Q4 2023 The Bank of Nova Scotia Earnings Call

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Good morning, and welcome to Scotia, Bank's 2023 fourth quarter results presentation.

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

Anything you here. This morning are Scott Thompson Scotia, banks, President and Chief Executive Officer, Raj Viswanathan, Our Chief Financial Officer, and Bill Thomas Our Chief Risk Officer. Following our comments, we'll be glad to take your questions.

So present to take questions are the following scotiabank executives.

Speaker 1: Aris Bogdanaris from Canadian Banking, Glenn Gallin from Global Wealth Management, Francisco Aristagieta from International Banking and Jake Lawrence from Global Banking and Markets.

Aerospace Daenerys from Canadian banking Glen Gowland from global wealth management Francisco Arista gains from international banking Jake Lawrence.

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Speaker 1: Before we start, and on behalf of those speaking today, I'll refer you to slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will turn the call over to Scott.

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

Thank you John and good morning, everyone.

Speaker 1: This month marks the completion of my first year in this role as president.

This month marks the completion of my first year in this role as president.

Speaker 1: I'm pleased to have had the opportunity to spend the year listening to and learning from our shareholders, clients, and employees.

Pleased to have had the opportunity to spend the year listening to and learning from our shareholders clients and employees.

Speaker 1: I have seen personally the passion and commitment that Scotiabankers across the footprint have to making us a better bank.

I have seen personally the passion and commitment that scotia bankers across the footprint have to making us a better bank.

Speaker 1: Our results for the year reflect a period of decelerating industry loan growth, as well as our own deliberate actions to focus on balance growth, and a thoughtful approach to improving the profitability of our businesses and client relationships.

Our results for the year reflect the period of decelerating the industry loan growth as well as our own deliberate actions to focus on balanced growth and a thoughtful approach to improving the profitability of our businesses and client relationships.

Speaker 1: We have made significant progress on key initiatives that are fundamental to strengthening our balance sheet and improving our business mix. Both will be important as we embark on the next session.

We've made significant progress on key initiatives that are fundamental to strengthening our balance sheet and improving our business mix.

It will be important as we embark on our next phase of growth.

Speaker 1: The bank reported adjusted earnings of $8.4 billion or $6.54 per share in fiscal 2023. Our return on equity was 11.7%.

The bank reported adjusted earnings of $8 4 billion or $6 54 per share in fiscal 2023, a return on equity was 11, 7%.

We believe our improved balance sheet strength and liquidity positions us to manage through potentially a more difficult economic scenario that could materialize.

Speaker 1: We believe our improved balance sheet strength and liquidity positions us to manage through potentially a more difficult economic scenario that could materialize.

We took actions to strengthen our capital position to meet my January 2023 commitment to a steady one ratio greater than 12% up from 11, 5% at this time last year.

Speaker 1: We took actions to strengthen our capital position to meet my January 2023 commitment to a SETI 1 ratio greater than 12%, up from 11.5% at this time last year.

Raj will explain in more detail the impact of the regulatory capital changes, which began in Q2 and will continue to impact us in the future.

Speaker 1: Raj will explain in more detail the impact of the regulatory capital changes, which began in Q2 and will continue to impact us in the future.

Yes.

Speaker 1: We also bolstered liquidity over the course of the year, meaningfully improving the liquidity coverage ratio to 136 percent, up from 119 percent, and the net stable funding ratio from 111 percent to 116 percent.

We also bolstered liquidity over the course of the year meaningfully improving the liquidity coverage ratio to 136% up from 119% and the net stable funding ratio from 111% to 116%.

Speaker 1: Importantly, we made progress focusing the organization on deposit.

Importantly, we made progress focusing the organization on deposits.

Speaker 1: Deposits across the bank increased 9% year over year.

It's across the bank increased 9% year over year.

Speaker 1: The all-bank loan-to-deposit ratio improved to 110% from 116%, resulting in the wholesale funding ratio dropping 100 basis points year-over-year to 20.6%.

The all bank loan to deposit ratio improved to 110% from 116%, resulting in the wholesale funding ratio dropping 100 basis points year over year to 26%.

2023 reflects early success in our enterprise wide focus on thoughtfully growing both sides of the balance sheet.

Speaker 1: 2023 reflects early success and our enterprise-wide focus on thoughtfully growing both sides of the balance sheet.

Speaker 1: In keeping with our commitment to ensure the bank is well positioned to manage through periods of slow growth and uncertain macroeconomic times, we have significantly increased the allowances for credit losses throughout the year across all portfolios by approximately $1.1 billion, mostly in performing allowance.

In keeping with our commitment to ensure the bank is well positioned to manage through periods of slow growth and uncertain macroeconomic times, we have significantly increased the allowance allowances for credit losses throughout the year across all portfolios by approximately $1 1 billion, mostly in performing allowances.

Speaker 1: As previously announced, in conjunction with our strategy review process, we made adjustments to our global workforce in the fourth quarter.

As previously announced in conjunction with our strategy review process, we made adjustments to our global workforce in the fourth quarter.

Speaker 1: This productivity effort reflects a continuation of the bank's long-term commitment to achieving positive operating leverage while ensuring the appropriate resource allocation in support of our future growth initiatives.

This productivity effort reflects a continuation of the bank's long term commitment to achieving positive operating leverage while ensuring the appropriate resource allocation in support of our future growth initiatives.

Turning to our economic outlook, our base case assumption is that economic growth will continue to moderate in the near term in North America.

Speaker 1: Turning to our economic outlook, our base case assumption is that economic growth will continue to moderate in the near term in North America.

Higher interest rates are having central bank's desired economic impact, which we are seeing through moderating inflation and our own client's behavior.

Speaker 1: Higher interest rates are having central banks' desired economic impact, which we are seeing through moderating inflation and our own clients' behavior.

Recognizing that rates could remain elevated for the foreseeable future. We do expect some interest rate easing in North America later next year, which will be a tailwind to our profitability.

