Q3 2023 The Bank of Nova Scotia Earnings Call

August 29, 2023

This conference is being recorded.

Speaker 1: This conference is being recorded. This conference is being recorded.

It's close to the homes that don't go as you see.

Good morning, and welcome to Scotia Bank's 2023rd quarter results presentation. My name is John Mccartney I'm head of Investor Relations here at Scotiabank.

Speaker 2: Good morning and welcome to Scotiabank's 2023 third quarter results presentation. My name is John McCartney. I'm Head of Investor Relations here at Scotiabank.

Speaker 2: Presenting to you this morning are Scott Thompson, Scotiabank's President and CEO , Raj Viswanathan, our Chief Financial Officer, and Phil Thomas, our Chief Risk Officer. Following our comments, we'll be glad to take your questions. Also present to take questions.

Presenting to you. This morning are Scott Thompson President.

CEO Raj Viswanathan, our Chief Financial Officer, Don 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, Dan Rees from Canadian banking Glen Gowland from global wealth management Francisco.

Speaker 2: Dan Rees from Canadian Banking, Glenn Gowland from Global Wealth Management, Francisco Aristagieta from International Banking and Jake Lawrence from Global Banking and Markets.

From International banking, and Jake Lawrence for global banking and markets.

Speaker 2: Before we start, and on behalf of those speaking today, I will refer to you to slide two of our presentation, which contains Goshavank's caution regarding forward-looking statements. With that, I will now turn the call over to Scott.

We start.

Speaking today I will refer you to slide two of our presentation, which contains scotiabank caution regarding forward looking statements.

I will now turn the call over to Scott.

Speaker 2: Thank you, John , and good morning, everyone. We appreciate you joining us today.

Thank you John and good morning, everyone. We appreciate you joining us today.

Speaker 2: The bank reported two, three adjusted earnings of $2.2 billion or $1.73 per share, up 2% sequentially.

The Bank reported Q3 adjusted earnings of $2 2 billion or $1 73 per share up 2% sequentially.

Pretax pre provision earnings of $3 5 billion were up 5% compared to the prior quarter.

Speaker 2: Pre-tax, pre-provision earnings of $3.5 billion were up 5% compared to the prior quarter.

The bank's Q3 results reflect both the resilient performance of our retail and commercial businesses and modest improvement in our market sensitive capital markets and wealth businesses.

Speaker 2: The bank's Q3 results reflect both the resilient performance of our retail and commercial businesses and modest improvement in our market-sensitive capital markets and wealth businesses.

Although the operating environment has stabilized following the Q2 market dislocation.

Speaker 2: Although the operating environment has stabilized following the Q2 market dislocation, deposit migration to term products and central bank rate increases continue to increase our funding curve.

Migration to term products in Central Bank rate increases continued to increase our funding costs.

Importantly, we strengthened our capital liquidity and deposit metrics as we prepare the bank for our next phase of profitable sustainable growth.

Speaker 2: Importantly, we strengthened our capital, liquidity, and deposit metrics as we prepare the bank for our next phase of profitable, sustainable growth.

Speaker 2: We continue to build capital this quarter resulting in a common equity tier 1 capital ratio of 12.7%.

We continue to build capital this quarter, resulting in a common equity tier one capital ratio of 12, 7%.

Speaker 2: Our liquidity coverage ratio was a strong 133% at quarter end, up from 122% in the prior year.

Our liquidity coverage ratio was a strong 133% at quarter end up from 122% in the prior year.

Deposits once again outpaced loan growth in the period from our sustained focused on deposit growth initiatives across our businesses, improving our loan to deposit ratio.

Speaker 2: Deposits once again outpaced loan growth in the period from a sustained focus on deposit growth initiatives across our businesses improving our loan to deposit ratio.

Year over year deposits increased by 9% or approximately $55 billion.

Speaker 2: year-over-year deposits increased by nine percent or approximately 55 billion dollars.

Speaker 2: On a sequential basis, deposits grew in our Canadian banking and international banking franchise.

On a sequential basis deposits grew in our Canadian banking and international banking franchises.

Lending volumes in the quarter reflect a more cautious environment from both a household confidence and business investment perspective as seen in activity levels across our various segments and geographies.

Speaker 2: Lending volumes in the quarter reflect a more cautious environment from both a household confidence and business investment perspective as seen in activity levels across our various segments and geographies. you

The impact of these macroeconomic realities, coupled with a more selective and deliberate approach to new originations has resulted in a moderation of our loan growth.

Speaker 2: The impact of these macroeconomic realities, coupled with a more selective and deliberate approach to new originations, has resulted in a moderation of our loan growth.

Speaker 2: Expense growth was flat to last quarter and will be a priority as we strive to achieve our medium-term objective of delivering positive operating leverage.

Expense growth was flat to last quarter and it will be a priority as we strive to achieve our medium term objective of delivering positive operating leverage.

Speaker 2: Disciplined expense management has always been a core competency of our bank.

Disciplined expense management has always been a core competency of our bank.

Speaker 2: The hire for longer interest rate environment that has played out across our operating geographies has already and will continue to impact consumer health.

The higher for longer interest rate environment that has played out across our operating geographies has already and will continue to impact consumer health.

Speaker 2: Through our advanced data and analytics, we are closely monitoring customer behaviour and have observed a very rational and responsible shift in spending as households manage through this period of reduced discretionary income.

Through our advanced data and analytics, we are closely monitoring customer behavior and have observed a very rational and responsible shift in spending as households manage through this period of reduced discretionary income.

In our core international banking markets, where the interest rate tightening cycle has led most other global economies. We are seeing the impact of recessionary conditions, which are reflected in our elevated provisions.

Speaker 2: In our core international banking markets, where the interest rate tightening cycle has led most other global economies, we are seeing the impact of recessionary conditions which are reflected in our elevated provisions.

Speaker 2: With the Chilean economy, for example, now in a recession, its central bank cut rates, with 100 basis point policy rate decrease in late July , and additional rate cuts are expected in the near term.

With the Chilean economy for example, now in a recession, it's central bank cut rates with a 100 basis point policy rate decrease in late July and additional rate cuts are expected in the near term.

Speaker 2: Overall, we remain confident that the investment grade bias to our corporate and commercial portfolios coupled with our conservative underwriting standards has the bank very well positioned to manage through this phase of the rate cycle.

Overall, we remain confident that the investment grade bias to our corporate and commercial portfolios, coupled with our conservative underwriting standards as the bank very well positioned to manage through this phase of the rate cycle.

We continue to build performing allowances and improve our ACL coverage at the longer term macroeconomic outlook continues to be uncertain.

Speaker 2: We continue to build performing allowances and improve our ACL coverage as the longer-term macroeconomic outlook continues to be uncertain.

From a business line performance perspective, I was particularly encouraged by our revenue led pretax pre provision growth in each of Canadian banking and international banking, both up year over year and quarter over quarter.

Speaker 2: From a business line performance perspective, I was particularly encouraged by our revenue-led, pre-tax, pre-provision growth in each of Canadian banking and international banking, both up year over year and quarter over quarter.

GBM and while both showed positive trends as market volatility stabilized.

Speaker 2: GBM and Wealth both showed positive trends as market volatility stabilized.

Speaker 2: In our Canadian banking business, as expected, profitability was impacted by higher provisions. However, we saw healthy net interest margin expansion supported by another quarter of double digit deposit growth.

In our Canadian banking business as expected profitability was impacted by higher provisions. However, we saw healthy net interest margin expansion supported by another quarter of double digit deposit growth.

Speaker 2: Our Scene Plus loyalty program reached 14 million members in the corridor and has been a strong contributor to new primary client relationships and deeper product penetration with existing customers.

Are seeing plus loyalty program reached 14 million members in the quarter and it's been a strong contributor to new primary client relationships and deeper product penetration with existing customers.

Just this month home hardware. It was added to the scene plus program, providing members the opportunity to earn and redeem seen plus points and one of Canada's largest home improvement retailers.

Speaker 2: Just this month, home hardware was added to the ScenePlus program, providing members the opportunity to earn and redeem ScenePlus points at one of Canada's largest home improvement retailers.

Speaker 2: The SceneTwist program was an important driver of the strong growth this quarter in Canadian banking deposits and clients who use this as their primary bank for day-to-day payments through credit card.

The <unk> program was an important driver of the strong growth this quarter in Canadian banking deposits and clients, who use us as their primary bank for day to day payments through credit cards.

Speaker 2: Our Tangerine franchise is performing well from a deposit gathering and profitability perspective and is increasingly focused on deepening client relationships through card and wealth management cross-sells.

Our tangerine franchises performing well from a deposit gathering and profitability perspective, and is increasingly focused on deepening client relationships through card and wealth management cross sell.

Speaker 2: Importantly, over 80% of our tangerine deposit flows in Q3 originated from digitally engaged, multi-product clients, and once again the business delivered double-digit revenue and earnings growth on a year-over-year basis.

Importantly over 80% of our Tangerine deposit flows in Q3 originated from digitally engaged multi product clients and once again the business delivered double digit revenue and earnings growth on a year over year basis.

International banking delivered solid performance against the challenging economic backdrop with strong revenue growth and good expense control.

Speaker 2: International banking delivered solid performance against a challenging economic backdrop with strong revenue growth and good expense control.

Speaker 2: Earnings were impacted by higher provisions and a normalizing tax rate.

Earnings were impacted by higher provisions and a normalized tax rate.

Our Mexico business continues to show great momentum delivering 16% pretax pre provision growth year over year and a return on equity of 25%.

Speaker 2: Our Mexico business continues to show great momentum, delivering 16% pre-tax, pre-provision growth year over year, and a return on equity of 25%.

Speaker 2: We are well positioned to strategically support both local and multinational clients in Mexico as a wave of supply chain related foreign direct investment drives outsized industrial activity and economic growth.

We are well positioned to strategically support both local and multinational clients in Mexico as a wave of supply chain related foreign direct investment drives outsized industrial activity and economic growth.

Speaker 2: Global wealth management earnings grew 4% from the prior quarter. Strong relative investment performance and continued momentum in our international wealth business tempered the impact of a negative industry investment fund flows.

Global wealth management earnings grew 4% from the prior quarter strong relative investment performance and continued momentum in our international wealth business tempered the impact of a negative industry investment fund flows.

Speaker 2: Global banking and markets delivered solid results on stronger capital markets activity in conjunction with moderating loan growth as the business continues efforts to optimize capital allocation with a focus on return metrics.

Global banking and markets delivered solid results on stronger capital markets activity in conjunction with moderating loan growth as the business continues efforts to optimize capital allocation with a focus on return metrics.

Speaker 2: Inclusive of continued strong results in GBM LATAM, GBM delivered earnings of $748 million, up 31% year-over-year and 11% sequentially, driven largely by growth in our fee and client underwriting and advisory business.

Inclusive of continued strong results in GBM, Latam GBM delivered earnings of $748 million up 31% year over year, and 11% sequentially driven largely by growth on our feet and client underwriting and advisory business.

In summary results across our businesses reflect the bank's ability to generate solid earnings through a period of economic uncertainty and transition.

Speaker 2: In summary, results across our businesses reflect the bank's ability to generate solid earnings through a period of economic uncertainty and transition.

Our results also reflect early actions in support of the priority initiatives I have previously outlined primary client growth purposeful capital allocation and excellence in operating efficiency.

Speaker 2: Our results also reflect early actions in support of the priority initiatives I have previously outlined. Primary client growth, purposeful capital allocation, and excellence in operating efficiency.

Speaker 2: Growing client primacy is critical to delivering on our strategy, which means bringing the entire bank to our clients to earn core relationships.

Growing client privacy is critical to delivering on our strategy, which means bringing the entire bank to our clients to earn core relationships.

Speaker 2: In each of our business lines, we are evaluating our approach to relationship building and our opportunity for relationship deepening.

And each of our business lines, we are evaluating our approach to relationship building and our opportunity for relationship deepening.

Speaker 2: We will look to prioritize markets where we have scale opportunity and target client segments where we have the product capability and connectivity to be a lead financial services provider.

We will look to prioritize markets, where we have scale opportunity and target client segments, where we have the product capability and connectivity to be a lead financial services provider.

Speaker 2: Allocating capital to the businesses where we have the highest return through a disciplined approach will result in profitable growth for the bank.

Allocating capital to the businesses, where we have the highest return through a disciplined approach will result in profitable growth for the bank.

Speaker 2: Operational excellence will entail continuing to digitize and streamline the way we do business to create efficiency across our bank.

Operational excellence will entail continuing to digitize and streamline the way, we do business to create efficiency across our bank.

Speaker 2: We want to make it easier to do business with us through continued digitization, simplified internal processes, and enhanced client interaction.

We want to make it easier to do business with us through continued digitization simplified internal processes and enhance client interactions.

Speaker 2: We are committed to ongoing productivity initiatives and a collaborative culture that positions us to win for our shareholders, colleagues and communities.

We are committed to ongoing productivity initiatives and a collaborative culture that positions us to win for our shareholders colleagues and communities.

In closing I would like to welcome Jackie Alard, who joins US next week as our Deputy had global wealth management and will assume leadership of that business early next year.

Speaker 2: In closing, I would like to welcome Jackie Allard, who joins us next week as our Deputy Head, Global Wealth Management, and we'll assume leadership of that business early next year.

Speaker 2: Jackie will work closely through a transition period with Glenn Gowland who has done a fantastic job building our wealth business to scale in recent years.

Jackie will work closely through a transition period with Glen Gowland, who has done a fantastic job building our wealth business to scale in recent years.

Speaker 2: I look forward to having Glenn work closely with me on strategic initiatives across the organization in his new role as a vice chair of the bank.

I look forward to having Glenn work closely with me on strategic initiatives across the organization in his new role as Vice chair of the bank.

Speaker 2: And finally, I wanted to acknowledge the devastating wildfires in the Northwest Territories and my home province of British Columbia.

And finally I wanted to acknowledge the devastating wildfires in the northwest territories, and my home Province of British Columbia.

Speaker 2: I want all our employees and clients to know that we're thinking of them and here to support.

I want all our employees and clients to know that we're thinking of them in here to support.

Speaker 2: We have made a donation to the Canadian Red Cross, the United Way Northwest Territories, and the Kelowna Firefighters to support relief and recovery efforts, and we are raising additional funds through our branches across Canada.

We've made a donation to the Canadian Red Cross, the United Way Northwest territories, and the Colonna firefighters to support relief and recovery efforts and we are raising additional funds through our branches across Canada.

Speaker 2: We remain focused on the safety of our employees and ensuring we're here to support our clients during this difficult time.

Remained focused on the safety of our employees and ensuring we're here to support our clients during this difficult time.

Speaker 2: With that, I will turn the call over to Raj for a more detailed review of our financial

With that I will turn the call over to Raj for a more detailed review of our financials.

Thank you Scott and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition related costs.

Speaker 3: Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition-related costs.

Speaker 3: I'll begin with a review of the performance for the quarter on Flight 5.

I'll begin with a review of the performance for the quarter on slide five.

Speaker 3: The bank reported quarterly adjusted earnings of $2.2 billion and dilated EPS of $1.73 and return on equity was $12.

The bank reported quarterly adjusted earnings of $2.2 billion in diluted EPS of $1 73.

And return on equity was 12, 2%.

Speaker 3: All bank pre-tax pre-provision profit decreased 2% year over year but increased 5% quarter over quarter.

All bank pretax pre provision profit decreased 2% year over year, but increased 5% quarter over quarter.

Speaker 3: Year over year, the decline was driven mainly by higher funding costs, which is recorded in the other segment, and lower wealth management results driven by challenging market conditions.

Year over year, the decline was driven mainly by higher funding costs, which is recorded in the other segment and lower wealth management results driven by challenging market conditions.

Net interest income was $4 6 billion.

Down 2% year over year as loan growth and the positive impact of foreign currency translation, but offset by lower margins.

Speaker 3: down 2% year over year as loan growth and the positive impact of foreign currency cancellation were offset by lower margins.

Speaker 3: The net interest margin declined 12 basis points year over year, and three basis points quarter over quarter, mostly from higher funding costs due to central bank rate increases.

The net interest margin declined 12 basis points year over year.

And three basis points quarter over quarter, mostly from higher funding costs due to central bank rate increases.

Speaker 3: Recall, given the increased probability for rates to remain higher for longer, last quarter we modified our interest rate positioning while remaining positioned to benefit meaningfully from declining interest rates.

Recall, given the increased probability for rates to remain higher for longer.

Last quarter, we modified our interest rate positioning while remaining position to benefit meaningfully from declining interest rates.

Speaker 3: For the second quarter in a row, deposit growth outpaced loan growth, resulting in a loan-to-deposit ratio of 114% and improvement of approximately 140 basis points quarter over quarter.

For the second quarter in a row deposit growth outpaced loan growth, resulting in a loan to deposit ratio of 114% an improvement of approximately 140 basis points quarter over quarter.

Speaker 3: Non-interest income was $3.5 billion, up 12% year-over-year, mainly due to higher banking revenues, trading-related revenues in fixed income and equities, underwriting and advisory fees, and wealth management revenue.

Noninterest income was three and a half billion dollars up 12% year over year, mainly due to higher banking revenues trading related revenues in fixed income and equities underwriting and advisory fees and wealth management revenues.

Speaker 3: The PCL ratio was 42 basis points this quarter, of which 4 basis points was performing PCLs. So we will cover PCL in more detail.

The PCL ratio was 42 basis points this quarter of a 12 basis points was performing T. C L.

A little color PCL in more detail later.

Quarter over quarter expenses were flat or down 1%, excluding the unfavorable impact of foreign currency translation.

Speaker 3: Quarter over quarter expenses were flat or down 1% excluding the unfavorable impact of foreign currency translations driven by lower share and performance based compensation and employee benefits.

And by lower share and performance based compensation and employee benefits.

Speaker 3: partly offset by the three additional days in the quarter.

Partially offset by the three additional days in the quarter.

Speaker 3: Expenses increased 9% year over year, or 5% excluding the unfavorable impact of foreign currency translation.

Expenses increased 9% year over year or 5%, excluding the unfavorable impact of foreign currency translation.

Speaker 3: reflecting growth in staffing related costs, technology costs, amortization, and advertising and business development.

And growth in staffing related costs technology costs, amortization and advertising and business development.

Speaker 3: The productivity ratio was 56.1% the squatter and improvement of 140 basis points quarter over quarter as revenue growth out base takes place.

The productivity ratio was 56, 1% this quarter, an improvement of 140 basis points quarter over quarter as revenue growth outpaced expenses.

Speaker 3: year-to-date operating leverage was negative 7.4 percent.

Year to date operating leverage was negative seven 4%.

The effective tax rate was 18, 4% this quarter compared to 18, 9% a year ago, driven by higher income and lower tax rate jurisdictions and higher tax exempt income in the quarter.

Speaker 3: Defective tax rate was 18.4% this quarter compared to 18.9% a year ago, driven by higher income in lower tax rate jurisdictions and higher tax exempt income in the quarter, partly offset by lower inflationary adjustments in international banking.

Partially offset by lower inflationary adjustments in international banking.

Turning to slide six.

Speaker 3: This slide provides an evolution of the common equity tier one ratio over the quarter, as well as the quarter changes and risk weighted assets.

This slide 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: The banks reported a common equity tier one ratio of 12.7%, an increase of approximately 40 basis points.

The banks reported a common equity tier one ratio of 12, 7% an increase of approximately 40 basis points.

Speaker 3: Net internal capital generation was strong at 37 basis points, including a lower risk-weighted asset number.

Net internal capital generation was strong at 37 basis points, including a lower risk weighted asset number.

Under the dividend reinvestment plan the bank issued 7 million shares that contributed 11 basis points.

Speaker 3: Under the dividend reinvestment plan, the bank issued 7 million shares that contributed 11 basis points.

Speaker 3: Risk-weighted assets were $439.8 billion during the quarter, a decrease of approximately $11.3 billion from the previous quarter.

Risk weighted assets were $439 8 billion during the quarter a decrease of approximately $11 3 billion from the previous quarter.

Speaker 3: Lower business loan growth, a reduction in the capital floor add-on of approximately $7 billion, and the benefits from the inaugural synthetic risk transfer transaction reduced the risk weighted asset during the quarter.

Lower business loan growth a reduction in the capital, Florida add on of approximately $7 billion and the benefits from the inaugural synthetics restaurants or transaction.

Reduce our risk weighted asset during the quarter.

The bank's capital ratio, so I'd expect it to continue to grow in Q4.

Speaker 3: the bank's capital ratios are expected to continue to grow in Q4.

Speaker 3: In addition, the bank's liquidity coverage ratio, or LCR, improved 200 basis points quarter over quarter to 133% this quarter and was significantly up from 122% last year.

In addition, the bank's liquidity coverage ratio or LCR improved 200 basis points quarter over quarter to 133% this quarter and it was significantly up from 122% last year.

Yeah.

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

Speaker 3: Turning now to the Business Minds results beginning on slide 7.

Speaker 3: Canadian banking reported earnings of $1.1 billion, a decrease of 13% year over year, due to higher provision for credit losses and non-interest expenses.

Canadian banking reported earnings of $1.1 billion, a decrease of 13% year over year due to a higher provision for credit losses and noninterest expenses.

Pre tax pre provision profit grew 2% year over year as revenue growth of 3% was partially offset by expense growth of 5%.

Speaker 3: Pre-tax-free provision profit grew 2% year over year as revenue growth of 3% was partly offset by extensive growth of 5%.

Speaker 3: pre-tax pre-provision profit increased a strong 5% quarter over quarter.

Pre tax pre provision profit increased a strong 5% quarter over quarter.

Speaker 3: Net interest income increased 4% year over year as deposits grew a strong 11% and earning assets grew a modest 3%.

Net interest income increased 4% year over yoda's deposits grew a strong 11% and earning assets grew a modest 3%.

Speaker 3: quarter over quarter margin expanded by five basis points due primarily to higher deposit margin.

Quarter over quarter margin expanded by five basis points due primarily to higher deposit margins.

Average loans and acceptance has grown 3% year over year.

Speaker 3: Average loans and acceptances grew 3% year over year.

Speaker 3: We saw continued growth in our higher yielding portfolios as business loans grew 13%, personal loans grew 4% and credit cards increased 17%.

We saw continued growth in our higher yielding portfolios as business loans grew 13% personal loans grew 4% and credit cards increased 17%.

Speaker 3: This was offset by a decline of 1% in residential mortgage balance.

This was offset by a decline of 1% and residential mortgage balances.

Average loan balances was in line with last quarter as a decline in mortgage balances was offset by growth in business personal and credit cards.

Speaker 3: Afford's loan balance was in line with last quarter as the decline in mortgage balances was offset by growth in business, personal and credit cards.

Speaker 2: We continue to see strong deposit growth with average deposits again up 11% year over year and 2% quarter over quarter.

