Q4 2022 Bank of Nova Scotia Earnings Call

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This conference is being recorded so it's closer to homes that don't have as you see.

Good morning, and welcome to Scotia Bank's 2022 fourth quarter results presentation. My name is John Mccartney I'm head of Investor Relations here at the bank.

Presenting to you. This morning are Brian Porter Scotia, banks, President and Chief Executive Officer.

Speaker 1: I'm head of investor relations here at the bank.

Raj Viswanathan, our Chief Financial Officer.

Speaker 1: Presenting to you this morning are Brian Porter, Scotiabank's President and Chief Executive Officer, Raj Vaswanathan, our Chief Financial Officer, and Phil Thomas, our Chief Risk Officer.

Bill Thomas our Chief risk Officer.

Following our comments, we'll be glad to take your questions also present to take questions are the following scotiabank executives.

Speaker 1: Following our comments, we'll be glad to take your questions.

Dan Rees from Canadian banking, Glen Gowland from global wealth management Nacho.

Speaker 1: Also present to take questions are the following Scotiabank Executives.

I'm not sure the shock from international banking, Jake Lawrence from global banking and markets.

Speaker 1: Dan Rees from Canadian Banking, Glenn Galvin from Global Wealth Management, Nacho Deschamps from International Banking and Jake Lawrence from Global Banking and Markets.

Before we start on behalf of those speaking today I'll refer you to slide two of our presentation, which contains scotiabank caution regarding forward looking statements with that I will now turn the call over to Brian .

Speaker 1: Before we start, on behalf of those speaking today, I'll refer you to slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements.

Thank you John and good morning, everyone.

I will begin with review of the bank's performance and progress over the course of fiscal 2022.

Speaker 1: With that, I will now turn the call over to Brian .

Speaker 2: Thank you John and good morning everyone.

Speaker 2: I will begin with review of the bank's performance and progress over the course of fiscal 2022, after which Raj will review the financial year in more detail. Bill Thomas, our Chief Risk Officer, will review risk performance.

After which Raj will review the financials in more detail Phil.

Bill Thomas our Chief Risk Officer will review risk performance, we will be pleased to then take your questions. Given that this will be my last quarterly call as CEO I will close off with a few final remarks.

Speaker 2: We will be pleased to then take your questions.

Speaker 2: Given that this will be my last quarterly call at CO, I will close off with a few final remarks.

The 2022 this fiscal year was indeed, a year in which the diversification of our businesses by both product and geography allowed us to continue to deliver strong all bank results.

Speaker 2: The 2022 fiscal year was indeed a year in which the diversification of our businesses by both product and geography allowed us to continue to deliver strong all-bank results.

Find heightened market volatility and rapid monetary response to deal with elevated inflation across our operating geographies each of our businesses performed well.

Speaker 2: Despite heightened market volatility and rapid monetary response to deal with elevated inflation across our operating geographies, each of our businesses performed well. The bank delivered adjusted earnings of $10.8 billion in fiscal 2022, or $8.50 per share, a healthy 8% increase over 2021.

The bank delivered adjusted earnings of $10 8 million in fiscal 2022, or $8 50 per share a healthy 8% increase over 2021.

And a strong 15, 6% all bank return on equity both exceeded our medium term financial targets are.

Speaker 2: and a strong 15.6% all-bank return on equity, both exceeding our medium-term financial targets. Our common equity tier one capital position at 11.5% has us well positioned to continue to support organic growth initiatives while continuing to return capital to our shareholders. Loan growth was robust, up 15%, with deposit growth up a commensurate 15%, which is a result of concentrated efforts and strategies to strengthen our core deposit franchise. As Phil will detail, we continue to observe very strong credit metrics across our portfolios despite the inflationary pressures that have been a reality for businesses and households alike over the course of the past year. Our full year PCL ratio was well within our guidance of 25 basis points provided at this time last year. Strong underlying fundamentals and our higher quality secured exposures have us confident.

Our common equity tier one capital position at 11, 5% has us well positioned to continue to support organic growth initiatives, while continuing to return capital to our shareholders.

Loan growth was robust up 15%.

Deposit growth commensurate, 15%, which is a result of the concentrator.

Concentrated efforts and strategies to strengthen our core deposit franchise.

As Phil will detail, we continue to observe very strong credit metrics across our portfolios. Despite the inflationary pressures that have been a reality for businesses and households.

Over the course of the past year, our full year PCL ratio was well within our guidance of 25 basis points provided at this time last year.

Strong underlying fundamentals and our higher quality secured exposures.

That we will deliver against our previously provided expectations in the coming year.

Specific to Q4 results adjusted earnings of $2 6 billion or $2 six per share represented a solid finish to the year Canadian.

Speaker 2: that we will deliver against our previously provided expectations in the coming year. Specific to Q4 results, adjusted earnings of $2.6 billion or $2.06 per share represented a solid finish to the year.

Canadian banking delivered earnings of $4 8 billion, a very strong 15% increase over the prior year and more notable progress against our strategic initiatives and support our future growth.

Speaker 2: Canadian banking delivered earnings of $4.8 billion, a very strong 15% increase over the prior year, and more notable progress against strategic initiatives in support of future growth.

Our business Bank, which includes our commercial small business and Ryan that franchises delivered another strong year in 2022.

Speaker 2: Our business bank, which includes our commercial, small business and ROINAT franchises, delivered another strong year in 2022.

This business has been a key driver of Canadian Bank performance and we are particularly pleased with the important role that our team has played in helping commercial clients expand their businesses post the pandemic in a strong funding profile that this business provides.

Speaker 2: This business has been a key driver of Canadian Bank performance and we are particularly pleased with the important role that our team has played in helping commercial clients expand their businesses post the pandemic and the strong funding profile that this business provides the bank.

This year's launch of scenes plus is another example of our ongoing efforts to further deliver value to our retail customers.

Speaker 2: This year's launch of Scenes Plus is another example of our ongoing efforts to further deliver value to our retail customers.

Addition of Empire company to the partnership and the inclusion of its brands, including <unk> <unk> and Iga into the program.

Speaker 2: The addition of Empire Company to the partnership in the inclusion of its brands, including Sobeys and IGA to the program, have added flexibility to earn and redeem points on everyday grocery in addition to banking, entertainment, dining and travel. The ScenePlus relaunch has resulted in more than 1.2 million new members joining the program.

Added flexibility to earn and redeem points on everyday grocery in addition to banking entertainment dining and travel.

Same plus relaunch has resulted in more than one 2 million new members joining the program.

Which now totals over $11 2 million Canadians.

And we continue to see strong performance at Tangerine.

Speaker 2: which now totals over 11.2 million Canadians. And we continue to see strong performance at Tangerine.

Canada's leading digital bank.

Tangerine grew deposits by over $4 billion. This year and continues to grow assets through a focused strategy to become an everyday.

Speaker 2: Canada's leading digital bank.

Speaker 2: Tangerine grew deposits by over $4 billion this year.

Of choice for value oriented Canadian consumers.

Speaker 2: and continues to grow assets through a focused strategy to become an everyday bank of choice for value-oriented Canadian consumers.

Our global wealth business showed strong resilience in fiscal 2022.

Speaker 2: Our global wealth business showed strong resilience in fiscal 2022, generating earnings of $1.6 billion despite the revenue impact of softer financial markets on fees.

<unk> generated earnings of $1 6 billion, despite the revenue impact of softer in financial markets on fees.

In the asset management business expenses continues to be well managed.

Market share gains and strong investment results and dynamic funds provided some offset to the impact of lower fixed income and equity markets. During the course of the year.

Speaker 2: in the asset management business. Expenses continue to be well managed.

Speaker 2: Market share gains and strong investment results at dynamic funds provided some offset to the AUM impact of lower fixed income and equity markets during the course of the year.

On the advisory side of our business double digit growth led to record results in each of our private banking Scotia, Mcleod and private investment counsel channels.

Speaker 2: On the advisory side of our business, double digit growth led to record results in each of our private banking, Scotia McLeod, and private investment council channels.

We continue this year to build and introduce new digital tools.

And platforms to enhance the customer investment experience, including Scotia, Smart Investor and Scotia Smart money.

Speaker 2: We continue this year to build and introduce new digital tools.

Speaker 2: and platforms to enhance the customer investment experience.

Plus as well as a new generation.

Speaker 2: including Scotia Smart Investor and Scotia Smart Money by Advice Plus, as well as a new generation of our iTrade mobile app.

However, I trade mobile App our.

Our global banking and markets business had a solid finish to the year in Q4, resulting in earnings of $1 9 billion for the fiscal year down a respectable 8% year over year in a very challenging period of market conditions.

Speaker 2: Our global banking and markets business had a solid finish to the year in Q4, resulting in earnings of $1.9 billion for the fiscal year, down a respectable 8% year over year in a very challenging period of market conditions.

Our GBM business in Latin America reported in the International banking segment continued to show strong momentum.

Speaker 2: Our GBM business in Latin America reported in the international banking segment continued to show strong momentum.

Delivering record Q4, and annual earnings contribution of $232 million.

$809 million respectively.

Speaker 2: delivering record Q4 and annual earnings contribution of $232 million and $809 million, respectively.

And rounding out our GBM strategy, our business in the United States has also grown significantly with earnings up 11% and Thats. It.

Speaker 2: In rounding out our GPM strategy, our business in the United States has also grown significantly.

Fiscal year.

Our international business delivered significantly improved fiscal 2022 earnings of $2 4 billion up 37% from the prior year.

Speaker 2: with earnings up 11% in the fiscal year.

Speaker 2: Our international business delivered significantly improved fiscal 2022 earnings of $2.4 billion, up 37% from the prior year.

A result of stronger loan volumes, expanding margins and impressive expense management.

While also benefiting from a lower tax rate.

Speaker 2: a result of stronger loan volumes, expanding margins, and impressive expense management.

Alrighty retail businesses performed well and continued to benefit from the efficiencies that resulted from our continued efforts to further digitize our platform.

Speaker 2: while also benefiting from a lower tax rate.

Speaker 2: Our IB retail businesses performed well and continued to benefit from the efficiencies that resulted from our continued efforts to further digitize our platform.

Our Caribbean businesses performed well delivering earnings in the quarter of $110 million.

Speaker 2: Our Caribbean businesses performed well, delivering earnings in the quarter of 110 million, up 42% year over year, and then the Caribbean unit is back to a more normalized level of contribution.

Up 42% year over year, and then the Caribbean unit is back to a more normalized level of contribution.

Our results this year clearly reflect solid contributions across our businesses and the ability to absorb periods of volatility.

Speaker 2: Our results this year clearly reflect solid contributions across our businesses.

Evidenced by the challenging conditions faced by our market sensitive businesses.