Speaker 1: Recognizing that rates could remain elevated for the foreseeable future, we do expect some interest rate easing in North America later next year, which will be a tailwind to our profitability.

Speaker 1: Our international banking markets experience more notable impacts of higher rates given an earlier and more rapid tightening response to inflation this cycle.

Our international banking markets experienced more notable impacts of higher rates, given an earlier and more rapid tightening response to inflation in the cycle.

Speaker 1: Chile and Peru are currently in the midst of modest economic contractions and have seen central bank easing this past quarter.

Chile, and Peru are currently in the midst of modest economic contractions and have seen central bank easing this past quarter.

Speaker 1: Economic growth is expected to rebound in the region later next year.

Economic growth is expected to rebound in the region later next year.

Speaker 1: Mexico is consistently seeing GDP growth beyond expectations. Currently forecast to deliver 3.5% growth this year and 3% plus growth again next year, significantly outpacing the sub 1% growth expected for Canada and the US.

Mexico has consistently seen GDP growth beyond expectations currently forecast delivered three 5% growth this year and 3% plus growth again next year significantly outpacing the sub 1% growth expected for Canada and the U S.

We expect consumer spending to moderate at this higher rate environment persists, leading to the very modest growth in our Canadian economic forecast.

Our current balance sheet strength structural interest rate positioning and deliberate approach to loan growth reflect our cautious near term outlook.

Speaker 1: Our current balance sheet strength, structural interest rate positioning, and deliberate approach to loan growth reflect our cautious near-term outlook.

Speaker 1: We look forward to sharing detailed business line strategic plans with you at our upcoming investor day. So I will be brief today with a few updates on each business.

We look forward to sharing detailed business line strategic plans with you at our upcoming Investor day, So I'll be brief today with a few updates on each business.

Speaker 1: In Canadian banking, the performing ACL bills materially impacted our profitability in Q4. However, I was encouraged by progress in certain key operating performance metrics.

In Canadian banking, the performing ACL build materially impacted our profitability in Q4.

However, I was encouraged by progress in certain key operating performance metrics.

Speaker 1: Deposits, up 10% year-over-year in Q4, outpaced loan growth in the Canadian Bank for the fourth consecutive quarter, resulting in notable early progress in reducing our loan-to-deposit ratio, which moved from 138% to 125% over the course of the year.

Posits up 10% year over year in Q4 outpaced loan growth in the Canadian Bank for the fourth consecutive quarter, resulting in notable early progress on reducing our loan to deposit ratio, which moved from 138% to 125% over the course of the year.

Solid net interest margin expansion of 21 basis points benefiting from higher deposit growth loans repricing at higher rates and business mix changes driven by more balanced loan growth across products.

Speaker 1: solid net interest margin expansion of 21 basis points, benefiting from higher deposit growth, loans repricing at higher rates, and business mix changes driven by more balanced loan growth across products.

Speaker 1: In retail, growth in the Scene Plus loyalty program continues to outpace expectations, surpassing 14 million members this quarter.

In retail growth in the <unk> plus loyalty program continues to outpace expectations, surpassing 14 million members this quarter.

Speaker 1: The program continues to accelerate as a strong customer growth engine responsible for over half our new to bank customers in the recent quarter.

The program continues to accelerate as a strong customer growth engine are responsible for over half are new to bank customers in the recent quarter.

New day to day account acquisition is up 6% year over year aligned to our commitment to grow everyday banking relationships.

Speaker 1: New day-to-day account acquisition is up 6% year-over-year, aligned to our commitment to grow everyday banking relationships.

Tangerine delivered another year of strong earnings as a result of its strong deposit position and continues to widen its lead as J D. Power's number one ranked bank in its class for retail banking client satisfaction for the 12th year in a row.

Speaker 1: Tangerine delivered another year of strong earnings as a result of its strong deposit position and continues to widen its lead as J.D. Power's number one ranked bank in its class for retail banking client satisfaction for the 12th year in a row.

Global wealth results this quarter reflect the impact of more challenged market performance in recent months and the resulting impact on investment industry fund flows which have been negative throughout 2023.

Speaker 1: Global wealth results this quarter reflect the impact of more challenged market performance in recent months and the resulting impact on investment industry fund flows which have been negative throughout 2023.

Speaker 1: We continue to broaden what is already a very robust product offering with the announcement last month of a new alternative asset partnership with Sun Life to bring a more complete offering of private credit, real estate and infrastructure products to our high net worth clients.

We continue to broaden what is already a very robust product offering with the announcement last month of the new alternative asset partnership with Sun life to bring a more complete offering of private credit real estate and infrastructure products to a high net worth clients.

We have a differentiated wealth offering in Canada through our total wealth advice model and a unique international opportunity that our team is delivering on.

Speaker 1: We have a differentiated wealth offering in Canada through our Total Wealth Advice model and a unique international opportunity that our team is delivering on.

Speaker 1: Our international wealth management business delivered double-digit earnings growth again this year.

Our international wealth management business delivered double digit earnings growth again this year.

Speaker 1: Our global banking and markets business has delivered resilient results in a challenging year for capital markets businesses, while continuing to add product capabilities and sectorial advisory expertise.

Our global banking and markets business has delivered resilient results in a challenging year for capital markets businesses, while continuing to add product capabilities and sectorial advisory expertise.

Loan growth has moderated considerably in recent quarters as our GBM team continuing to take a more targeted approach to client selection with a focus on industries and geographies, where we can deliver higher returns and more multi product value add to our clients.

Speaker 1: Loan growth has moderated considerably in recent quarters as our GBM team continues to take a more targeted approach to client selection with a focus on industries and geographies where we can deliver higher returns and more multi-product value-add to our clients.

We continue to target deeper client relationships and leverage our footprint to grow our business.

Speaker 1: We continue to target deeper client relationships and leverage our footprint to grow our business.