We continue to see strong deposit growth with average deposits again up 11% year over year and 2% quarter over quarter.

Speaker 2: year-over-year personal deposits grew 13%, primarily in term products, and non-personal deposits increased 6% in the year-over-year.

Year over year personal deposits grew 13%.

I'm really into them products and non personal deposits increased 6%.

Speaker 2: The loan-to-deposit ratio has improved to 129% from 139% last year in the second.

The loan to deposit ratio has improved to 129% from 139% last year in this segment.

Speaker 2: Non-interest income was down 1% year-over-year, driven by lower cost revenue and reduced income from associated corporations.

Noninterest income was down 1% year over year, driven by lower cost of revenue and reduced income from associated corporations.

Expenses increased 5% year over year, primarily due to higher personnel costs from increased client facing staff and inflationary adjustments.

Speaker 2: Expenses increased 5% year-over-year primarily due to higher personal costs from increased client-facing staff and inflationary adjustments.

Speaker 2: quarter over quarter expenses were down a modest 1%.

Total quarter expenses were down a modest 1%.

Speaker 2: The BCL ratio was 27 basis points, an increase of 7 basis points quarter over quarter.

The PCL ratio was 27 basis points, an increase of seven basis points quarter over quarter.

Turning now to global wealth management on slide eight.

Speaker 2: Earnings of $373 million declined 3% year-over-year, primarily due to Canadian wealth being down 7%.

Earnings of $373 million declined 3% year over year, primarily due to Canadian wealth being down 7%.

Speaker 2: International wealth earnings grew a strong 26% year over year.

International wealth earnings grew a strong 26% year over year.

Speaker 2: earnings grew 4% quarter over quarter in spite of difficult market conditions.

Earnings grew 4% quarter over quarter in spite of difficult market conditions.

Revenue grew 2% year over year, and 3% quarter over quarter due primarily to higher mutual fund.

Speaker 2: Revenue grew 2% year over year and 3% quarter over quarter, due primarily to high mutual fund and brokerage revenue.

Brokerage revenues.

Expenses were up 6% year over year from expansion of revenue generating sales force and 3% quarter over quarter driven by higher volumes.

Speaker 2: Expenses were up 6% year over year from expansion of revenue generating sales force and 3% quarter over quarter driven by higher volume.

Speaker 2: Assets under management increased 4% year-over-year to $331 billion as market appreciation was partly offset by net redemption.

Assets under management increased 4% year over year to $331 billion as market appreciation was partially offset by net redemptions.

Speaker 2: As such, the administration increased 9% over the same period to $631 billion from both market appreciation and higher net sales.

Assets under administration increased 9% over the same period to 631 billion.

From both market appreciation and higher net sales.

While investment funds in Canada remain in net redemptions Scotia Global asset management investment result continued to perform well against their benchmarks and the bank maintained its number two ranking and investment funds in Canada.

Speaker 2: While investment funds in Canada remain in net redemptions, Scotia Global Asset Management investment results continue to perform well against their benchmarks, and the bank maintained its number two ranking in investment funds in Canada.

Speaker 2: international wealth generated earnings of 60 million dollars driven by higher net interest income and business volume growth.

International wealth generated earnings of $60 million.

And by higher net interest income and business volume growth.

Speaker 2: International wealth management, AUA, grew 21% year over year to $130 billion.

International wealth management.

<unk> grew 21% year over year to $130 billion.

Speaker 2: Turning to slide nine, global banking and markets, generated earnings of $434 million, up 15%

Turning to slide nine global banking and markets generated earnings of $434 million.

Up 15% year over year.

Speaker 2: Revenues grew 17% year-over-year, outpacing expense growth of 16%.

Revenues grew 17% year over year outpacing expense growth of 16%.

Capital markets revenue was up 41% year over year as F. I C. C grew 52% in global equities grew 28%.

Speaker 2: Capital markets revenue was up 41% year over year as FICC grew 52% and global equities grew 28%.

Speaker 2: Business banking revenue grew 2% and the loans grew 13% year over year.

Business banking revenues grew 2%.

And the loans grew 13% year over year.

Net interest income was down 17% year over year as a result of lower corporate lending and deposit margins and lower loan fees.

Speaker 2: Net interest income was down 17% year-over-year as a result of lower corporate lending and deposit margins and lower loan fees.

Noninterest income grew $259 million or 35% year over year.

Speaker 2: Non-interest income grew $259 million or 35% year over year.

Speaker 2: primarily due to higher underwriting and advisory fees and growth in trading-related revenue in fixed income and ex...

Primarily due to higher underwriting and advisory fees and growth in trading related revenue and fixed income and equities.

Expenses were up a modest 1% quarter over quarter, mainly from higher performance based compensation and salaries.

Speaker 2: Expenses were up a modest 1% quarter-over-quarter mainly from higher performance-based compensation and salaries.

On a year over basis.

Speaker 2: Expenses were up 16% due mainly to higher personal costs and technology investments both related to business growth.

Expenses were up 16% due mainly to higher personal cost and technology investments both related to business growth.

Speaker 2: The provision for credit losses was a recovery of $6 million driven by Stage 3 recovery.

The provision for credit losses was a recovery of 6 million driven by state Street comedies.

Speaker 2: The US business generated earnings of $217 million this quarter.

The U S business generated earnings of $217 million this quarter.

Speaker 2: GBM Latin America, which is reported as part of international banking, had another strong quarter reporting earnings of $314 million.

GBM Latin America, which is reported as part of international banking had another strong quarter reporting earnings of $314 million.

Speaker 2: up 64% year-over-year driven by Mexico, Chile and Brazil.

Up 64% year over year, driven by Mexico, Chile and Brazil.

Okay.

Moving to slide 10 for a review of International banking My comments that follow on unadjusted and constant dollar basis.

Speaker 2: My comments said follow auto-none adjusted and constant dollar based.

Speaker 2: The segment reported net income of $635 million down 8% year over year.

The segment reported net income of $635 million down 8% year over year.

Speaker 2: However, pre-tax pre-provision profit grew a strong 11%.

However, pretax pre provision profit grew a strong 11%.

Speaker 2: The Pacific Alliance was up 10%, with strong growth in Mexico of 16% and 19% growth in Caribbean and Central America.

The Pacific Alliance was up 10%, but strong growth in Mexico, or 16% and 19% growth in Caribbean and Central America.

Revenue was up 8% year over year, driven by good loan growth higher net interest margin and strong capital markets and corporate banking revenues in Mexico and Chile.

Speaker 2: Revenue is up 8% year-over-year driven by good loan growth, high net interest margin, and strong capital markets and corporate banking revenues in Mexico and Chile.

Speaker 2: year over year loan growth moderated at 5%.

Year over year loan growth moderated.

5%.

Speaker 2: mortgages were up 10%, personal loans and credit cards grew 3% and business banking was up 3%.

Mortgages were up 10% personal loans and credit cards grew 3% in business banking was up 3%.

Speaker 2: Deposits grew a strong 8% year over year and 1% quarter over quarter, reducing the loan to deposit ratio to approximately 400 basis points year over year.

Deposits grew a strong 8% year over year, and 1% quarter over quarter, reducing the loan to deposit ratio at approximately 400 basis points year over year.

Net interest margin expanded 15 basis points year over year.

Speaker 2: Net interest margin expanded 15 basis points year over year. The margin was down two basis points quarter over quarter, mostly from lower inflation benefits in Chile and Uruguay.

The margin was down two basis points quarter over quarter, mostly from lower inflation benefits in Chile and Uruguay.

Speaker 2: The provision for credit losses was 118 basis points, or $516 million, up 15 basis points from last quarter.

The provision for credit losses was 118 basis points or $516 million.

15 basis points from last quarter.

On a quarter over quarter basis expenses were down 1% due to lower salaries and employee benefits.

Speaker 2: On a quarter over quarter basis, expenses were down 1% due to lower salaries and employee benefits.

Speaker 2: On a year-over-year basis, non-interest expense were up 5%, driven mainly by the inflationary impacts on personal costs.

On a year over year basis, noninterest expense was up 5% driven mainly by the inflationary impacts on personnel costs.

Speaker 2: The tax rate of 22.9% for the quarter increased from 20.7% in the prior quarter due to lower inflation readjustments in Chile and Mexico.

The tax rate of 22, 9% for the quarter increased from 27% in the prior quarter due to lower inflationary adjustments in Chile and Mexico.

Turning to slide 11.

Speaker 2: The other segment reported an adjusted net loss attributable to equity holders of $299 million, an improvement of $24 million compared to the prior quarter.

The other segment reported an adjusted net loss attributable to equity holders of 299 million, an improvement of $24 million compared to the prior quarter.

Speaker 2: Quarter over quarter, higher funding costs, mainly driven by continued rate increases, were more than offset by higher income from liquid assets and lower expenses. I'll now turn the call over to Phil to discuss with.

What sort of a quarter higher funding costs, mainly driven by continued rate increases were more than offset by higher income from liquid assets and lower expenses.

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

You Raj and good morning, everyone.

Speaker 4: While we continue to operate in an environment of heightened uncertainty, we believe our business is well positioned to navigate this success.

Well, we continue to operate in an environment of heightened uncertainty we believe our business is well positioned to navigate this successfully.

Unknown Executive: The conference is being recorded. This conference is being recorded.

Operator: The conference is being recorded. This conference is being recorded.

Speaker 4: PCLs in Q3 were 819 million, up 110 million for a reporter, translating to a PCL ratio of 42 bases.

PCL in Q3 were $819 million up $110 million quarter over quarter translating to a PCL ratio of 42 basis points.

Speaker 4: Our PCL ratio reflects four basis points of performing allowance build, reflecting the continued uncertain macroeconomic outlook.

Our PCL ratio reflects four basis points of performing allowance build reflecting the continued uncertain macroeconomic outlook.

John McCartney: Good morning and welcome to Scotiabank's 2023-3rd quarter results presentation. My name is John McCartney, I'm head of investor relations here at Scotiabank. Presenting to you this morning are Scott Thomson, Scotiabank's president, CEO, Rajavis Wanathan, our chief financial officer, and Phil Thomas, our chief risk officer.

John McCartney: Good morning and welcome to Scotiabank's 2023-3rd quarter results presentation. My name is John McCartney. I'm head of investor relations here at Scotiabank.

Speaker 4: This fifth consecutive quarter of performing allowance build contributes to our balance sheet strength with a total ACL coverage now at 78 bases.

This fifth consecutive quarter of performing allowance build contributes to our balance sheet strength with a total ACL coverage now at 78 basis points.

John McCartney: Presenting to you this morning are Scott Thomson, Scotiabank's president and CEO, Rajavis Wanathan, our chief financial officer, and Phil Thomas, our chief risk officer. Following our comments will be glad to take your questions. Also present to take questions are the following Scotiabank executives, Dan Rees from Canadian Banking, Glenn Gallen from Global Book Wealth Management, Francisco Aris de Gaeta from International Banking, and Jake Lawrence from Global Banking and Markets.

Stage three PCL also increased nonperforming provisions of $738 million up $117 million quarter over quarter.

Speaker 4: Stage 3 PCL also increased non-performing provisions of $738 million up $117 million quarter-by-quarter.

John McCartney: Following our comments will be glad to take your questions. Also present to take questions are the following Scotiabank executives, Dan Rees from Canadian Banking, Glenn Gallen from Global Book Wealth Management, Francisco Areesa Gata from International Banking, and Jake Lawrence from Global Banking and Markis. Before we start, and on behalf of those speaking today, I will refer to you slide two of our presentation which contains Scotiabank's caution regarding forward-looking statements.

Speaker 3: The largest increase was in Chile and Colombia on secured retail, where the economies continued to slow.

The largest increase was in Chile, and Colombia unsecured retail where the economies continue to slow.

Speaker 3: In Canada, despite two additional rate increases in Q3, variable rate mortgage customers remain resilient.

In Canada. Despite two additional rate increases in Q3 variable rate mortgage customers remain resilient.

John McCartney: Before we start, and on behalf of those speaking today, I will refer to you slide two of our presentation, which contains Scotiabank's caution regarding forward-looking statements.

Speaker 3: These customers have adjusted quickly with spending down 15% year over year driven by reduction in discretionary areas.

These customers have adjusted quickly with spending down 15% year over year, driven by a reduction in discretionary areas.

Scott Thomson: With that, I will now turn the call over to Scott. Thank you, John, and good morning, everyone. We appreciate you joining us today. The bank reported two-three adjusted earnings of $2.2 billion or $1.73 per share, up 2% sequentially. Pre-tax, pre-provision earnings of $3.5 billion were up 5% compared to the prior quarter. The bank's Q3 results reflect both the resilient performance of our retail and commercial businesses and modest improvement in our market sensitive capital markets and wealth businesses.

Scott Thomson: With that, I will now turn the call over to Scott. Thank you, John, and good morning, everyone. We appreciate you joining us today. The bank reported 2-3 adjusted earnings of $2.2 billion or $1.73 per share, up 2% sequentially. Pre-tax, pre-prevision earnings of $3.5 billion were up 5% compared to the prior quarter. The bank's Q3 results reflect both the resilient performance of our retail and commercial businesses and modest improvements in our market sensitive capital markets and wealth businesses.

Speaker 3: we remain comfortable in our retail, commercial, and corporate customers' ability to manage through this credit cycle.

We remain comfortable in our retail commercial and corporate customers' ability to manage through this credit cycle.

Yeah.

Moving to international retail are secured balances remained stable at 73% of total loans for the third consecutive quarter.

Speaker 3: Moving international retail, our secured balances remain stable at 73% of total loans for the third consecutive quarter.

Speaker 3: While inflation is beginning to ease, the absolute levels of price pressures on consumers remain high.

While inflation is beginning to ease the absolute levels of price pressures on consumers remain high.

Speaker 3: This erosion of purchasing power is impacting the financial health of consumers in the Pacific Alliance, in particular in Chile. This is compounded by a gradual rise in unemployment given the decline in economic activity.

This erosion of purchasing power is impacting the financial health of consumers in the Pacific Alliance in particular in Chile. This is compounded by a gradual rise in unemployment given the decline in economic activity.

Scott Thomson: Although the operating environment has stabilized following the Q2 market dislocation, deposit migration to term products and central bank rate increases continue to increase our funding costs. Importantly, we strengthened our capital liquidity and deposit metrics as we prepare the bank for our next phase of profitable, sustainable growth. We continue to build capital this quarter, resulting in a common equity tier-one capital ratio of 12.7%. Our liquidity coverage ratio was a strong 133% at quarter end, up from 122% in the prior year.

Scott Thomson: Although the operating environment has stabilized following the Q2 market dislocation, deposit migration to term products and central bank rate increases continue to increase our funding costs. Importantly, we strengthened our capital, liquidity, and deposit metrics as we prepare the bank for our next phase of profitable, sustainable growth. We continue to build capital this quarter, resulting in a common equity tier 1 capital ratio of 12.7%. Our liquidity coverage ratio was a strong 133% quarter end, up from 122% in the prior year.

Overall, 90 day delinquency increased eight basis points quarter over quarter within expectations.

Speaker 3: Overall, 90-day delinquent feeding threes 8 basis points quarter-by-quarter within expectation.

Speaker 3: In Q3, the International Banking Retail PCL ratio is 215 basis points compared to 185 basis points in Q2.

In Q3, the international banking retail PCL ratio was 215 basis points compared to 185 basis points in Q2.

Turning to business banking. This portfolio continues to perform well the segment reported sales of 18 basis points down from 21 basis points in Q2.

Speaker 3: Turning to business banking, this portfolio continues to perform well. This segment recorded PCLs of 18 basis points down from 21 basis points in Q2.

Speaker 3: international commercial was stable quarter over quarter, while we had a small release in GBM driven by a recovery on one account.

International commercial was stable quarter over quarter, while we had a small release in GBM driven by a recovery on one account.

Scott Thomson: Deposits once again outpaced loan growth in the period from a sustained focus on deposit growth initiatives across our businesses, improving our loan to deposit ratio. Year-over-year deposits increased by 9% or approximately $55 billion. On a sequential basis, deposits grew in our Canadian banking and international banking franchises. Lending volumes in quarter reflect a more cautious environment from both a household confidence and business investment perspective as seen in activity levels across our various segments and geographies.

Scott Thomson: Deposits, once again outpaced loan growth in the period, from a sustained focus on deposit growth initiatives across our businesses, improving our loan to deposit ratio. Year-over-year deposits increased by 9% or approximately $55 billion. On a sequential basis deposits grew in our Canadian banking and international banking franchises. Lending volumes in the quarter reflect a more cautious environment from both a household confidence and business investment perspective as seen in activity levels across our various segments and geographies.

Speaker 3: Canada, we built performing allowances, being cautious on macroeconomic outlook and headwinds facing commercial real estate.

In Canada, we built performing allowances being cautious on macroeconomic outlook and headwinds facing commercial real estate.

Yeah.

Speaker 2: Our global commercial real estate portfolio is $66.2 billion.

Our global commercial real estate portfolio is $66 2 billion.

Speaker 2: down 1% quarter-to-quarter, representing approximately 8% of our loan portfolio.

Down 1% quarter over quarter, representing approximately 8% of our loan portfolios.

Scott Thomson: The impact of these macroeconomic realities coupled with a more selective and delivered approach to new originations has resulted in a moderation of our loan growth. Expense growth was flat to last quarter and will be a priority as we strive to achieve our medium-term objective of delivering positive operating leverage. Disciplined expense management has always been a core competency of our bank. The higher-for-longer interest rate environment that has played out across our operating geographies has already and will continue to impact consumer health.

Scott Thomson: The impact of these macroeconomic realities coupled with a more selective and delivered approach to new originations has resulted in a moderation of our loan growth. Expense growth was flat to last quarter and will be a priority as we strive to achieve our medium term objective of delivering positive operating leverage. Disciplined expense management has always been a core competency of our bank. The higher for longer interest rate environment that has played out across our operating geographies has already and will continue to impact consumer health.

Speaker 2: We remain focused on undersupplied asset classes with 72% of our CRE exposure in residential and industrial.

We remain focused on under supplied asset classes with 72% of our CRE exposure in residential and industrial.

Speaker 2: Office exposure represents less than 1% of our total loans, and we have built performing allowances if the longer term impact of flexible work remains uncertain.

Office exposure represents less than 1% of our total loans and we have built performing allowances at the longer term impact of flexible work remains uncertain.

Yeah.

Speaker 2: We continue to proactively manage maturities and credit events.

We continue to proactively manage maturities and credit events.

Moving to slide 13.

Speaker 2: Gross impaired loans were up three basis points quarter over quarter to 70 basis points, but remained below pre-pandemic levels.

Gross impaired loans were up three basis points quarter over quarter to 70 basis points, but remain below pre pandemic levels.

Speaker 2: Gills were primarily driven by new formations in retail, specifically in Chile and Colombia.

Skills were primarily driven by new formations in retail specifically in Chile and Colombia.

Business banking guilds were relatively unchanged this quarter.

Speaker 2: Canadian commercial gills increased quarter over quarter, however GBM and international commercial gills were lower.

D and commercial skills increased quarter over quarter, However, GBM in international commercial deals were lower.

Scott Thomson: Through our advanced data and analytics, we're closely monitoring customer behavior and have observed a very rational and responsible shift in spending as households manage through this period of reduced discretionary income. In our core international banking markets, where the interest rate tightening cycle has led most other global economies, we are seeing the impact of recessionary conditions which are reflected in our elevated provisions. With the Chilean economy, for example, now in a recession, its central bank cut rates with a 100 basis point policy rate decrease in late July, and additional rate cuts are expected in the near term.

Scott Thomson: Through our advanced data and analytics, we are closely monitoring customer behavior and have observed a very rational and responsible shift in spending as households manage through this period of reduced discretionary income. In our core international banking markets, where the interest rate tightening cycle has led most other global economies, we are seeing the impact of recessionary conditions which are reflected in our elevated provisions. With the Chilean economy, for example, now in a recession, its central bank cut rates with a hundred basis point policy rate decrease in late July, and additional rate cuts are expected in the near term.

Moving to slide 14.

Canadian banking reported PCL loss of $307 million, the PCL ratio of 27 basis points reflects a performing build.

Speaker 2: Canadian Banking reported PCLs of $307 million. The PCL ratio of 27 basis points reflects a performing build.

Four basis points.

Speaker 2: The quarter-to-quarter increase was due to continued uncertain macroeconomic outlook, a performing build in commercial, and higher impairments in Canadian commercial and prime auto.

Quarter over quarter increase was due to continued uncertain macroeconomic outlook are performing building commercial and higher impairments in Canadian commercial and Prime auto.

Speaker 2: International banking PCLs were $516 million, translating to a PCL ratio of 118 bases.

International banking PCL were $516 million translating to a PCL ratio of 118 basis points.

Scott Thomson: Overall, we remain confident that the investment great bias to our corporate and commercial portfolios coupled with our conservative underwriting standards has the bank very well positioned to manage through this phase of the rate cycle. We continue to build performing allowances and improve our ACL coverage as the longer term macroeconomic outlook continues to be uncertain. From a business line performance perspective, I was particularly encouraged by our revenue led pre-tax, pre-provision growth in each of Canadian banking and international banking, both up year over year and quarter over quarter.

Scott Thomson: Overall, we remain confident that the investment grade bias to our corporate and commercial portfolios coupled with our conservative underwriting standards has the bank very well positioned to manage through this phase of the rate cycle. We continue to build performing allowances and improve our ACL coverage as the longer term macroeconomic outlook continues to be uncertain. From a business line performance perspective, I was particularly encouraged by our revenue led pre-tax pre-provision growth in each of Canadian banking and international banking both up year over year and quarter over quarter.

Speaker 2: The quarter-to-quarter increase was primarily due to retail, driven by delinquency and net write-offs, mainly in Chile and Colombia.

The quarter over quarter increase was primarily due to retail driven by delinquency and net write offs, mainly in Chile and Colombia.

Speaker 2: In International, ACL coverage is now at 218 basis points, up 9 basis points, quarter over quarter.

And international ACL coverage is now at 218 basis points up nine basis points quarter over quarter.

Speaker 2: We continue to build prudent allowances across our portfolios with the all-bank ACL ratio of 78 basis points up 3 basis points quarter by quarter.

We continue to build Britain allowances across our portfolios with the all bank ACL ratio of 78 basis points up three basis points quarter over quarter.

We expect key macroeconomic indicators in Chile, and Colombia to remain challenged in the near term owing to a lagged impact of higher interest rates and the loss of purchasing power associated with high inflation.

Speaker 2: We expect key macroeconomic indicators in Chile and Colombia to remain challenged in the near term owing to a lagged impact of higher interest rates and the loss of purchasing power associated with high inflation.

