seamlessly invest digitally at home or with an adviser across all our channels and branch online or through contact centers.
This initiative is another example of our Canadian banking and global wealth business lines, working together to bring the whole bank to our customers.
Overall digital adoption through the banks footprint continues with active mobile users, increasing 13% year over year and the percentage of self serve transactions increasing to 91%.
Our digital metrics in the Pacific Alliance continue to track at a strong pace as we capitalize on the behaviors of the younger demographic embracing digital first approach to banking.
These strong trends clearly validate our initiatives to accelerate our customer experience driven digital first model and improved efficiencies in our international business Yes.
Yesterday, we were pleased to announce an agreement to purchase the remaining 16, 8% minority interest and Scotiabank, Chile from our local partner. This purchase will add approximately $35 million per quarter two earnings an international bank upon closing.
The transaction allows us to further invest in our business and then our economy, we know very well.
Moshe Bank, Chile has exceeded pre COVID-19 levels of profitability since Q1, 2021, and it's very competitively positioned locally in terms of scale and profitability.
Our global banking and markets business has great client franchise momentum GP.
<unk> recently launched Scotia Red a series of state of the art electronic trading tools that provide high quality electronic execution solution for our capital markets clients.
<unk> also continued to build its leadership around ESG and sustainable finance.
Year to date, and including 2021 GBM was ranked number one for ESG bond issuance here in Canada and number two in Latin America recently GPM was also awarded its first ESG mandate in the U S, which supports our continued growth in that area.
We also continue to be a leader in advancing our own ESG efforts focused on climate community and diversity initiatives are pathways to net zero project with interim targets and timelines is largely complete and.
And will be released shortly we recently announced that Scotia bank's global operations will be carbon neutral by 2030.
And you're one of Scotia rise or a 10 year $500 million initiative to promote economic resilience, we supported over 200 organizations throughout our footprint.
We were also recently included in the 2020 to Bloomberg gender equality index and recognized as one of the best places to work for the LGD TQ plus the quality by the human rights campaign Foundation in the U S, Mexico and Chile.
Our industry leadership on the ESG front has not gone unnoticed.
Having recently been named best corporate sustainability strategy at the ESG investing awards 2022 for our work addressing climate risk and promoting ratio and gender equality.
And finally for the third consecutive year of Scotiabank was named bank of the year in Canada by banker magazine acne.
Acknowledging excellence and providing customers with exceptional advice and a great banking experience, while delivering for our shareholders and our communities Q.
Q1 was an excellent quarter in terms of both financial performance and progress on our initiatives to continue to enhance the customer experience and further invest in scale and product capability within our simplified geographic footprint with that I will 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 will be on adjusted basis.
As I did in the past few quarters in select sections I've been wrestling with quarter over quarter performance as well as certain metrics, we feel it is relevant to discuss those trends.
And also therefore the numbers excluding the impact of FX in many areas. As this continues to be an important factor for evaluating particularly the year over your competitors.
You will recall in Q3, we added slide 38, which discloses the impact of FX to fee income lines. We believe this continues to be an element of disclosure.
With that I will begin the review of the performance for the quarter on slide five.
The bank reported another strong quarter with earnings of $2 7 billion.
Diluted earnings per share of $2 15.
An increase of 14% year over year, and 2% quarter over quarter.
All four business lines reported strong results again this quarter.
Enforcing the strength of our diversified platform.
Return on equity improved to 15, 9% this quarter, while pre tax pre provision earnings increased a strong 6% compared to the previous quarter.
Revenues were also up 3%, excluding the impact of FX.
In addition, lower investment gains in the high performance fees earned in global wealth management last year impacted the revenue growth by an additional 2%.
Quarter over quarter revenues increased 5% with strong growth in all four business lines.
Net interest income was up 3%, excluding the impact of FX net interest income was also up 3% compared to last quarter driven by strong loan growth across all the business lines.
Fortunately the quarter net interest margin was relatively stable at 216 basis points.
On slide six you can see the drivers of the quarter over quarter change in net interest margin at the all bank level.
As well as for the Canadian and international banking segments.
Our balance sheet does naturally positioned to benefit from administered interest rate increases.
I expected to commence in Canada in the next quarter.