International banking had a solid 2023 results were negatively impacted by higher PCL and moderating capital markets activity offset somewhat by encouraging margin expansion and continued momentum in our deposit strong Caribbean franchise.

Speaker 1: International banking had a solid 2023. Results were negatively impacted by higher PCLs and moderating capital markets activity, offset somewhat by encouraging margin expansion and continued momentum in our deposit-strong Caribbean franchise.

Speaker 1: Deposit growth in Q4 continued, up 3% quarter over quarter and 9% year over year.

Deposit growth in Q4 continued up 3% quarter over quarter and 9% year over year.

Speaker 1: This combined with a more disciplined approach to loan growth has seen our loan to deposit ratio improve from 140% to 129%.

This combined with a more disciplined approach to loan growth has seen our loan to deposit ratio improve from 140% to 129%.

Despite inflationary pressures international banking held expense growth to a modest 3% on a constant dollar basis for the year as a result of continuous efforts to rationalize our operations and further digitize the bank.

Speaker 1: Despite inflationary pressures, international banking held expense growth to a modest 3% on a constant dollar basis for the year as a result of continuous efforts to rationalize our operations and further digitize the bank.

Speaker 1: International banking continued to deliver positive operating leverage.

International banking continued to deliver positive operating leverage.

Speaker 1: Our 2023 financial results reflect a year of transition, economic transition in the markets in which we operate, and transition within the bank as we prepare for our next phase of growth.

Our 2023 financial results reflect a year of transition economic transition in the markets in which we operate and transition within the bank as we prepare for our next phase of growth.

We are seeing early signs of progress across the bank on the strategic priorities previously outlined that will lead us to more consistent earnings growth over time, more specifically client privacy, earning a greater share of the client wallet with a focus beyond the balance sheet.

Speaker 1: We are seeing early signs of progress across the bank on the strategic priorities previously outlined that will lead us to more consistent earnings growth over time. More specifically, client primacy, earning a greater share of the client wallet with a focus beyond the balance.

Speaker 1: Discipline capital allocation. Managing resources with a view to value over volume.

Disciplined capital allocation managing resources with a view to value over volume.

Speaker 1: and operational excellence, a continuous focus on productivity, process simplification, and a relentless effort to build a culture that will give us competitive advantage. Better, faster, and at a lower cost.

And operational excellence, our continuous focus on productivity process simplification and a relentless effort to build a culture that will give us competitive advantage better faster and at a lower cost.

Speaker 1: all underpinned by a strong balance sheet, ample liquidity, and appropriate allowances for credit loss.

All underpinned by a strong balance sheet ample liquidity and appropriate allowances for credit losses.

I am encouraged by the franchise strength across our businesses. We are recognized again this year by the banker magazine with both the bank of the year in Canada Award and the Global award for banking in the community recognizing our Scotia rise program and the positive impact it is having in our communities.

Speaker 1: I am encouraged by the franchise strength across our businesses. We are recognized again this year by the Banker Magazine with both the Bank of the Year in Canada Award and the Global Award for Banking in the Community, recognizing our Scotia RISE program and the positive impact it is having in our communities.

The Bank has also recognized leader for our commitment to fostering a more sustainable and inclusive future for our stakeholders. We were recognized by global Finance with five awards for our leadership and sustainable finance, including global leadership in sustainability transparency and best Bank for sustainable financing Canada.

Speaker 1: The bank is also a recognized leader for our commitment to fostering a more sustainable and inclusive future for our stakeholders.

Speaker 1: We are recognized by Global Finance with five awards for leadership in sustainable finance, including Global Leadership and Sustainability Transparency and Best Bank for Sustainable Finance in Canada.

And we continue to build on our position as an employer of choice. This year, we were recognized as one of the best workplaces in Canada by Great Places to work and we are once again included in the Bloomberg gender equality index for a sixth consecutive year.

Speaker 1: And we continue to build on our position as an employer of choice. This year we were recognized as one of the best workplaces in Canada by Great Places to Work and we were once again included in the Bloomberg Gender Equality Index for a sixth consecutive year.

Going forward as we focus on execution of our strategy and a cohesive enterprise wide mindset to meeting the needs of our clients. We've also made important senior leadership additions to the bank.

Speaker 1: Going forward, as we focus on execution of our strategy and a cohesive enterprise-wide mindset to meeting the needs of our clients, we've also made important senior leadership additions to the bank.

I am confident in the strength and leadership team as we focus on the future and our plans to deliver sustainable profitable growth for our shareholders.

Speaker 1: I am confident in this strength and leadership team as we focus on the future and our plans to deliver sustainable, profitable growth for our shareholders.

I would like to sincerely. Thank Glen Gowland first contributions since joining the bank over 20 years ago.

Speaker 1: I would like to sincerely thank Glenn Gowland for his contributions to joining the bank over 20 years ago.

Speaker 1: I am delighted that we will continue to benefit from his expertise as he transitions to the role of Vice Chair, reporting directly to me.

I am delighted that we will continue to benefit from his expertise as he transitions to the role of Vice chair reporting directly to me.

Speaker 1: As previously announced, Jackie Lard will assume the role of Group Head Global Wealth Management on December 1st this year.

As previously announced <unk> will assume the role of group had global wealth management on December one this year.

Speaker 1: I realize 2023 has been a difficult year financially, but the actions taken have been decisive, deliberate, and necessary.

I realize 2023 has been a difficult year financially, but the actions taken have been decisive.

Liberate and necessary.

Speaker 1: A strong balance sheet, a relentless focus on becoming more efficient, and appropriate allowances will set the bank up for success going forward.

Our strong balance sheet, a relentless focus on becoming more efficient and appropriate allowances will set the bank up for success going forward.

As I look to 2024, I'm confident earnings will increase driven by benefits from the productivity initiatives and a more stable rate environment.

Speaker 1: As I look to 2024, I am confident earnings will increase, driven by benefits from the productivity initiatives and a more stable rate environment.