Scott Thomson: GBM and wealth both showed positive trends as market volatility stabilized. In our Canadian banking business, as expected, profitability was impacted by higher provisions. However, we saw healthy net interest margin expansion, supported by another quarter of double digit deposit growth. Our scene plus loyalty program reached 14 million members in the quarter and has been a strong contributor to new primary client relationships and deeper product penetration with existing customers. Just this month, Home Hardware was added to the scene plus program providing members the opportunity to earn and redeem scene plus points at one of Canada's largest home improvement retailers.

Speaker 2: We continue to closely monitor our portfolio and will respond with adjustments to allowances as appropriate. We remain prudent with new exposures and will focus on high quality borrowers. With that, I will pass the call back to John for Q&A.

We continue to closely monitor our portfolio and will respond with adjustments to allowances as appropriate.

We remain prudent with new exposures and will focus on high quality borrowers with that I will pass the call back to John for Q&A.

Scott Thomson: The scene plus program was an important driver of the strong growth this quarter in Canadian banking deposits and clients who use this as their primary bank for day-to-day payments through credit cards. Our Tangerine franchise is performing well from a deposit gathering and profitability perspective and is increasingly focused on deepening client relationships through card and wealth management cross sell. Importantly, over 80% of our Tangerine deposit flows in Q3 originated from digitally engaged multi-product clients and once again the business delivered double digit revenue and earnings growth on a year over your basis.

Great. Thank you felt operator, if we could queue for questions.

Speaker 2: Great, thank you, Phil. Operator, if we could queue for questions.

Speaker 5: Our first question is from Ibrahim Punaola with the Bank of America. Please go ahead. Good morning.

Yeah.

Question is from Ebrahim <unk>.

With the bank of America.

Go ahead.

Hey, good morning.

I guess just wanted to.

[noise] narrow down on the Canadian banking segment.

Speaker 6: narrow down on the Canadian banking segment, Raj. I think you referenced the loan to deposit ratio.

Definitely.

Sure.

Speaker 6: If we look at loan and deposit balances relative to year-end, loans have been relatively flat, you've grown deposits.

If we look at loan and deposit balances relative to year end loans had been that it could be flat you're growing deposits.

Speaker 6: And I know deposits growth and deposits a big priority for Scott. Just give us a sense of, is there a targeted loan to deposit ratio that you want that business to get to before we see loan balances grow? Like is that intentional and what is the strategy around the deposit customers who are coming on? Are those really sticky customers that you can convert into a multi-pronged relationship or is it driven by rate?

And I know deposits growth in deposits a big priority for Scott just give us a sense of is did a targeted loan to deposit to ensure that you want that business to get to before we see loan balances grow like is that intentional and what what is that.

Did you get on the deposit customers, who are coming on are those really sticky customers that you can convert into a multi pronged relationship or is it driven by rates.

Scott Thomson: International banking delivered solid performance against the challenging economic backdrop with strong revenue growth and good expense control. Earnings were impacted by higher provisions and a normalizing tax rate. Our Mexico business continues to show great momentum delivering 16% pre-tax pre-provision growth year over year and a return on equity of 25%. We are well positioned to strategically support both local and multinational clients in Mexico as a wave of supply chain related foreign direct investment drives outsides industrial activity and economic growth.

Speaker 6: and it's TBD in terms of whether this becomes a lasting relationship for the bank. Thank you.

And Oh it is.

It's TBD in terms of it just becomes a lasting relationship with the bank.

Okay.

Speaker 4: Great, thanks, Ibrahim. I'll just start simplistically on the loan to deposit ratio and I'll pass it on to Dan to talk about, you know, customers and how we are approaching deposits and loans from a client primacy perspective.

Great. Thanks, Hey, Brian I'll, just talk Simplistically on the loan to deposit ratio and I'll pass it onto Dan to talk about you know customers and how we're approaching deposits and loans from our client privacy perspective.

Speaker 4: What we have seen in the reduction in loan to deposit ratio, both in IB as well as in the Canadian bank, is what we are going to continuously aspire to achieve. And like you point out, there are two sides to it, loans and deposits.

What we have seen in the reduction in loan to deposit ratio, both an IV as well as in the Canadian Bank is what we are going to continuously I aspire to achieve and like you point out there's two sides to it as loans and deposits.

Speaker 4: So the deposit drive, I think, will continue because we do need to build our deposit base, something we've been quite clear about since Scott talked about it. I think in January , February of this year, you'll see that momentum continue.

So the deposit drive I think will continue because we do need to build up also base something we've been quite clear to boats and Scott talked about it I think in January February of this year, you'll see that momentum continue.

Scott Thomson: Global wealth management earnings grew 4% from the prior quarter. Strong relative investment performance and continued momentum in our international wealth business tempered the impact of a negative industry investment fund flows. Global banking and markets delivered solid results on stronger capital markets activity in conjunction with moderating loan growth as the business continues efforts to optimize capital allocation with a focus on return metrics. Works, Inclusive of continued strong results in GBM Latam, GBM delivered earnings of 748 million up 31% year over year, and 11% sequentially, driven largely by growth in our fee and client underwriting and advisory business.

Scott Thomson: Global wealth management earnings grew 4% from the prior quarter. Strong relative investment performance and continued momentum in our international wealth business tempered the impact of a negative industry investment fund flows. Global banking and markets delivered solid results on stronger capital markets activity in conjunction with moderating loan growth as the business continues efforts to optimize capital allocation with a focus on return metrics. Marks, Inclusive of Continued Strong Results in GBM Latam, GBM delivered earnings of $748 million, up 31% year over year, and 11% sequentially, driven largely by growth in our fee and client underwriting and advisory business.

Speaker 4: on the entire relationship will be more thoughtful about how we want to grow the share of the wallet and so on. So I'm going to pass it on to Dan. He can talk about it in greater detail. Great. Thanks, Raj. Thank you for him. Dan here. Look, a couple of things I would call it. We are aiming for an ongoing improvement in the LDR ratio in the CB segment.

On the entire relationship will be more thoughtful about how we wanted to grow with the share of the wallet and so on so I'm going to pass it onto die and he can talk about it in greater detail great. Thanks Raj. Thank you even for him Dan here look a couple of things I would call. It we are aiming for a an ongoing improvement in the LDR ratio in the CEB segment.

Speaker 2: We're 129 this quarter, we were 139 a year ago. So that's a substantial change, clearly decelerating loan growth, particularly in mortgages has had an important impact to that as well as the market appetite for term on the personal deposit side. I would call out a few key planks of our mission towards deepening with clients or improving our client primacy.

We're 129 this quarter, we were 139 a year ago. So that's a substantial change clearly decelerating loan growth, particularly in mortgages has had an important impact of that as well as the market appetite for term on the personal deposit side I would call out a few key planks of our mission.

Scott Thomson: In summary, results across our businesses reflect the bank's ability to generate solid earnings through a period of economic uncertainty and transition. Our results also reflect early actions in support of the priority initiatives I have previously outlined, primary client growth, purposeful capital allocation, and excellence in operating efficiency. Growing client primacy is critical to delivering on our strategy, which means bringing the entire bank to our clients to earn core relationships. In each of our business lines, we are evaluating our approach to relationship building and our opportunity for relationship deepening.

Towards deepening with clients or improving our client privacy Scott off the top referred to the importance of seen we've seen on the back of that customer loyalty program about a half a million new day to day accounts opened in the last year those would be core deposit low price.

Speaker 2: I know Scott off the top referred to the importance of seen. We have seen on the back of that customer loyalty program, about a half a million new day-to-day accounts opened in the last year. Those would be core deposit, low price.

Speaker 2: accounts which are often the result of cross-selling off the existing stock. That would be 0.1. We have also seen substantial improvements in our market share position with new Canadians as a result of target value propositions for those.

Sticky accounts, which are often the result of cross selling off the existing stock that would be 0.1. We've also seen substantial improvements in our market share position with new Canadians as a result of targeted value propositions for those or improvement in Tangerine has also been noticeable Scott called out.

Scott Thomson: We will look to prioritize markets where we have scale opportunity and target client segments where we have the product capability and connectivity to be a lead financial services provider. Allocating capital to the businesses where we have the highest return through a disciplined approach will result in profitable growth for the bank. Operational excellence will entail continuing to digitize and streamline the way we do business to create efficiency across our bank. We want to make it easier to do business with us through continued digitization, simplified internal processes, and enhanced client interactions. We are committed to ongoing productivity initiatives and a collaborative culture that positions us to win for our shareholders, colleagues, and communities.

Speaker 2: Our improvement in tangerine has also been noticeable. Scott called out in his remarks, the deepening on core there. And obviously we've been improving our deposit growth in commercial for quite some time. And in this quarter again at a faster growth rate than loans. So we are intensely decelerating our mortgage growth in favor of clients.

In his remarks, the deepening on core there and obviously, we've been improving our deposit growth in commercial for quite some time and in this quarter again at a faster growth rate than alone. So we are intensely decelerating our mortgage growth in favor of clients and we launched in Q3.

Speaker 2: and we launched in Q3 a really important pilot to deepen the deposit cross-sell-off mortgages at time of origination. So we're being very intentional here as we signal the number of quarters ago and we're really pleased with the cost of that deposit growth.

Really important pilot.

To deepen the deposit cross sell off mortgages at time of origination. So we're being very intentional here as we signaled a number of quarters ago, and we're really pleased with the cost of that deposit growth as Raj mentioned deposit margin improved again this quarter.

Speaker 2: Raj mentioned, deposit margin improved again this quarter.

Scott Thomson: In closing, I would like to welcome Jackie Alar, who joins us next week as our deputy head global wealth management, and will assume leadership of that business early next year. Jackie will work closely through a transition period with Glenn Gowland, who has done a fantastic job building our wealth business to scale in recent years. I look forward to having Glenn work closely with me on strategic initiatives across the organization in his new role as a vice chair of the bank.

Speaker 6: God, that was helpful. And just separately, in terms of when we think about expense management, not that it was a big issue this quarter, we are hearing from peers around the structuring charges. We saw one this quarter, there's probably more coming from others going into four queue. Maybe just stop of the house. Your head count is somewhat flatness about 2% up to the end of 21. Give us a sense of just how you think about expense management, and right-sizing the franchise for the current revenue backdrop.

Got it that was helpful and just separately.

Just when we think about expense management not that it was a big issue this quarter.

Hearing from peers.

Putting charges, we saw one this quarter, there's probably more coming from others going into walk you, maybe just stop of the house.

You had called us somewhat flattish about 2% relative to the end of look when do you want give us a sense of just how you're thinking about expense management and right sizing the franchise for the current revenue back up.

Scott Thomson: And finally, I wanted to acknowledge the devastating wildfires in the Northwest Territories and my home province of British Columbia. I want all our employees and clients to know that we are thinking of them and here to support. We have made a donation to the Canadian Red Cross, the United Way Northwest Territories, and the Klonop firefighters to support relief and recovery efforts, and we are raising additional funds through our branches across Canada. We remain focused on the safety of our employees and ensuring we are here to support our clients during this difficult time.

Scott Thomson: Finally, I wanted to acknowledge the devastating wildfires in the Northwest Territories and my home province of British Columbia. I want all our employees and clients to know that we are thinking of them and here to support. We have made a donation to the Canadian Red Cross, the United Way Northwest Territories, and the Kelowna firefighters to support relief and recovery efforts, and we are raising additional funds through our branches across Canada. We remain focused on the safety of our employees and ensuring we're here to support our clients during this difficult time.

Speaker 7: Thanks Abraham and Scott. I think it's clear to say, clear for me that operational excellence will be an important component of the refresh strategy. And I was pleased to see the cost discipline in the quarter, but also recognize there's more work to do to align the organization and resources around our focus areas for growth. So good progress, but more to do as we as we look forward.

Thanks, Ebrahim it Scott.

I mean, I think it's clear to say are clear for me that's operational excellence will be an important component of our refresh strategy.

And I was pleased to see the cost discipline in the quarter, but also recognize there's more work to do to align the organization and resources around our four focus areas for growth. So a good progress, but more to do as we as we look forward.

Rajagopal Viswanathan: With that, I will turn the call over to Raj for a more detailed review or a financial.

Rajavis Wanathan: With that, I will turn the call over to Raj for a more detailed review of our financials.

Got it thank you.

Rajavis Wanathan: Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition-related costs. I will begin with a review of the performance for the quarter on flight five. The bank reported quarterly adjusted earnings of $2.2 billion and diluted EPS of $1.73. And return on equity was 12.2%. All bank pre-tax-free provision profit decreased 2% year over year, but increased 5% quarter over quarter. Year over year the decline was driven mainly by higher funding costs, which is recorded in the other segment, and lower wealth management results driven by challenging market conditions.

Rajagopal Viswanathan: Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition-related costs. I'll begin with a review of the performance for the quarter on flight five. The bank reported quarterly adjusted earnings of $2.2 billion and diluted EPS of $1.73, and return on equity was $12 0.2%. All bank pre-tax-free provision profit decreased 2% year over year, but increased 5% quarter over quarter. Year over year, the decline was driven mainly by higher funding costs, which is recorded in the other segment, and lower wealth management results driven by challenging market conditions.

Thank you.

Speaker 5: Our next question is from Gabrielle Deschine with National Bank Financial. Please go ahead.

Our next question is from Gabriel <unk> with National Bank Financial. Please go ahead.

Speaker 8: I'd like to follow on the balance sheet management line of questioning.

Likes to follow on the AR balance sheet management question line of questioning them.

In Canada, I mean, you clearly pointed out the mortgages and decelerating growth you've been shrinking our book is a big part of the plan. So I'm. Just wondering you know considering it as mortgages I don't I wouldn't expect a big impact your revenue.

Speaker 8: clearly pointed out that mortgages and decelerating growth, even shrinking that book is a big part of the plan.

Speaker 8: Just wondering, you know, considering it is mortgages, I don't, I wouldn't expect a big impact to your, your breath. Um, they in, in the Canadian business and equally wondering if the declines we.

Hum in the Canadian business and.

Equally wondering if the declines we've seen this quarter and prior.

Were the main drivers of the decline in the AR capital risk floor at all.

Speaker 8: were the main drivers of the decline in the capital risk floor.

Rajagopal Viswanathan: Americans, Ned Inter's income was $4.6 billion, down 2% year over year, as loan growth and the positive impact of foreign currency translation were offset by lower margins. The Ned Inter's margin declined 12 basis points year over year, and 3 basis points quarter to quarter, mostly from higher funding costs due to central bank rate increases. Recall, given the increased probability for rates to remain higher for longer, last quarter we modified our interest rate positioning while remaining position to benefit meaningfully from declining interest rates.

Rajavis Wanathan: Jones, Ned Inter's income was $4.6 billion, down 2% year over year, as loan growth, and the positive impact of foreign currency translation were offset by lower margins. The Ned Inter's margin declined 12 basis points year over year, and three basis points quarter to quarter, mostly from higher funding costs due to central bank rate increases. Recall, given the increased probability for rates to remain higher for longer, last quarter we modified our interest rate positioning while remaining position to benefit meaningfully from declining interest rates.

I'll talk to the capital rates Flora and then Dan can probably talk about the business in any more detail than you did you gave.

Speaker 4: Alphard has a capital risk floor and then Dan can probably talk about the business and then more detail than he did. The capital risk floor is actually driven by three different components and I think it's it's an important factor that will impact you know what the floor add-on is quarter after quarter

The Garboard Russ floor is actually driven by three different confidence and I think it's it's an important.

A factor that will impact you know what the Florida I don't is quarter after quarter.

Speaker 2: because there are drivers that impact the standardized risk weight, there's drivers that impact the ARB calculations, so you're going to see that movement every quarter, not necessarily every quarter down like you saw this quarter. This quarter had three components created. It's actually quite simple. When you break it down, we did the synthetic risk transfer, so that benefited the floor, and that gave us about $2 billion benefiting in the $6.9 billion that we have called out in the slide.

Because there are drivers that impact the standardized earthquake does drive it does not impact the a or b calculation, so you're going to see that movement every quarter not necessarily every quarter down like you saw this quarter. This quarter at three continents, great. It's actually quite simple when you break it down we did this synthetic restaurants for so that benefited the floor and that gave us.

Rajavis Wanathan: For the second quarter in a row, deposit growth outpace loan growth resulting in a loan to deposit ratio of 114%, and improvement of approximately 140 basis points quarter to quarter. Known Inter's income was $3.5 billion, up 12% year over year, mainly due to higher banking revenues, trading related revenues, infixed income inequities, underwriting and advisory fees, and wealth management revenues. The PCL ratio was 42 basis points quarter, of which 4 basis points was performing PCLs, Phil will cover PCL in more detail later.

Rajagopal Viswanathan: For the second quarter in a row, deposit growth outpaced loan growth, resulting in a low deposit ratio of 114%, and improvement of approximately 140 basis points quarter to quarter. Known Inter's income was $3.5 billion, up 12% year over year, mainly due to higher banking revenues, trading related revenues, infixed income inequities, underwriting and advisory fees, and wealth management revenues. The PCL ratio was 42 basis points quarter, of which 4 basis points was performing PCLs, Phil will cover PCL in more detail later.

About $2 billion benefiting in the $6 9 billion that we have called out in the slide.

Speaker 2: The next two billion results from, you know, when you see credit migration which impacts the ARB RWA and standardized as we all know is risk insensitive.

The next 2 billion results from you know when you see credit migration, which in fact say a or b arguably and standardized as we all know his risk insensitive.

Speaker 2: the flow write-down reduces as you see slightly higher credit migration which we saw this quarter. The third one is the split of the allowances, the expected credit losses and the expected losses which is used for Basel. That will move between ARB and standardized and that will move in a direction that helps with the flow write-down this quarter of another two billions.

The Florida I don't reduces as you see slightly higher credit migration.

We saw this quarter and the third one is the split of the allowances they expected credit losses, and the expected losses, which is useful Basel that'll move between a or b and standardized on dock moved in a direction that helped with the Florida out on this quarter are another 2 billion. So it's not going to do with the mortgages question, but I'll, let Dan answer that.

Rajavis Wanathan: Quarter over quarter expenses were flat, or down 1% excluding the unfavorable impact of foreign currency translation driven by lower share and performance based compensation, and employee benefits, partly offset by the three additional days in the quarter. Expenses increased 9% year over year, or 5% excluding the unfavorable impact of foreign currency translation, reflecting growth in staffing related costs. Technology costs, amalgamation, and advertising and business development. The productivity ratio was 56.1% the quarter, and improvement of 140 basis points quarter over quarter, as revenue growth outpaced expenses.

Rajagopal Viswanathan: Quarter over quarter expenses were flat, or down 1% excluding the unfavorable impact of foreign currency translation driven by lower share and performance-based compensation, and employee benefits, partly offset by the three additional days in the quarter. Expenses increased 9% year over year, or 5% excluding the unfavorable impact of foreign currency translation, reflecting growth in staffing related costs, technology costs, amalgamation and advertising and business development. The productivity ratio was 56.1% per quarter, and improvement of 140 basis points quarter over quarter, as revenue growth outpaced expenses.

Speaker 2: So it's not got to do with the mortgages question, but I'd let Dan answer the business question that you had. Thanks, Raj. Dave, we're just being more disciplined with regards to customer selection at time of origination. I think this is a good time to drive that standard higher here because it's a softer, slower housing market. I mean, that is a definite fact affecting the street. We are also being...

Question that you had right.

Yes. Thanks Raj gave you know, we're just being more disciplined with regards to customer selection at time of origination and I think this is a good time to drive that standard higher here, because it's a softer slower housing market I mean that is.

That is a definite factor affecting the street, we are also being.

Speaker 2: more efficient with regards to our use of capital and using customer deselection at renewal as part of that conversation. We like the mortgage business, okay. We're very pleased with the pilot we put in place.

More efficient with regards to our use of capital and using customer deselection that renewal as part of that conversation, we like the mortgage business. Okay.

We're very pleased with the pilot, we probably put in place sequentially spreads expanded as we expected in the mortgage business new spreads are good and the deepening that we've done off the mortgages in the last three or four quarters has been really encouraging I think it's slowed a little bit faster than maybe we might have expected a couple of quarters ago, but customers.

Speaker 2: sequentially spreads expanded as we expected in the mortgage business. New spreads are good and the deep thing that we've done off the mortgages in the last three, four quarters has been really encouraging. I think it's slowed a little bit faster than maybe we might have expected a couple of quarters ago, but customers are behaving well on the VRM side as Phil mentioned, the shift into fixed rate mortgages.

Rajavis Wanathan: Year-to-date operating leverage was negative 7.4%. Defective tax rate was 18.4% this quarter compared to 18.9% a year ago, driven by higher income in lower tax rate jurisdictions, and higher tax exempt income in the quarter, partly offset by lower inflationary adjustments in international banking.

Rajagopal Viswanathan: Year-to-date operating leverage was negative 7.4%. Defective tax rate was 18.4% this quarter compared to 18.9% a year ago, driven by higher income in lower tax rate jurisdictions, and higher tax exempt income in the quarter, partly offset by lower inflationary adjustments in international banking. Turning to slide 6. This slide provides an evolution of the common equity tier 1 ratio over the quarter, as well as the quarter's changes and was weighted assets. The banks reported a common equity tier 1 ratio of 12.7% an increase of approximately 40 basis points.

Are behaving well on the V. R M side as Phil mentioned, the shift into fixed rate mortgages.

Speaker 2: has been prominent through the course of this calendar year as expected. And so we just we know Basel changes are coming. We're focused on liquidity and focused on customers and client parameters.

Been prominent through the course of this calendar year as expected and so we just we know Basel changes are coming we're focused on liquidity and focus on customers and client privacy.

Rajavis Wanathan: Turning to slide 6. This slide provides an evolution of the common equity tier 1 ratio over the quarter, as well as the quarter's changes and was weighted assets. The banks reported a common equity tier 1 ratio of 12.7% an increase of approximately 40 basis points. Net internal capital generation was strong at 37 basis points, including a lower risk weighted asset number. Under the dividend reinvestment plan, the bank issued 7 million shares that contributed 11 basis points.

Speaker 8: Okay, great. And just a quick one on capital, like your CT1 ratio was getting very close to 13% I'm wondering...

Okay, Great and then just a quick one on capital like your your CET one ratio is getting very close.

Close to 13% I'm wondering.

Speaker 8: What does it take to turn off the discount on the drip and then ultimately maybe implement the buyback?

What does it take to turn off the discount on the drip and then ultimately maybe implement the buyback because you're obviously in a good position here.

Rajagopal Viswanathan: Net internal capital generation was strong at 37 basis points, including a lower risk weighted asset number. Under the dividend reinvestment plan, the bank issued 7 million shares that contributed 11 basis points. Rosquited assets were 439.8 billion during the quarter, a decrease of approximately 11.3 billion from the previous quarter. Lower business loan growth, a reduction in the capital flow add-on of approximately 7 billion dollars, and the benefits from the inaugural synthetic was transfer transaction, reduced the risk weighted asset during the quarter.