Maybe significant rate increases across the Pacific Alliance that will benefit earnings for the remainder of 2022.
More specifically in Mexico and Chile.
This quarter, we have provided additional interest rate sensitivity disclosures on slide 22.
Year over year noninterest income was up 2%, excluding the impact of FX.
Higher banking and wealth management fees and higher income from associated corporations were offset by lower investment gains trading revenues.
Insurance Haynesville.
Quarter over quarter noninterest income was up a strong 7% driven by higher trading revenues banking and wealth management fees and underwriting and advisory fees.
The PCL ratio of 13 basis points for the quarter was a decline of 36 basis points from last year.
A modest increase of three basis points from last quarter.
Year over year adjusted expenses were up 2%, excluding the impact of FX.
The increase related to growth in performance and share based compensation and other discretionary costs, such as advertising and technology to support business growth.
On an adjusted basis, our productivity ratio was 52, 2% this quarter compared to 51, 8% a year ago.
Operating leverage was negative <unk>, 7%.
On slide seven we provide an evolution of our common equity tier one ratio over the quarter as well as changes in risk weighted assets.
The bank reported a strong common equity tier one ratio of 12% down 24 basis points compared to the prior quarter.
The decrease was due primarily to buyback of approximately one 4 million shares during the quarter under the bank's normal course issuer bid.
Strong internal capital generation of 32 basis points was offset by organic business growth in risk weighted assets of $12 million or 29 basis points across all business lines.
At these levels compared to 11% CET one ratio the bank will have excess capital of approximately $4 billion.
Fourth continued organic growth.
Welcome to the unit share buyback program.
As Brian mentioned, we have agreed to purchase the remaining 16, 8% of Scotiabank, Chile from a local partner.
The transaction is valued at $1 3 billion.
And upon closing will have an impact on capital of approximately 10 basis points.
The transaction remains subject to customary closing conditions.
And regulatory approvals.
Turning now to the business line results beginning on slide eight.
Canadian banking reported very strong earnings of $1 2 billion up 32% year over year.
Pretax pre provision earnings grew 10% year over year as strong revenue growth.
Based expense growth.
Revenue increased 9% year over year as net interest income and non interest income grew by 8%.
And 12% respectively.
Net interest income growth was driven by a strong year over year loan growth of 12%, including 15% growth in mortgages and 16% growth in business loans and acceptances.
Net interest margin declined seven basis points year over year impacted by shifts in business mix in particular, the continued strong growth in mortgages.
<unk> was how were stable quarter over quarter.
The noninterest income year over year increase of 12% was driven by higher banking and mutual fund distribution fees.
Expenses increased 6%.
The increase was driven by higher personal cost as we continue to have those teams in the retail and business banking businesses.
Along with technology and other discretionary costs to support business growth.
Operating leverage continued to be positive for the fourth quarter in a row at two 1%.
The PCL ratio was negative 30 basis points compared to 23 basis points, a year ago and negative 10 basis points in the prior quarter.
Turning now to global wealth management on slide nine.
Earnings of $419 million were up 13%, excluding the seasonally elevated performance fees in the prior year and up a strong 7% quarter over quarter.
Canadian wealth management earnings grew 14%, excluding the mentioned performance fees driven by higher investment fund fees from AUM.
On growth double digit balance sheet growth in private banking and a strong fee based asset growth.
International wealth management grew a strong 19% on a constant dollar basis.
Revenue grew 6% quarter over quarter underpinned by higher investment fees.
Net interest income growth and higher fee based revenues.
AUM and <unk>, both increased 11% to $345 billion and 601 million last year with strong net sales and market appreciation.
We continued to generate positive net sales along with strong investment results for our clients with dynamic funds ranked number one among independent and five year return.
Referring to slide 10, global banking and markets.
Global banking and markets generated earnings of $561 million this quarter up 3% year over year on a strong 12% quarter over quarter.
Pretax pre provision income increased 25% quarter over quarter, and 2% year over year.
Revenue increased 19% quarter over quarter, and 5% year over year.
And by strong performance across most of <unk> business lines.
Quarter over quarter capital markets revenue was up 33% with strong growth in F ICC and equities.