We look forward to sharing our new strategy at our Investor Day on December 13th.

Speaker 1: We look forward to sharing our new strategy at our investor day on December 3rd.

Speaker 1: With that, I will turn the call over to Raj for a detailed financial review of our results.

With that I'll turn the call over to Raj for a detailed financial review of our results.

Speaker 2: Thank you, Scott, and good morning, everyone. This quarter's net income was impacted by adjusting items of $289 million after tax for $0.24 of earnings per share and about six basis points on the common equity tier 1 ratio, all of which were recorded in the other segment.

Thank you Scott and good morning, everyone.

This quarter's net income was impacted by adjusting items of $289 million after tax.

24 of earnings per share and about six basis points on the common equity tier one ratio all of which were recorded in the other segment.

Speaker 2: This consisted of a $258 million restructure charge relating to workforce reductions, a $63 million charge related to the exit of certain real estate and service contracts, and a $2.5 million charge related to the exit of certain real estate and service contracts.

This consistent of a $258 million restructuring charge relating to workforce reductions.

$603 million charge related to the exit of certain real estate and service contracts.

Speaker 2: a $159 million in payment charge for the bank's investment in Bank of Xi'an.

$159 million impairment charge to the bank's investments in bank of Xeon.

Speaker 2: a $114 million dollar impairment of certain software.

A $114 million impairment of certain software.

Speaker 2: These were partly offset by a $319 million gain from the sale of the bank's 20% equity interest in Canadian Tower Financial Services.

These were partially offset by a $319 million gain from the sale of the banks, 20% equity interest in Canadian tire financial services.

Speaker 2: The folio results were also impacted by the $579 million Canada recovery dividend recorded in Q1, 2023.

The full year results were also impacted by the $579 million of Canada company dividends recorded in Q1 2023.

Speaker 2: All my comments that follow will be after adjusting for these items and the usual acquisition-related costs on a year-over-year basis unless specified otherwise.

All my comments that follow will be after adjusting for these items and the usual acquisition related costs on a year over year basis unless specified otherwise.

Speaker 2: Starting on slide 5 on fiscal 2023 performance.

Starting on slide five on fiscal 2023 performance.

The bank ended the year with adjusted diluted earnings per share of $6 54.

And our return on equity of 11, 7%.

Speaker 2: Revenue was up 1% and expenses increased 9%, resulting in negative operating leverage of 8.3% for the year.

Revenue was up 1% and expenses increased 9%, resulting in negative operating leverage of eight 3% for the year.

Speaker 2: Provision for credit losses were $3.4 billion in 2023, approximately $2 billion higher, of which over $1 billion was performing allowance build. Phil will speak to this later.

Provision for credit losses were $3 4 billion in 2023, approximately $2 billion higher of which over $1 billion was performing allowance build.

I'll speak to this later.

Canadian banking earnings were $4 billion down $757 million or 16%.

Speaker 2: Canadian banking earnings were $4 billion, down 757 million or 16%, primarily due to higher provision for credit losses that increased by $1.2 billion while revenues grew a strong 7%.

Primarily due to higher provision for credit losses increased by one point to $1 billion while.

<unk> grew a strong 7%.

Speaker 2: International banking earnings were $2.5 billion, down 4% on a constant dollar basis.

International banking earnings were $2 5 billion.

Down 4% on a constant dollar basis.

Speaker 2: Revenues were up $710 million for a strong 7%, while provision for credit loss has increased $638 million.

Revenues were up $710 million on a strong 7% while provision for credit losses increased $638 million.

Speaker 2: Global wealth management earnings of $1.5 billion were down 126 million or 8% as a result of the very challenging market environment.

Global wealth management earnings of $1 $5 billion were down $126 million or 8% as a result of the very challenging market environment.

Canadian wealth was down 12% impacted by lower fee income while international wealth earnings grew 19%.

Speaker 2: Canadian wealth was down 12%, impacted by lower fee income, while international wealth earnings grew 19%.

Global banking and markets reported earnings of $1 8 billion.

Speaker 2: Global banking and markets reported earnings of $1.8 billion, down 143 million or 7%.

Down $143 million or 7%.

Speaker 2: Even in a slow capital markets environment, revenues grew 7%, but expenses were up 15% to support business growth initiatives.

Even in a slow capital markets environment revenues grew 7%, but expenses were up 15% to support business growth initiatives.

Speaker 2: The provision for credit losses were higher by $167 million compared to the prior year.

The provision for credit losses were higher by $167 million compared to the prior year.

Speaker 2: The other segment reported a net loss of $1.4 billion compared to a loss of $229 million in 2022.

The other segment reported a net loss of $1 $4 billion compared to a loss of $229 million in 2022.

Speaker 2: The higher loss of approximately $1.2 billion was due to lower revenues driven by higher funding costs and lower investment gains that were partly offset by higher income from liquor apps.

The higher loss of approximately one point to $1 billion was due to lower revenues.

And by higher funding costs and lower investment gains that were partially offset by higher income from liquid assets.

Speaker 2: The segment had some offsetting benefits from a lower provision for taxes and lower non-interest expense.

The segment had some offsetting benefits from a lower provision for taxes and lower noninterest expenses.

Speaker 2: The bank's earnings in 2024 are expected to benefit from strong net interest income growth, while non-interest revenues are expected to grow modestly.

The bank's earnings in 2024.

Are expected to benefit from strong net interest income growth, while noninterest revenues I would expect it to grow modestly.

Loan growth is expected to be modest how would we expect the benefits of repricing to support net interest margin expansion.

Speaker 2: Loan growth is expected to be modest. However, we expect the benefits of repricing to support net interest margin expansion.

Expense growth is expected to moderate largely in line with inflation.

Speaker 2: Expense growth is expected to moderate, largely in line with inflation, as strategic investments are mostly offset by efficiency savings.

Strategic investments are mostly offset by efficiency savings.