Speaker 4: Thanks Gabe, it's Raj. Yeah, it is 4.7 as you pointed out. Good growth this quarter. We know it will grow again in Q4, Gabe. I think we'll be closer to 13% from what I can tell. But there's two things we need to think about from SCOTIA's perspective at least.

Thanks, Gabe it's Raj Yeah. It does it is $12 seven as you pointed out good growth. This quarter, we know what to grow again in Q4 gave I think it will be closer to 13% from what I can tell but there's two things we need to think about from scotia's perspective at least.

Rajavis Wanathan: Resquated assets were 439.8 billion during the quarter, a decrease of approximately 11.3 billion from the previous quarter. Lower business loan growth, a reduction in the capital flow add-on of approximately 7 billion dollars, and the benefits from the inaugural synthetic first transfer transaction, reduce the risk weighted asset during the quarter. The bank's capital ratios are expected to continue to grow in Q4. In addition, the bank's liquidity coverage ratio or LCR improved 200 basis points quarter to 133% this quarter and was significantly up from 122% last year.

Speaker 2: the floor is going to go up by 2.5%, so that is going to impact, so we're building for that, definitely. And at this time, the fundamental review of the trading book will be, we know it will be something, right? We don't know the exact number as this moves around with how trading positions move and how our CBA risk changes and so on. So we're preparing ourselves for those two, not to suggest it will be anywhere close to the 100 base.

The Florida is going to go up by two and a half per cent. So that is going to impact. So we're building for that definitely and at this time. The fundamental review of the trading book will be we know what it would be something like we don't know the exact number as this moves out on with you know how trading positions moving or CVA address changes and so on so we had.

Rajagopal Viswanathan: The bank's capital ratios are expected to continue to grow in Q4. In addition, the bank's liquidity coverage ratio or LCR improved 200 basis points quarter to 133% this quarter and was significantly up from 122% last year.

Preparing ourselves for those schools not to suggest that it would be anywhere close to the 100 basis points.

Speaker 2: you know, to go from 13, we want to run about 12%. And then we also have to wait and see what OSPI does in December . So a lot of it to build our balance sheet so that when we are able to talk about our strategic refresh, that we have enough capital balance sheet strength to execute on it from day one.

To go from 13 to be wandering around about 12% and then we also have to wait and see what else fit us in December.

So a lot of it to build our balance sheet. So that when we are able to talk about our strategic refresh that we have enough capital balance sheet strength to execute on it from day one.

Rajagopal Viswanathan: Turning now to the business line results beginning on slide 7. Canadian banking reported earnings are 1.1 billion dollars. A decrease of 13% year-over-year due to higher provision for credit losses and non-interest expenses. Pretax-free provision profit grew 2% year-over-year as revenue growth of 3% was partly offset by extends growth of 5%. Pretax-free provision profit increased as strong 5% quarter to quarter. Net interest income increased 4% year-over-year as deposits grew as strong 11% and earning assets grew a modest 3%.

Rajavis Wanathan: Turning now to the business line results beginning on slide 7, Canadian banking reported earnings are 1.1 billion dollars, a decrease of 13% year over year due to higher provision for credit losses and non-interest expenses. Pretax Free Provision Profit grew 2% year over year as revenue growth of 3% was partly offset by extends growth of 5%. Pretax Free Provision Profit increased a strong 5% quarter over quarter. Net interest income increased 4% year over year as deposits grew a strong 11% and earning assets grew by modest 3%.

Thank you.

Yeah.

Thank you.

Speaker 5: Thank you. All right, next question is from Mario Mandonka with TD Securities. Please go ahead. Raj, I just want to follow up on what you just referred to, because that reference to getting to 13% surprises me a little bit that GOSHA would target 13%. The DSP floors.

Question is from Mario Mendonca with TD Securities. Please go ahead.

I just want to follow up on what you just referred to cause that referenced again to 13%, which surprises me a little bit, but us gaucher would target 13% BR.

Beyond the D. S. B floors is there something else that's driving this.

Speaker 9: pursuit of a higher capital ratio? Are you sensitive to the deterioration in Latin America for example? Is there anything else that I can say?

Our pursuit of a higher capital ratio are you sensitive to whats the deterioration in Latin America for examples or anything else, but I could be missing.

Speaker 2: No, I think we want to stay above 12%, right? 12% above, that hasn't changed at all. I just said it'll go up to 13%. Drip is going to give us another 10, 11 basis points. We know next quarter, Mario. So it's simply 1270 to 1280. We know our RWA growth has been fairly modest in this whole year. I think that'll continue in Q4. It's not the pursuit of 13%, how I describe it.

No I think you know we want to stay above 12% ROIC of 12% about that hasn't changed at all I. Just said it will go up to 13% drip is going to give us. Another 10 11 basis points, we know next quarter Mario.

Rajagopal Viswanathan: Quarter to quarter margin expanded by 5 basis points due primarily to higher deposit margins. At its loans and acceptances grew 3% year-over-year. We saw continued growth in our higher yielding portfolios as business loans grew 13% personal loans grew 4% and credit cards increased 17%. This was offset by a decline of 1% in residential mortgage balances. Office loan balance was in line with last quarter as a decline in mortgage balances was offset by growth in business, personal and credit cards.

Rajavis Wanathan: Quarter to quarter margin expanded by 5 basis points due primarily to higher deposit margins. At its loans and acceptances grew 3% year over year. We saw continued growth in our higher yielding portfolios as business loans grew 13%, personal loans grew 4% and credit cards increased 17%. This was offset by a decline of 1% in residential mortgage balances. At its loan balance was in line with last quarter as a decline in mortgage balances was offset by growth in business, personal and credit cards.

It's simply a 12, 7% or 12 Lady we know what arguably growth has been fairly modest in this whole year I think that will continue in Q4, it's not the pursuit of 13% how I describe it.

Speaker 2: It is more about we will get to 13 percent, which puts us in a fantastic position as we think about our strategic refresh and where we want to go going forward, apart from the two factors I called out. Does the strategic refresh require the bank to have a starting point of 13 percent?

It is more about we will get to 13%, which puts us in a fantastic position as we think about our strategic refresh embedded we wanted to grow going forward apart from the two factors I called it out because the strategic refresh require the bank to have a starting point of 13% is there something about the strategic refresh that necessitates a higher capital ratio.

Rajavis Wanathan: We continue to see strong deposit growth with average deposits again up 11% year over year and 2% quarter quarter. Year over year of personal deposits grew 13%. Primarily in term products and non-personal deposits increased 6%. The loan deposit ratio has improved to 129% from 139% last year in the segment. Non-interest income was down 1% year over year driven by lower cards revenue and reduced income from associated corporations. Expenses increased 5% year over year primarily due to higher personal costs from increased client-freezing staff and inflationary adjustments. Quarter over quarter expenses were down a modest 1%. The PCL ratio was 27 basis points and increase of 7 basis points quarter over quarter.

Rajagopal Viswanathan: We continue to see strong deposit growth with average deposits again up 11% year-over-year and 2% quarter quarter. Year-over-year personal deposits grew 13% primarily in term products and non-personal deposits increased 6%. The loan-to-deposit ratio has improved to 129% from 139% last year in the segment. Non-interest income was down 1% year-over-year driven by lower cards revenue and reduced income from associated corporations. Expenses increased 5% year-over-year primarily due to higher personal costs from increased client-freezing staff and inflationary adjustments. Quarter to quarter expenses were down a modest 1%. The PCL ratio was 27 basis points and increased of 7 basis points quarter to quarter.

Speaker 2: No, it does not Mario. It absolutely does not. The 13% is just an outcome of how we manage capital through 2023. It puts us in a great position where capital will not be a constraint for all the growth we want to have.

No. It does not matter yeah. It absolutely does not the 13% is just an outcome of how we manage capital through 2023, it puts us in a great position that capital will not be a constraint for all the growth we wanted to have.

Speaker 9: I referred to the risk transfer as your inaugural risk transfer. I took that to mean there's more to come.

You referred to the the risk transfer as your inaugural was transfer I took that to mean, there's more to come did I interpret that correctly.

Speaker 2: No, I meant inaugural simply as the first one we have done. It doesn't mean we will do more, but what it does is it gives us another tool in the toolkit as we manage capital. And basically we have tested out the plumbing, so to speak, and we know that if necessary, we will have the ability to do it operationally. That's all I meant to say. Is there any way to size the...what I'm trying to figure out here is for every 10 bases...

No I meant inaugural simply ask the first one we have done it doesn't mean, we will do more but what it does is it gives us another tool in the tool kit as we manage capital and basically we are desperate out the plumbing so to speak and we know that if necessary. We will have the ability to do it operationally. That's all I meant to say is there any way to size.

The.

What I'm trying to figure out here is.

For every 10 basis point lift you get in your capital ratio is a result of of a risk transfer.

Rajagopal Viswanathan: Turning now to global wealth management on slide 8. Earnings of 373 million decline 3% year-over-year primarily due to Canadian wealth being down 7%. International wealth earnings grew a strong 26% year-over-year. Earnings grew 4% quarter to quarter in spite of difficult market conditions. Revenue grew 2% year-over-year and 3% quarter to quarter due primarily to higher mutual fund and brokerage revenues. Expenses were up 6% year-over-year from expansion of revenue generating sales force and 3% quarter to quarter driven by higher volumes.

Rajavis Wanathan: Turning now to global wealth management on slide 8. Earnings of 373 million decline 3% year over year primarily due to Canadian wealth being down 7%. International wealth earnings grew a strong 26% year over year. Earnings grew 4% quarter over quarter in spite of difficult market conditions. Revenue grew 2% year over year and 3% quarter over quarter due primarily to higher mutual fund and brokerage revenues. Expenses were up 6% year over year from expansion of revenue generating sales force and 3% quarter over quarter driven by higher volumes.

It didn't it.

Implies a certain percentage decline in your EPS or pennies I mean, your EPS is there anything you can give me to help me understand that dynamic.

Speaker 2: I can speak to you offline on that Mario. I think the synthetic risk transfer will have a small cost attached to it. The way we think about it is what is the cost of equity of the bank and the cost of equity of the bank. You can take weighted average cost of capital, call it 11%. As long as it's significantly south of that, we feel like it's accretive to the EPS. Which just means that we've got to manage capital through other levers if we continue to do synthetic.

I can speak to you offline on that Mario I think.

Particular transfer will have a small cost attached to it is the way we think about it is what is the cost of equity off the bank and the cost of the equity of the bank and all you can take weighted average cost of capital call. It 11% as long as it significantly south of that we feel like it's accretive to the E. P. S, which just means that'd be go to manage capital through other.

If we continue to produce synthetic costanza and final thing then perhaps this is for Scott you referred I think the phrase you used was prioritized markets.

Rajavis Wanathan: As the fund management increased 4% year over year to 331 billion dollars as market appreciation was partly offset by net redemption. Associations, Athens and the administration increased 9% over the same period to $631 billion from both market appreciation and higher net sales.

Rajagopal Viswanathan: As the fund management increased 4% year-over-year to $331 billion as market appreciation was partly offset by net redemption. Associations, Athens and the administration increased 9% over the same period to $631 billion from both market appreciation and higher net sales. While investment funds in Canada remain in net redemptions, Scotia Global asset management investment results continue to perform well against their benchmarks, and the bank maintained its number two ranking in investment funds in Canada. International wealth generated earnings of $60 million, driven by higher net interest income and business volume growth. International wealth management, AUA, grew 21% year over year to $130 billion.

Speaker 9: Okay, final thing then. Perhaps this is for Scott. You referred, I think the phrase you used was prioritize markets. Perhaps this is going to be part of your discussion in the refresh.

Perhaps this is gonna be a part of your discussion and a refresh but what do you mean by prioritize markets or are you signaling that the bank would exit certain markets in Latin America for example.

Rajavis Wanathan: While investment funds in Canada remain in net redemptions, Scotia Global asset management investment results continue to perform well against their benchmarks, and the bank maintained its number two ranking in investment funds in Canada. International wealth generated earnings of $60 million, driven by higher net interest income and business volume growth. International wealth management, AUA, grew 21% year over year to $130 billion.

Speaker 7: Mario, I think, you know, going forward, our plan is to prioritize capital allocation to areas where we see the highest risk adjusted return on a full cycle basis.

Mario I think you know going forward our plan is to prioritize capital allocation to areas, where we see the highest risk adjusted return on a full cycle basis.

Speaker 7: we'll take into consideration where we can build competitive advantage and also connectivity across the platform. So we'll have more to say on that at investor day.

We will take into consideration, where we can build competitive advantage and also connectivity across the platform. So we'll have more to say on that at Investor day.

Speaker 7: But no, I wouldn't read too much into my comments that you refer to. And then secondly, I'd come back to the capital piece just to reinforce what Raj said, recognizing I'm relatively new in role. Right now with what OSCI has highlighted.

But no I wouldn't read too much into my comments that you referred to and then secondly, I'd come back to the capital piece just to reinforce what Raj said are recognizing you know I'm relatively new enroll right now with what Osophy has highlighted.

Rajagopal Viswanathan: Turning to slide 9 global banking and markets, generated earnings of $434 million, up 15% year over year. Revenue grew 17% year over year, outpacing expense growth of 16%. Copper market revenue was up 41% year over year, as FICC grew 52% and global equities grew 28%. Business banking revenue grew 2%, and the loans grew 13% year over year. Net interest income was down 17% year over year as a result of lower corporate lending and deposit margins and low of loan fees.

Rajavis Wanathan: Turning to slide 9 global banking and markets, generated earnings of $434 million, up 15% year over year. Revenue grew 17% year over year, outpacing expense growth of 16%. Copper market revenue was up 41% year over year, as FICC grew 52% and global equities grew 28%. Business banking revenue grew 2% and the loans grew 13% year over year. Net interest income was down 17% year over year as a result of lower corporate lending and deposit margins and low of loan fees.

Speaker 7: you know, 12%, that's the right number, you know, plus 12%. So I don't want at all you to think that we should be running here at 13%.

12%, that's the right number plus 12% so I don't want it all you to think that we should be running here at 13%, but we do have a situation where there's going to be some offsets in Q1 associated with Basel when there's uncertainty with what oxy is doing and so the objective here would be to get off the drip as soon as we can and we also ran.

Speaker 7: But we do have a situation where there's going to be some offsets in Q1, associated with Vazel, and there's uncertainty with what off he's doing. And so the objective here would be to get off the drip as soon as we can. And we also recognize that the risk transfer is not a good use of capital. And so...

Besides that the the risk transfer is not a good use of capital and so.

Speaker 7: trying to manage this prudently given the uncertainties, but also being rarely sensitive to the shareholder is the key objective here going forward.

You know trying to manage this prudently given the uncertainties, but also being really sensitive to the shareholder is the key objective here going forward.

Thank you.

Okay.

Thank you.

Speaker 5: Thank you. Our next question is from Doug Young Desjardins Capital Markets

Rajagopal Viswanathan: Non-interest income grew $259 million or 35% year over year, primarily due to higher underwriting and advisory fees and growth in trading related revenue in fixed income and equities. Expenses were up a modest 1% quarter to quarter mainly from higher performance-based compensation and salaries. On a year over basis, expenses were up 16% due mainly to higher personal costs and technology investments both related to business growth. The provision for credit losses was a recovery of $6 million, driven by stage 3 recoveries.

Rajavis Wanathan: Non-interest income grew $259 million or 35% year over year, primarily due to higher underwriting and advisory fees and growth in trading related revenue in fixed income and equities. Expenses were up a modest 1% quarter to quarter mainly from higher performance-based compensation and salaries. On a year over basis, expenses were up 16% due mainly to higher personal costs and technology investments both related to business growth.

Next question is from Doug Young with dish I think capital markets. Please go ahead.

Speaker 10: Hi, good morning. Just maybe a two-part NIM question. I mean NIM up in Canada, up in international, down at the all bank level. Can you talk a bit about the drivers and corporate?

Hi, Good morning, just maybe I am too.

Two part question I mean, NIM up in Canada, and international down at the all bank level can you talk a bit about the drivers in corporate.

Speaker 3: Raj, I think you signaled last quarter that you've made some changes in the hedge book. And as we think about what you've talked about and Dan's talked about on the deposit and the loan grow side, how should we think about NIMS evolving over the next year, maybe at the divisional level, but also as it kind of goes through the corporate and to the all-bank level as well?

Raj I think you signaled last quarter that you've made some changes in the hedge book.

And as we think about what you've talked about and Dan talked about the deposit and the loan growth side like how should we think about nims are evolving over the next year or maybe at the divisional level, but also as it kind of goes through the corporate to the all bank level as well.

Rajavis Wanathan: The provision for credit losses was a recovery of $6 million driven by state's three recoveries. The US business generated earnings of $217 million as a quarter. GBM Latin America, which is reported as part of international banking, had another strong quarter reporting earnings of $314 million, up 64% year over year driven by Mexico, Chile and Brazil.

Rajagopal Viswanathan: The US business generated earnings of $217 million as quarter. GBM Latin America, which is reported as part of international banking, had another strong quarter reporting earnings of $314 million, up 64% year over year driven by Mexico, Chile, and Brazil.

Speaker 2: Sure, I'll start and I'll try to cover all the components of your questions.

Sure I'll start and I'll try to cover all of the competence of your question dogs.

Speaker 2: All bank level NIMM had a modest compression of three basis points. I would attribute all of that to the corporate segment which relates to the cost of funds increase as you know we recorded there.

All bank level NIM had a modest compression of three basis points I would attribute all of that to the corporate segment, which relates to the cost of funds increase as you know we recorded there.

Speaker 2: Since we talked in May, there's been rate increases both in Canada and the United States, and at that time we did not expect rate increases in Canada. So what you're seeing this quarter is the impact of that.

Since we talked to me there's been rate increases both in Canada, the United States and at that time, we did not expect rate increases in Canada. So what you're seeing this quarter is the impact of stock.

Rajagopal Viswanathan: Moving to slide 10 for the review of international banking, my comments that follow are on an adjusted and constant dollar basis. The segment reported net income of $635 million down 8% year over year. However, free tax pre-provision profit grew a strong 11%. The Pacific Alliance was up 10% with strong growth in Mexico of 16% and 19% growth in Caribbean and Central America. Revenue was up 8% year over year driven by good loan growth, fire net interest margin and strong capital markets and corporate banking revenues in Mexico and Chile.

Rajavis Wanathan: Moving to slide 10 for the review of international banking, my comments that follow are on an adjusted and constant dollar basis. The segment reported net income of $635 million down 8% year over year. However, free tax pre-provision profit grew a strong 11%. The Pacific Alliance was up 10% with strong growth in Mexico of 16% and 19% growth in Caribbean and Central America. Revenue was up 8% year over year driven by good loan growth, fire net interest margin and strong capital markets and corporate banking revenues in Mexico and Chile.

The improvement in NIM in the Canadian Bank will continue.

Speaker 2: As we pointed out this quarter's improvement was all deposit driven and I think that will continue. Asset margin is actually starting to show signs of growth like Dan pointed out mortgage margin is starting to go up. So I'm optimistic that it will also contribute maybe modestly to next quarter so that you should see it happen.

As we pointed out this quarter's improvement was all deposit driven and I think that'll continue I said margin is actually starting to show signs of good old like Dan pointed out mortgage margin is starting to go up so I'm optimistic that that will also contribute maybe modestly for next quarter. So that you should see it happen.

Speaker 2: International banking them, you know, many times in the past I said there are so many moving parts.

International banking them.

Many times in the past I've said there are so many moving parts within the Internet Bank segment. The Caribbean is benefiting from U S rate increases, particularly the English Caribbean.

Speaker 2: within the international bank segment, the Caribbean is benefiting from U.S. rate increases, particularly the English Caribbean.

Speaker 2: while the Pacific Alliance countries, you know, inflation moves it around quite a bit. Business mix also does. I think it will remain in and about these levels, you know, there might be a quarter of a vehicle, you know, a couple of base points down or up. But when you take it to the all bank level, it's about 20% of the assets of the bank, so it wouldn't have a meaningful impact to the banks, them going forward. The biggest impact will always be, you know, the cost of funds in this environment. And as we talked about before,

While the Pacific Alliance countries, you know inflation moves around quite a bit business makes it also does I think it will remain in that at about these levels, you know that might be a quarter, where it would be you know a couple of basis points down not up.

Rajagopal Viswanathan: Year over year loan growth moderated at 5%. Movages were up 10%. Personal loans and credit cards grew 3% and business banking was up 3%. Deposits grew a strong 8% year over year and 1% quarter over quarter. Reducing the loan deposit ratio, they have approximately 400 basis points year over year. Editors margin, expanded 15 basis points here over here. The margin was down to basis points quarter over quarter, mostly from lower inflation benefits in Chile and Uruguay.

Rajavis Wanathan: Year over year loan growth moderated at 5%. Movages were up 10%. Personal loans and credit cards grew 3% and business banking was up 3%. Deposits grew a strong 8% year over year and 1% quarter over quarter. Reducing the loan deposit ratio, they have approximately 400 basis points year over year. Andrews Margin expanded 15 basis points here over here. The margin was down to basis points quarter to quarter, mostly from lower inflation benefits in Chile and Uruguay.

Really take it to the all bank level and so it's about 20% of the assets of the bank. So it wouldn't have a meaningful impact to the bank's NIM going forward. The biggest impact will always be you know the cost of funds in this environment and as we talked about before.

Speaker 2: Currently the bank is neutralized to the sensitivity across the rate curve, which is what we disclose. However, when you have rate cuts happening at the short end of the curve, which is where we expect it to benefit us, that will be a meaningful benefit when it happens.

Currently the bank because you know neutralized for the sensitivity across the right code, which is what we disclose however, when you have rate cuts happening at the short end of the cold, which is where we expect it to benefit us that will be a meaningful benefits when it happens.

Rajagopal Viswanathan: The provision for credit losses was 118 basis points of 516 million, up 15 basis points from last quarter. On a quarter over quarter basis, expenses were down 1% due to lower salaries and employee benefits. On a year over year basis, non-intersex expenses were up 5% driven mainly by the inflationary impacts on personal costs. The tax rate of 22.9% for the quarter increased from 20.7% in the prior quarter due to lower inflationary adjustments in Chile and Mexico.

Rajavis Wanathan: The provision for credit losses was 118 basis points of 516 million, up 15 basis points from last quarter. On a quarter to quarter basis, expenses were down 1% due to lower salaries and employee benefits. On a year-over-year basis, non-intersex expenses were up 5%, driven mainly by the inflationary impacts on personal costs. The tax rate of 22.9% for the quarter increased from 20.7% in the prior quarter due to lower inflationary adjustments in Chile and Mexico. Water over quarter, higher funding costs, mainly driven by continued rate increases were more than offset by higher income public good assets and lower expenses.

Okay.

Speaker 3: And then maybe just on the strategic risk transfer, Scott, if I'd heard you, you said that's not an efficient use of your capital. I mean, and Raj, I heard you wanted to test at the plumbing, but why do a strategic risk transfer?