Corporate and investment banking also experienced a very strong quarter with loan growth of 5% quarter over quarter.
And 8% year over year combined with margin expansion.
Underwriting and advisory fees were up 4% year over year, and 19% quarter over quarter.
Expenses were up 13% sequentially due to seasonally higher personnel costs.
A year over year expenses of almost 9%.
The increase in technology costs to support business.
The productivity ratio of GBM remained strong at 47, 7% for the quarter.
GBM Latam, which is reported as part of international banking had a record quarter with $200 million of earnings and income.
It's up 15% from last year and 11% over the prior quarter.
Revenues grew strongly in both business banking and capital markets up, 18% and 46% respectively from the prior quarter.
Again this quarter, we maintained our number one position in Bloomberg loan syndication League table.
Slide 11 shows the international banking results my comments that follow are on an adjusted and constant dollar basis.
International banking reported net income of 552 million up 50% over Q1 last year.
And 5% quarter over quarter.
Pretax pre provision earnings grew 4% year over year, and 7% quarter over quarter.
Pretax pre provision earnings and the Pacific Alliance grew a strong 9% quarter over quarter.
While our pretax pre provision earnings in Mexico, and Chile are well above pre COVID-19 levels, while furrows pretax pre provision earnings grew 15% quarter over quarter.
The segment's net income continues to grow in line with economic recovery and are steadily deliver improving results for the last six quarters.
Quarter over quarter loans grew 3% with commercial up 2% in mortgages up a strong 5%, while personal loans and credit card balances increased 2% for the fourth.
Time in eight quarters.
Revenue was up 5% over the prior quarter as a positive trend in net interest income continued.
NII increased 5% quarter over quarter, driven by strong loan growth and margin expansion.
Net interest margin improved seven basis points from the prior quarter to 376% driven by spread increases offset slightly by business mix changes.
Noninterest revenue was up 4% year over year and 5% over the prior quarter mainly.
Mainly driven by strong capital markets results banking and card fees across the Pacific Alliance and the Caribbean.
Provisions for credit losses ratio declined quarter over quarter by 14 basis points to 77 basis points.
Driven primarily by lower provisions for impaired loans, resulting from lower formations, mainly in Peru and Mexico.
Noninterest expenses declined 2% year over year, but increased 3% quarter over quarter due to higher seasonal expenses in the Caribbean and due to higher performance based compensation.
This was partly offset by the benefits of the Q4 2021 restructuring charge.
The business generated positive operating leverage of one 8%.
Now turning to the auto segment, we reported an adjusted net loss of $67 million.
As compared to a loss of $35 million in the prior quarter and a gain of $47 million in the prior year.
Year over year. The change was a result of significantly lower investment gains and lower contribution from asset liability management activities.
Fully offset by the scene loyalty program payment in 2021.
I'll now turn the call over to Phil to discuss.
Good morning, Thank you Raj and good morning, everyone.
Credit performance has trended better than expectations, we laid out at fiscal 2021 year end.
Our credit portfolio is healthy and well balanced driven by a favorable business mix shift towards more secured and higher quality affluent customers, especially in international banking.
Our focus will continue to be our customers with strong individual balance sheet and investment grade corporate clients.
Please outline the details for the quarter beginning on slide 14.
Gross impaired formations and net write offs continue to decline.
Continue to see a positive trend with lower impairments across all portfolios and quarter over quarter. The Gil ratio has improved three basis points to 64 basis points.
Our net write off ratio also improved to 27 basis points down by seven basis points quarter over quarter.
Additionally, write offs were $457 million, mainly driven by improved performance in underlying credit quality and international banking.
And are expected to be stable for the remainder of the year.
From a balance sheet perspective, we ended the quarter with allowances for credit losses of $5 6 billion down approximately $150 million from the prior quarter.
We are suitably provisioned and our coverage ratio reflects the high quality nature of our portfolio, including a higher mix of secured lending.
Our ACL ratio will continue to improve and is now 80 basis points. This is down six basis points compared to the prior quarter.
Turning to slide 16.
I will speak to our PCL performance this quarter.
For Q1, 2022, all bank PCL is $222 million or 13 basis points drew.
Driven by net reversals from performing loan PCL and lower formations.