Speaker 2: the bank expects to generate positive operating leverage in 2024.

The bank expects to generate positive operating leverage in 2024.

The bank's earnings I would expect it to improve marginally this year, despite higher <unk> and a higher tax rate with first half profitability improving from the current quarter and the second half of the year being stronger than the bush.

Speaker 2: The bank's earnings are expected to improve marginally this year, despite higher PCLs and a higher tax rate, with first-half profitability improving from the current quarter and the second half of the year being stronger than the first.

Speaker 2: Moving to slide six for a review of the fourth quarter results.

Moving to slide six for a review of the fourth quarter results.

The Bank reported quarterly adjusted earnings of $1 7 billion and diluted earnings per share of $1 26.

Speaker 2: The bank reported quarterly adjusted earnings of $1.7 billion and diluted earnings per share of $1.26. The return on equity was in the last year.

The return on equity was eight 9%.

Net interest income was $4 7 billion up 1% year over year, and 2% quarter over quarter from a six basis point margin expansion from higher lending margins and business mix changes, including deposit growth across all business lines.

Speaker 2: Net interest income was $4.7 billion, up 1% year over year and 2% quarter over quarter, from a 6 basis point margin expansion, from higher lending margins, and business exchanges, including deposit growth across all business.

Deposit growth outpaced loan growth again this quarter.

Speaker 2: Deposit growth outpaced loan growth again this quarter, resulting in a loan-to-deposit ratio of 110% compared to 116% in the prior year.

And the loan to deposit ratio of 110%.

<unk> to 116% in the prior year.

Noninterest income was $3 3 billion down 3% year over year, mainly due to lower trading revenues and investment gains offset by higher fee and commission and wealth management revenues.

Speaker 2: Non-interest income was $3.3 billion, down 3% year over year, mainly due to lower trading revenues and investment gains.

Speaker 2: offset by higher fee and commission and wealth management revenue.

Speaker 2: The provision for credit losses increased $437 million, or 53% from the last quarter, driven by higher performing loan provisions, which were $454 million this quarter.

The provision for credit losses increased $437 million or 53% from the last quarter driven by higher performing loan provisions, which were $454 million this quarter.

Speaker 2: The PCL ratio was 65 basis points per quarter, of which 23 basis points were performing PCL.

The PCL ratio was 65 basis points, this quarter of which 23 basis points with performing PCL loss.

Speaker 2: Quarter over quarter expenses were up 4%, mainly from higher technology costs, performance-based compensation, and professionals.

Quarter over quarter expenses were up 4%, mainly from higher technology costs performance based compensation and professional fees.

Expenses increased 10% year over year or 7%, excluding the unfavorable impact of foreign currency translation, reflecting higher staffing related costs technology costs and performance and share based compensation.

Speaker 2: Expenses increased 10% year-over-year or 7%, excluding the unfavorable impact of foreign currency translation, reflecting higher staffing-related costs, technology costs, and performance and share-based compensation.

The productivity ratio was 59, 5% this quarter, an increase of 340 basis points quarter over quarter.

Speaker 2: The productivity ratio is 59.5% this quarter, an increase of 340 basis points quarter over quarter.

The effective tax rate was 14, 7% this quarter compared to 17, 6% a year ago.

Speaker 2: The effective tax rate was 14.7% this quarter compared to 17.6% a year ago, driven by higher tax exempt income and higher income from lower tax year restrictions.

Driven by higher tax exempt income and higher income from lower tax jurisdictions.

Speaker 2: partly offsetting an increase in the bank's test rate tax rate and lower inflation readjustment.

Partially offsetting an increase in the bank's statutory tax rate.

Lower inflationary adjustments.

Moving to slide seven the bank reported a common equity tier one ratio of 13% an increase of approximately 30 basis points this quarter.

Speaker 2: Moving to slide 7, the bank reported a common equity tier 1 ratio of 13%, an increase of approximately 30 basis points this quarter.

Speaker 2: Net internal capital generation was 19 basis points. The sale of our 20% equity interest in Canadian Tire Financial Services contributed 16 basis points. And the dividend reinvestment plan contributed 11 basis points.

Net internal capital generation was 19 basis points.

Sale of our 20% equity interest in Canadian tire financial services contributed 16 basis points and the dividend reinvestment plan contributed 11 basis points.

Speaker 2: This is partly offset by 10 basis points impact from the restructuring and one-time items and the negative 8 basis points from the fair value impact of available for sale securities.

This was partially offset by 10 basis points impact from the restructuring and onetime items and the negative eight basis points from the fair value impact of available for sale Securities.

Risk weighted assets were $440 billion flat quarter over quarter.

Speaker 2: Earth created assets were $440 billion flat quarter over quarter as the decline in book size was offset by the impact of foreign exchange.

The decline in book size was offset by the impact of foreign exchange.

Speaker 2: The estimated impact from the adoption of the Basel 3 reforms is approximately 75 basis points in Q1 2024.

The estimated impact from the adoption of the Basel III reforms is approximately 75 basis points in Q1 2024.

Speaker 2: The 2.5% increase of the capital floor to 67.5%

They're doing a 5% decrease of the capital floor to 67, 5%.

Speaker 2: is approximately 45 basis points and the implementation of the fundamental review of the trading book is approximately 30 basis points.

Is approximately 40 basis 45 basis points and the implementation of the fundamental review of trading book is approximately 30 basis points.

In addition, the bank's liquidity coverage ratio at 136% and was significantly up from 119% last year.

Speaker 2: In addition, the bank's liquidity coverage ratio grew to 136% and was significantly up from 119% last year.

Speaker 2: The net stable funding ratio also improved at 116% from 111% in the prior year.

The net stable funding ratio also improved at 116% from 111% in the prior year.

Speaker 2: The capital and liquidity ratios are expected to remain strong in 2024, with our plan to manage our common equity tier one ratio in the 12.5% rate.

The capital and liquidity ratios had expected to remain strong in 2024.