Speaker 2: and the ability to absorb periods of volatility as evidenced by the challenging conditions faced by our market-sensitive businesses in recent quarters.

This quarter's.

Turning to our outlook global growth prospects have clearly been impacted by the Central Bank Central Banks war on inflation and affected our various operating geographies in different ways.

Speaker 2: Turning to our outlook, global growth prospects have clearly been impacted by the central banks' war on inflation and affected our various operating geographies in different ways and at a different pace.

Current pace.

Central banks in Canada, and the United States appear to be nearing the end of their tightening cycles as inflation finally appears to be slowing.

Speaker 2: Central banks in Canada and the United States appear to be nearing the end of their tightening cycles.

In Canada, the economic economic growth is moderating.

Speaker 2: as inflation finally appears to be slowing.

But economic levels of activity remained robust the strength of our labor market and strong balance sheets, along with robust commodity prices are providing a counterbalance to the impact of our last plant European and Asian economic environment.

Speaker 2: In Canada, the economic growth is moderating.

Speaker 2: that economic levels of activity remain robust. The strength of our labor market and strong balance sheets along with robust commodity prices are providing a counterbalance to the impact of a less buoyant European and Asian economic environment.

In the Pacific Alliance countries growth is moderating.

From its recent pace.

Speaker 2: In the Pacific Alliance, the country's growth is moderating.

<unk> seen over the past year central banks in our key Latin American economies have responded early and aggressively to inflation with Orthodox monetary policy and despite this we have not seen any meaningful reduction in capital.

Speaker 2: from its recent pace, but...

Speaker 2: seen over the past year. Central banks and our key Latin American economies have responded early and aggressively to inflation.

Speaker 2: with orthodox monetary policy and despite this we have not seen any meaningful reduction in capital flows in the region. We are confident that this decisive action will allow most central banks to hit terminal rates soon and allow others to ease during fiscal 2023. The bank continues to be recognized for industry excellence.

In the region.

We are confident.

Size of action will allow most central banks to hit terminal rates soon.

Others to ease during fiscal 2023.

Bank continues to be recognized for industry excellence throughout our footprint. We were again recognized as bank of the year in Canada for the third year in a row and investment bank of the year for the Americas by the banker.

Speaker 2: throughout our footprint. We were again recognized as Bank of the Year in Canada for the third year in a row and Investment Bank of the Year for the Americas by the Banker.

The best Bank in Canada by Euromoney.

Fiscal 2022 was also a year of great progress on our commitments to the environment and then communities in which we live and work we.

Speaker 2: and Best Bank in Canada by EuroMoney.

Speaker 2: Fiscal 2022 was also a year of great progress on our commitments to the environment and the communities in which we live and work.

We have now authorized a total of 96 billion of client related financing up from 58 billion last year, putting us well on track to achieve targets communicated in our inaugural net zero pathways report published earlier this year.

Speaker 2: We have now mobilized a total of $96 billion of client-related financing, up from $58 billion last year, putting us well on track to achieve targets communicated in our inaugural Net Zero Pathways report published earlier this year.

Since launching Scotia rise, our $500 million 10 year community investment commitment, we have partnered with more than 200 nonprofit organizations and made more than $60 million and humidity investments globally.

Speaker 2: Since launching Scotia Rise, our $500 million dollar 10-year community investment commitment, we have partnered with more than 200 non-profit organizations and made more than $60 million in community investments globally.

<unk> opportunity for hundreds of thousands of people and communities, where we live and work.

Speaker 2: creating opportunity for hundreds of thousands of people in communities where we live and work.

And our Scotia Bank women's initiatives continues to grow our capital deployed to women and women led businesses grew to $5 6 billion against our target to reach 10 billion by 2025 and.

Speaker 2: And our Scotiabank Women's Initiative continues to grow. Our capital deployed to women-owned and women-led businesses grew to $5.6 billion against our target to reach $10 billion by 2025.

And finally, one of my proudest moments as CEO just last month, we were recognized as one of the top 25 World Best workplaces.

Speaker 2: And finally, one of my proudest moments as CEO , just last month we were recognized as one of the top 25 world best workplaces.

Great place to work Institute, the only Canadian headquartered company and the only bank to be recognized in the field.

Speaker 2: by Great Place to Work Institute, the only Canadian headquartered company and the only bank to be recognized in the field.

Overall, we are very pleased with our financial results and progress on many strategic growth initiatives over the course of the past year and with that I'll turn the call over to Raj.

Speaker 2: Overall, we are very pleased with our financial results and progress on many strategic growth initiatives over the course of the past year. So with that, I'll turn this all over to Raj.

Thank you, Brian and good morning, everyone.

This quarter's net income was impacted by certain adjusting items of $504 million after tax of 43 cents of EPS.

Speaker 3: Thank you Brian and good morning everyone.

Speaker 3: This quarter's net income was impacted by certain adjusting items of $504 million after tax or 43 cents of EPS.

And about two basis points on our common equity tier one ratio.

In the other segment.

Speaker 3: and above two basis points on our common equity tier one ratio that was recorded in the other segment.

This consisted of $6 6 million restructuring charge relating to the re alignment of southern GBM businesses in Asia and ongoing technology modernization.

Speaker 3: This consisted of a 66 million restructuring charge relating to the realignment of certain GBM businesses in Asia and ongoing technology modernization.

$98 million of Suffolk costs relating to the expansion of our St plus role IQ program.

Speaker 3: $98 million of support costs relating to the expansion of our Saint Plus loyalty program and a $340 million currency related loss resulting from the sale of investments in Associates in Venezuela and Thailand as well as the wind down of operations in India and Malaysia.

<unk> $314 million currency related losses from the sale of investments and associates.

In Venezuela, and Thailand, as well as the wind down of operations in India and Malaysia.

All of my comments on the bank and the other segment. That's one follow up will be after adjusting for these items.

Speaker 3: All my comments on the bank and the other segment that will follow will be after adjusting for these items.

So starting on slide five on fiscal 2022 performance the.

At the bank ended the year with adjusted diluted earnings per share of $8 50.

Speaker 3: So starting on slide 5 on fiscal 2022 performance.

And our return on equity of 15, 6%, both exceeding our medium term objectives.

Speaker 3: The bank ended the year with an adjusted diluted earnings per share of $8.50 and a return on equity of 15.6% both exceeding our medium-term objectives.

Revenue was up 2% and expenses increased 3%.

Lasting and negative operating leverage for the year.

Speaker 3: Revenue was up 2% and expenses increased 3% resulting in negative operating leverage for the year. Our business lines, particularly our P&C businesses, had strong performance.

Our business lines, particularly our P&C businesses had strong performance.

Nadine banking earnings increased 15%, while international banking earnings increased 37% on a constant currency basis.

Speaker 3: Canadian banking earnings increased 15% while international banking earnings increased 37% on a constant currency basis.

Global wealth management earnings of $1 6 billion, but down a modest 1% year over year as higher net interest income and brokerage revenues were offset by lower mutual fund fees.

Speaker 3: Global wealth management earnings of $1.6 billion were down a modest 1% year-over-year, as higher net interest income and brokerage revenues were offset by lower mutual fund fees driven primarily by market conditions and higher volume related expenses.

Driven primarily by market conditions and higher volume related expenses.

Global banking and markets supported earnings of $1 9 billion down 8% compared to first quarter 2021.

Speaker 3: Global banking in markets supported earnings of $1.9 billion, down 8% compared to fiscal 2021.

Solid business banking performance, including strong loan growth momentum was offset by weaker capital markets performance and with the industry face challenging market conditions.

Speaker 3: Solid business banking performance, including strong loan growth momentum, was offset by weaker capital markets performance in which the industry faced challenging market conditions.

The banks earnings in 2023, I would expect it to benefit from higher interest income and noninterest revenue has been impacted by higher funding costs higher expenses.

Speaker 3: The bank's earnings in 2023 are expected to benefit from higher interest income and non-interest revenue, but be impacted by higher funding costs, higher expenses, and higher interest rates.

Normalizing provision for credit losses relating to the end up performing allowance releases and a higher tax rate in both Canada and certainly international countries.

Speaker 3: novelizing provision for credit losses relating to the end of performing allowance releases and a higher tax rate in both Canada and certain international countries.

Once rates stabilized the bank is expected to benefit from asset repricing, resulting in net interest margin expansion.

Speaker 3: Once rate symbolized.

The bank's capital and liquidity position is expected to remain strong in 2020.

Speaker 3: The bank is expected to benefit from asset repricing, resulting in net interest margin expansion.

Speaker 3: The bank's capital and liquidity position is expected to remain strong in 2023.

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

The bank reported solid quarterly adjusted earnings of $2 6 billion and diluted earnings per share of $2 and success.

Speaker 3: I will now review the performance for the quarter on slide 6.

Speaker 3: The bank reported solid quarterly adjusted earnings of $2.6 billion and diluted earnings per share of $2.06.

And then we're done.

Equity was 15%.

All bank pretax pre provision profit increased 2% year over year impacted by the other segment.

Speaker 3: and the return on equity was 15%.

Speaker 3: All bank pre-tax pre-provision profit increased 2% year-over-year impacted by the other segment as the pre-tax pre-provision profit of the four business lines in aggregate increased 7% as detailed on slide 25.

Pre tax pre provision profit of the full business lines in aggregate increased 7% as detailed on slide 25.

Revenues were up 4% year over year as an increase in net interest income of 10%.

Speaker 3: Revenues were up 4% year over year as an increase in narrative income of 10% more than offset a decline in non-interest revenue of 3%.

More than offset a decline in noninterest revenue of 3%.

Mainly driven by lower wealth management revenues lower unrealized gains on non trading derivatives and lower income from associated corporations.

Speaker 3: mainly driven by lower wealth management revenues, lower unrealized gains on non-trading derivatives, and lower income from associated corporations.

The net interest margin declined four basis points quarter over quarter, mainly driven by the increase in funding cost due to the velocity of administered rate increases.

Speaker 3: The net interest margin declined four basis points quarter over quarter, mainly driven by the increase in funding costs due to the velocity of administered rate increases.

The impact of the Canadian banking net interest margin of three basis points was partially offset by the 13 basis points expansion in the international banking, which benefited from asset repricing.

Speaker 3: The impact of the Canadian banking net interest margin of three basis points was partially offset by the 13 basis points expansion in international banking which benefited from asset retracing. Thanks for listening.

The PCL ratio was 28 basis points for the quarter up six basis points.

Last quarter.

Speaker 3: The PCL ratio was 28 basis points for the quarter, up 6 basis points from last quarter.

Year over year adjusted expenses increased by 6%.

Led by higher personnel costs and performance based compensation and spend to support business growth.