And then maybe just on the strategic risk transfer Scott If I heard you said, that's not an efficient use of your capital I mean, and Raj I heard you know you wanted to test at the plumbing, but why why do with strategic risk transfer.

At this point in time.

Speaker 2: Yeah, it's a synthetic press transfer. So it's not an actual elimination from the balance sheet, as you know. So it's a synthetic exposure.

Yeah, it's a synthetic restaurants, so it's not an actual elimination from the from the balance sheet. As you know so it's a synthetic exposure I think it's capital management is going to be key as we see it going forward because of the significant changes that is happening all around us, including regulatory Basel those kinds of things having another tool in the toolkit is an important.

Speaker 2: I think its capital management is going to be key as we see it going forward because of the significant changes that is happening all around us including regulatory bars and those kind of things.

Rajagopal Viswanathan: Turning to slide 11, the other segment reported an adjusted net loss attributable to equity holders of $299 million, an improvement of $24 million compared to the prior quarter. Quarter over quarter, higher funding costs, mainly driven by continued rate increases were more than offset by higher income from liquid assets and lower expenses.

Speaker 2: Having another tool in the toolkit is an important component of how we manage capital. So we look at it from that perspective. We'd rather test it early to see, you know, we know how to make it work operationally, like I mentioned, and we've established that. So we feel very comfortable that we'll be able to do it as required in quarters, where we think it is the necessary first step to do.

Morten component of how we manage capital so we looked at it from that perspective, we'd rather desperate early to see you know we know how to make it work operationally like I mentioned and we've established that so we feel very comfortable that we'll be able to do with ASIC like eight quarters, but if we think it doesn't have the necessary first step to do.

Phil Thomas: I'll now turn the call over to Phil to discuss risk.

Phil Thomas: Thank you, Rosh, and good morning, everyone. Well, we continue to operate in an environment of heightened uncertainty. We believe our business is well positioned to navigate this successfully. PCLs in Q3 were 819 million, up 110 million quarter recorder, translating to a PCL ratio of 42 basis points. Our PCL ratio reflects four basis points of performing allowance build, reflecting the continued uncertain macroeconomic outlook. This fifth consecutive quarter of performing allowance build contributes to our balance sheet strikes with a total ACL coverage now at 78 basis points.

Phil Thomas: Thank you, Raj, and good morning, everyone. Well, we continue to operate in an environment of heightened uncertainty. We believe our business is well positioned to navigate this successfully. PCLs in Q3 were 819 million, up 110 million quarter recorder, translating to a PCL ratio of 42 basis points. Our PCL ratio reflects four basis points of performing allowance build, reflecting the continued uncertain macroeconomic outlook. This fifth consecutive quarter of performing allowance build contributes to our balance sheet strikes with a total ACL coverage now at 78 basis points.

I appreciate it thank you.

Thanks Chuck.

Thank you. Our next question is from Paul Holden with CIBC. Please go ahead.

Speaker 5: Our next question is from Paul Holden with CIBC. Please go ahead. Thank you, good morning.

Thank you good morning, first question's for so and so I appreciate the color on Kennedy provided on the International Bank and just wanted to ask and past experiences.

Speaker 11: For Phil, appreciate the colour and candidate provided on the International Bank and just want to ask in past experiences, what does history tell you in terms of how long unemployment may remain elevated and thereby how long PCLs may remain elevated assuming those two remain correlated.

What does history tell you in terms of how long unemployment may remain elevated and thereby how long pcl's may remain elevated assuming those to remain a correlated.

Phil Thomas: Stage 3 PCL also increased non-performing provisions of 738 million, up 117 million quarter recorder. The largest increase was in Chile and Colombia on secured retail, where the economies continue to slow. In Canada, despite two additional rate increases in Q3, variable rate mortgage customers remain resilient. These customers have adjusted quickly with spending down 15% year over year driven by reduction in discretionary areas. We remain comfortable in our retail, commercial, and corporate customers' ability to manage through this credit cycle.

Phil Thomas: Stage 3 PCL also increased non-performing provisions of 738 million, up 117 million quarter recorder. The largest increase was in Chile and Colombia on secured retail, where the economies continued to slow. In Canada, despite two additional rate increases in Q3, variable rate mortgage customers remain resilient. These customers have adjusted quickly, with spending down 15% year over year driven by reduction in discretionary areas. We remain comfortable in our retail, commercial, and corporate customers ability to manage through this credit cycle.

Speaker 12: Thanks, Paul. Are you referring to international specifically or do you want to think your Canada pertain your question pertain to Canada mostly? International mostly. Okay. So

Thanks, Paul are you, referring to international specifically or or do you want to see your candidate pertain to your question pertaining to Canada.

International mostly okay. So yeah.

Speaker 10: If you look at where we're having the most pockets of friction in Chile, as an example, they've decreased interest rates by about 100 basis points a few weeks ago, which we view as promising. We're going to monitor that over the next quarter or so, and we expect that we'll start to see some improvements in terms of purchasing power of our customers.

You look at where we're having the most pockets of friction in Chile as.

As an example, they they've decreased interest rates by about 100 basis points.

A few weeks ago, which we view as promising.

We're going to monitor that over the next quarter or so and we expect that those will start to see some improvements in terms of the purchasing power of our customers.

Speaker 7: Um, but you know, this is something that will, that will stick around for a, for a little bit.

And but this is something that will that will stick around for a little bit.

Phil Thomas: Moving international retail, our secured balance is remained stable at 73% of total loans for the third consecutive quarter. While inflation is beginning to ease, the absolute level of the price pressures on consumers remain high. This erosion of purchasing power is impacting the financial health of consumers in the Pacific Alliance. In particular, in Chile, this is compounded by a gradual rise in unemployment given the decline in economic activity. Overall, 90-day delinquency increased 8 basis points quarter recorder within expectations.

Speaker 7: But you know what, one of the things I've been really pleased with Paul is the the strategy pivot we made around originations about two years ago to focus on affluent customers.

But you know what one of the things I've been really pleased with Paul as the the pivot the strategy pivot we made around originations about two years ago to focus on affluent customers. This is really paying dividends for us right now and as I look and we double double click on that customer base, they're not we're not seeing the level of <unk>.

Speaker 2: This is really paying dividends for us right now. And as I look and we double, double click on that customer base.

Speaker 2: They're not, we're not seeing the level of stress with those customers as we would see with some of our other customers. And so I think that pivot that the IB team have been doing in Francisco is...

Dressed with those customers as we would see with some of our other customers and so I think that pivot that you know the IBP team had been had been doing in Francisco's is now focused on is has a has been really positive for us.

Phil Thomas: In Q3, the International Banking Retail PCL ratio is 215 basis points compared to 185 basis points in Q2. Turning to business banking, this portfolio continues to perform well. The segment recorded PCL's of 18 basis points, down from 21 basis points in Q2. International Commercial was stable quarter of a quarter, while we had a small release in GBM driven by a recovery on one account. In Canada, we built performing allowances, being cautious on macroeconomic outlook and headwinds facing commercial real estate.

Speaker 2: is now focused on has been really positive for us.

Phil Thomas: In Q3, the International Banking Retail PCL ratio is 215 basis points, compared to 185 basis points in Q2. Turning to business banking, this portfolio continues to perform well. The segment recorded PCL's of 18 basis points, down from 21 basis points in Q2. International Commercial was stable quarter of a quarter, but we had a small release in GBM driven by a recovery on one account. In Canada, we built performing allowances, being cautious on macroeconomic outlook and headwinds facing commercial real estate.

But this is gonna be Oh. This is this is something we're working on closely there's a lot of activity with collections.

Speaker 2: But this is going to be, you know, this is something we're working on closely. There's a lot of activity with collections. A lot of activity between Francisco and I and looking at how we manage our originations moving forward. I think a Scott said in his opening remarks, focusing on primary customer being focused on that affluent segment international will pay dividends for us.

A lot of activity between Francisco and I am looking at how we manage originations moving forward I think as Scott said in his opening remarks, focusing on primary customer being focused on that affluent segment international will pay dividends for us.

Speaker 11: So a challenge in the near term, but how long will we wait to see? You got it. OK. And then second question, which is probably for Raj, just want to ask on expenses. I see decline in FTE, notably in Canada, Court of Recorder.

Okay.

In the near term, but how long will a well wait to see okay. Yeah, you got it okay.

And then second question, which is probably for Raj just wanted to ask on.

Phil Thomas: Our global commercial real estate portfolio is 66.2 billion, down 1% quarter of a quarter representing approximately 8% of our loan portfolios. We remain focused on under supplied asset classes with 72% of our CRU exposure in residential and industrial. Office exposure represents less than 1% of our total loans, and we have built performing allowances of a longer term impact of flexible work remains uncertain. We continue to proactively manage maturities and credit of us.

Phil Thomas: Our global commercial real estate portfolio is 66.2 billion, down 1% quarter of a quarter, representing approximately 8% of our loan portfolios. We remain focused on undersupplied asset classes with 72% of our CRU exposure and residential and industrial. Office exposure represents less than 1% of our total loans, and we have built performing allowances that the longer term impact of flexible work remains uncertain. We continue to proactively manage maturities and credit of S. Moving to slide 13, gross impaired loans were of three basis points quarter over quarter to 70 basis points, but remain below pre-pandemic levels.

Expenses I see decline.

F T E, notably in Canada quarter over quarter.

You know it seems like expenses were kind of in line with what you would expect yet still negative operating leverage and I would argue for a challenging revenue environment going into next year for for everyone. Not just for Scotia prefer everyone. So how are you thinking about the expense management going forward is there potential to take additional.

Speaker 11: you know, it seems like expenses were kind of in line with what you'd expect, yet still negative operating leverage. And I would argue for a challenging revenue environment going in next year for everyone, not just for scholarship, but for everyone. So how are you thinking about expense management going forward? Is there potential to take additional actions to rein in operating expenses?

Auctions to rain and.

Operating expenses.

Speaker 4: Yeah, I think like Scott referenced in his remarks too, I think expense management is a cornerstone of this bank. I think we've been proving it over many, many years. Paul, as you know, this quarter is just a reflection of how we manage it in line with revenue. We've talked about it before, where we'd like to generate positive operating leverage this year, as you point out, likely not. You know, probably not as probably a more...

Yeah, I think like Scott referenced in his remarks to expense management is a cornerstone of this bank I think they've been proving it over many many years Paul as you know this quarter. There is just a reflection of how we manage it in line with revenue we've talked about it before.

Phil Thomas: Moving to slide 13, gross impaired loans were of three basis points quarter over quarter to 70 basis points but remain below pre-pandemic levels. Gills were primarily driven by new formations in retail, specifically in Chile and Colombia. Business banking gills were relatively unchanged this quarter. Canadian commercial gills increased quarter of a quarter, however GBM and international commercial gills were lower.

Phil Thomas: Gills were primarily driven by new formations in retail, specifically in Chile and Colombia. Business banking gills were relatively unchanged this quarter, Canadian commercial gills increased quarter of a quarter, however GBM and international commercial gills were lower. Moving to slide 14, Canadian banking reported PCLs of 307 million, the PCL ratio of 27 basis points reflects performing build of four basis points. The quarter of a quarter increase was due to continued uncertain macroeconomic outlook of performing build in commercial and higher impairments in Canadian commercial and primato.

Well, we'd like to generate positive operating leverage this year as you point out likely knocks you know.

Probably an artist Bobby a mood I could agree I'm, saying it.

Speaker 4: Quarter over quarter you should see our expenses being moderated the way you saw this quarter.

Quarter over quarter, you should see our expenses being moderated debate you saw this quarter.

Phil Thomas: Moving to slide 14, Canadian banking reported PCL's of 307 million. The PCL ratio of 27 basis points reflects performing build of four basis points. The quarter of a quarter increase was due to continued uncertain macroeconomic outlook of performing build in commercial and higher impairments in Canadian commercial and primato. International banking PCL's were 516 million translating to a PCL ratio of 118 basis points. The quarter of a quarter increase was primarily due to retail driven by delinquency and net write-ups mainly in Chile and Colombia.

Speaker 4: I wouldn't talk about 2024 at this time. I think it's a little early. We'll talk about it in our outlook call in November .

I wouldn't talk about 'twenty 'twenty four at this time I think it's a little early to talk about it and not outlook call in November.

Speaker 4: But prioritizing our spend, investing appropriately where we need to invest, and as you point out, managing our staffing costs in two staffing numbers has been an approach we've taken in the past.

Prioritizing our spend investing appropriately bad we need to invest and as you point towards managing our staffing costs through staffing numbers as being an approach we've taken in the past.

Speaker 4: The Canadian Bank's reduction in employee count that you point out is something that we decided we needed to do in the right spots within the Canadian Bank. So it doesn't impact revenue, it doesn't impact customers. How can we manage it prudently? And I think Dan has done a great job of that in the last three quarters. The Canadian National Bank has always been great in managing their expenses.

The Canadian banks are you know reduction in employee contact you point out there's something that we decided we needed to do in the right spots within the Canadian banks. So it doesn't impact revenue it doesn't impact customers. How can we manage it prudently and I think Dan has done a great job all stock in the last three quarters and touching back has always been great in managing that expenses because many.

Phil Thomas: International banking PCLs were 516 million translating to a PCL ratio of 118 basis points. The quarter of a quarter increase was primarily due to retail driven by delinquency and net write-ups mainly in Chile and Colombia. In international, ACL coverage is now of 218 basis points up nine basis points quarter of a quarter. We continue to build prudent allowances across our portfolios with the all bank ACL ratio of 78 basis points up three basis points quarter of a quarter.

Speaker 4: Because many times we forget they operate in an exceptionally high inflationary environment, even in normal times.

I'm sure you forget the I'll pick an exceptionally high inflationary environment, even in normal times, and you'll have a 5% expense growth year over year I think it's a very credible off all we pay attention to those lines in that segment as well. So you should expect us to continue doing duck and our expectation is always to generate positive operating leverage every year.

Phil Thomas: In international, ACL coverage is now of 218 basis points up nine basis points quarter of a quarter. We continue to build prudent allowances across our portfolios with the all bank ACL ratio of 78 basis points up three basis points quarter of a quarter. We expect key macroeconomic indicators in Chile and Colombia to remain challenged in the near term, owing to a lagged impact of higher interest rates and the loss of purchasing power associated with high inflation. We continue to closely monitor our portfolio and we'll respond with adjustments to allowances as appropriate. We remain prudent with new exposures and we'll focus on high quality borrowers.

Speaker 4: And to have a 5% expense growth year over year, I think it's very credible of how we pay attention to those lines in that segment as well. So you should expect us to continue doing that. And our expectation is always to generate positive operating leverage every year. And we hope to start doing that again in 2024.

John McCartney: With that, it will pass the call back to John for Q&A. Great.

And we hope to start doing that again in 2024 worthy mission 'twenty three.

John McCartney: Thank you, Phil.

Phil Thomas: We expect key macroeconomic indicators in Chile and Colombia to remain challenged in the near term, going to a lagged impact of higher interest rates and the loss of purchasing power associated with high inflation. We continue to closely monitor our portfolio and we'll respond with adjustments to allowances as appropriate. We remain prudent with new exposures and we'll focus on high quality borrowers.

Okay.

Speaker 11: And so, sorry, I guess just to find a point on it, to get to that positive operating leverage in 2024, you believe you're on the right path today, or do you think additional actions might be required?

And sort of get sorry, I guess, just a finer point on it to get to that positive operating leverage in 'twenty 'twenty. Four you believe you're on the right path today or do you think additional actions might be required.

Speaker 4: I think we're on the right path. We always look at what additional actions we need to take every year. We took Q4, if you look at last year, we rationalized some of the expenses in the technology teams as well as in international banking. We always look at that call, we look at it again. So we set ourselves in the right path before we start a year. And I suspect when it will be the same as we have done in five years. OK, thanks for that.

I think we got on the right path you know we all.

Look at what are the additional actions we need to take every up we took Oh you know Q4, if you look at last year, we rationalized some of the expenses in the technology teams as well as in international banking.

Phil Thomas: With that, it will pass the call back to John for Q&A. Great.

Phil Thomas: Thank you, Phil.

Unknown Executive: Operator, if we get Q for questions.

Operator: Operator, if we could cue for questions. Thank you.

He has looked at that call we looked at it again, so it would be set ourselves right.

Unknown Executive: Thank you.

Ebrahim Poonawala: Our first question is from Ibrahim Punawala with the Bank of America.

Ebrahim Poonawala: Our first question is from Ibrahim Punawala with the Bank of America. Please go ahead. Good morning. I guess I just wanted to narrow down on the Canadian banking segment. Raj, I think you referenced the low deposit ratio. If we look at loan and deposit balances relative to year end, loans have been relatively flat. You've grown deposits and I know deposits growth and deposits are a big priority for Scott. This gives us a sense of, is there a targeted loan to deposit ratio that you want that business to get to before we see loan balances grow?

Before we start the year.

Ebrahim Poonawala: Please go ahead.

And I suspect right.

Ebrahim Poonawala: Good morning.

As we have done in prior years.

Ebrahim Poonawala: I guess I just wanted to narrow down on the Canadian banking segment.

Thanks for that.

Okay.

Thank you.

Speaker 5: Our next question is from Mike Rizlanovich with KBW Research. Please go ahead.

Our next question is from Mike.

Rajagopal Viswanathan: Raj, I think you reference the low deposit ratio.

K B W. Research. Please go ahead.

Rajagopal Viswanathan: If we look at low and deposit balances relative to year end, loans have been relatively flat.

Speaker 13: Good morning. A quick question for Dan on your mortgage growth. I'm just wondering, I'm not sure if there's a way to, to basically remove the impact of the net, the fact that you don't have negative amortization in that DRM product. What's your sense of what your true market share trend is here. I know you've been losing some share. I feel like it's largely related to that factor. I'm not sure if you're able to split that out. But what's your sense in terms of what you guys are doing on the origination side versus industry right now?

Good morning, a quick question for Dan on your mortgage growth I'm, just wondering I'm not sure if there's a way to basically remove the impact of the the fact that you don't have negative amortization in that D. R M product.

Rajagopal Viswanathan: You've grown deposits and I know deposits growth and deposits are a big priority for Scott.

Rajagopal Viswanathan: This gives us a sense of is there a targeted loan to deposit ratio that you want that business to get to before we see loan balances grow?

What's your sense of what your true market share trend is here I know you've been losing some share I feel like it's largely related to to that factor I'm not sure if you're able to split that out but what's your sense in terms of what you guys are doing on the origination side versus industry right now.

Rajagopal Viswanathan: Like is that intentional?

Ebrahim Poonawala: Is that intentional? What is the strategy around the deposit customers who are coming on? Are those really speaking customers that you can convert into a multi-pronged relationship or is it driven by rates and it's DVD in terms of whether this becomes a lasting relationship for the bank.

Rajagopal Viswanathan: And what is the strategy around the deposit customers who are coming on?

Rajavis Wanathan: Thank you. Great, thanks, Ebrahim.

Rajagopal Viswanathan: Are those really speaking customers that you can convert into a multi-pronged relationship or is it driven by rates and it's DVD in terms of whether this becomes a lasting relationship for the bank.

Yeah. Thanks, Mike I don't think that the new booking mix VRM versus fixed is affecting the total new originations in the quarter I would just reinforce the points I made earlier, which is we're being more.

Speaker 14: Yeah, thanks Mike. I don't think that the new booking mix VRM versus fixed is affecting the total new new originations in the quarter. I would just reinforce the points I made earlier which is we're being more...

Rajagopal Viswanathan: Thank you.

Rajagopal Viswanathan: Great, thanks, Ebrahim.

Rajagopal Viswanathan: I'll just start simplistically on the loan to deposit ratio and I'll pass it on to Dan to talk about, you know, customers and how we're approaching deposits and loans from a client primacy perspective.

Dan Rees: I'll just start simplistically on the loan to deposit ratio and I'll pass it on to Dan to talk about, you know, customers and how we're approaching deposits and loans from a client primacy perspective. What we have seen in the reduction and loan to deposit ratio, both in IB as well as in the Canadian bank is what we are going to continuously aspire to achieve. And like you point out there's two sides to it, loans and deposits.

Speaker 14: deliver it with regards to efficient use of capital, pricing to the full customer relationship and potential and taking this time given a slow housing market to put those plans into effect. And that the pickup on cross-sell off that product is very encouraging. We like the mortgage business, we know it's important to our customers and I think the VRM dynamic is more around client preference, removing

Deliberate with regards to efficient use of capital pricing to the full customer relationship and potential and taking this time given a slow housing market to put those plans into effect and that the pick up on cross sell off that product is very encouraging and we like the mortgage business that we don't support to our customers and I think the V. R. M dynamic is more.

Rajagopal Viswanathan: What we have seen in the reduction and loan to deposit ratio, both in IB as well as in the Canadian bank is what we are going to continuously aspire to achieve.

Rajagopal Viswanathan: And like you point out there's two sides to it, loans and deposits.

Round.

Rajagopal Viswanathan: So the deposit drive I think will continue because we do need to build our deposit base.

Dan Rees: So the deposit drive, I think, will continue because we do need to build our deposit base. Something we've been quite clear about since got talked about it. I think in January, February of this year, you'll see that momentum continue on the entire relationship will be more thoughtful about how we want to grow the share of the wallet and so on.

Client preference for moving into fixed which were supportive of from a financial advice standpoint, as opposed to anything around volume or market share.

Speaker 12: which we're supportive of from a financial advice standpoint, as opposed to anything around volume or market share.

Rajagopal Viswanathan: Something we've been quite clear about since got talked about it.

Rajagopal Viswanathan: I think in January, February of this year, you'll see that momentum continue on the entire relationship will be more thoughtful about how we want to grow the share of the wallet and so on.

Speaker 13: OK, so you don't think it's having an impact on the market share losses that you had the last few quarters, just that negative amortization dynamic that some of the other banks have, which you don't.

Okay. So you don't think it's having an impact on the market share losses that you've had the last few quarters, just that negative amortization dynamic that some of the other banks have which you don't.

Daniel Rees: So I'm going to pass it on to Dan.

Dan Rees: So I'm going to pass it on to Dan. He can talk about it in greater detail. Great. Thanks, Raj. Thank you for him.

Daniel Rees: He can talk about it in greater detail.

Daniel Rees: Great.

Daniel Rees: Thanks, Raj.

Speaker 4: That's possible. I mean we're certainly We are deliberately slowed the mortgage book as we signaled some time ago, and so that's intentional as an outcome So we're actually pleased by that. I think the VRM dynamic might be showing up more fill in gills. We do have customers who are seeing their payments

Daniel Rees: Thank you for him.

That's possible I mean, we're certainly we certainly we are we deliberately slowed the mortgage book as we signaled some time ago and so that's intentional as an outcome. So we're actually pleased by that I think the VRM dynamic might be showing up more fill in and guilds. We do have customers who are seeing their payments rise.