International retail continues to improve mostly driven by personal loans and credit card performance.
Performing PCL had a net reversal of $183 million and impaired PCL reported $405 million in Q1 down $106 million from last quarter.
Overall, our credit portfolio remains strong and we continue to thoughtfully expand our balance sheet with a focus on high quality credit customers.
Our provisioning approach incorporates multiple scenarios for economic factors, such as GDP growth inflation and changes in rates, thus, providing us with comfort with our provisioning and our total allowances for credit losses, I will now turn the call over to Brian for closing remarks. Thank you. Phil we are encouraged by our start to 2002.
22, and we are confident in our ability to exceed our medium term objectives. We expect the earnings growth in our Canadian banking business to continue driven by loan growth and additional fee income as the year progresses, we expect the strong momentum in our international banking business to accelerate in the <unk>.
Pacific Alliance countries and the renewed growth in the Caribbean to continue for the balance of the year.
We expect pretax pre provision growth to continue from higher revenue and our ongoing focus on cost efficiencies.
Strong franchise momentum continues in our global wealth businesses, resulting from industry, leading investment management performance and gains throughout our advice channels and our private banking businesses GB.
Gbm's earnings continue to grow with strong contributions from capital markets businesses in corporate and investment banking results driven by loan and advisory revenue growth our advisory pipelines remained strong the.
The benefits of our diversified trading businesses, a strong advisory pipeline and a rebound in financing activity throughout our footprint support our constructive outlook.
We are confident that each of our four business lines are well positioned to deliver growth and continue to believe that 2022 will be a year that clearly demonstrates the full earnings power of Scotiabank.
That I will turn the call back to John for Q&A.
Brian will now be please state your questions. Please limit yourself to one question and then rejoin the queue to allow everyone. The opportunity to participate in the call. Operator can we have the first question on the phone. Please.
The first question is from Doug Young Dayshell Bank capital markets. Please go ahead.
Hi, sorry, good morning.
Just wanted to go to the international banking side and I guess, it's a two part question I think Raj you mentioned rate increases in Mexico, and Chile should benefit international banking the rest of the year can you put this into context in terms of what the NIM impact could be or where in terms of dollar figures.
Then the second part of the question on International banking as you know we did see a sequential increase in pretax pre provision earnings in Peru, and Colombia, and I get the cord last quarter was low.
But it is still encouraging to see the sequential increase.
Have we made that pivot.
Should we expect that momentum sequentially to continue and what are some of the drivers. Thanks.
Yes, sure Doug I'll talk about rate increases.
Like we indicated last quarter at 25 basis points as I think about 20 20 million off of <unk> and the international Bank.
That does assume a reasonable change in the slope of the rate curve.
As we have disclosed this year sorry this quarter.
Not prepared analyst deck.
Ray situation, both in Chile, and Mexico, which is where we are most rate sensitive now the long enough to cause us to remain flat we've seen significant improvement in the short end of the curve and we are also seeing significant rate increases, which you've seen you know 475 basis points and shutting in a 175 basis points in Mexico, and so on so this quarter.
Did benefit because the seven basis points equates as you can tell me if you did the math.
Do you owning assets and $723 million of net interest income that has come through as we see the rates move up we should see significant benefits happening for the rest of the year.
Difficult to give you a specific guidance by country, because there's multiple factors that moved the rates and therefore the impact on NII.
Akshay you want to take the question on Colombia, Mexico, and Peru, Yes.
Good morning, Doug, Yes, it's really good to see everyone, Colombia recovery income had a strong recovery in the quarter you just coming on the back of very strong GDP growth over 10% in 2021 in both countries and we are seeing that reflected in strong loan growth of 3% in Peru, five percentage, Colombia margin.
Sure.
What I'm very pleased to see the overall performance of all geographies seeing international banking. These water because strong loan growth was 3% for the second consecutive quarter. We saw so revenue acceleration at 5% Q on Q, both net interest income.
Any interest revenue NIM expansion as you have a light of seven bps this quarter and strong <unk> growth in all geographies improved credit credit quality and positive operating leverage so that in addition to the acquisition of the Scotiabank, Chile share So our partners there.