Speaker 3: Year-over-year adjusted expenses increased by 6%, driven by higher personal costs and performance-based compensation.

The productivity ratio was 53.

7% this quarter, while the full year operating leverage was negative one 1%.

Speaker 3: spend to support business growth.

Speaker 3: The productivity ratio was 53.7% this quarter, while the whole year offering leverage was negative 1.1%.

Yes.

Slide seven provides an evolution of the common equity tier one ratio for the quarter as well as the quarters changes in risk weighted assets.

Speaker 3: Slide 7 provides an evolution of the common equity tier 1 ratio over the quarter as well as the quarter changes and risk weighted assets.

The banker portrait of common equity tier one ratio of 11, 5% up 10 basis points from last quarter.

Speaker 3: The banks reported a common equity tier one ratio of 11.5%, up 10 basis points from last bottle.

Not only from strong earnings net of dividends that exceeded 21 basis points.

Speaker 3: primarily from strong earnings net of dividends that exceeded 21 basis points.

Risk weighted assets grew $9 6 billion in the quarter.

Mostly related to foreign exchange.

Speaker 3: Discrete assets grew 9.6 billion in the quarter, mostly related to foreign exchange.

Excluding the impact of FX loan growth was $6 1 billion combined.

Combined with positive migration.

Speaker 3: Excluding the impact of FX, loan growth was $6.1 billion.

<unk> ratio benefited two basis points.

The impact of higher rates on the bond portfolio.

Speaker 3: Combined with positive migration, the CET1 ratio benefited two basis points.

Held for liquidity purposes, and fair value through OCI at 14 basis points impact on the CET one ratio this quarter.

Speaker 3: The impact of higher rates on the bond portfolio.

Speaker 3: held for liquidity purposes and fair value through OCI had a 14 basis points impact on the CED-1 ratio this quarter.

Our priority remains to deploy capital to support organic growth initiatives in each business line.

Speaker 3: Our priority remains to deploy capital to support organic growth initiatives in each business line while prudently managing capital in the face of a less-certain economic outcome.

Lindsay managing capital in the face of a less certain.

Economic outcome.

Turning now to the business line results beginning on slide eight.

Canadian banking reported earnings of $1 2 billion a.

Speaker 3: Turning now to the business line results beginning on slide 8.

A decrease of 5% year over year, while our pretax pre provision profit grew 10% year over year, driven by revenue growth of 11%.

Speaker 3: Canadian banking reported earnings of $1.2 billion, a decrease of 5% year over year, while pre-tax pre-provision profit grew 10% year over year, driven by revenue growth of 11%.

Net interest income increased 13% as loan and deposit growth continue while the net interest margin declined three basis points since Q3.

Speaker 3: Net interest income increased 13% as loan and deposit load continued, while the net interest margin declined 3 basis points since Q3.

As lowest spreads in particular, the prime SEDAR compression.

Lag on fixed rate asset repricing and lower mortgage prepayments were partially offset by higher deficit Express.

Speaker 3: as lower spreads, in particular the prime seed or compression, the lag on fixed rate asset repricing, and lower mortgage prepayments.

As expected.

Water or water mortgages grew a modest 1%, but increased 11% compared to the prior year.

Speaker 3: were partially offset by higher deposit spreads.

Speaker 3: As expected.

Speaker 3: Quarter over quarter mortgages grew a modest 1% but increased 11% compared to the prior year.

Business loans grew a strong 25% compared to last year.

Deposit growth during the quarter.

Speaker 3: Business loans grew a strong 25% compared to last year.

Strong at 7% year over year, driven by an 8% increase in personal deposits and a 6% increase in non personal deposits.

Speaker 3: Deposit growth during the quarter was strong at 7% year over year, driven by an 8% increase in personal deposits and a 6% increase in non-personal deposits.

Non interest income increased by 3% Geo primarily to higher banking revenue and foreign exchange fees, partially offset by lower mutual fund distribution fees.

Speaker 3: Non-interest income increased by 3% due primarily to higher banking revenue and foreign exchange fees partially offset by lower mutual fund distribution fees.

Expenses increased 12% year over year, driven by higher technology and personnel costs to support business growth.

Speaker 3: Expenses increase 12% year-over-year driven by higher technology and personal costs to support business growth.

The segment generated positive operating leverage for the year of one 5%.

The PCL ratio was 15 basis points, an increase of six basis points compared to the prior quarter at 25 basis points compared to the prior year.

Speaker 3: The segment generated positive operating leverage for the year of 1.5%.

Speaker 3: The PCL ratio is 15 basis points, an increase of 6 basis points compared to the prior quarter, or 25 basis points compared to the prior.

Canadian banking revenue growth is expected to be driven by deposit and loan growth with stable margins.

Speaker 3: Needed banking revenue growth is expected to be driven by deposit and loan growth with stable margins while mortgage growth is expected to decelerate.

Wage growth is expected to decelerate.

The segment will maintain strong expense discipline to generate positive operating leverage.

2023 earnings that are expected to be impacted by normalization and provision for credit losses.

Speaker 3: The segment will maintain strong expense discipline to generate positive operating leverage.

Speaker 3: 2023 earnings are expected to be impacted by normalization in provision for credit losses.

And a higher tax rate.

Turning now to global wealth management on slide nine.

Speaker 4: and a higher tax rate.

Earnings of $368 million declined 6% year over year.

Speaker 3: Turning now to global wealth management on slide nine.

Revenue declined 4% due primarily to lower fee income driven by lower assets under management and I trade volumes.

Speaker 3: Earnings of $368 million declined 6% year over year.

Speaker 3: Revenue declined 4%, due primarily to lower fee income driven by lower assets under management and high trade volume, partially offset by higher interest income, driven by strong loan growth and improved margins.

Partially offset by higher interest income driven by strong loan growth and improved margins.

Expenses declined 3% driven by lower volume related expenses, while the productivity ratio of this quarter was 61, 2%.

Speaker 3: Expenses decline 3% driven by low volume related expenses.

The wealth business lines has generated positive operating leverage in 10 of the last 12 quarters and adjusting for performance fees.

Speaker 3: while the productivity ratio this quarter was 61.2%.

Speaker 3: The Work Business Line has generated positive operating leverage in 10 of the last 12 portals and adjusting for performance needs.

<unk> operating leverage are positive.

8% full fiscal year.

Assets under management decreased 10% to $311 billion, while assets under administration decreased 3% to 580 billion, primarily due to market depreciation.

Speaker 3: generated operating leverage of positive 0.8% for the full fiscal year.

Speaker 3: Assets under banishment decreased 10% to $311 billion while assets under administration decreased 3%.

Yeah.

Despite a challenging market environment, we continue to be ranked number two by assets in the Canadian retail mutual fund industry.

Speaker 3: to $580 billion primarily due to market depreciation.

Speaker 3: Despite a challenging market environment, we continue to be ranked No. 2 by assets in the Canadian retail mutual fund industry.

Investment returns have been strong across core share global asset management, but 72% of assets in the top two for titles.

Speaker 3: Investment returns have been strong across core-share global asset management, with 72% of assets in the top two quartiles over a five-year period as of October . Dynamic funds is ranked number three among independent asset managers, with 87% of assets in the top two quartiles over a five-year period.

A five year period as of October .

Dynamic funds is ranked number three among independent asset managers with 87% of assets in the top two quartile over a five year period.

We also saw strong growth in our key international markets with double digit earnings growth.

Across the Pacific Alliance wealth management businesses.

Speaker 3: We also saw strong growth in our key international markets with double digit earnings growth across the Pacific Alliance of Wealth Management Businesses.

Global wealth management expects modest revenue growth and will continue to invest in the business, while remaining focused on managing expense growth in line with revenue growth.

Speaker 3: Global wealth management expects modest revenue growth and will continue to invest in the business while remaining focused on managing expense growth in line with revenue growth.

Earnings are expected to remain stable in 2023, reflecting the slowing economic backdrop and the highest attach great tax rate.

Speaker 3: Earnings are expected to remain stable in 2023, reflecting the slowing economic backdrop and a highest tax rate tax rate.

Turning to slide 10, global banking and markets generated earnings of $484 million down, 4% compared to the prior year, but up 28% compared to the prior quarter.

Speaker 3: Turning to slide 10, global banking and markets generated earnings of $484 million, down 4% compared to the prior, but up 28% compared to the prior quarter.

Results were driven by strong loan and deposit growth as loans grew 31% year over year.

Speaker 3: Results were driven by strong loan and deposit growth as loans grew 31% year over year while the bosses grew 12%.

Boston grew 12%.

Revenue increased 15% as.

Net interest income grew 35% driven by strong volume growth and expanding margins.

Speaker 3: Revenue increased 15% as net interest income grew 35% driven by strong volume growth and expanding margins.

Noninterest income grew 6% as higher banking revenues was partially offset by visa primary and secondary markets.

Speaker 3: Noninterest income grew 6% as higher banking revenues were partially offset by weaker primary and secondary markets.

Markets revenue was down 9% from last year.

However, it rebounded and 19% from the prior quarter.

Speaker 3: Double markets revenue was down 9% from last year. However, it rebounded 19% from the prior quarter.

Expenses were up 18% year over year, due mainly to personnel costs and technology costs to support business.

Speaker 3: Expenses were up 18% year over year, due mainly to personal costs and technology costs to support business development.

And the negative impact of foreign currency translation.

GBM Latin America, which is reported as part of international banking reported record earnings of $232 million up 29% year it'll be you with.

Speaker 3: and the negative impact of foreign currency transformation.

Speaker 3: GBM Latin America, which is reported as part of international banking, reported record earnings of $232 million, up 29% year-over-year, with particularly strong results from Chile and Brazil.

Clearly strong results from Chile, and Brazil.

Global banking and markets extra Delaware earnings growth in 2023.

Through the amount of cost strategy. The segment continues to deepen client relationships, while also adding new clients.

Speaker 3: Global banking and markets expects to deliver earnings growth in 2023.

Speaker 3: Through the Americas strategy, the segment continues to deepen client relationships while also adding new clients.

Capital markets results are expected in April driven by more favorable market conditions and increased levels of client activity.

Speaker 3: Capital Markets results are expected to improve driven by more favorable market conditions and increased levels of client activity.

The segment Plaza, Delaware on disciplined expense management that is expected to result in positive operating leverage to more than offset any increase in provision for credit losses.

Speaker 3: The segment plan should deliver on disciplined expense management that is expected to result in positive operating leverage to more than offset any increase in provision for credit losses.

Slide 11 highlights this quarter's strong international banking results.

Comments that follow are on an adjusted and constant dollar basis.

Speaker 3: Slide 11 highlights this quarter's strong international banking results. My comments that follow are on an adjusted and constant dollar basis.