Daniel Rees: Dan here.

Dan Rees: Dan here. Look, a couple of things I would call it. We are aiming for an ongoing improvement in the LDR ratio in the CB segment. We're 129 this quarter. We were 139 a year ago. So that's a substantial change. Clearly, decelerating loan growth, particularly in mortgages, has an important impact of that as well as the market appetite for term on the personal deposit side. I would call out a few key planks of our mission towards deepening with clients or improving our client primacy.

Daniel Rees: Look, a couple of things I would call it.

Daniel Rees: We are aiming for an ongoing improvement in the LDR ratio in the CB segment.

Daniel Rees: We're 129 this quarter.

Daniel Rees: We were 139 a year ago.

Daniel Rees: So that's a substantial change.

Daniel Rees: Clearly decelerating loan growth, particularly in mortgages, has an important impact of that as well as the market appetite for term on the personal deposit side.

Speaker 4: rise faster than peers. And so we're, we've been saying for at least a year now that we've been proactive with those customers. So the VRM mix is more around managing credit, which we're pleased with than it is around market share or volume.

Foster than Paris, and so where we've been saying for at least a year now that we've been proactive with those customers. The VRM mixes more around managing credit, which we're pleased with it than it is around market share or volume and I would just say on the back of Roger's comments on expenses.

Daniel Rees: I would call out a few key planks of our mission towards deepening with clients or improving our client primacy.

Speaker 4: And I would just say on the back of Raja's comments on expenses, you know, we're really pleased with how we've been decelerating quickly. And in Q3, we printed positive operating leverage for the big retail bank, which was our ambition. We did that a quarter ahead of schedule.

Daniel Rees: I know Scott off the top referred to the importance of scene.

Dan Rees: I know Scott off the top referred to the importance of scene. We have seen on the back of that customer loyalty program about a half a million new day-to-day accounts opened in the last year. Those would be core deposit, low price, sticky accounts, which are often the result of cross-selling off the existing stock. That would be point one. We've also seen substantial improvements in our market share position with new Canadians as a result of targeted value propositions for those.

Daniel Rees: We have seen on the back of that customer loyalty program about a half a million new day-to-day accounts opened in the last year. Those would be core deposit, low price, sticky accounts, which are often the result of cross-selling off the existing stock.

We're really pleased with how we've been decelerating quickly and in Q3, we printed positive operating leverage with the big retail Bank, which was our ambition we did that a quarter ahead of schedule.

Got it thanks for that and then just a quick one for Jake I'm just.

Speaker 13: Got it. Thanks for that. And then just a quick one for Jake, just thinking back in and the fact that Scotia had maybe been under investing a little bit in the cap markets business heading into the pandemic. And you know, you didn't have the same upward sort of trajectory during that time. I'm just wondering where you currently sit with respect to your just the full platform, the capabilities.

It came back in and the fact that Scotia has maybe been under investing a little bit in the cap markets business heading into the pandemic and you you didn't have the same upward sort of trajectory during that time I'm just wondering where you currently sit with respect to your just the full platform capabilities.

Daniel Rees: That would be point one.

Daniel Rees: We've also seen substantial improvements in our market share position with new Canadians as a result of targeted value propositions for those.

Daniel Rees: Our improvement in Tangerine has also been noticeable.

Dan Rees: Our improvement in Tangerine has also been noticeable. Scott called out in his remarks the deepening on core there. Obviously, we've been improving our deposit growth in commercial for quite some time and in this quarter again at a faster growth rate than loans. So we are intensely decelerating our mortgage growth in favor of clients. We launched in Q3 a really important pilot to deepen the deposit cross-sell off mortgages at time of origination.

Daniel Rees: Scott called out in his remarks the deepening on core there and obviously we've been improving our deposit growth in commercial for quite some time and in this quarter again at a faster growth rate than loans.

Speaker 13: And do you see any pockets where maybe you want to allocate more capital and invest in maybe interest by any thoughts on that? Just in terms of where you sit today and where you want to ideally be on your capability.

And do you see any pockets, where maybe you want to allocate more capital and invest in size.

Any thoughts on that just in terms of where you sit today and where you want on site capabilities.

Daniel Rees: So we are intensely decelerating our mortgage growth in favor of clients. We launched in Q3 a really important pilot to deepen the deposit cross-sell off mortgages at time of origination.

Speaker 4: Yeah, thanks for the question, Mike. You're right, heading into the pandemic and I think back to our investor day in Chile, we weren't where we wanted to be. We've definitely grown to our natural share here in Canada, which has been really positive.

Thanks for the question Mike.

You're right heading into the pandemic and and think back to our Investor day.

Chile, we weren't where we want it to be we've we definitely grow into our natural share here in Canada, which has been really positive.

Daniel Rees: So we've been very intentional here as we signal the number of quarters ago and we're really pleased with the cost of that deposit growth as Raj mentioned deposit margin improved again this quarter.

Dan Rees: We were being very intentional here as we signaled a number of quarters ago and we're really pleased with the cost of that deposit growth as Raj mentioned deposit margin improved again this quarter. Your head count is somewhat flat. It's about two percent up relative to the end of 21 years as a sense of this.

Speaker 4: But the US market continues to be a good opportunity. There's opportunities to invest there by sector, by product, and really attract into some new areas.

But the U S market continues to be a good opportunity theres opportunities to invest there by sector by product.

And really attract into some new areas.

Ebrahim Poonawala: God, that was helpful and just separately in terms of when we think about expense management not that it was a big issue this quarter.

Speaker 4: We're not terribly large in non-investment grade at this stage. That's an area we can look to add value. Our US loan book is at zero guilds for the past six quarters. So there's an opportunity to grow in some different segments there.

We're not terribly large in non investment grade at this stage. That's an area. We can look to add value. Our U S. Loan book is at zero deals for the past six quarters, So theres an opportunity to grow in some different segments there.

Ebrahim Poonawala: We are hearing from peers around the structuring charges.

Speaker 4: I'd also say we're underrepresented in private capital. You've seen we've launched a CLO practice. That's been positive to access the private credit growth we've seen. And then when we look further into our platform, Mexico has been really promising with a strong quarter. So we think there's real opportunity across that network in North America as we build out further capabilities, whether it's treasury services, cash management, etc.

Ebrahim Poonawala: We saw one this quarter.

I'd also say, we're underrepresented in private capital.

Ebrahim Poonawala: There's probably more coming from others going into Tokyo.

You've seen we've launched a CLO practice, that's been positive to access the private credit growth. We've seen and then when we look further into our platform Mexico has been really promising with a strong quarter. So we think there's real opportunity across that network in North America as we build out further capabilities, whether it's treasury services cash management et.

Ebrahim Poonawala: Maybe just top of the house.

Ebrahim Poonawala: Your head count is somewhat flat.

Ebrahim Poonawala: It's about two percent up relative to the end of 21 years as a sense of this.

Ebrahim Poonawala: How do you think about expense management rightsizing the franchise for the current revenue backdrop.

Scott Thomson: How do you think about expense management, rightsizing the franchise for the current revenue backdrop. Thanks, Abraham Scott. I think it's clear to say are clear for me that operational excellence will be an important component of the refresh strategy. And I was pleased to see the cost as a point in the quarter, but also recognizes more work to do to align the organization and resources around our focus areas for growth. So good progress, but more to do as we as we look forward. Thank you.

Ebrahim Poonawala: Thanks, Abraham Scott.

Scott Thomson: I think it's clear to say are clear for me that operational excellence will be an important component of the refresh strategy. And I was pleased to see the cost discipline in the quarter but also recognize there's more work to do to align the organization and resources around our focus areas for growth. So good progress but more to do as we as we look forward.

Cetera.

Got it got it so is it fair to say that there is some low hanging fruit in your business at this point in time.

Speaker 13: Is it fair to say that there is some low hanging fruit in your business at this point in time?

Ebrahim Poonawala: Thank you.

Without a doubt and as we move forward it will be key that we allocate the capital that the bank has to generate the most profitable returns we can across our footprint, whether its in GBM or other parts of the organization.

Speaker 4: Without a doubt, and as we move forward, it will be key that we allocate the capital that the bank has to generate the most profitable returns we can across our footprint, whether it's in GBM or other parts of the organization.

Alright, thanks for the color I appreciate it.

Speaker 5: Thank you. Our next question is from Lamar Prasad with Coolmarks to you.

Thank you.

Gabriel Dechaine: Our next question is from Gabriel Dechaine with National Bank Financial.

Gabriel Dechaine: Our next question is from Gabriel Dechaine with National Bank Financial. Please go ahead. I'd like to follow on the balance sheet management question line of questioning in Canada. I mean, you've clearly pointed out that mortgages and decelerating growth, even shrinking that book is a big part of the plan. Just wondering, you know, considering it is mortgages, I don't, I wouldn't expect a big impact to your rep, based in the Canadian business.

Next question is from Nomura Prasad with Kumar Securities. Please go ahead.

Gabriel Dechaine: Please go ahead.

Speaker 3: Yes, thanks, maybe for Phil. I'm probably front-leaning the XU4 here, but just help me think through PCL for a moment. So study five in the PCL ratio, the total PCL ratio of the last five quarters with challenges in Chile and Colombia and the domestic. It looks like it was trend to continue, so.

Gabriel Dechaine: I'd like to follow on the balance sheet management question line of questioning in Canada.

Yeah, Thanks, maybe for Phil I'm, probably front money be a Q4 here, but just help me think through P sales for a moment.

Gabriel Dechaine: I mean, you've clearly pointed out that mortgages and decelerating growth even shrinking that book is a big part of the plan.

Climb in the PCL ratios piece of.

The total PCL ratio in the last five quarters.

Challenges in Chile, and Colombia, and the domestic.

Rajagopal Viswanathan: Just wondering, you know, considering it is mortgages, I don't, I wouldn't expect a big impact to your rep in the Canadian business.

Looks like you know this trend to continue.

Speaker 3: Perhaps, should we expect continued sequential increases in the total PCLs? Or is there some reason why we should expect it to kind of move down from the 42 basis point this quarter?

Perhaps I shouldn't we expect continued sequential increases in the total PCL L or is there some reason where why we should expect it to kind of move down from a 42 basis points this quarter.

Gabriel Dechaine: And equally wondering if the declines we've seen this quarter and prior were the main drivers of the decline in the capital risk floor add on? Also, because the capital risk floor and then Dan can probably talk about the business and then more detail than he did. The capital risk floor is actually driven by three different components. And I think it's, it's an important factor that will impact, you know, what the floor add on is quarter after quarter.

Rajagopal Viswanathan: And equally wondering if the declines we've seen this quarter and prior were the main drivers of the decline in the capital risk floor add-on.

Speaker 2: Thanks Lamar. I appreciate the question. Yet this is how I would think about it. There's a lot of moving parts in our portfolio. I think as I said, you know, in my prepared remarks and in the answer to the last question, Chile and Columbia remain, remain an area of great focus.

Thanks Omar I appreciate the question. Yeah. This is how this is how I would think about it there's a lot of moving parts in our portfolio I think as I've said in my prepared remarks, and the answer to the last question, Chile, and Colombia remain.

Rajagopal Viswanathan: Also, because the capital risk floor and then Dan can probably talk about the business and then more detail than he did.

Rajagopal Viswanathan: The capital risk floor is actually driven by three different components.

Remain.

Rajagopal Viswanathan: And I think it's, it's an important factor that will impact, you know, what the floor add-on is, quarter after quarter, because there are drivers that impact the standardized risk rate, there's drivers that impact the ARB calculation.

An area of great focus for us.

Speaker 2: And so I would probably look to Q4 to be at, or maybe slightly elevated above where we are today, but then I'll come back to you next quarter with an outlook for 2024. Okay.

And so I would probably look to Q4 to be at or maybe slightly elevated above where we are today, but then and then I'll come back to you next quarter with a with an outlook for 2024.

Gabriel Dechaine: Because there are drivers that impact the standardized risk rate, there's drivers that impact the ARB calculation. So you're going to see that moment every quarter, not necessarily every quarter down like you saw this quarter. This quarter at three confidence grade, it's actually quite simple. When you break it down, we did the synthetic transfers. So that benefited the floor and that gave us about $2 billion benefit in the 6.9 billion that we have called out in the slide.

Rajagopal Viswanathan: So you're going to see that moment every quarter, not necessarily every quarter, down like you saw this quarter.

Okay, Okay I'll leave it there.

Rajagopal Viswanathan: This quarter had three components grave.

Thank you.

Rajagopal Viswanathan: It's actually quite simple.

Rajagopal Viswanathan: When you break it down, we did the synthetic risk transfer, so that benefited the floor.

Speaker 5: Your next question is from a Jewell Kim with Credit Suisse. Please go ahead.

Our next question is from <unk>, Kim with Credit Suisse. Please go ahead.

Rajagopal Viswanathan: And that gave us about two billion dollars benefiting in the 6.9 billion that we have called out in the slide.

Hi, good morning, Thank you.

Speaker 3: All right, good morning. Thank you. Just one quick one for me. And a question on international banking and Chile specifically with the country in a recession. And I know this quota was impacted by in-parallelses and potential for more as we go for. But I'm trying to get a sense of whether it's possible to grow that business in Chile in an environment like this. And maybe if you can speak to on-up pre-tax, pre-provision basis, thanks. Thank you.

One quick one for me and a question on international banking at Chili's specifically.

Gabriel Dechaine: The next two billion results from, you know, when you see credit migration, which impacts the ARB RWA and standardized as we all know is risk insensitive. The floor add on reduces as you see slightly higher credit migration, which we saw this quarter and the third one is the split of the allowances, you know, they expected credit losses and expected losses, which is used for basil. That will move between ARB and standardized and that moved in a direction that helped with the floor add on this quarter of another two billion.

Rajagopal Viswanathan: The next two billion results from, you know, when you see credit migration which impacts the ARB RWA and standardized as we all know, is risk insensitive.

With the country in a recession and I know this quarter was impacted by impairment losses and.

Potential for more as we go forward, but I'm trying to get a sense of whether it's possible to grow that business in Chile.

Rajagopal Viswanathan: The floor add-on reduces as you see slightly higher credit migration, which we saw this quarter.

An environment like this and maybe if you can speak to on a pretax pre provision basis. Thanks.

Rajagopal Viswanathan: And the third one is the split of the allowances, you know, the expected credit losses and expected losses, which is used for Basel.

Well. Thank you very much for the question Oh.

Rajagopal Viswanathan: That will move between ARB and standardized and that moved in a direction that helped with the floor add-on this quarter of another two billion.

Speaker 2: As you said, we're going through a cycle and when we look at our retail business, for example, in Chile is performing quite well from the PCL perspective outside of the commercial space. Similarly, on the GBM space, so we are growing quite significantly year on year on a PTP basis. So we are optimistic on how the business is performing even on a very difficult year where we are seeing an economic contraction.

As you said, we're going through a cycle and when we look at our retail business. For example, each unit is performing quite well from the PCL perspective outside of the commercial space. Similarly on the G. P. M space. So we are growing.

Rajagopal Viswanathan: So it's not about to do with the mortgages question, but I'd let then answer the business question that you had.

Rajavis Wanathan: So it's not about to do with the mortgages question, but I'd let then answer the business question that you had. Thanks, Raj. We're just being more disciplined with regards to customer selection at time of origination. I think this is a good time to drive that standard higher here because it's a softer, slower housing market. I mean, that is a definite fact affecting the street. We are also being more efficient with regards to our use of capital and using customer desallection at renewal as part of that conversation.

Daniel Rees: Right.

Daniel Rees: Thanks, Raj.

Daniel Rees: We're just being more disciplined with regards to customer selection at time of origination.

Quite significantly year on year on a P. T. P. B basis. So we are optimistic on how the business is performing even on a very difficult year, where we're seeing I think we're gonna be protraction.

Daniel Rees: I think this is a good time to drive that standard higher here because it's a softer, slower housing market.

Speaker 2: As we look at 2024, we see Chile coming back to GDP growth and that will play strong to our positioning in the market. So we remain optimistic with Chile our positioning, actually commercial space.

As we look at 2024, we see Chile coming back to GDP growth.

Daniel Rees: I mean, that is a definitive fact affecting the street.

And that will play a strong to our positioning in the market. So we remain optimistic with Chile are positioning extra the commercial space.

Daniel Rees: We are also being more efficient with regards to our use of capital and using customer deselection at renewal as part of that conversation.

Rajavis Wanathan: We like the mortgage business, okay. We're very pleased with the pilot we put in place sequentially spreads expanded as we expected in the mortgage business. New spreads are good. And the deep thing that we've done off the mortgages in the last three, four quarters has been really encouraging. I think it's slowed a little bit faster than maybe we might have expected a couple of quarters ago, but customers are behaving well on the VRM side.

Got it. Thank you that's it for me.

Daniel Rees: We like the mortgage business, okay.

Daniel Rees: We're very pleased with the pilot we put in place.

Speaker 5: Thank you. Our next question is from Sarah Movedhiri with BMO Capital Market. Please go ahead.

Thank you. Our next question is from surround them over here with BMO capital markets. Please go ahead.

Daniel Rees: Sequentially spreads expanded as we expected in the mortgage business.

Okay. Thank you maybe if I can just stay with Francisco <unk> Mex.

Speaker 15: OK, thank you. Maybe if I can just stay with Francisco. Mexico, I think, has been highlighted a couple of times, both in Scott's remarks and Jade's remarks as. An area of.

Daniel Rees: New spreads are good.

Daniel Rees: And the deep thing that we've done off the mortgages in the last three, four quarters has been really encouraging.

Mexico I think has been highlighted a couple of times both in Scott's remarks changed remarks.

Daniel Rees: I think it's slowed a little bit faster than maybe we might have expected a couple of quarters ago, but customers are behaving well on the VRM side as Phil mentioned.

An area of opportunity I think.

Speaker 15: Last year, this quarter, it contributed to about 7% of total bank earnings. It's up closer to 11%.

Last year this quarter it contributed to about 7% of total bank earnings it's up closer to 11%.

Rajavis Wanathan: As Phil mentioned, the shift into fixed rate mortgages has been prominent through the course of this calendar here as expected. And so we just, we know basil changes are coming. We're focused on liquidity and focused on customers and client-prem. Okay, great.

Daniel Rees: The shift into fixed rate mortgages has been prominent through the course of this calendar here as expected.

Rajagopal Viswanathan: And so we just we know basil changes are coming.

Speaker 15: It's been a nice offset to Chile with Inter-Pacific Alliance.

It's been a nice offset to Chile within the Pacific Alliance.

Rajagopal Viswanathan: We're focused on liquidity and focused on customers and client-prem.

Speaker 15: Just curious as to what the growth prospects there look like and how much, what's the risk appetite I suppose.

Just curious as to what the growth prospects, there look like and how.

Rajagopal Viswanathan: Okay, great, and just a quick one on Capitol, like your CT1 ratio is getting very close to 13%, I'm wondering what does it take to turn off the drift and then ultimately maybe implement a buyback because you're obviously in a good position here.

Rajavis Wanathan: And just a quick one on Capitol, like your CT-1 ratio is getting very close to 13%, I'm wondering what does it take to turn off the drift and then ultimately maybe implement a buyback because you're obviously in a good position here. Thanks, Gabe, it's Raj. Yeah, it is. It is 4.7 as you pointed out. Good road to this quarter. We know it. You'll grow again in Q4, Gabe. I think we'll be closer to 13% from what I can tell, but there's two things we need to think about from scourcious perspective at least.

How much.

What's the risk appetite I suppose at the total bank level how.

Speaker 15: how much of the total bank can be accounted for by Mexico? In particular, if you could just give us a little bit of additional color as to what is, that is secured on secured. And is it going through, is it going through a boom benefiting from the US or is there a chance that we may have a similar, I guess, slowdown like Chile, I think.

How much of that how much of the total bank can be.

[noise] accounted for by Mexico in particular, and if you could just give us a little bit of additional color as to what is that.

Rajagopal Viswanathan: Thanks, Gabe, it's Raj.

And.

Rajagopal Viswanathan: Yeah, it is, it is 4.7 as you pointed out, good road, this quarter, we know it, you grow again and Q4 gave.

Is it going to is it going through a boom benefiting from the U S or is.

Rajagopal Viswanathan: I think we'll be closer to 13% from what I can tell, but there's two things we need to think about from scourcious perspective at least.

Is there a chance that we may have a similar.

Slow down.

Chinas.

Yeah.

Rajagopal Viswanathan: The floor is going to go up by two and a half percent, so that is going to impact, so we're building for that definitely.

Rajavis Wanathan: The floor is going to go up by 2.5% so that is going to impact. So we're building for that, definitely. And at this time, the fundamental review of the trading book will be we know it'll be something, right. We don't know the exact number. As this moves around with, you know, how trading positions move and how our CBA risk changes and so on. So we're preparing ourselves for those two, not to suggest it'll be anyway.

Well. Thank you for the question I would say first on a macro basis. We are very bullish in Mexico. We believe the dynamics around that economy will continue to benefit growth I'm certainly benefit our positioning in country. So we're very very fast to give us as to the outlook imposition of a Mexico, given what is going on around efforts like <unk>.

Speaker 2: Well, thank you for the question. I would say first on a macro basis, we are very bullish on Mexico. We believe the dynamics around that economy will continue to benefit growth.

Rajagopal Viswanathan: And at this time, the fundamental review of the trading book will be, we know it'll be something, right, we don't know the exact number.

Speaker 2: and certainly benefit our positioning in country. So we're very, very positive as, have to the outlook, I'm position of a Mexico, given what is going on around efforts like near-shoring and other dynamics that are certain to benefit economic growth in Mexico.

Rajagopal Viswanathan: As this moves around with, you know, how trading positions move and how are CBA risk changes and so on.

Rajagopal Viswanathan: So we're preparing ourselves for those two, not to suggest it'll be anyway.

Near shoring and other dynamics that are certain to benefit our economic growth in Mexico, our business cost structure is very well diversified across our different.

Rajagopal Viswanathan: So that's going to be close to the 100 base points, you know, to go from 13, we want to run about 12% and then we also have to wait and see what else we does in December.

Rajavis Wanathan: We're going to be close to the 100 base points. You know, to go from 13, we want to run about 12%. And then we also have to wait and see what us fit us in December. So a lot of it to build up balance sheet so that when we are able to talk about us to a day to refresh, that we have enough capital balance sheet strength to execute on it from day one. Thank you.

Speaker 2: Our business construct is very well diversified across different aspects of our universal banking capabilities.

Different aspects of where a universal banking capabilities. When you look at our corporate commercial positioning is very very strong and as Jay alluded to we're seeing very positive growth in that business I'm, certainly commercial will benefit from the near shoring.

Rajagopal Viswanathan: So lot of it to build our balance sheet so that when we are able to talk about us to a day to three fresh, that we have enough capital balance sheet strength to execute on it from day one.