Going to also add around 35 million of incremental <unk> in international banking when we close these transactions. So looking forward I see very good momentum for growth based on the macro outlook on the business performance.
Okay. Thank you.
Yeah.
Yeah.
Okay.
The next question is from Gabriel Duchaine National Bank Financial Please go ahead.
Sticking with international margin was up but there was a bit of a headwind from mix and I know you know mortgage growth commercial growth is outpacing our other categories, but I also Wanna.
I wanted to revisit the whole strategy to downsize or.
Exit certain lending activities and if we can talk a bit about.
What those are how big they are and you know what.
Sort of financial impact.
Expect from them.
Well.
I would I would follow up on what I was saying game, but we are seeing very positive growth, where we grew 3% in the quarter in international banking very strong growth, 5% mortgages, 2% and commercial and for the first time, we also saw a growth 2% in personal loans and credit.
So overall, we see within our risk appetite so very positive momentum for growth also <unk> also positive in terms of revenues and even expansion that we increased seven bps ec's equivalent to 30 million in net interest income and as we mentioned the last time, we expect to continue growing.
And Eddie series D income Raj, if you would like to.
Sure Gabe.
Gabe you could go back to the outlook that we talked about asset growth in international banking and we talked about high single digit growth primarily in commercial right.
All at a 69% in that range likely double digit growth in mortgages and unsecured lending we said we'd be in the mid single digit growth. That's exactly how this quarter has played out with momentum like Nacho mentioned, we've seen growth in the unsecured lending space, which is the first one on credit costs, we expect that to actually accelerate for the rest of the year. So the risk appetite hasn't.
Had a big change other than like Phil mentioned, we have a lot of what we call affluent customers. So the originating better quality and our stock is a better quality too so you're seeing the effects of that on PCL unlikely you will see the effect on growth, but not to mute and any any fact other than you know metrics like NIM and so on like we mentioned earlier.
Likely will not get to the 450 basis point range, but you're going to see NIM expansion talk to you.
So theres nothing changing I mean.
Thought I heard Bob last quarter, there was some I don't want to revisit that.
Yeah, Gabe, it's Brian last last call, we made a comment about our consumer finance business in Peru.
As you know we were in the business and the Dr. We exited we sold the business. It is the same thing in Chile.
Peru was the last business, we had outstanding.
We were close to having it so pre pandemic that process is ongoing it's relatively small it's not material for the bank, we having said that we didn't like how it performed throughout.
Throughout the pandemic, but it would be roughly $400 million of our standing. So it's relatively small so that's the only change in the product lineup, Okay. All right.
But it could be something more substantial but that's not the case, thanks yep okay.
Okay.
The next question Bruce.
Scott Chan Canaccord Genuity. Please go ahead.
Thanks, a lot.
Bryan Bryan talked about it in your earlier comments that you've got full earnings power into 2022, and if I look at your adjusted ROA. This quarter at 15, 9% it continues to improve sequentially.
Every quarter since the start of the thing that makes so when I think about our we eat potential in 'twenty two 'twenty three.
No considered quite it's slow is it feasible that your aro trajectory continues to improve.
Yes look Scott. Thank you for the question the answer is yes.
No it's.
We're very bullish about the outlook of the bank and if you look at it by business line and I'll give you a couple of examples and Dan's business in Canadian banking auto is improving but it's still not where you'd expect it to be and there's issues around supply chain and availability of cars and things like that the credit card business.
Coming back and Youre seeing that in our numbers, but youll.
You'll see the full earnings power of the Canadian Bank as well as it pertains to international banking for.
Nacho has articulated how our.
Business in the Pacific Alliance continues to improve the Caribbean still playing catch up here a bit.
We're a major bank in the Caribbean as tourism improves our fee business improves for our credit card business there.
And day to day banking will improve so.
There's lots of things that.
We will leverage the ROE going forward and Youll see our Roes are we through 16%.
The 16% good and then maybe Dan just on the auto loans in Canada.
Supply chain issues. It seems significantly higher used car prices I was just wondering on that front and center.
Quite a pause right now and as you're underwriting standards changed.
Recently.
Yeah. Thank you it's Dan here.