The segment reported a net income of $650 million up 25% year over year. Please.

Speaker 3: The segment reported net income of $650 million, up 25% year-over-year.

Pretax pre provision profit grew 9% year over year, but the Pacific Alliance growing, 6% and Caribbean and Central America.

Speaker 3: Pre-tax pre-provision profit grew 9% year over year, with the Pacific Alliance growing 6%.

Teen percent.

Year over year loans grew 12% with commercial loans also up 12% and mortgage is up 16%, while the personal loans and credit cards grew 9%.

Speaker 3: and Caribbean and Central America are up 18%.

Speaker 3: Year-over-year loans grew 12% with commercial loans also up 12% and mortgages up 16% while commercial loans and credit cards grew 9%.

Revenue was up 8% year over year.

Driven by higher net interest margin strong capital markets and banking fees, and partially offset by lower gains in investment securities.

Speaker 3: Revenue was up 8% year over year, driven by high net interest margins, strong capital markets and banking fees and partially offset by lower gains in investment securities.

Quarter over quarter, the net interest margin improved a strong 13 basis points.

Speaker 3: Quarter over quarter, the net interest margin improved a strong 13 basis points.

Assets reprice faster to offset the increase in funding costs and impacts from changes in deposit mix.

Speaker 3: Assets reapply faster to offset the increase in funding costs and impact from changes in deposit mix.

Provision for credit losses ratio decrease year over year by two basis points to 89 basis points.

Speaker 3: Provision for credit law office ratio decreased year-over-year by 2 basis points to 89 basis points.

Noninterest expenses increased 7% year over year, driven by business growth and the inflationary impacts partially offset by the benefit from efficiency initiatives executed last year.

Speaker 3: Noninterest expenses increased 7% year-over-year, driven by business growth and inflationary impacts partially offset by the benefit from efficiency initiatives executed last year.

The tax rate of 13, 6% for the quarter and 80 918, 9% for the year benefited primarily from higher inflation benefits in Mexico and Chile.

Speaker 3: The tax rate of 13.6% for the quarter and 18.9% for the year benefited primarily from higher inflation benefits in Mexico and Chile.

With lower inflation expectations in 2023, the tax rate is expected to return to more normal levels. It's talking in Q1 2023.

Speaker 3: With lower inflation expectations in 2023, the tax rate is expected to return to more normal levels starting in Q1 2023.

The segment generated positive operating leverage of one 8% for the whole year.

Speaker 3: The segment generated positive operating leverage of 1.8% for the whole year.

Revenues from the International Bank unexpected benefit from loan growth and modest net interest margin expansion as a result of the expected stabilization of interest rates.

Speaker 3: Revenues in the international bank are expected to benefit from loan growth and modest net interest margin expansion as a result of the expected stabilization of interest rates.

And potential rate reductions in the second half of 2023.

Expenses are expected to grow in line with revenue supported by strong digital progress to do.

Speaker 3: and potential rate reductions in the second half of 2020.

Speaker 3: Expenses are expected to grow in line with revenue supported by strong digital progress to Denver positive operating leverage.

Delaware positive operating leverage.

Earnings are expected to be impacted by normalizing provision for credit losses.

The higher tax rate.

Speaker 3: Earnings are expected to be impacted by normalizing provision for credit losses.

Now turning to the other segment.

Speaker 3: and a higher tax rate.

And adjusted net loss of $100 million compared to a loss of $35 million in the prior year.

Speaker 3: Now turning to the other segment.

Speaker 3: We reported an adjusted net loss of $100 million compared to a loss of $35 million in the prior year.

Year over year.

<unk> was a result of higher funding costs, resulting from higher interest rates.

Speaker 3: Year over year, the change was a result of higher funding costs, resulting from higher interest rates and asset liability management activities.

And asset liability management activities.

With that I'll turn the call to vote to those customers.

Thank you Raj and good morning, everyone.

Speaker 3: With that, I will turn the call to Phil to discuss first.

For fiscal 2022, the bank reported an all bank PCL of 19 basis points, well within our guidance of 25 basis points.

Speaker 5: Thank you, Raj. Good morning, everyone.

Speaker 5: For fiscal 2022, the bank reported an all-bank PCL of 19 basis points, well within our guidance of 25 basis points.

As we look to 2023, we remain confident that our PCL ratio will be in the mid 30 basis point range. This is driven by three key factors.

Speaker 5: As we look to 2023, we remain confident that our PCL ratio will be in the mid 30s basis point range. This is driven by three key factors.

A higher quality customer mix, a more stable and predictable portfolio driven by a higher level of secured lending and our strong credit and underwriting fundamentals, which position us well for macroeconomic uncertainty.

Speaker 5: a higher quality customer mix.

Speaker 5: a more stable and predictable portfolio driven by a higher level of secured lending.

Speaker 5: and our strong credit and underwriting fundamentals which position us well for macroeconomic uncertainty.

I will now highlight some of the trends that youre seeing for the quarter across our portfolios.

Speaker 5: I will now highlight some of the trends we are seeing for the quarter across our portfolios.

Despite higher interest rates and inflation, our customers' financial health remains resilient.

Indian retail deposits on average are 13% higher than they were in February 2020.

Speaker 5: Despite higher interest rates and inflation, our customers' financial health remains resilient.

Speaker 5: Canadian retail deposits on average are 13% higher than they were in February 2020.

And delinquency of 90 plus days for Canadian retail has been stable at 15 basis points for the last three quarters and roughly half of the pre pandemic ratio.

Speaker 5: And delinquency of 90 plus days for Canadian retail has been stable at 15 basis points for the last three quarters and roughly half of the pre-pandemic ratio.

We remain confident in our Canadian mortgage portfolio.

After six rate hikes by the bank of Canada. This year, our Canadian variable rate mortgage customers continued to maintain high liquidity with approximately 36% higher balances in their deposit accounts compared to fixed rate customers.

Speaker 5: We remain confident in our Canadian mortgage portfolio.

Speaker 5: After six rate hikes by the Bank of Canada this year, our Canadian variable rate mortgage customers continue to maintain high liquidity, with approximately 36% higher balances in their deposit accounts compared to fixed rate customers.

Our uninsured mortgage portfolio has an average LTV of 49% and average FICO scores of 799.

Speaker 5: Our uninsured mortgage portfolio has an average LTV of 49% and average FICO scores of 799.

In international banking.

Our retail portfolio remains 72% secured versus 65% of pre pandemic.

Speaker 5: in international banking.

Speaker 5: Our retail portfolio remains 72% secured versus 65% pre-pandemic.

High quality rated customers also remain at 96% of originations.

Portfolio delinquency of 90, plus days increased marginally this quarter by eight basis points in line with slowing economic growth remained well below pre pandemic levels.

Speaker 5: High quality rated customers also remain at 96% of originations.

Speaker 5: Portfolio delinquency of 90 plus days increased marginally this quarter by 8 basis points, in line with slowing economic growth but remain well below pre-pandemic levels.

Finally in business banking, we have observed upgrades across the portfolio due to customer performance credit quality and liquidity levels remain strong.

Speaker 5: Finally, in business banking, we have observed upgrades across the portfolio due to customer performance. High quality and liquidity levels remain strong.

Our business banking gross impaired loans are up slightly quarter over quarter.

They are primarily driven by foreign exchange fluctuations and one account and international banking.

Speaker 5: while business banking gross impaired loans are up slightly quarter over quarter.

Speaker 5: They are primarily driven by foreign exchange fluctuations and one account in international banking.

Now turning to PCL on slide 15.

He feels this quarter were $529 million. This increase in our PCL ratio this quarter to 28 basis points reflects normalizing trends and forward looking indicators.

Speaker 5: Now turning to PCLs on slide 15.

Speaker 5: PCL at this quarter were 529 million. This increase in our PCL ratio this quarter to 28 basis points reflects normalizing trends.

The increase from last quarter was mainly driven by stage three PCL up $105 million of delinquency levels rose modestly primarily in international retail and GBM.

Speaker 5: and forward-looking indicators.

Speaker 5: The increase from last quarter was mainly driven by Stage 3 PCLs up 105 million as delinquency levels rose modestly, primarily in international retail and GBM, though remaining well within our expectations and well below pre-pandemic levels.

Remaining well within our expectations and well below pre pandemic levels.

Year over year, performing PCL as were up driven by a less favorable macroeconomic forecast and strong portfolio growth. We continue to be focused on high quality credit originations and diversification across markets as we look to fiscal year 'twenty three.

Speaker 5: Year over year performing PCLs were up, driven by a less favorable macroeconomic forecast and strong portfolio growth.

Speaker 5: We continue to be focused on high quality credit originations and diversification across markets as we look to fiscal year 23.

Our current allowances for credit losses, this quarter were $5 5 billion.

$204 million quarter over quarter, or an ACL ratio of 71 basis points.

Speaker 5: Our current allowances for credit losses this quarter were $5.5 billion.

Nonperforming ACL increased slightly this quarter.

Speaker 5: up 204 million quarter of a quarter or an ACL ratio of 71 basis points.

As we saw small increases in guild formations in net write offs, primarily driven by international retail and commercial.

Speaker 5: Non-performing ACL increased slightly this quarter, as we saw small increases in yield formations and net write-offs primarily driven by international retail and commercial.

Total ACL coverage represents about 12 quarters of net write offs almost double our pre pandemic levels.

Speaker 5: Total ACL coverage represents about 12 quarters of net write-off, almost double our pre-pandemic levels.

While current macroeconomic and while the current macroeconomic environment continues to be uncertain, we remain prudent in building allowances in response to these changing conditions.

Speaker 5: While the current macroeconomic environment continues to be uncertain, we remain prudent in building allowances in response to these changing conditions.

Our coverage reflects the quality of our portfolio strong credit practices and changes to business mix.

Speaker 5: Our coverage reflects the quality of our portfolio, strong credit practices and changes to business mix.

Looking ahead to fiscal 2023, we expect strong credit performance to continue.

Speaker 5: Looking ahead to Fiscal 2023, we expect strong credit performance to continue.

While pressure from inflation and interest rates will continue to be a sector. We believe our efforts to de risk our portfolio have positioned us well to manage economic uncertainties for these reasons our earlier outlook of PCL ratios in the mid <unk> basis point range remains unchanged.

Speaker 5: While pressure from inflation and interest rates will continue to be a factor, we believe our efforts to de-risk our portfolios have positioned us well to manage economic uncertainties.

Speaker 5: For these reasons, our earlier outlook of PCL ratios in the mid-30s basis point range remains unchanged.

And finally, I would like to congratulate Brian .

And thanks, Brian on behalf of all Scotia bankers globally first 41 years of service and leadership. Thank you Brian . Thank you I will now turn the call over to John for Q&A.