Speaker 2: When you look at our corporate commercial positioning, it's very, very strong. And as Jake alluded to, we're seeing very positive growth in that business. And certainly commercial will benefit from the nearshoring phenomenon that is expected to continue to grow sustainably over the coming years.

Rajagopal Viswanathan: Thank you.

Mario Mendonca: Our next question is from Mario Mandanco with PD securities. Please go ahead. Raj, I just want to follow up on what you just referred to because that the reference to get into 13% surprises me a little bit that. Gosha would target 13% beyond the DSB floors. Is there something else that's driving this pursuit of a higher capital ratio? Are you sensitive to what's the deterioration in Latin America, for example, is there anything else that I could be missing?

Phenomenon that is attractive to continue to grow sustainably over the coming years.

Mario Mendonca: Our next question is from Mario Mandanco with PD securities, please go ahead.

Speaker 2: From the retail perspective, what you'll see is our credit performance has been quite strong. It's primarily a secure portfolio. So in terms of our exposure currently in Mexico, they overwhelm me majority.

From a retail perspective, what you'll see is our credit performance has been quite strong is primarily a secured portfolio. So in terms of our exposure currently in Mexico. The overwhelming majority is secured and therefore performing quite well we.

Speaker 2: is secured and therefore performing quite well. We expect to move to primacy as we are across the bank.

We expect to move to a primacy as we are across the bank and we intend to penetrate further those relationships are primarily today, our mono line or more you just came to a more broad based privacy driven relationships. So we expect that again to be a contributor to outsized growth within our franchise. So overall very positive on Mexico, not only the mine.

Speaker 2: and we intend to penetrate further those relationships that primarily today are monoline mortgages into more broad-based primacy-driven relationships.

Mario Mendonca: No, I think, you know, we want to stay about 12% right 12% about that hasn't changed at all. I just said it'll go up to 13%. Drip is going to give us another 10, 11 basis points. We know next quarter, Mario. So it's simply 1270 to 1280. We know our RWA growth has been fairly modest in this whole year. I think that'll continue in Q4. It's not the pursuit of the 13% how I describe it.

Speaker 2: So we expect that again to be a contributor to outsize growth within our franchise.

Mario Mendonca: Raj, I just want to follow up on what you just referred to because that the reference to get into 13% surprises me a little bit that Gocha would target 13%.

Speaker 2: So overall, very positive in Mexico, not only the macro outlook, but certainly our positioning within that macro outlook. And in the context of the connectivity of Scotiabank across Canada and the international footprint, certainly a strong contributor to our long-term positioning for growth and capital allocation. Francisco?

Crow outlook, but certainly our positioning within that macro outlook in the context of the connectivity of Scotiabank across Canada, and the international footprint certainly a strong contributor to our long term positioning for growth I've got provocation.

Mario Mendonca: Beyond the DSB floors, is there something else that's driving this pursuit of a higher capital ratio?

Mario Mendonca: Are you sensitive to what's the deterioration in Latin America, for example, is there anything else that I could be missing?

Rajagopal Viswanathan: No, I think, you know, we want to stay about 12%, right?

Mario Mendonca: It is more about we will get to 13% which puts us in a fantastic position as we think about our strategic refreshing where we want to grow going forward apart from the two factors they called out. Does the strategic refresh require the bank to have a starting point of 13% is there something about the strategic refresh that necessitates a higher capital ratio? No, it does not, Mario. It absolutely does not. The 13% is just an outcome of how we manage capital through 2023.

Francisco how important.

Right.

Speaker 6: are your local presence in places like Colombia and Peru to future success in Mexico.

Are your local presence in places like Colombia, and Peru to future success in mix.

Rajagopal Viswanathan: 12% about that hasn't changed at all.

Well it is a mixed story I would say that when you look at our positioning in each of these countries is quite relevant and at scale domestically our ability to connect those markets for the benefit of global initiatives will be very important to determine that a relative importance in the context of the strategy and we're working towards that.

Speaker 2: Well, it is a mixed story. I would say that when you look at our positioning in each of these countries, it's quite relevant and at scale domestic.

Speaker 2: Our ability to connect those markets for the benefit of global initiatives will be very important to determine that relative importance in the context of the strategy and we're working towards that in our refresh.

Rajagopal Viswanathan: I just said it'll go up to 13%.

Rajagopal Viswanathan: Drip is going to give us another 10, 11 basis points.

Mario Mendonca: It puts us in a great position where capital will not be constrained for all the growth we want to have. You referred to the risk transfer as you're a nogger was transferred. I took that to mean there's more to come. Did I interpret that correctly? No, I meant inaugural simply as the first one we have done. It doesn't mean we will do more, but what it does is it gives us another tool in the toolkit as we manage capital.

Rajagopal Viswanathan: We know next quarter, Mario.

Our refresh.

Speaker 2: So I would say today it's important to get improvement in all of our operations, in all the points that Scott has highlighted in terms of efficiency, discipline allocation of capital, improvement of capital return. So that remains our core effort. And over time what we intend is to maximize the opportunity of connectivity across that footprint. Okay, thank you very much.

So I would say today, it's important to get improvement in all of our operations in all the points that Scott has highlighted a in terms of efficiency a disciplined allocation of capital improvements capital return. So that remains our core effort on overtime, what we intend is to maximize the opportunity of connectivity across.

Rajagopal Viswanathan: So it's simply 1270 to 1280.

Rajagopal Viswanathan: We know our RWA growth has been fairly modest in this whole year. I think that'll continue in Q4.

Mario Mendonca: And basically we have tested out the plumbing so to speak and we know that if necessary we will have the ability to do it operationally. That's all I meant. Is there any way to size the What I'm trying to figure out here is, for every ten basis point lift you get in your capital ratio as a result of a risk transfer, it implies a certain percentage decline in your EPS or pennies in your EPS.

That footprint.

Okay. Thank you very much for taking my questions.

Thank you.

There are no further questions on the line.

Okay on behalf with anti management team I want to thank everyone for participating in our call today and look forward to our Q4 calls. This concludes our third quarter results call have a great day.

Speaker 16: On behalf of the entire management team, I want to thank everyone for participating in our call today and look forward to our Q4 call. This concludes our third quarter results call. Have a great day.

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

Speaker 5: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

Mario Mendonca: Is there anything you can give me that help me understand that dynamic. I can speak to you offline on that, Mario. I think the synthetic response will have a small cost or damage. The way we think about it is what is the cost of equity of the bank and the cost of the equity of the bank. You can take weighted up its cost of capital, call it 11%. As long as it's significantly south of that we feel like it's a creative to the EPS, which just means that we've got to manage capital through other levers if we continue to do synthetic response.

Mario Mendonca: Okay, final thing then perhaps this is for Scott, you referred to think the phrase used was prioritized markets. Perhaps this is going to be a part of your discussion in the refresh, but what do you mean by prioritized markets? Are you signaling that the bank would exit certain markets in Latin America, for example? Mario, I think going forward our plan is to prioritize capital allocation to areas where we see the highest risk adjusted return on a full cycle basis. We'll take into consideration where we can build competitive advantage and also connectivity across the platform.

Scott Thomson: So we'll have more to say on that investor day. But now I wouldn't read too much into my comments that you refer to. And then secondly, I'd come back to the capital piece just to reinforce what Raj said, recognizing, you know, unrelatively new and roll. Right now with what off he has highlighted, you know, 12%. That's the right number, you know, plus 12%. So I don't want at all you to think that we should be running here at 13%.

Rajagopal Viswanathan: It's not the pursuit of 13%.

Rajagopal Viswanathan: How I describe it.

Scott Thomson: But we do have a situation where there's going to be some offsets in Q1 associated with battle and there's uncertainty with what off he's doing. And so the objective here would be to get off the trip as soon as we can. And we also recognize that the risk transfer is not a good use of capital. And so, you know, trying to manage this prudently given the uncertainties, but also being rarely sensitive to the shareholder is the key objective you're going forward.

Rajagopal Viswanathan: It is more about we will get to 13% which puts us in a fantastic position as we think about our strategic refreshing where we want to grow going forward apart from the two factors they called out.

Scott Thomson: Thank you.

Rajagopal Viswanathan: Does the strategic refresh require the bank to have a starting point of 13% is there something about the strategic refresh that necessitates a higher capital ratio?

Rajagopal Viswanathan: No, it does not, Mario.

Rajagopal Viswanathan: It absolutely does not.

Rajagopal Viswanathan: The 13% is just an outcome of how we managed capital through 2023.

Doug Young: Our next question is from Doug Young with digital capital markets. Please go ahead. Hi, good morning, just maybe I'm too part of a new question. I mean, them up in Canada, up in international down at the all bank level. Can you talk a bit about the drivers and corporate and Raj, I think you've signaled last quarter that you've made some changes in the hedge book. And as we think about what you talked about and Dan talked about the deposit and the loan growth side, like, yeah, how should we think about nims evolving over the next year, maybe at the divisional level, but also as it kind of goes through the corporate and to the all bank level as well.

Rajagopal Viswanathan: It puts us in a great position where capital will not be constrained for all the growth we want to have.

Rajagopal Viswanathan: You referred to the risk transfer as your inaugural was transferred.

Rajagopal Viswanathan: I took that to mean there's more to come.

Rajagopal Viswanathan: Did I interpret that correctly?

Rajagopal Viswanathan: No, I meant inaugural simply as the first one we have done.

Rajagopal Viswanathan: It doesn't mean we will do more, but what it does is it gives us another tool in the toolkit as we manage capital.

Doug Young: Sure, I'll try to cover all the components of your question, Doug. All bank level nims had a modest compression of three basis points. I would attribute all of that to the corporate segment, which relates to the cost of funds increase, as you know, we recorded there. Since we talked in May, there's been rating increases both in Canada, the United States, and at that time we did not expect rating increase in Canada.

Doug Young: So what you're seeing this quarter is the impact of that. The improvement in them in the Canadian Bank will continue. As we pointed out, this quarter's improvement was all deposit driven, and I think that will continue. As it margin is actually starting to show signs of growth, like Dan pointed out, mauge margin is starting to go up. So I'm optimistic that it will also contribute, maybe modestly to next quarter, so that you should see it happen.

Doug Young: International banking them, you know, many times in the past, I said there are so many moving parts within the international bank segment. And the Caribbean is, you know, benefiting from US rate increases, particularly the English Caribbean, while the Pacific Alliance countries, you know, inflation moves it around quite a bit. Business makes also does. I think it will remain in about these levels, you know, there might be a quarter where we can, you know, a couple of base points down or up.

Doug Young: But when you take it to the all bank level, it's about 20% of the assets of the bank, so it wouldn't have a meaningful impact to the banks, nem going forward. The biggest impact will always be, you know, the cost of funds in this. In this environment, and as we talked about before, currently the bank is, you know, neutralized to the sensitivity across the rate curve, which is what we disclose. However, when you have rate cuts happening at the short end of the curve, which is where we expect it to benefit us, that will be a meaningful benefit when it happens.

Rajavis Wanathan: And then maybe just on the strategic risk transfer, Scott, if I heard you said there's not an efficient use your capital, I mean, and Rajah heard, you know, you wanted to test at the plumbing, but why do a strategic risk transfer at this point in time? Yeah, it's a synthetic risk transfer, so it's not an actual elimination from the, from the balance sheet, as you know, so it's a synthetic exposure. I think it's capital management is going to be key as we see it going forward because of the significant changes that is happening all around us, including regulatory bars, all those kind of things.

Rajagopal Viswanathan: And basically we have tested out the plumbing so to speak and we know that if necessary we will have the ability to do it operational.

Rajagopal Viswanathan: That's all I meant.

Mario Mendonca: Is there any way to size the What I'm trying to figure out here is, for every ten basis point lift you get in your capital ratio as a result of a risk transfer, it implies a certain percentage decline in your EPS or pennies in your EPS.

Mario Mendonca: Is there anything you can give me that help me understand that dynamic?

Mario Mendonca: I can speak to you offline on that, Mario.

Mario Mendonca: I think the synthetic response will have a small cost or damage.

Rajavis Wanathan: Having another tool in the toolkit is an important component of how we manage capital. So we look at it from that perspective, we'd rather test it early to see, you know, we know how to make it work operationally, like I mentioned, and we've established that. So we feel very comfortable that we'll be able to do it as required in quarters, where we think it is the necessary first step to do. Appreciate it. Thank you. Thanks, Scott. Thank you.

Mario Mendonca: The way we think about it is what is the cost of equity of the bank and the cost of the equity of the bank. You can take weighted up its cost of capital, call it 11%.

Mario Mendonca: As long as it's significantly south of that, we feel like it's a creative to the EPS, which just means that we've got to manage capital through other levers if we continue to do synthetic response.

Paul Holden: Our next question is from Paul Holden with CIBC. Let's go ahead. Thank you.

Phil Thomas: Good morning. First questions for Phil and I'll appreciate the color and Kennedy provided on the International Bank and just want to ask and past experiences. What does history tell you in terms of how long unemployment may remain elevated and thereby how long PCLs may remain elevated, assuming those two remain correlated? Thanks, Paul. Are you referring to international specifically, or do you want to, you think your Canada pertain, your question pertain to Canada mostly?

Phil Thomas: International mostly. Okay. So, you know, if you look at where we're having the most pocket, the friction and chili, as an example, they've decreased interest rates by about 100 basis points, a few weeks ago, which we view as promising. We're going to monitor that over the next quarter or so and we expect that those will start to see some improvements in terms of purchasing power of our customers. Partners, but this is something that we'll stick around for a little bit, but one of the things I've been really pleased with Paul is the strategy pivot we made around originations about two years ago to focus on affluent customers.

Scott Thomson: Okay, final thing then, perhaps this is for Scott, you referred to think the phrase used was prioritized markets.

Phil Thomas: This is really paying dividends for us right now. And as I look and we double, double click on that customer base, they're not, we're not saying the level of stress with those customers as we would see with some of our other customers. And so I think that pivot that the IB team have been doing in Francisco is now focused on has been really positive for us, but this is going to be, you know, this is something we're working on closely.

Phil Thomas: There's a lot of activity with collections, a lot of activity between Francisco and I am looking at how we manage originations moving forward. I think a Scott said in his opening remarks focusing on primary customer being focused on that affluent segment international will pay dividends for us. Okay, so a challenge in the near term, but how long will we wait to see? Okay, yeah, you guys.

Scott Thomson: Perhaps this is going to be a part of your discussion in the refresh, but what do you mean by prioritized markets?

Scott Thomson: Are you signaling that the bank would exit certain markets in Latin America, for example?

Scott Thomson: Mario, I think going forward our plan is to prioritize capital allocation to areas where we see the highest risk adjusted return on a full cycle basis.

Scott Thomson: We'll take into consideration where we can build competitive advantage and also connectivity across the platform.

Scott Thomson: So we'll have more to say on that investor day.

Rajavis Wanathan: Okay, and then second question, which is probably for Raj, just just want to ask on expenses. I see decline in FTE, notably in Canada, quarter of a quarter. You know, seems like expenses were kind of in line with what you'd expect, yet still negative operating leverage. And I would argue for a challenging revenue environment going in next year for everyone, not just for scholarship, but for everyone. So how are you thinking about the expense management going forward?

Scott Thomson: But no, I wouldn't read too much into my comments that you refer to.

Scott Thomson: And then secondly, I'd come back to the capital piece just to reinforce what Raj said, recognizing, you know, unrelatively new and roll.

Scott Thomson: Right now with what off he has highlighted, you know, 12%.

Scott Thomson: That's the right number, you know, plus 12%.

Scott Thomson: So I don't want at all you to think that we should be running here at 13%.

Rajavis Wanathan: Is there potential to do to take additional actions to reign in operating expenses? Yeah, I think like Scott referenced in this remarks too, I think expense management is a cornerstone of this bank. I think we've been proving it over many, many years, Paul, as you know, this quarter is just a reflection of how we manage it in line with revenue. We've talked about it before, where we'd like to generate positive operating leverage this year, as you point out, likely not, you know, probably not as probably a more accurate way of saying it. Quarter of a quarter, you should see our expenses being moderated the way you saw this quarter.

Scott Thomson: But we do have a situation where there's going to be some offsets in Q1 associated with basil, and there's uncertainty with what off he's doing.

Scott Thomson: And so the objective here would be to get off the trip as soon as we can.

Scott Thomson: And we also recognize that the risk transfer is not a good use of capital.

Scott Thomson: And so, you know, trying to manage this prudently given the uncertainties, but also being rarely sensitive to the shareholder is the key objective here going forward.

Scott Thomson: Thank you.

Doug Young: Our next question is from Doug Young with digital capital markets.

Doug Young: Please go ahead.

Rajavis Wanathan: I wouldn't talk about 2024 at this time. I think it's a little early. We'll talk about it in our outlook call in November. But prioritizing our spend, investing appropriately, where we need to invest. And as you point out, managing our staffing costs and through staffing numbers has been an approach we've taken in the past. The Canadian banks, you know, reduction in employee count that you point out is something that we decided we needed to do in the right spots within the Canadian bank.

Doug Young: Hi, good morning.

Doug Young: Just maybe I'm too hard to name a question.

Rajagopal Viswanathan: I mean, name up in Canada.

Rajavis Wanathan: So it doesn't impact revenue, it doesn't impact customers. How can we manage it, and I think Dan's done a great job of that in the last three quarters. International bank has always been great in managing their expenses because many times you forget they operate in an exceptionally high inflationary environment even in normal times. And to have a 5% expense growth year over year, I think it's very credible of how we pay attention to those lines in that segment as well. So you should expect us to continue doing that and our expectation is always to generate positive operating leverage every year. And we hope to start doing that again in 2024.

Rajagopal Viswanathan: It's up in international down at the Albank level.

Rajagopal Viswanathan: Can you talk a bit about the drivers and corporate.

Rajagopal Viswanathan: Roger, I think you've signaled last quarter that you've made some changes in the hedge book.

Rajavis Wanathan: 33. Okay. And so to get, sorry, I guess, just a finer point on it, to get to that positive operating leverage in 2024, you believe you're on the right path today, or do you think additional actions might be required? I think you're on the right path. You know, we always look at what additional actions we need to take every year. We took, you know, Q 40, if you look at last year, we rationalize some of the expenses in the technology teams as well as in international banking.

Rajagopal Viswanathan: You know, and as we think about what you talked about and Dan talked about the deposit and the loan growth side, like, yeah, how should we think about nims evolving over the next year, maybe at the divisional level, but also as it kind of goes through the corporate and to the Albank level as well.

Rajagopal Viswanathan: Sure.

Rajagopal Viswanathan: I'll try to cover all the components of your question, Doug.

Rajagopal Viswanathan: All bank level nims had a modest compression of three basis points. I would attribute all of that to the corporate segment, which relates to the cost of funds increase as you know we recorded there.

Rajagopal Viswanathan: Since we talked in May, there's been rating increases both in Canada and the United States, and at that time we did not expect rating increase in Canada. So what you're seeing this quarter is the impact of that.

Rajagopal Viswanathan: The improvement in them in the Canadian Bank will continue. As we pointed out, this quarter's improvement was all deposit-driven, and I think that will continue.

Rajagopal Viswanathan: Asset margin is actually starting to show signs of growth, like Dan pointed out, mauge margin is starting to go up.

Rajagopal Viswanathan: So I'm optimistic that it will also contribute, maybe modestly to next quarter, so that you should see it happen.

Rajagopal Viswanathan: International banking them, you know, many times in the past, I said, there are so many moving parts within the International Bank segment.

Rajavis Wanathan: We always look at that call, we look at it again, so we set ourselves in the right path before we start a year, and I suspect it will be the same as we have done in five years.

Rajagopal Viswanathan: And the Caribbean is, you know, benefiting from US rate increases, particularly the English Caribbean, while the Pacific Alliance countries, you know, inflation moves it around quite a bit.

Rajagopal Viswanathan: Business makes also does.

Rajagopal Viswanathan: I think we'll remain in about these levels, you know, there might be a quarter where we can, you know, a couple of base points down or up.

Rajagopal Viswanathan: But when you take it to the all bank level, it's about 20% of the assets of the bank, so it wouldn't have a meaningful impact to the banks, them going forward.

Rajagopal Viswanathan: The biggest impact will always be, you know, the cost of funds in this, this environment.

Rajavis Wanathan: Okay. Thanks for that.

Rajagopal Viswanathan: And as we talked about before, currently the bank is, you know, neutralized to the sensitivity across the rate curve, which is what we disclose.

Mike Rizvanovic: Thank you.

Rajagopal Viswanathan: However, when you have rate cuts happening at the short end of the curve, which is where we expect it to benefit us, that will be a meaningful benefit when it happens.

Dan Rees: Our next question is from Mike Rizvanovic with the KBW Research. Please go ahead. Good morning. Quick question for Dan on your mortgage growth. I'm just wondering, I'm not sure if there's a way to basically remove the impact of the, the fact that you don't have negative amortization in that VRM product. What's your sense of what your true market share trend is here? I know you've been losing some share. I feel like it's largely related to that factor.

Dan Rees: I'm not sure if you're able to split that out, but what's your sense in terms of what you guys are doing on the origination side versus industry right now? Yeah, thanks, Mike. I don't think the new booking next VRM versus fixed is affecting the total new, new, new originations in the quarter. I would just reinforce the points I made earlier, which is we're being more deliberate with regards to efficient use of capital pricing to the full customer relationship and potential and taking this time given a slow housing market to put those plans into effect.

Scott Thomson: And then maybe just on the strategic risk transfer, Scott, if I heard you said there's not an efficient use your cap.

Scott Thomson: Well, I mean, and Raj, I heard, you know, you wanted to test it.

Dan Rees: And that the pickup on cross sell off that product is very encouraging. We like the mortgage business. We know it's important to our customers. And I think the VRM dynamic is more around client preference for moving into fixed, which were supportive of from a financial advice standpoint, as opposed to anything around volume or market share. Okay, so you don't think it's having an impact on the market share losses that you had the last few quarters, just that negative amortization dynamic that some of the other banks have, which you don't.

Scott Thomson: The plum means, but why do a strategic risk transfer at this point in time?

Scott Thomson: Yeah, it's a synthetic risk transfer.

Scott Thomson: So it's not an actual elimination from the, from the balance sheet as you know, so it's a synthetic exposure.

Scott Thomson: I think it's capital management is going to be key as we see it going forward because of the significant changes that is happening all around us, including regulatory bars of those kind of things.

Scott Thomson: Having another tool in the toolkit is an important component of how we manage capital.

Dan Rees: That's possible. I mean, we're certainly we are deliberately slow the mortgage book as we signal some time ago. And so that's intentional as an outcome. So we're actually pleased by that. I think the VRM dynamic might be showing up more fill in in gills. We do have customers who are seeing their payments rise faster than peers. And so we're we've been saying for at least a year now that we've been proactive with those customers.