Credit appetite remains open for business, but hasnt changed in the last number of quarters. As you mentioned given the supply chain issues. There is a greater appetite for used cars, we anticipate to be clear that LGD for used vehicles will be better in this part of the cycle than they would have been pre COVID-19 as Brian mentioned theres lots of opportunity to come in.
Full supply comes to dealers in Canada, we have seen bookings rise as of Q1 up year over year, 7%. So that's a very encouraging trend.
Notwithstanding.
Dealers, having challenges getting product to their floor plans are we are seeing some softness on the commercial side. The bulk of our revenue is driven by retail paper, we had a record revenue year in fiscal 'twenty. One in auto we saw that continue in Q1 and the case really is.
When are we going to see the full torque of this business is that Q3 is that Q4, it's certainly coming it's a mainstay of our franchise and we're open for business in auto.
Okay. Thank you very much.
Yes.
Yeah.
The next question is from Mike <unk> from Stifel GMP. Please go ahead.
Hey, Good morning, I had a question for Dan I wanted to go to slide 32 in your presentation. So thanks for this additional color.
I wanted to ask about it.
With respect to your mortgage origination.
The non branch channel is there any way you could give us a little bit of insight into the cross sell.
So if it's coming in from the broker.
Yeah.
Yes, sorry, I think you may have dropped off there I think assuming the thrust of your question was sources of growth in mortgage given we had a particularly robust balanced quarter are one of my primary.
[noise] objectives in our retail is to improve our direct ownership over the customer opportunity and so we've been very intentional about growing the sales force and our proprietary mortgage specialist channel I'm pleased to say in the last two years with that it's 50%, 50% more salespeople and dollar balance.
Volume through that channel is up 100%.
And so it's been a major source of growth for us over the last number of quarters and you saw that appear again in Q1 on the question of cross sell I would like to demystify the perspective that mortgage brokers do not offer cross sell opportunity the delta between our proprietary channel and mortgage broker and cross sell.
<unk> is indistinguishable they didn't get the last.
<unk> months in particular, our pick up on day to day checking and savings accounts off mortgages in general has been at levels, we haven't seen in years.
We do believe that we continue to have opportunity to convert more of these net new customers into full franchise Scotia customers and that's our game plan and Youll see us continue to invest in this anchor product from here I hope that answers the full part of your question. Yes. That's very helpful. Then so basically not much of a difference between what you can cross sell.
All through a branch originated mortgage versus one that comes through the broker channel.
That's correct. It is as others have heard me speak of in the past our unique market, leading staff programs Gaucher total equity program.
Broker channel I'm pleased to report originates a 80% of new product in that step program, which sets us up with a global limit for drawing customers into our revolving product, including the high ROE credit card position.
Thank you.
That's super helpful. Thanks, very much.
Okay.
The next question is from Paul Holden from CIBC. Please go ahead.
Thank you good morning, so going back to international banking Nacho just a common question I'm hearing is regarding the pace of rate increases in the Pacific Alliance countries then.
Potential for demand destruction as a result of that so.
Just wondering if you can help us think through demand sensitive loan demand sensitivity relative to our borrowing costs.
Thank you for your question well.
<unk> seen increased interest rate increases, but I believe this is also at the same time, we do a significant change in the economic environment of strong economic growth credit demand have been low, particularly for some retail products. So we're seeing the opposite at this point pickup in general in credit demand.
In oil products.
Well I would say that we expect these loan growth momentum to continue also.
In the case of interest rates for retail product is much less sensitivity to leasing interest rates increases.
More important more relevant on the commercial segment, but overall I am very optimistic about loan growth. We are growing up 3% as I said in just for two quarters already so that is going to dice. Our expectation that we will continue to grow 2% to 3% per quarter, which is similar to pre COVID-19 loan growth less.
Okay, Great. That's helpful. Thank you.
Yeah.
The next question is from Lamar Prasad from core Mark. Please go ahead.
Yeah. Thanks, I wanted to circle back to the discussion on the international banking margin. So it feels like you guys can come in above the low end of the three.
90 basis point range offered last quarter quite quite quite easily frankly, considering the seven basis point increase this quarter.
The rate.
Okay.
So maybe for Roger.
On the range of 390 basis points.
Maybe take that discussion up to the all bank level and offer an outlook on nims there. Thanks.