It's our plan to manage our common equity tier one ratio in the 12, 5% range.

Speaker 2: Turning now to the Q4 business line results beginning on slide A.

Turning now to the Q4 business lines results beginning on slide eight.

Canadian banking reported earnings of $810 million a.

Speaker 2: Canadian banking reported earnings of $810 million, a decrease of 31% year-over-year due to higher provision for credit losses and higher non-interest expense.

A decrease of 31% year over year due to a higher provision for credit losses and higher noninterest expenses.

Speaker 2: Year over year revenues grew 6% while expense growth was 9%.

Year over year revenues grew 6% while expense growth was 9%.

Speaker 2: Average loans and acceptances were in line with prior year and down 1% from the prior quarter while the mix changed.

Average loans and acceptances were in line with prior year and down 1% from the prior quarter, while the mix change.

We saw continued growth in our highly linked portfolios as business loans grew 11% personal loans grew 3% in credit cards increased 18%.

Speaker 2: This was offset by a decline of 4% in residential mortgage business.

This was offset by a decline of 4% and residential mortgage businesses.

Speaker 2: We continue to see deposit growth primarily in term products, with average deposits up 2% quarter over quarter.

We continue to see deposit growth, primarily in term products with average deposits up 2% quarter over quarter.

Speaker 2: Year-over-year deposits grew 10% and the loan-to-deposit ratio improved to 125% from 138% last year.

Year over year deposits grew 10% and the loan to deposit ratio improved to 125 basis points. So I don't want them to 25% from 138% last year.

Speaker 2: Net interest income increased 8% year-over-year as deposits grew a strong 10%.

Net interest income increased 8% year over year as deposits grew a strong 10%.

Speaker 2: quarter over quarter margin expanded by 12 basis points.

Quarter over quarter margin expanded by 12 basis points benefiting from asset repricing and intentional changes in business mix.

Speaker 2: benefiting from asset repricing, and intentional changes in business.

Noninterest income was in line with last year due to lower banking fees, mostly offset by higher insurance revenue.

Speaker 2: Non-interest income was in line with last year due to lower banking fees, mostly offset by higher insurance revenues.

Expenses increased 9% year over year, primarily due to higher personnel cost and inflationary adjustments.

Speaker 2: Expenses increase 9% year-over-year primarily due to higher personal costs and inflationary adjustments. Quarter over quarter expenses.

Quarter over quarter expenses were up 4%.

Speaker 2: The PCL ratio was 63 basis points, an increase of 36 basis points, quarter over quarter, from significantly higher performing loan provision.

The PCL ratio was 63 basis points, an increase of 36 basis points quarter over quarter from significantly higher performing loan provisions.

Speaker 2: Looking forward to 2024, deposit and loan growth is expected to moderate from 2023 level.

Looking forward to 2020 for deposit and loan growth is expected to moderate from 2023 levels.

This along with improving net interest margins is expected to drive revenue growth.

Speaker 2: This, along with improving net interest margins, is expected to drive revenue growth.

Solid revenue growth in retail, including Tangerine is expected to continue while business banking revenues are expected to moderate.

Speaker 2: Solid revenue growth in retail, including tangerine, is expected to continue, while business banking revenues are expected to moderate.

Speaker 2: The segment will grow expenses in line with revenue growth while balancing strategic growth investments.

The segment will grow expenses in line with revenue growth, while balancing strategic growth investments.

Turning now to global wealth management on slide nine.

Speaker 2: Earnings of $333 million declined 10% year over year. A strong 8% growth within international wealth was offset by Canadian wealth results declining 12% largely due to lower average assets under management.

Earnings of $333 million declined 10% year over year.

A strong 8% growth with an international world, but is offset by Canadian wealth vessel results declining 12% largely due to lower average assets under management.

Speaker 2: Revenues grew 3% year over year due primarily to higher brokerage revenues in Canada and private banking revenues within our international business.

Revenues grew 3% year over year, due primarily to higher brokerage revenues in Canada, and private banking revenues within our international business.

Speaker 2: Expenses were up 11% year-over-year driven by higher volume-related expenses and technology costs.

Expenses were up 11% year over year, driven by higher volume related expenses.

And technology costs.

Spot asset under management increased 2% year over year to $317 billion as market appreciation was mostly offset by net redemptions.

Speaker 2: Spot asset under management increased 2% year over year to $317 billion as market appreciation was mostly offset by net redemption.

Speaker 2: Assets under administration increased 5% over the same period to $610 billion from higher net sales and market appreciation.

Assets under administration increased 5% over the same period to $610 billion, some higher net sales and market appreciation.

Investment fund sales in Canada continue to be under pressure with approximately $60 billion in net redemptions over the last year.

Speaker 2: Investment and fund sales in Canada continue to be under pressure with approximately $60 billion in net redemptions over the last year.

Under this backdrop Scotia global asset management and investment results continued to perform well against their benchmarks.

Speaker 2: Under this backdrop, Scotiabank Global Asset Management and investment results continue to perform well against a benchmark.

Speaker 2: International wealth management generated earnings of $52 million driven by higher revenues from business volume growth.

International wealth management generated earnings of $52 million, driven by higher revenues from business volume growth.

Speaker 2: AUA and AUM grew 12% and 16% respectively year over year.

<unk> and AUM grew 12% and 16% respectively year over year.

Global wealth management expects to deliver revenue growth in 2024, driven by retail mutual fund volume growth solid growth across our Canadian advisory businesses and continued expansion across key international markets.

Speaker 2: Global wealth management expects to deliver revenue growth in 2024, driven by retail mutual fund volume growth, solid growth across our Canadian advisory businesses, and continued expansion across key international markets.

Things are expected to grow in line with the recovering market conditions and strong new business volume growth.

Turning to slide 10.

Speaker 2: Global banking and market generated earnings of $414 million, down 14% year over year.

Mobile banking and markets generated earnings of $414 million down 14% year over year.