Speaker 5: And finally, I would like to congratulate Brian .

Speaker 1: and thank Brian on behalf of all Scotiabankers globally for his 41 years of service and leadership. Thank you Brian . Thank you. I will now turn the call over to John for Q&A. Thanks Phil. We'll now be pleased to take your questions. Please limit your question to one 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? Thank you.

Thanks Bill.

We will now be please state your questions. Please limit your question to one 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 thank you.

With <unk> at this time, if you have a question.

There will be a brief pause for all participants with just a question. We thank you for your business.

Speaker 6: Please press 1 at this time if you have a question. There will be a brief call for participants registered for questions. We thank you for your patience.

Our first question is from Ebrahim <unk> from Bank of America. Please go ahead.

Hey, good morning.

Speaker 6: Our first question is from Abraham Poonawalla from Bank of America. Please go ahead.

Yes.

So I guess, so maybe for you on the net interest margin. If we can just breakdown in terms of the outlook for the margin consolidated versus the Canadian and international banking NIM you gave some color earlier, but what's happened to the P. Mod Nathan just margins in a way that.

Speaker 7: Good morning.

Speaker 7: I guess maybe Raj for you on the net interest margin, if we can just break down in terms of the outlook for the margin consolidated versus the Canadian and the international banking name. You gave some color earlier, but what happens with the three net interest margins in a world where Bank of Canada, the central banks are hiking rates.

Bank of Canada, Central banks are hiking rates and do we actually need it cuts in Canada for the Canadian Bank NIM to stop going lower.

Speaker 7: And do we actually need rate cuts in Canada for the Canadian bank name to stop going lower? Thanks, Ibrahim and good morning.

Yes, Thanks, Brian and good morning.

I'm not going to forecast margins quarter by quarter, and I'd ask Dan or not here to comment on their specific business line margins.

Speaker 3: I'm not going to focus margin quarter by quarter and I'll ask Dan or Nachha to comment on the specific business line margins.

I would call it four important factors for anything.

Net interest margin evolution over the next two years 2824 lots of changes that are happening.

Speaker 3: But I would call out four important factors when I think about net interest margin evolution over the next two years, you know, 23, 24, lots of things that are happening.

Trajectory of Central Bank interest rate changes definitely is going to be a factor of our margin.

Speaker 3: The trajectory of central bank industry changes definitely is going to be a factor of how a margin reacts to it at the all-bank level.

At the all bank level.

The schedule of assets repricing, that's actually quite well underway both in IV as well as starting to do in the Canadian banking business segment.

Speaker 3: The schedule of assets repricing that's actually quite well underway both in IP as well as it's starting to do in the Canadian banking business segment.

And thus we expect it to accelerate change.

Changes in business mix as the bank expects to generate less low margin mortgages, you know the business has slowed down as I.

Speaker 3: and this we expect it to accelerate.

Speaker 3: changes in business mix as the bank expects to generate less low margin mortgages, you know, the businesses slow down as they

Set in my prepared remarks in the Canadian Bank and of course deposit marketing behaviors.

So these factors have always been a fact.

Speaker 3: set in my prepared remarks in the Canadian Bank, and of course, deposit margin behaviors.

Key for the net interest margin evolution for this bank and I think it will be key to how it's going to evolve in 2023 and enter 2020 fold as well.

Speaker 3: So these factors have always been key for the net interest margin evolution for this bank and I think it will be key to the household evolvement 2023 and into 2024.

Dan do you want to say something when it came back in margin or.

Yeah Ebrahim, it's Dan here I would just say that we expect margin in the Canadian bank to build out the Q4 levels as I look at the full year of next year certainly the change in business mix has an impact and of course, the the speed of loan re pricing is underway through the course of this quarter and we expect that to expand in.

Speaker 3: Dan, do you want to say something about the claim banking margin?

Speaker 3: Abraham, it's Dan here. I would just say that we expect margin...

Speaker 3: in the Canadian bank to build up the Q4 levels as I look at the full year of next year. Certainly the change in business mix has an impact and of course the speed of loan re-pricing is underway through the course of this quarter and we expect that to expand into next year. The composition of deposits is important to bear in mind here obviously. As we grow our business banking book there's a fair portion of non-maturity deposits in there.

Next year the composition of deposits is important to bear in mind here, obviously and as we grow our business banking book, There's a fair portion of non maturity deposits in there for which the deposit NIM has been a tailwind this quarter and we expect that to continue for the next couple of quarters and I think our emphasis on deposits.

I may well have been overshadowed in the front half of the year, where we saw strong mortgage growth clearly in the last two quarters, you've seen deposit growth rates in Canadian banking equal or beat loan growth rates in Q4 and balances deposits grew faster than loans. So that emphasis on a balanced balance sheet will continue in 'twenty three.

Speaker 3: equal or beat loan growth rates and in Q4 and balances.

And that should help them.

Speaker 3: deposits grew faster than loans. So that emphasis on a balance balance sheet will continue in 23 and that should help NIMS.

And Ebrahim in terms of good morning in terms of international banking.

Meanwhile, soft 13 bps in the quarter and this was driven by the Caribbean and Central America, while in the Pacific Alliance countries, where central banks moderated the pace of interest rate increases and even stabilized compared to last quarter in the Caribbean. We had with people who are at 50% of our balances are U S soldiers NIM increase.

Speaker 3: Ibrahim, in terms of international banking, NIM was off 13 bps in the quarter and this was driven by the Caribbean and Central America. While in the Pacific Alliance countries where central banks moderated the pace of interest rate increases, NIM stabilized compared to last quarter. In the Caribbean, we had 50% of our balances are US dollars.

38 bps in the quarter driven by the benefit of higher rates I think the Pacific Alliance countries, namely increased three bps in the quarter wed assets repricing faster than liabilities.

Speaker 3: NIM increased 38 bps in the quarter, driven by the benefit of higher fed rates. And in the Pacific Alliance countries, NIM increased 3 bps in the quarter, with assets reprising faster than liabilities.

Sage Central banks in the Pacific Alliance countries took proactive measures in advance of the fed to increase the interest rate the titanium <unk> cycled Sydney and it is likely they will be some of the first countries to start a reduction trend in 2023, starting with Chile.

Speaker 3: I would say central banks in the Pacific allies countries took proactive measures in advance of the Fed to increase interest rate. The tightening SIC cycle is ending and it is likely they will be some of the first countries to start a reduction trend in 2023 starting with Chile.

But just one follow up on that Dan why is the Canadian NIM not going higher given just the $112 billion of variable rate mortgages is the spread compression offsetting the increase in benchmark rates or am I missing something.

Speaker 7: Just one follow up on that Dan, why is the Canadian name not going higher given just the $112 billion of variable rate mortgages? Is the spread compression offsetting the increase in benchmark rates or am I missing something?

It looks like there's just a lot of moving parts Ebrahim is certainly we did see in Q4 the movement to fixed in.

Speaker 3: There's just a lot of moving parts, Ibrahim. Certainly we did see in Q4 the movement to fix and mortgages occur as we had been indicating for some time, so that would have been a component. The movement out of low-pay deposits into term as consumers were anxious about equity markets, that would have been a component. There's a lot of moving parts in margin where we ended in.

In mortgages occur as we have been indicating for some time, so that that would have been in component the movement out of low pay deposits into term as consumers were anxious about equity markets that would've been a component. There is a lot of moving parts and margin where we ended in Q4 is about where we expected.

We gave back some of the expansion you saw in Q2, and Q3 and we expect to be growing through the course of next year in the aggregate.

Speaker 3: Q4 is about where we expected. We gave back some of the expansion you saw in Q2 and Q3 and we expect to be growing through the course of next year in the aggregate.

Got it and then Brian Congratulations on your retirement and good luck.

Thank you Ebrahim.

Speaker 7: And Brian , congratulations on your retirement and good luck.

Thank you.

Our following question is from Paul Holden from CIBC. Please go ahead.

Speaker 2: Thank you, Abraham.

Speaker 8: Thank you.

Speaker 9: Thank you. Thank you.

Thank you good morning.

Speaker 6: Our following question is from Paul Olden from CIBC. Please go ahead....

There is a lot of questions popping up around variable rate mortgages, and obviously Scotia is you know one or two banks that offer variable payment variable rate mortgages and <unk>.

Speaker 10: Thank you. Good morning. There's a lot of questions popping up around variable rate mortgages, and obviously Scotia is one of two banks that offer variable payment, variable rate mortgages. You adjusted a bit in your prepared remarks, but wondering if you can dive down a little bit deeper just in terms of how those higher interest payments are impacting consumer behaviour.

You addressed it a bit in your prepared remarks, but wondering if you can dive down a little bit deeper just in terms of how those higher interest payments are impacting consumer behavior. If at all sort of give us a flavor for what proportion of the converted to a fixed payments or again any kind of pressure or payment behavior you're seeing.

Speaker 10: if at all, sort of give us a flavor maybe for what proportion of converted to fixed payments or again any kind of pressure or payment behavior you're seeing.

Yes.

Sure Paul It's Dan here I'll start and maybe Phil can add if he if he would like.

We really appreciate the question, we believe strongly that a variable rate mortgage should has a payment that varies.

Speaker 3: Sure, Paul. If Dan here, I'll start and maybe Phil could add it if he would like. We really appreciate the question. We believe strongly that a variable rate mortgage should have a payment that varies. We are not seeing credit pressure in that category during Q4.

We are not seeing credit pressure in that category during Q4.

Full stop.

We are certainly preparing for and never having lots of conversations about cash flow management at the customer level, but big picture the credit worthiness of the variable customer is higher than fixed and as film would've mentioned in his remarks deposit balances are substantially higher and as we look at the liquidity.

Speaker 3: full stop. We are certainly preparing for and are having lots of conversations about cash flow management at the customer level, but big picture the credit worthiness of the variable customer is higher than fixed and as Phil would have mentioned in his remarks, deposit balances are substantially higher and as we look at the liquidity position of checking and savings accounts combined.

<unk> of checking and savings accounts combined.

The variable customer balances that are with us, we see well over a year worth of excess liquidity to absorb payment increases of two three $400 per month. So we're not concerned about the credit side of the mortgage position and on the other and we're not seeing tremendous pressure on.

Speaker 3: in the variable customer balances that are with us. We see well over a year worth of excess liquidity to absorb payment increases of $200, $300, $400 per month. So we're not concerned about the credit side of the mortgage position. And on the other end, we're not seeing tremendous pressure on payment levels. We're seeing a lot of forward credit card balances.

Payment levels in other words credit card balances expanded this quarter and as you will have seen and our personal deposits are holding in on the non maturity side. So from a consumer behavior standpoint, the variable customers in good shape.