Sure. Thanks, Nomura Hi.
Happy to take that question I'll talk about the order that you asked.
The National banking margin as you know is very complicated you know we've got inflation impactful with that we've got rate caps. We bought obviously big increases that have come through fairly quickly and be administered rate.
And we're seeing a flattening batesville, so theres a lot of things going on with that product mix is changing from our perspective as well.
So I.
I want to update the you know the outlook that we gave the 380 to 390 basis points. At this time likely will talk more about it in Q2, because you want to see more trends and what I can tell you is it's trending better than what we thought when we gave the outlook in Q4 2021.
I'll leave it at that specifically to the international Bank. So theres more to come like I mentioned little earlier, we think that is more goodness that we've gone through the process.
It's a lot about how the rate of shapes.
You know as we go through these these months looking forward.
The bank Sony is likely definitely I think the banks, we manage our net interest margin as as I mentioned before.
By actively positioning the balance sheet appropriately so that continues and as I mentioned in my prepared remarks, we are positioned to benefit from rate increases across our footprint.
And we should see some of that benefit coming through the Canadian banking business, which as you know.
Pretty modest margin compression and that's mostly driven by business mix.
As credit cards, and personal loans start growing as well that will have an impact on NIM.
Like I mentioned in the outlook in November the banks margin showed good old modestly throughout the year. This year lot of it will depend on how the business mix shift happens and how soon it happens in our P&C businesses.
And of course, a bake off situation, depending on how soon rate increases come in Canada, and how does the long enough the rate curve shape itself. So I think it'll be positive, but it won't be a headwind for us for the rest of the year, but it's a little difficult to predict in this environment, how soon and how much that 80 places and we had to hold back level.
Okay. Thanks, that's it for me.
The next question is from Sohrab <unk> from BMO capital markets. Please go ahead.
Thank you Glenn.
Glen.
It was mentioned that there is some.
<unk> getting done with global wealth in Canadian banking.
To generate some I guess, some new business opportunities are there as such opportunities also that you could talk about India International banking segment between the international wealth.
And then maybe give us an update on <unk>.
It plans to add some capabilities, maybe acquire some capabilities in the U S.
Where are you on that part.
Sure Thanks, very much Rob.
I would say if we look at.
International and the growth we have there I really think Canada is a blueprint is a good place to look so.
We're obviously very proud of the strong results, we had this quarter, but the real story is really the bread.
Across the various business lines, so as I look across the business line.
Before beyond the performance fees as Raj mentioned in asset management, the industry, leading investment results are helping drive those market share gains.
And positive net sales across all of our internal external channels.
That's actually moved up to number two among Canadian banks and retail mutual fund assets in Canada and that engine is a really important one because our asset management business is quite global by nature and as we look to build out within our international footprint in conjunction with Nacho, that's going to play a very big raw.
And that similarly, when we look across our advisory businesses and our total wealth offerings in Canada the growth of our private banking and the advisory advisory businesses more broadly is a really good blueprint that we've already started to launch an international unsold that led to that 19% growth we're already starting to securely.
<unk> there.
Last thing I'll mention on the U S. Nothing to announce at this point, but certainly as we look to develop U S capability is something that we continue to look and more on that later.
And Glenn just to just to be abundantly clear some of the opportunities you were talking about.
With the International segment. For example is that contingent on a U S capability or with a U S capability would be additive to that yes. That's an important question sorry, but it's actually not so the biggest opportunity that we have we've already got existing wealth management businesses in international but as we build out in la.
Leverage our footprint across specifically the Pacific Alliance countries, that's really where the where the primary benefit is in onshore so.
Do you have the capability.
It helped us in the ultra high net worth space force for that for.
For those clients both in Latin America, as well as Canada, but it's not a it's not contingent on that at all.
Okay. Thank you.
Thank you.
There are no further questions on the lines at this time.
Well. Thank you everyone for participating in our call today Im very pleased with the strong start to the year with earnings momentum across all our businesses.
On behalf of the anti management team I want to thank everyone for participating in our call today and look forward to speaking with you again.
Q2 2022 call in May.
This concludes the first quarter results call have a great day.
Yeah.
Thank you the conference has now ended please.
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