Capital markets revenue was up 9% year over year as global equities grew 25%.

Our business banking revenues declined 5% as loans will slot year over year.

Net interest income was down 19% year over year as a result of higher trading related funding costs and lower corporate lending margins.

Speaker 2: Net interest income was down 19% year-over-year as a result of higher trading-related funding costs and lower corporate lending markets.

Speaker 2: Non-interest income grew 95 million or 11% year over year.

Noninterest income grew $95 million or 11% year over year.

Speaker 2: primarily due to higher fee and commission revenue partly offset by lower trading related revenue.

Primarily due to higher fee and commission revenue, partly offset by lower trading related revenue.

Speaker 2: Expenses were up a modest 3% quarter over quarter, mainly from higher technology costs and the negative impact of foreign exchange.

Expenses were up a modest 3% quarter over quarter, mainly from higher technology costs and the negative impact of foreign exchange on.

Speaker 2: On a year-over-year basis, expenses were up 12%, due mainly to higher personal costs and technology investments for late-pecker business growth.

On a year over year basis expenses were up 12% due mainly to higher personal cost and technology investments will lead to good business growth.

The provision for credit losses increased 13 basis points quarter over quarter to $39 million, mostly on performing loans.

Speaker 2: The provision for credit losses increased 13 basis points quarter over quarter to $39 million, mostly on performing law.

The U S business generated strong earnings of $228 million.

Speaker 2: The US business generated strong earnings of $228 million.

Speaker 2: GBM Latin America, which is reported as part of the international banking segment, reported earnings of $251 million, down $63 million from a record third quarter, with lower earnings in Chile, Peru and Mexico due to lower capital market sectors.

GBM Latin America, which is reported as part of the International banking segment reported earnings of $251 million down $63 million from a record third quarter, but lowered earnings in Chile, Peru, and Mexico due to lower capital markets activities.

Speaker 2: In 2024, in capital markets, revenue growth will be led by FICC, while business banking is expected to grow fee-based revenue.

In 2024 in capital markets revenue growth will be led by <unk>, while the business banking is expected to grow fee based revenues.

Speaker 2: Extense growth will be focused on key investments and priority segments in MARA.

Expense growth will be focused on key investments in priority segments and markets.

Speaker 2: Earnings in GBM LATAM are expected to moderate in 2024 to more normal levels from the elevated earnings in 2023 and the impact of reduced capital allocation.

Earning and earnings in GBM Latam are expected to moderate in 2024 to more normal levels from the elevated earnings in 2023, and the impact of reduced capital allocation.

Moving to slide 11 for a review of International banking My comments that follow are on an adjusted and constant dollar basis.

Speaker 2: Moving to slide 11 for a review of international banking. My comments that follow are on an adjusted and constant dollar base.

Speaker 2: The segment reported net income of $570 million, down 12% of $75 million quarter over quarter, primarily from lower earnings from GBM LATAM of $63 million.

The segment reported net income of $570 million down, 12% or $75 million quarter over quarter, primarily from lower earnings from GBM Latam of $63 million.

Revenue was up 3% year over year, driven by higher net interest margins.

Speaker 2: Revenue was up 3% year-over-year driven by higher net interest margins. year-over-year loan growth

Year over year loan growth moderated to 2%.

Speaker 2: mortgages were up 7% while business banking decreased 1%.

Mortgages were up 7%, while business banking decreased 1%.

Speaker 2: Deposits grew a strong 9% year over year and 3% quarter over quarter.

Deposits grew a strong 9% year over year and 3% quarter over quarter.

Speaker 2: the drone to deposit ratio improved by over a thousand basis points year over year to 129%.

The loan to deposit ratio improved by over 1000 basis points year over year to 129%.

Speaker 2: Net interest margin expanded 8 basis points quarter over quarter from asset margin expansion and business exchange.

Net interest margin expanded eight basis points quarter over quarter from asset margin expansion and business mix changes.

The provision for credit losses was 119 basis points of $512 million up a modest one basis point quarter over quarter.

Speaker 2: The provision for credit losses was 119 basis points of $512 million up a modest one basis point quarter over quarter.

Expenses were up 3% year over year due to inflationary pressure.

Speaker 2: Expenses were up 3% year-over-year due to inflationary pressure, partly offset by the benefits of cost reduction initiative.

Clearly offset by the benefits of cost reduction initiatives.

Expenses were up 2% quarter over quarter, driven by technology expense.

Speaker 2: Expenses were up 2% quarter-over-quarter driven by technology expense. Operating Love

Operating leverage was positive for the year.

Speaker 2: Looking ahead to 2024, revenues in international banking are expected to benefit from loan growth and net interest margin expansion.

Looking ahead to 2024 revenues in international banking out expected to benefit from loan growth and net interest margin expansion.

Speaker 2: Expenses are expected to grow at a lower rate than revenue, reflecting expense saving initiative.

Expenses are expected to grow at a lower rate than revenue, reflecting expense saving initiatives.

Speaker 2: earnings are expected to be impacted by higher provision for credit losses and a higher tax rate.

Earnings are expected to be impacted by higher provision for credit losses, and a higher tax rate.

Turning to slide 12, the other segment reported an adjusted net loss attributable to equity holders of $487 million that was higher by $188 million compared to the prior quarter.

Speaker 2: Revenue was lower than last quarter by 222 million.

Revenue was lower than last quarter by $222 million.

Speaker 2: Higher interest from liquid assets was more than offset by increase in funding costs.

Higher interest from liquid assets was more than offset by increase in funding costs.

Speaker 2: Also contributing was further improvement in our liquidity levels, which comes at a net cost.

Also contributing was further improvement in our liquidity levels, which comes at a net cost.

Speaker 2: Revenue was also impacted by minimal investment gains and lower income from associated corporations and unrealized gains on non-profit industries.

Revenue was also impacted by minimal investment gains and lower income from associated corporations and unrealized gains on non trading derivatives.