Speaker 3: expanded this quarter, as you will have seen, and our personal deposits are holding in on the non-majority side. So from a consumer behavior standpoint, the variable customer is in good shape. I think our proportion of mix there is not showing up in the credit line, and we're confident with the transparent structure and the conversations that we're having with customers to date. The final thing I would say is,

And I think our proportion of mixed there is not showing up in the credit line and we're confident with deep transparent structure and the conversations that.

That we're having with customers to date. The final thing I would say is on a big picture basis strategically we've been focused in the mortgage business at cross selling into the deposits. We've been doing that year on year now for the last three years, 50% of our mortgage holders have a deposit account with us and within the first six months of opening.

Speaker 3: On a big picture basis, strategically we've been focused in the mortgage business at cross-selling into the deposits. We've been doing that year on year now for the last three years. Fifty percent of our mortgage holders have a deposit account with us and within the first six months of opening, variable rate mortgage customers now have three or more products. So our visibility into their health and strength is good and we're comfortable with our position as we said last quarter. For more information, visit www.fema.gov

Variable rate mortgage customers now have three or more products. So our visibility into their health and strength is good and we're comfortable with our position as we said last quarter.

Yeah, just to add to that.

And then a lot of comments that would be consistent with minus it relates to the credit performance, but.

Speaker 5: Just to add to that, and Dan had a lot of comments that would be consistent with mine as it relates to the credit performance, but just to speaking in generally, we're not seeing any signs of stress across our portfolios, whether in retail or in our business banking segments right now. And we continue to monitor, as Dan mentioned, we've made significant investments in our ability to...

Just speaking and generally we're not seeing any signs of distress across our portfolios whether in retail or <unk>.

Our business banking segments right now.

And we continue to monitor as Dan mentioned, we've made significant investments in our ability to look in and see how our consumers are behaving and the type of performance. They have both in retail and business banking and we're not seeing any signs of.

Speaker 5: look in and see how our consumers are behaving and the type of performance they have both in retail and in business banking and you know we're not seeing any signs of

No.

Liquidity pressures in our business banking book and certainly we're seeing the health of the Canadian consumer.

Speaker 5: liquidity pressures in our business banking book and certainly we're seeing the health of the Canadian consumer considerably stronger than they were pre-pandemic and holding. And so from a credit perspective we're quite comfortable with how these books are performing right now.

Considerably stronger than they were pre pandemic and hold it and so from a credit perspective, we're quite comfortable with how these folks.

They are performing right now.

And maybe just to add to that.

I think it's also important as we as we look forward.

Speaker 5: And maybe just to add to that, I think it's also important as we look forward, employment or rather unemployment continues to be strong in Canada and this is always a pre-determinant of as we hit sort of bumpier times but we're not seeing any changes to that and certainly we're also seeing wage increases consistently.

Employment to rather unemployment continues to be.

Strong in Canada, and this is always a predetermined.

As we hit sort of a bumpier times, but we're not seeing any any any changes to that and certainly we're also seeing wage increases consistently.

Our customer base as well, particularly for those customers that that we participated in the variable rate mortgage program.

Speaker 5: across our customer base as well, particularly for those customers that do participate in the variable rate mortgage program.

That's helpful. Thank you. Thank you for your response.

Thank you.

The following question is from Doug Young from Desjardins Capital markets. Please go ahead.

Speaker 10: That's helpful. Thank you. Thank you for your response.

Speaker 6: Thank you. The following question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Good morning, I just wanted to go back to the Canadian banking NIM discussion and I'm not sure. If this is for Deanna for Raj, but I think there is an interplay between corporate and Treasury and Canadian banking and maybe I can just ask it this way.

Speaker 5: I just wanted to go back to the Canadian banking NIM discussion and I'm not sure if this is for Dyan or for Raj, but I think there's an interplay between corporate and treasury and Canadian banking and maybe I can just ask it this way.

Yes, yes, if the other or the treasury toss.

In corporate were actually allocated that the divisions are allocated back to Canadian banking would that NIM.

Speaker 5: If the other or the treasury costs in corporate were actually allocated, that the divisions are allocated back to Citi and banking, would that MIM decline this quarter have been worse, no different or better? And can you talk a bit about that?

This quarter I've been worse, no different or better.

And can you talk a bit about that.

Yes, sure I'll start Doug and just see if I can help you with that.

<unk> console pricing is a factor in that so what I want you to know is that doesn't apply only to the Canadian bank, whereas in the other segment.

Speaker 11: I will start Doug and see if I can help you with that. Transfer pricing is a factor. What I want you to know is that doesn't apply only to the Canadian bank. Whatever is in the other segment.

Lots of pricing generally from an asset repricing perspective will track to that.

Speaker 11: Transfer pricing generally from an asset re-pricing perspective will track to that.

The Boston for auto pricing happens quicker because very simply put the deposit rate tracks, what would be the wholesale funding rate from a transfer pricing perspective.

Speaker 11: Deposit transfer pricing happens quicker because very simply put the deposit rate tracks what would be the wholesale funding rate from a transfer pricing perspective.

While the asset transfer pricing will happen as assets reprice in the business line and that's to ensure that the business line in them.

Speaker 11: while the asset transfer pricing will happen as assets reprice in the business line. And that is to ensure that the business line name is consistent. This is not inconsistent with what other banks do. So I wouldn't attribute it only to the Canadian bank. This is a nuance when you have significant rate changes up or down, how it manifests itself in our bank and the other segment. That's the comment I'd make.

Is consistent this is not inconsistent with what other banks too so I wouldn't attribute it only to the Canadian Bank is a nuance when you have significant rate changes up or down how it manifests itself not back in the other segment.

That's the comment I'd make but I would suggest that you take it up to the higher level just looking at it from an all bank perspective, net interest margin and if you understand the reasons why it moved up or down in any particular quarter I think tended to go either way.

Speaker 11: But I would suggest that you take it up to the higher level, just look at it from an all-bank perspective, net interest margin, and if you understand the reasons why it moved up or down in any particular quarter, I think generally you'll be in the right place.

Yeah.

Okay. So the squeezed between the deposit costs going up faster than massive repricing is actually being captured within the other segment I think we've talked about this before and I guess the way they really kind of just high level just thinking about the does detract the all bank.

Speaker 5: Okay, so the squeeze between the positive costs going up faster than the asset repricing is actually being captured within the other segments. I think we've talked about this before. And I guess the way they really kind of just high level just think about it is to track the all bank. That's what you're suggesting.

That's what you're suggesting.

That's what I'm, saying, Doug I think it's easier at the all bank NIM compression the simple way to think about it as our funding costs have grown quicker and monostrophe pricing catches up to you shouldn't see that book.

Speaker 11: Yeah, that's what I'm saying Doug. I think it's easier than the all-bank name compression. The simple way to think about it is our funding costs have grown quicker. If you have a massive net rising catch yourself, you shouldn't see that problem.

I wanted to follow up on what happened and I beat this quarter. Yeah. Yeah. Okay. Now that makes all of that but I'll leave it at that thank you very much.

Speaker 5: So, we're going to follow up on what happened in IB Discord. Yeah, yeah, okay. No, that makes follow up. I'll leave it at that. Thank you very much. Thanks, Doug. You're welcome, Doug.

Thanks, Doug.

Thank you. The following question is from Gabriel <unk> from National Bank Financial. Please go ahead.

Speaker 6: Thank you. Our following question is from Gabriel Deschenes from National Bank Financial. Please go ahead.

Hi, Good morning, Brian So best of luck in retirement, but you need it but good.

Speaker 12: Good morning and Brian , best of luck in retirement. Not that you need it, but pleasure engaging with you in the past nine years plus.

Pleasure engaging with you and.

My nine years plus.

My question is all trading.

Canadian banking margin surprise for us, but you know we talk about asset yields or spreads that are tightening I suspect. That's mortgages can you talk about the spread dynamic in that business plus the impact of prepayment income.

Speaker 12: My question is on Canadian banking margins, surprise surprise, but you know we talk about assets, the yields that are spreads that are tightening. I suspect that's mortgages. Can you talk about the spread dynamic in that business plus the impact of pre-payment income probably decline? And then just a left field question, it could be a quick yes or no answer. Is there any thought to or current...

I believe the clients and then just a left field question it could.

Could be a quick yes, or no answer various thought two or three.

Progress towards converting the a R. W. As in the international segment to meet.

Speaker 12: progress towards converting the RWAs in the international segment to the AIRB model. Thanks.

The model thanks.

I'll take the second one first and then I'll talk on the Canadian banking NIM I'm shutdowns have more to say no. We're not looking to move any of those portfolios you are be anytime soon Gabe I think that's the short answer.

Speaker 11: I'll take the second one first and then I'll start on the Canadian Bank. I'm sure Dan will have more to say. No, we're not looking to move any of those portfolios to ARB anytime soon, Gabe. I think that was the short answer.

On the Canadian banking NIM.

There's a couple of nuances in this quarter. So we've called it out in the disclosure on the moment one is the timing of crime SEDAR and that's always going to be a factor not necessarily flicking clauses for scotiabank, but for other banks, because we price off.

Speaker 11: on the Canadian banking them what

Speaker 11: There's a couple of nuances in this quarter. So we've called it out in the disclosure on the moment. One is the timing of prime CDOR. And that's always going to be a factor, not necessarily for the, for Scotiabank, but for other banks because, you know, we price off prime and then the CDOR moves in advance, particularly in a rising date environment. So that should normalize next quarter.

Prime and then the SEDAR moves in advanced, particularly in a rising rate environment. So that should normalize next quarter once Brian catches up which happened in the last week of October mortgage prepayment I guess when rates go up you expect to see less prepayment happening and that's what we've seen in the Canadian banks net interest margin and like Dan talked a little.

Speaker 11: once Prime catches up, which happened in the last week of October . Mortgage prepayment, yes. When rates go up, you expect to see less prepayment happening, and that's what we're seeing in the Canadian Bank's net interest margin. And like Dan talked a little bit earlier, that margin will continue to modestly expand in line with how the assets start to reprice.

But earlier that margin will continue to modestly expand in line with how the asset start to reprice and the pace at which you know maidens business makes changes will happen in the Canadian Bank is a mortgage volume growth will slow down in 'twenty compared to what we saw in 'twenty two.

Speaker 11: and the pace at which various business exchanges will happen in the Canadian bank as the mortgage volume growth will slow down in 23 compared to what we saw in 22.

Speaker 11: the pace at which various business exchanges will happen in the Canadian bank as the mortgage volume growth will slow down in 23 compared to what we saw in 22.

Right no quantification of person when they come.

We haven't quantified it before but I don't think it's substantial but if you back into the.