Scott Thomson: So we look at it from that perspective.

Scott Thomson: We'd rather test it early to see, you know, we know how to make it work operationally, like I mentioned, and we've established that.

Scott Thomson: So we feel very comfortable that we'll be able to do it as required in quarters, where we think it is the necessary first step to do.

Scott Thomson: Appreciate it.

Scott Thomson: Thank you.

Scott Thomson: Thanks, Scott.

Scott Thomson: Thank you.

Dan Rees: The VRM mix is more around managing credit, which we're pleased with than it is around market share or volume. And I would just say on the back of Roger's comments on expenses, you know, we're really pleased with how we've been decelerating quickly. And in Q3, we printed positive operating leverage for the big retail bank, which was our ambition. We did that a quarter ahead of schedule. Thanks for that.

Paul Holden: Our next question is from Paul Holden with CIBC.

Paul Holden: Let's go ahead.

Paul Holden: Thank you.

Paul Holden: Good morning.

Phil Thomas: First questions for Phil, and I'll appreciate the color and candidate provided on the International Bank and just want to ask and past experiences.

Jake Lawrence: And then just a couple for Jake, just thinking back in and the fact that Scotia had maybe been under investing a little bit in the cap markets business heading into the pandemic. And you know, you didn't have the same upward sort of trajectory during that time. And I'm just wondering where you currently sit with respect to your just the full platform, the capabilities.

Jake Lawrence: And do you see any pockets where maybe you want to allocate more capital and invest in by any thoughts on that just in terms of where you sit today and where you want to ideally on your capability. Technologies, Yeah, thanks for the question, Mike. You're right, heading into the pandemic, and if we're back to our investor day, in Chile, we weren't where we wanted to be. We've definitely grown to our natural share here in Canada, which has been really positive.

Phil Thomas: What does history tell you in terms of how long unemployment may remain elevated and thereby, how long PCLs may remain elevated, assuming those two remain correlated?

Phil Thomas: Thanks, Paul.

Phil Thomas: Are you referring to international specifically?

Phil Thomas: Or do you want to, you think your candidate pertains, your question pertains to Canada mostly?

Jake Lawrence: But the US market continues to be a good opportunity. There's opportunities to invest there by sector, by product, and really attract into some new areas. We're not terribly large in non-investment grade at this stage. That's an area we can look to add value. Our US loan book is at zero guilds for the past six quarters. So there's an opportunity to grow in some different segments there. I'd also say we're underrepresented in private capital.

Phil Thomas: International, mostly.

Phil Thomas: Okay.

Phil Thomas: So, you know, if you look at where we're having the most pocket, the friction and chili, as an example, they've decreased interest rates by about 100 basis points, a few weeks ago, which we view as promising.

Phil Thomas: We're going to monitor that over the next quarter or so, and we expect that those will start to see some improvements in terms of purchasing power of our customers.

Phil Thomas: Partners, but this is something that will stick around for a little bit.

Phil Thomas: But one of the things I've been really pleased with Paul is the strategy pivot we made around originations about two years ago to focus on affluent customers. This is really paying dividends for us right now.

Phil Thomas: And as I look and we double, double click on that customer base, they're not, we're not saying the level of stress with those customers as we would see with some of our other customers.

Jake Lawrence: You've seen, we've launched a CLO practice. That's been positive to access the private credit growth we've seen. And then when we look further into our platform, Mexico has been really promising with a strong quarter. So we think there's real opportunity across that network in North America as we build out further capabilities. Whether it's treasury services, cash management, etc. It's fair to say that there is some low hanging fruit in your business at this point in time.

Phil Thomas: And so I think that pivot that, you know, the IB team have been, have been doing in Francisco is now focused on has, has been really positive for us, but this is going to be, you know, this is something we're working on closely with a lot of activity with collections, a lot of activity between Francisco and I am looking at how we manage originations moving forward.

Phil Thomas: I think a Scott said in his opening remarks, focusing on primary customer being focused on that affluent segment international will pay dividends for us.

Phil Thomas: Okay, so a challenge in the near term, but how long will we wait to see?

Phil Thomas: Okay.

Phil Thomas: Yeah, you guys.

Phil Thomas: Okay.

Jake Lawrence: Without a doubt, and as we move forward, it'll be key that we allocate the capital that the bank has to generate the most profitable returns we can across our footprint. Whether it's in GBM or other parts of the organization.

Rajagopal Viswanathan: And then second question, which is probably for Raj, just just want to ask on expenses.

Jake Lawrence: Thanks for the color. Appreciate it. Thank you.

Rajagopal Viswanathan: I see decline in FTE, notably in Canada, quarter of a quarter.

Lemar Persaud: Our next question is from Lamar Passaud. Yes, thanks. Maybe for Phil. I'm probably front-running the XU4 here, but just help me think through PCLs for a moment. So study five in the PCL ratio is the total PCL ratio of the last five quarters with challenges in Chile and Colombia and the domestic. It looks like, you know, is trying to continue. So perhaps should we expect continued sequential increases in the total PCLs?

Rajagopal Viswanathan: You know, seems like expenses were kind of in line with what you'd expect yet still negative operating leverage.

Rajagopal Viswanathan: And I would argue for a challenging revenue environment going in next year for everyone, not just for scholarship, but for everyone.

Lemar Persaud: Phil, or is there some reason where why we should expect it to kind of move down from the 42 basis points of quarter? Thanks Lamar. Appreciate the question. Yes, this is how I would think about it. There's a lot of moving parts in our portfolio. I think as I said, you know, in my prepared remarks and in the answer to the last question, Chile and Colombia remain an area of great focus for us.

Phil Thomas: And so I would probably look to Q4 to be at or maybe slightly elevated above where we are today, but then I'll come back to you next quarter with a with an outlook for 2024. Okay. You know what? I'll leave it there.

Lemar Persaud: Thank you.

Sohrab Movahedi: Our next question is from a dual Kim with credit Swiss. Please go ahead. Hi, good morning. Thank you. Just one quick one for me and a question on international banking in Chile, specifically with the country in a recession. And I know this quarter was impacted by impaired losses and potential for more as we go for, but I'm trying to get a sense of whether it's possible to grow that business in Chile in an environment like this. And maybe if you can speak to on a pre tax pre provision basis. Thanks.

Rajagopal Viswanathan: So how are you thinking about the expense management going forward?

Rajagopal Viswanathan: Is there potential to do to take additional actions to rain in operating expenses?

Rajagopal Viswanathan: Yeah, I think like Scott referenced in this remarks too, I think expense management is a cornerstone of this bank.

Francisco Silva: Well, thank you very much for the question. As you said, we're going through a cycle and when we look at our retail business, for example, in Chile, it's performing quite well from the PCL perspective outside of the commercial space, similarly on the GBM space. So we are growing quite significantly here in year on a PTPB basis. So we are optimistic on how the business is performing even on a very difficult year where we're seeing an economic contraction.

Rajagopal Viswanathan: I think we've been proving it over many, many years.

Francisco Silva: As we look at 2024, we see Chile coming back to GBM growth and that will play strong to our positioning in the market. So we remain optimistic with Chile, our positioning, excellent commercial space. Thank you. That's different. Thank you.

Rajagopal Viswanathan: Paul, as you know, this quarter is just a reflection of how we manage it in line with revenue.

Rajagopal Viswanathan: We've talked about it before, where we'd like to generate positive operating leverage this year, as you point out, likely not, you know, probably not as probably a more accurate way of saying it.

Rajagopal Viswanathan: Quarter of a quarter, you should see our expenses being moderated the way you saw this quarter.

Francisco Silva: Our next question is from Sharab Movahedi with BMO Capital Market. Please go ahead. Okay, thank you. Maybe if I can just stay with Francisco. Mexico, I think, has been highlighted a couple of times, both in Scott's remarks and Jade's remarks as an area of opportunity. I think last year, this quarter, it's contributed to about 7% of total bank earnings. It's up closer to 11%. It's been a nice offset to Chile within the Pacific Alliance.

Rajagopal Viswanathan: I wouldn't talk about 2024 at this time.

Rajagopal Viswanathan: I think it's a little early.

Rajagopal Viswanathan: We'll talk about it in our outlook call in November.

Francisco Silva: Just curious as to what the growth prospects there apply. And how much, what's the risk appetite I suppose at the total bank level? How much of the total bank can be accounted for by Mexico? In particular, if you could just give us a little bit of additional color as to what is that business, it's secured on secure. And is it going to, is it going to a boom benefiting from the U.S, or is there a chance that we may have a similar, I guess, slowed down like Chile's been experiencing?

Francisco Silva: Well, thank you for the question. I would say first on a macro basis, we are very bullish on Mexico. We believe the dynamics around that economy will continue to benefit growth and certainly benefit our positioning in country. So we're very, very positive after the outlook and position of Mexico, given what is going on around efforts like near-shoring and other dynamics that are certain to benefit economic growth in Mexico. Our business construct is very well diversified across different aspects of our universal banking capabilities.

Francisco Silva: When you look at our corporate commercial positioning is very, very strong. And as Jake alluded to, we're seeing very positive growth in that business and certainly commercial will benefit from the near-shoring phenomenon that is expected to continue to grow sustainably over the coming years. From the retail perspective, what you'll see is our credit performance has been quite strong. It's primarily a secured portfolio. So in terms of our exposure currently in Mexico, the overwhelming majority is secured and therefore performing quite well.

Francisco Silva: We expect to move to primacy as we are across the bank and we intend to penetrate further those relationships that primarily today are monoliner mortgages into a more broad-based primacy driven relationships. So we expect that again to be a contributor to outside growth within our franchise. So overall, very positive on Mexico, not only the macro outlook, but certainly our positioning within that macro outlook. And in the context of the connectivity of Scotiabank across Canada and the international footprint, certainly a strong contributor to our long-term positioning for growth and capital obligation.

Francisco Silva: Francisco, how important are your local presence in places like Colombia and Peru to future success in Mexico? Well it is a mixed story. I would say that when you look at our positioning in each of these countries is quite relevant and at scale domestically. Our ability to connect those markets for the benefit of global initiatives will be very important to determine that relative importance in the context of the strategy and we're working towards that in our refresh.

Francisco Silva: So I would say today is important to get improvement in all of our operations in all the points that Scott has highlighted in terms of efficiency, discipline allocation of capital improvement of capital return. So that remains our core effort. And over time what we intend is to maximize the opportunity of connectivity across that footprint.

Rajagopal Viswanathan: But prioritizing our spend, investing appropriately, where we need to invest.

Rajagopal Viswanathan: And as you point out, managing our staffing costs through staffing numbers has been an approach we've taken in the past.

Rajagopal Viswanathan: The Canadian banks, you know, reduction in employee count that you point out is something that we decided we needed to do in the right spots within the Canadian bank.

Sohrab Movahedi: Okay, thank you very much for taking my question. Thank you.

Rajagopal Viswanathan: So it doesn't impact revenue, it doesn't impact customers.

Operator: There are no further questions on the line.

John McCartney: Okay, on behalf of the entire management team, I want to thank everyone for participating in our call today and look forward to our Q4 call.

Operator: This concludes our third quarter results call.

Rajagopal Viswanathan: How can we manage it, and I think Dan's done a great job of that in the last three quarters.

Rajagopal Viswanathan: International bank has always been great in managing their expenses, because many times we forget they operate in an exceptionally high inflationary environment even in normal times.

Rajagopal Viswanathan: And to have a 5% expense growth year over year, I think it's very credible of how we pay attention to those lines in that segment as well.

Operator: Have a great day. Thank you.

Rajagopal Viswanathan: So you should expect us to continue doing that.

Operator: The conference has now ended.

Rajagopal Viswanathan: And our expectation is always to generate positive operating leverage every year.

Rajagopal Viswanathan: And we hope to start doing that again in 2024.

Operator: Please disconnect your lines of this time and we thank you for your participation.

Rajagopal Viswanathan: 33.

Rajagopal Viswanathan: Okay.

Rajagopal Viswanathan: And so to get, sorry, I guess just a finer point on it, to get to that positive operating leverage in 2024, you believe you're on the right path today, or do you think additional actions might be required?

Rajagopal Viswanathan: I think we're on the right path.

Rajagopal Viswanathan: You know, we always look at what additional actions we need to take every year.

Rajagopal Viswanathan: We took, you know, Q40.

Rajagopal Viswanathan: If you look at last year, we rationalize some of the expenses in the technology teams as well as in international banking.

Rajagopal Viswanathan: We always look at that call.

Rajagopal Viswanathan: We look at it again.

Rajagopal Viswanathan: So we set ourselves in the right path before we start a year.

Rajagopal Viswanathan: And I suspect it will be the same as we have done in five years.

Rajagopal Viswanathan: Okay.

Rajagopal Viswanathan: Thanks for that.

Rajagopal Viswanathan: Thank you.

Mike Rizvanovic: Our next question is from Mike Rizvanovic with the KBW Research.

Mike Rizvanovic: Please go ahead.

Mike Rizvanovic: Good morning.

Mike Rizvanovic: Quick question for Dan on your mortgage growth.

Mike Rizvanovic: I'm just wondering, I'm not sure if there's a way to basically remove the impact of the the fact that you don't have negative amortization in that VRM product.

Mike Rizvanovic: What's your sense of what your true market share trend is here?

Mike Rizvanovic: I know you've been losing some share.

Mike Rizvanovic: I feel like it's largely related to that factor.

Mike Rizvanovic: I'm not sure if you're able to split that out, but what's your sense in terms of what you guys are doing on the origination side versus industry right now?

Mike Rizvanovic: Yeah.

Mike Rizvanovic: Thanks, Mike.

Mike Rizvanovic: I don't think the new booking next VRM versus fixed is affecting the total new new new originations in the quarter.

Mike Rizvanovic: I would just reinforce the points I made earlier, which is we're being more deliberate with regards to efficient use of capital pricing to the full customer relationship and potential.

Mike Rizvanovic: And taking this time given a slow housing market to put those plans into effect and that the pickup on cross sell off that product is very encouraging.

Mike Rizvanovic: We like the mortgage business.

Mike Rizvanovic: We know it's important to our customers.

Mike Rizvanovic: And I think the VRM dynamic is more around client preference, removing into fixed, which were supportive of from a financial advice standpoint, as opposed to anything around volume or market share.

Mike Rizvanovic: Okay, so you don't think it's having an impact on the market share losses that you had the last few quarters, just that negative amortization dynamic that some of the other banks have, which you don't.

Mike Rizvanovic: That's possible.

Mike Rizvanovic: I mean, we're certainly we are deliberately slow the mortgage book as we signal some time ago.

Mike Rizvanovic: And so that's intentional as an outcome.

Mike Rizvanovic: So we're actually pleased by that.

Mike Rizvanovic: I think the VRM dynamic might be showing up more fill in in gills.

Mike Rizvanovic: We do have customers who are seeing their payments rise faster than peers.

Mike Rizvanovic: And so we're we've been saying for at least a year now that we've been proactive with those customers.

Mike Rizvanovic: So the VRM mix is more around managing credit, which we're pleased with, then it is around market share or volume.

Mike Rizvanovic: And I would just say on the back of Roger's comments on expenses, you know, we're really pleased with how we've been decelerating quickly.

Mike Rizvanovic: And in Q3, we printed positive operating leverage with the big retail bank, which was our ambition. We did that a quarter head of schedule.

Mike Rizvanovic: Thanks for that.

Mike Rizvanovic: And then just for Jake, just thinking back in and the fact that Scotia had maybe been under investing a little bit in the cat markets business heading into the pandemic.

Mike Rizvanovic: And you know, you didn't have the same upward sort of trajectory during that time.

Mike Rizvanovic: And I'm just wondering where you currently sit with respect to your just the full platform, the capabilities.

Mike Rizvanovic: And do you see any pockets where maybe you want to allocate more capital and invest in by any thoughts on that, just in terms of where you sit today and where you want to ideally on your capability.

Mike Rizvanovic: Colleges.

Mike Rizvanovic: Yeah, thanks for the question, Mike.

Mike Rizvanovic: You're right, heading into the pandemic.

Mike Rizvanovic: And if we're back to our investor day in Chile, we want where we want it to be.

Mike Rizvanovic: We've definitely grown to our natural share here in Canada, which has been really positive.

Mike Rizvanovic: But the US market continues to be a good opportunity.

Mike Rizvanovic: There's opportunities to invest there by sector by product and really attract into some new areas.

Mike Rizvanovic: We're not terribly large in non-investment grade at this stage.

Mike Rizvanovic: That's an area we can look to add value.

Mike Rizvanovic: Our US loan book is at zero guilds for the past six quarters.

Mike Rizvanovic: So there's an opportunity to grow in some different segments there.

Mike Rizvanovic: I'd also say we're underrepresented in private capital.

Mike Rizvanovic: You've seen we've launched a CLO practice.

Mike Rizvanovic: That's been positive to access the private credit growth we've seen.

Mike Rizvanovic: And then when we look further into our platform, Mexico has been really promising with a strong quarter.

Mike Rizvanovic: So we think there's real opportunity across that network in North America as we build out further capabilities.

Mike Rizvanovic: Whether it's treasury services, cash management, et cetera.

Mike Rizvanovic: It's fair to say that there is some low hanging fruit in your business at this point in time.

Mike Rizvanovic: Without a doubt.

Mike Rizvanovic: And as we move forward, it'll be key that we allocate the capital that the bank has to generate the most profitable returns we can across our footprint, whether it's in GBM or other parts of the organization.

Mike Rizvanovic: Thanks for the color.

Mike Rizvanovic: Appreciate it.

Mike Rizvanovic: Thank you.

Sohrab Movahedi: Our next question is from Lamar Passaud, with cool marks to you, please go ahead.

Sohrab Movahedi: Yes, thanks, maybe for Phil.

Phil Thomas: I'm probably front running the XU4 here, but just help me think through PCLs for a moment.

Phil Thomas: So study five and the PCL ratio is the total PCL ratio of the last five quarters with challenges in Chile and Colombia and the domestic.

Phil Thomas: It looks like, you know, it's trying to continue.

Phil Thomas: So perhaps should we expect continued sequential increases in the total PCLs?

Phil Thomas: Phil, or is there some reason where why we should expect it to kind of move down from the 42 basis points of quarter?

Phil Thomas: Thanks, Lamar.

Phil Thomas: Appreciate the question.

Phil Thomas: Yes, this is how this is how I would think about it.

Phil Thomas: There's a lot of moving parts in our portfolio.

Phil Thomas: I think as I said, you know, in my prepared remarks and in the answer to the last question, Chile and Colombia remain.

Phil Thomas: Remain, remain an area of great focus for us.

Phil Thomas: And so I would probably look to Q4 to be at or maybe slightly elevated above where we are today, but then I'll come back to your next quarter with a with an outlook for 2024.

Phil Thomas: Okay, okay, you know what I'll leave it there.

Phil Thomas: Thank you.

Joo Kim: Our next question is from a dual Kim with a credit twist, please go ahead. Good morning. Thank you.

Francisco Silva: Just one quick one for me and a question on international banking and Chile, specifically with the country in a recession. And I know this quarter was impacted by impaired losses and potential for more as you go for, but I'm trying to get a sense of whether it's possible to grow that business in Chile in an environment like this. And maybe if you can speak to on a pre tax pre provision basis.

Francisco Silva: Thanks. Well, thank you very much for the question. As you said, we're going through a cycle, and when we look at our retail business, for example, in Chile is performing quite well, from the PCL perspective outside of the commercial space, similarly on the GBM space, so we are growing quite significantly here and here on a PTPB basis, so we are optimistic on how the business is performing even on a very difficult year where we're seeing an economic contraction.

Francisco Silva: As we look at 2024, we see Chile coming back to GDP growth, and that will play strong to our positioning in the market, so we remain optimistic with Chile, our positioning, actually commercial space. Thank you, that's different. Thank you.

Francisco Silva: Our next question is from Sharab Movahedi with BMO Capital Market. Please go ahead. Okay, thank you. Maybe if I can just stay with Francisco, Mexico, I think has been highlighted a couple of times, both in Scott's remarks and Jade's remarks as an area of opportunity. I think last year, this quarter, it's contributed to about 7% of total bank earnings. It's up closer to 11%. It's been a nice offset to Chile within the Pacific Alliance.

Francisco Silva: Just curious as to what the growth prospects there apply, and what's the risk appetite I suppose at the total bank level, how much of the total bank can be accounted for by Mexico? In particular, if you could just give us a little bit of additional color as to what is that business, it's secure, don't secure. And is it going through a boom benefiting from the US, or is there a chance that we may have a similar, I guess, slow down like Chile's been experiencing?

Francisco Silva: Well, thank you for the question. I would say, first, on the macro basis, we are very bullish on Mexico. We believe the dynamics around that economy will continue to benefit growth, and certainly benefit our positioning in country. So we're very, very positive after the outlook, and position of Mexico, given what is going on around efforts like near-shoring and other dynamics that are certain to benefit economic growth in Mexico. Our business construct is very well diversified across different aspects of our universal banking capabilities.

Francisco Silva: When you look at our corporate commercial positioning is very, very strong, and as Jake alluded to, we're seeing very positive growth in that business, and certainly commercial will benefit from the near-shoring phenomenon that is expected to continue to grow sustainably over the coming years. From the retail perspective, what you'll see is our credit performance has been quite strong. It's primarily a secure portfolio, so in terms of our exposure currently in Mexico, the overwhelming majority is secured, and therefore performing quite well.

Francisco Silva: We expect to move to primacy as we are across the bank, and we intend to penetrate further those relationships that primarily today are monoliner mortgages into a more broad-based primacy driven relationships. So we expect that again to be a contributor to outside growth within our franchise. Over all very positive of Mexico, not only the macro outlook, but certainly our positioning within that macro outlook, and in the context of the connectivity of Scotiabank across Canada and the international footprint is certainly a strong contributor to our long-term positioning for growth and capital education.

Francisco Silva: Francisco, how important are your local presence in places like Colombia and Peru to future success in Mexico? Well, it is a mixed story. I would say that when you look at our positioning in each of these countries is quite relevant and at scale domestically. Our ability to connect those markets for the benefit of global initiatives will be very important to determine that relative importance in the context of the strategy and we're working towards that in our refresh.

Francisco Silva: So I would say today is important to get improvement in all of our operations in all the points that Scott has highlighted in terms of efficiency. Discipline allocation of capital improvement of capital return so that remains our core effort. And over time what we intend is to maximize the opportunity of connectivity across that footprint. Okay, thank you very much for taking my question. Thank you.

Unknown Executive: There are no further questions on the line. On behalf of the entire management team, I want to thank everyone for participating in our call today and look forward to our Q4 call. This concludes our third quarter results call. Have a great day. Thank you.

Unknown Executive: The conference has now ended.

Unknown Executive: Please disconnect your lines of this time and we thank you for your participation.

Q3 2023 The Bank of Nova Scotia Earnings Call

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