Speaker 11: We haven't quantified it before. I don't think it's substantial, but if you back it through the NEM disclosure, you'll probably be within the ballpark.

Through the NIM discussion would probably be within the ballpark.

Alright. Thanks.

Thanks Kipp.

Thank you.

Following question is from Mario Mendonca from TD Securities. Please go ahead.

Speaker 13: All right, thanks.

Speaker 13: All right, thanks. Thanks, Gabe.

Speaker 9: Thanks, Kate. Thank you.

Good morning, everyone and Brian all the best to you in retirement.

Speaker 6: Following question is from Mario Mandonca from TD Securities. Please go ahead.

You Maryann.

So.

Speaker 1: Good morning everyone and Brian all the best to you in retirement. Thank you Mario. So

Raj just get started first with.

Going back to Abrahams opening question he asked.

Speaker 1: Raj, let's get started first with –

Or whether the all bank margin could only improve one once rates decline and the reason I want to go back to this as your disclosure indicates that the bank is positioned for falling rates higher rates lead to lower NII.

Speaker 3: Going back to Abraham's opening question, he asks,

Speaker 3: for whether the all bank margin could only improve once rates.

Speaker 1: And the reason I want to go back to this is your disclosure indicates that the bank is positioned for falling rates. Higher rates lead to lower NII.

Lower rates lead to higher NII. So can we interpret from your disclosure.

That the all bank margin can only improve once rates start to fall or is that too simple and interpretation.

Speaker 1: lower rates lead to higher NII. So can we interpret from your disclosure

Speaker 1: that the all-bank margin can only improve once rates start to fall? Or is that too simple an interpretation?

I looked at it two ways Directionally, you're right Mario Yes, we will benefit from falling rates the balance sheet is positioned that way.

Speaker 11: I look at it two ways. Directionally you are right Mario. Yes, we will benefit from falling rates. The balance sheet is positioned that way.

Why don't the key factors, which applies now is the pace of asset repricing and depending on how fast that re prices that benefit will be higher than what we show in that discussion, but directionally you're right based on the discussion.

Speaker 11: One of the key factors which applies now is the pace of asset repricing and depending on how fast that reprices, the benefit will be higher than what we show in the disclosure, directionally or right based on this.

Okay.

Okay.

Different type of question that this is probably the most frequently asked questions throughout two through this last quarter.

Speaker 14: Okay.

Speaker 1: Different type of question then. This is probably the most frequently asked question throughout this last quarter.

It relates to debt service costs. We can all appreciate that unemployment is an important aspect of the stage one stage two performing loan.

Speaker 1: It relates to debt service costs. We can all appreciate that unemployment is an important aspect of the stage one, stage two performing loan.

Speaker 1: We can all appreciate that unemployment is an important aspect of the stage 1, stage 2 performing loan provisions.

Provisions.

But debt service cost and debt service ratios clearly are going materially higher.

Could you talk about how that factors into your performing loan provisions and whether it's really just a matter of time before all the banks have to start building performing loan reserves for their mortgage book.

Speaker 1: But debt service costs and debt service ratios clearly are going materially higher.

Speaker 1: Could you talk about how that factors into your performing loan provisions and whether it's really just a matter of time before all the banks have to start building performing loan reserves for their mortgage book?

Yes, I'll start.

Happy to take that and still here. Thanks.

Thanks for the question.

Speaker 5: Yeah, I'll start. I'm happy to take that. It's Phil here. Thanks for the question. I go back to some of the comments I made in my prepared remarks and my comments from a few minutes ago. While TDSRs have been increasing just because of the cost of the mortgage,

I'd go back to some of the comments I made in my prepared remarks.

Comments from a few minutes ago.

Well <unk> have been increasing.

Just because of the cost.

The cost of the mortgage we're not seeing we're not seeing any sort of reciprocal stress and as I said most of our customers still are maintaining high levels of liquidity in their portfolio and they're in their deposit accounts. So far for example, our average customer is up 13%.

Speaker 5: We're not seeing any sort of reciprocal stress. And as I said, most of our customers still are maintaining high levels of liquidity in their portfolio, in their deposit accounts. So for example, our average customer is up 13% versus pre-pandemic in terms of the level of liquidity. FICO scores continue to improve.

Versus pre pandemic in terms of the level of liquidity.

FICO scores continue to improve.

Up to.

799 basis points 800, plus seven to $8 40 with customers with <unk> and so what we've what we've seen actually is.

Speaker 5: up to 799 basis points, 800 plus, 840 with customers with HELOCs. And so what we've seen actually is positive credit migration over the last quarter or so. And so as we're looking at performing loans and we look at our forward-looking indicators, there's some positive credit migration over the last quarter or so.

Positive credit migration over the last quarter or so and so as we as we're looking at performing loans.

Look at our forward looking indicators, there's some built in pessimistic scenarios for for macroeconomic but look we're seeing more importantly is the credit change in quality is actually a tailwind for us from a performing loan perspective, and I think that's important to note.

Speaker 5: built in pessimistic scenarios for macroeconomic, but what we're seeing more importantly is the credit change in quality is actually a tailwind for us from a performing loan perspective. And I think that's important to note as you're looking forward. So I would be less focused on TDSRs, and I'd be more focused on health of the consumer, quality of the portfolio, and sort of the shift in the dynamic within the arsenal in terms of choosing value of going off from the market, and seeing what wonder changes if you try to change behavior in some way. And so I think, again, the200 bucks into TDSR itself, people just as Watts said, never becomes sleepover.

As Youre looking forward, so I would be less focused on <unk> and it would be more focused on the health of the consumer a quality of the portfolio is sort of the shift in the dynamic within the.

Within the macroeconomic that we're seeing today.

Which is which is positive okay final question then.

Banks talk about how you manage to get securities gains in the quarter in a rising rate environment I was a little surprised because over the last few quarters, we haven't seen any in this quarter a nice meaty number could you help me think through that.

Sure Mario as you know investment gains will be lumpy in any quarter.

And in any year for the first three quarters of this year.

Speaker 11: investment gains will be lumpy in any quarter and in any year. The first three quarters of this year, I think we had $1 million if I remember my numbers right. We didn't have any opportunities, but we continue to roll those because these are high-quality liquid assets. These are all supported for liquidity purposes.

I think we had $1 million if I remember my numbers right. We didn't have any opportunities, but we continue to roll those because these are high quality liquid assets, we've owned it for liquidity purposes.

And depending on when we invest and when we think he does reaches economic value to the maximum and we don't think that.

Speaker 11: And depending on when we invest and when we think it has reached its economic value to the maximum and we don't think that it's going to raise in value so to speak because of interest rate changes, we monetize it. We just had the opportunity to do it when some of the securities, debt securities, this quarter that's what you're seeing. Like I said, it will be lumpy. It all depends on the...

It's going to raise and values so to speak because of interest rate changes, we monetize it we just had the opportunity to do it when someone with a securities debt securities This quarter and Thats, what youre seeing.

It'll be lumpy it all depends on the.

At the time at which we put on these securities and how much value does gain based on rising rates falling rates. All of these are part of a larger portfolio.

Speaker 11: The time at which we put on these securities and how much value does it gain based on rising rates, falling rates, all these are factors. It's a large portfolio.

Thank you.

Thanks, Mike.

Thank you. Our following question is from Scott Chan from Canaccord Genuity. Please go ahead.

Speaker 13: Thank you.

Speaker 6: Thank you. Our following question is from Scott Chan from Kennacore Genuity. Please go ahead.

Hi, good morning, all I'll kind of switch to capital.

More specifically on the business banking side revenue has been up a lot year over year, driven by a corporate borrowers both on a quarter over quarter and year over year basis. So my question is like what.

Speaker 1: Good morning. I'll kind of switch to capital through global banking. More specifically on the business banking side, revenue has been up a lot year over year driven by corporate loans both on a quarter over quarter and year over year basis. So my question is like what's driving that robust growth in this segment if you could reflect it, perhaps a little bit of an outlook and if that did contribute.

Isn't that robust growth in this segment.

Perhaps a little bit of an outlook and if that did contribute to the higher personnel costs in the quarter.

Great. Thanks for the question Scott So Theres a few things in that question.

First thing I'd say is we're very focused on our existing clients and adding new clients and that's been core to that loan growth that youre seeing in the business.

Big part of that loan growth is happening in the U S, where we're focused on the Americas strategy and I think that's important to note because we've talked about that several times.

Q3 was a very quiet DCM quarter, not a lot of activity happening. So we saw a lot of clients come into banks for facilities, we're going to see that monetize as we move into 2023.

Speaker 2: where we're focused on the America strategy. And I think that's important to note because we've talked about that several times.

Speaker 2: Q3 was a very quiet DCM quarter. Not a lot of activity happening. So we saw a lot of clients come into banks for facilities. We're going to see that monetized as we move into 2023. Excuse me, I've got a bit of a horse's throat. So we're quite confident we're being there for our clients, we're putting out balance sheet and we're doing it on both sides. The deposit line continues to grow.

I've got a bit of a horse room.

So we're quite confident we're being there for our clients, we're putting our balance sheet and we're doing it on both sides of the deposit line continues to grow and we have an LDR and the business below one which is positive I'd say.

In terms of performance cost in the quarter Q3 was an air pocket for the capital markets industry and what we saw happen was a step back in the performance cost for the year that stepped up ahead. When we delivered what we felt was a pretty solid Q4.

Speaker 2: and we have an LDR in the business below one, which is positive I'd say. In terms of performance costs in the quarter, Q3 was an air pocket for the capital markets industry and what we saw happen was a step back in the performance costs for the year. That stepped up ahead when we delivered what we thought was a pretty solid Q4.

Does that does that help answer your question Scott Yeah. That's very helpful. Thank you very much.

Thank you.

Speaker 3: Does that help you answer your question, Scott? Yeah, that's very helpful. Thank you very much. Thank you.

Thank you.

Our following question is from Darko <unk> from RBC capital markets. Please go ahead.

Speaker 15: Thank you.

Speaker 6: Thank you. Our following question is from Darko Milek from RBC Capital Markets. Please go ahead. Thank you.

Okay.

Alright, Thank you and good morning, and Brian are also Oh.

Best of luck in retirement.

Speaker 1: Hi, thank you, good morning and Brian also best of luck in retirement.

I just wanted to dig Dan a little bit deeper into the mortgage question.

Speaker 1: I just wanted to dig, Dan, a little bit deeper into the mortgage question.

You mentioned in your remarks that were in response to one question that there was.

Speaker 1: You mentioned in your remarks that, or in response to one question, that there was a shift from variable to fixed, but when I look at slide

Chip from variable to fixed, but when I look at slide.

With slide 35, I don't see a change quarter over quarter.

And there wasn't a lot of rate increases that just recently happened to my question on the portfolio.

Speaker 2: What slide is it? 35. I don't see a change. Quarter over quarter. And there was a lot of rate increases that just recently happened. So my question on the portfolio of mortgages is really to dig into a couple of different areas. First and foremost, if there is a shift happening from the existing variable rate mortgage portfolio to fixed.

Mortgage is.

Really.

They've been through a couple of different areas first and foremost if there is a shift happening from the existing variable rate mortgage portfolio to fixed.

Could it be that originations are heavily variable rate.

Mortgage related and therefore, you don't see an overall shift in the portfolio.

Speaker 2: Could it be that originations are heavily variable rate mortgage related and therefore you don't see an overall shift in the portfolio? Are you in fact?

Are you in fact.

Suggesting to customers.

To continue to go down the variable rate mortgage as a preferred vehicle, especially since you think rates are going down.

Speaker 1: suggesting to customers

Speaker 16: to continue to go down the variable rate mortgage as a preferred vehicle, especially since you think rates are going down.

And lastly, with respect to the average loan to value for the whole portfolio I see it rising a little bit.

Speaker 16: And lastly, with respect to the average loan to value, for the whole portfolio, I see it rising a little bit. You have a very heavy concentration in Ontario.

You have a very heavy concentration in Ontario.

Where house prices are falling so maybe you can speak to what you're seeing there on the loan to values of the portfolio and where do you think that's headed.

Speaker 16: where house prices are falling. So maybe you can speak to what you're seeing there on loan to values of the portfolio and where you think that's headed over the next couple of quarters, please. Thank you.

Over the next couple of quarters. Please thank you.

Sure Darko, there's a lot there and I am sensitive to think rbcs calls at nine so I'll make this briefing we can do a follow up in detail. If you like my comments around shift effects was new business flows during the fourth quarter as opposed to I think the slide you're referencing is a photograph of the stock on the portfolio.

Speaker 3: Sure, Darko. There's a lot there and I am sensitive to think RBC's called at nine. So I'll make this brief and we can do a follow-up in detail if you like. My comments around shift to fix was new business flows during the fourth quarter as opposed to, I think the slide you're referencing is a photograph of the stock of the portfolio. We are not on the front foot with regards to advising customers strongly into or out of variable effects.

We are not on the front foot with regards to advising customers strongly into or out of variable or fixed we worked with the customer based on their unique situation often youre seeing renewals come forward.

And therefore.

I think our view is balanced there whether it's by channel or by term. So the movement out of variable into fixed does begin to happen in Q3 that continued in Q4 as expected.

In terms of our outlook on Ltvs I wouldn't say, we're over indexed in Ontario necessarily I would say, we're slightly under indexed in Quebec versus the rest of the marketplace and clearly as a house prices have deflated over the last number of months the emphasis on loan to value at.

Speaker 3: LTVs. I wouldn't say we're over indexed in Ontario necessarily. I would say we're slightly under indexed in Quebec versus the rest of the marketplace. Clearly, as house prices have deflated over the last number of months, the emphasis on loan to value at origination will be maintained at, call it Phil Thomas's credit risk standard. As the book comes in for renewal.

Nation will be maintained at call it Phil Thomas as credit risk standards as the book as the book comes in for renewal, where we are concerned about any consumer situation, we will reappraise the value of the home and decide whether we want to renew on that basis, we are not leaning into high LTV High T D.

Speaker 3: Where we are concerned about any consumer situation, we will re-appraise the value of the home and decide whether we want to renew on that basis. We are not leaning into high LTV, high TVSR, long amortization, credit situations in the mortgage book. We believe very strongly that immigration, employment, wages, shortage of housing will be

As our low long amortization credits.

Credit situations in the mortgage book, we believe very strongly that immigration employment wages shortage of housing will be constructive for the housing market. Once we get through this price adjustment period and as margins return as the prime SEDAR compression dissipates.

Speaker 3: constructed for the housing market once we get through this price adjustment period and as margins return as the prime seed ore compression dissipates.

Yeah.

Thank you Rob.

Okay.

Thank you.

Our following question is from the Sohrab <unk> from BMO capital markets. Please go ahead.

Speaker 13: Thank you. You're welcome. You're welcome.

Speaker 9: Thank you.

Speaker 6: Our following question is from Saurabh Movahedi from BMO Capital Markets. Please go ahead.

Thank you and Brian Congratulations on a very illustrious career.

Speaker 17: Thank you and Brian , congratulations on a very illustrious career.

Phil I have just maybe a quick clarifying question I think you've talked about normalization I'll call. It on the PCL into the mid thirties can you can you just talk a little bit more detail on that what should have been unemployment rate does that assume.

Speaker 17: Phil, I have just maybe a quick clarifying question. I think you've talked about normalization, I'll call it, on the PCL into the mid 30s.

Speaker 17: Can you just talk a little bit more detail on that? What should have been unemployment rate?

Where is that.

Performing versus nonperforming and how does it kind of which line items of our business segments or geographies would you say you're kind of Ah I guess.

Speaker 17: Where is that?

Speaker 17: you know, performing versus non-performing, and how does it kind of, which line items or business segments or geographies, which you say you're kind of, I guess, over-earning in right now on that line. So, you know, would this be adding to performance in mortgages in Canada, or is it non-performers in business lending in Latam, or, you know, just...

We're earning in right now on that line so.

Just be adding to performing in mortgages in Canada or is it not.

Performers in business lending in Latam or just if you could give me a little bit more color as to how we get to that maturities and what sort of assumptions.

Sure.

Speaker 5: if you could give me a little bit more colour as to how we get to that and the clarity and what sort of assumptions are we on? Sure, that's not a quick question but I'm happy to maybe answer it and you and I can maybe spend a little bit of time together offline but I'd go back to you know we

A quick question I'm happy and maybe answer it and you and I can maybe spend a little bit of time together offline, but I'd go back to.

If you look at where we were a year plus ago.

This bank has done a tremendous amount of work to derisk, our portfolios and so as we head into 'twenty three a new normalized run rate is sort of in that mid thirty's.

Speaker 5: If you look at where we were a year plus ago, this bank has done a tremendous amount of work to de-risk our portfolios. And so as we head into 23, a new normalized run rate is sort of in that mid 30s basis point range. And I would say the mid 90s basis point range for international banking.

Basis point range, and I would say the mid 90 basis point range for international banking and so we continue to grow our mortgage book in international continue to put on more secured lending. Our focus has primarily been on affluence or the higher end segment and as I mentioned in my remarks about 96%.

Speaker 5: And so we continue to grow our mortgage book in international, continue to put on more secured lending. Our focus has primarily been on affluence or the higher end segment. And as I mentioned in my remarks, about 96% of our originations in IT are sort of that higher credit quality segment now. And so we're really, as we normalize, it's sort of a new normal in sense of...

Our originations in IV or sort of that higher credit quality segment now and so we're really.

We normalize it.

Sort of a new normal incentive.

Portfolios have really shifted again higher big focus on high investment grade corporate and commercial lending.

Speaker 5: the portfolios have really shifted. Again, big focus on high investment grade, corporate and commercial lending. And so, as I look out into next year, I'm confident in the guidance and we'll continue to work very, very closely with Dan and Nacho and Jake and James Neat and others to make sure that we have that focus on higher quality credit moving into the year.

And so as I look out into next year I'm confident in the guidance and we'll continue to work very very closely with Dan and Nacho and Jacob Jameson Eaton others to make sure that we have that focus on higher quality credits moving into the year I would also say that this bank has made a significant them.

Out of investment in the collections, we have we've built collections hubs, we have invested in technology, we've invested in analytics and so we're doing a lot of preemptive phone calls to customers, who may see hasn't been a stress and so both from a quality of the portfolio. The processes that we have in place to help our customers and from a collections perspective, we're feeling pretty.

Speaker 5: I would also say that this bank has made a significant amount of investment in the collections. We have built collections hubs, we have invested in technology, we have invested in analytics and so we are doing a lot of preemptive phone calls to customers who we may see have a bit of stress. And so both from a quality of the portfolio, the processes that we have in place to help our customers and from a collections perspective we are feeling pretty good as we go into next year.

Good as we go into next year.

What's the unemployment rate in Canada, and 30 basis points.

Yes, it would be yes.

Obviously, we stress test our portfolio on a regular basis every day.

We have a number of stress scenarios for for unemployment that are that we put in into the stress scenarios.

I'm happy to maybe spend a little bit of time with you offline. We can go into those.

Okay, but the mid 30 basis points, you don't it's not based on an unemployment rate it.

Speaker 5: maybe spend a little bit of time with you offline we can go into those.

Speaker 17: Okay, but the mid-30 basis point, is it not based on unemployment rate?

It would be based on a whole bunch of different factors, including unemployment our outlook, how we're thinking about our portfolios.

Speaker 5: It would be based on a whole bunch of different factors including unemployment, our outlook, how we're thinking about our portfolios, what is performing, what are we looking at for non-performing, where are we focused on in terms of growth of assets.

What is performing what are we looking at for nonperforming where are we where are we focused on in terms of growth of assets.

Okay. Thank you.

Thank you that's all the time, we have for questions I would now like to turn the meeting back over to Mr points.

Speaker 13: Okay, thank you.

Speaker 2: Thank you. That's all the time we have for questions. I would now like to turn the meeting back over to Mr. Porter. Thank you very much. I wanted to extend my sincere thanks to the analyst community for your ongoing coverage of the bank and to our investors for your continued support of the bank. I'm extremely proud of our team of over 90,000 Scotiabankers for their tireless efforts to put our customers first.

Thank you very much I wanted to extend my sincere thanks to the analyst community for your ongoing coverage at the bank and to our investors for your continued support of our bank I'm extremely proud of our team of over 90000 Scotia bankers for their tireless efforts to put our customers first.

And I have every confidence that Scott Thompson and the entire leadership team will continue to build on the strong foundation, we've established and the many successes we have achieved over the past decade.

Speaker 2: And I have every confidence that Scott Thompson and the entire leadership team will continue to build on the strong foundation we have established and the many successes we have achieved over the past decade. Together we have built an enduring, resilient institution that continues to champion Canadian values around the world. It has been the privilege of my lifetime to serve as CEO of this storied institution.

Together, we have built an enduring resilient institution that continues to champion Canadian values around the world.

It has been the privilege of my lifetime to serve as CEO of this storied institution.

And I have every confidence that the bank's best days are yet to come and I wanted to wish you and yours, all the very best for the upcoming holiday season and beyond Thank you very much.

Thank you.

The conference has now ended.

Please disconnect your lines at this time and we thank you for your participation.

Speaker 6: Thank you for your participation.

Yeah.

Yeah.

Yeah.