This was partly offset by lower taxes and noninterest expenses.

Speaker 2: This is partly offset by lower taxes and non-interest expense.

Speaker 2: In 2024, the other segment loss is expected to remain elevated, as funding costs are expected to remain at these levels for most of the year, with significantly lower investment gains.

In 2020 for the other segment loss is expected to remain elevated as funding costs are expected to remain at these levels for most of the Europe, but significantly lower investment gains we will see improvements in this segment as rates decline towards the second half of 2024.

Speaker 2: We will see improvements in this segment as rates decline toward the second half of 2024.

I will now turn the call over to fell to the southwest.

Speaker 3: I will now turn the call over to Phil for the fast-risk. Thank you, Raj. Good morning, everyone. We continue to strengthen our balance sheet by increasing our ACL ratio from 71 basis points to 85 basis points this year.

Thank you Raj and good morning, everyone. We continued to strengthen our balance sheet by increasing our ACL ratio from 71 basis points to 85 basis points. This year.

Speaker 3: With this, we have now increased our allowances for credit losses by $1.1 billion in 2023, with $780 million of this increase from performing allowance.

With this we have now increased our allowances for credit losses by $1 1 billion in 2023 with $780 million of this increase from performing allowances.

Given the macroeconomic backdrop with higher unemployment levels higher for longer interest rates and upcoming renewals or fixed rate mortgages in Canada. We have focused on strengthening the balance sheet, including a further increase in performing allowances this quarter up $448 million leveraging expert credit judgment for Canadian banking and go.

Speaker 3: Given the macroeconomic backdrop of higher unemployment levels, higher for longer interest rates, and upcoming renewals of fixed-rate mortgages in Canada, we have focused on strengthening the balance sheet, including a further increase in performing allowances this quarter of $440 million, leveraging expert credit judgment for Canadian banking and global banking and marketing.

Banking and markets.

Speaker 3: higher quality originations with a focus on affluent in international, and higher credit quality at business bank.

Higher quality originations with a focus on affluent in international.

And higher credit quality and business banking.

Speaker 3: shifting business mix to a more secured across our footprint, and finally a continued focus on building performance allowances in international resulting in a approximate $200 million increase over the past six floors.

Shifting business mix to a more secured across our footprint and finally, our continued focus on building performance allowances in international <unk>.

<unk>, an approximate $200 million increase over the past six quarters.

Speaker 3: This improved ACL coverage provides us with a solid foundation to manage through periods of slow growth and an uncertain macroeconomic environment.

This improved ACL coverage provides us with a solid foundation to manage through periods of slow growth in an uncertain macroeconomic environment.

It is important to note that while delinquencies are still within historical norms consumer health in Canada continues to weaken and we expect households may continue to experience financial pressure through 2024 with.

Speaker 3: It is important to note that while delinquencies are still within historical norms, consumer health in Canada continues to weaken. And we expect households may continue to experience financial pressure through 2024 with the build in ACL address.

With to build an ACL addressing this.

In business banking, we are not seeing increased defaults due to high quality of our portfolios. However, we are increasing our coverage ratio given the expectation of continued elevated interest rates and the potential impact on client performance.

Speaker 3: In business banking, we are not seeing increased defaults due to high quality of our portfolios. However, we are increasing our coverage ratio given the expectation of continued elevated interest rates and the potential impact on client performance.

Moving to slide 15, the quarter over quarter PCL increase was primarily driven by the performing allowance build which was 23 basis points. This compares to four basis points last quarter to build was primarily in Canadian banking.

Speaker 3: Moving to slide 15, the quarter-per-quarter PCL increase was primarily driven by the Performing Allowance build, which was 23 basis points. This compares to four basis points last quarter. The build was primarily in Canadian banking.

Speaker 3: As a result of the increased ACL, our total PCLs in Q4 were 1.26 billion, including 454 million in performing PCLs.

As a result of the increased ACL, our total PCL in Q4 were 126 building, including $454 million in performing PCL.

Speaker 3: Total PCLs were up 437 million quarter over quarter. This translates to a PCL ratio of 65 basis points.

Total PCL as were up $437 million quarter over quarter. This translates to a PCL ratio was 65 basis points in <unk>.

Speaker 3: Impaired PCL's trend is higher at 42 basis points compared to 38 basis points in Q3.

<unk> trended higher at 42 basis points compared to 38 basis points in Q3.

Canadian banking total Pcl's were 63 basis points quarter over quarter total <unk> increased by $393 million, resulting in a total PCL of $700 million.

Speaker 3: Canadian Banking total PCLs were 63 bases.

Speaker 3: quarter over quarter, total PCLs increased by 393 million resulting in a total PCL of 700 million.

$414 million or 37 basis points of the <unk> sales were related to performing allowance build of which $240 million was for Canadian retail and $174 million was for business banking.

Speaker 3: 414 million or 37 basis points of the PCLs were related to performing allowance bills, of which $240 million was for Canadian retail and $174 million was for business banking.

Retail customers in Canada continued to spend less on discretionary goods and more on our central items year over year. Overall spending has continued to slow as total debit and credit card spend fell 3% quarter over quarter and remained flat year over year, despite inflation <unk>.

Speaker 3: Retail customers in Canada continue to spend less on discretionary goods and more on essential items year over year. Overall, spending has continued to slow as total debit and credit card spend fell 3% quarter over quarter and remained flat year over year despite inflation.

Speaker 3: Variable rate mortgage customers continue to spend less than their fixed rate counterparts with total spend down 11% year over year, while spending for fixed rate customers is only down 5% at least 200%

We're able rig mortgage customers continue to spend less and they're fixed rate counterparts with total spend down 11% year over year, while spending for fixed rate customers is only down 5%.

Additionally, delinquencies continue to trend up across all products in Canada.

Speaker 3: Additionally, delinquencies continue to trend up across all products in Canada. 90-day delinquency levels were 3 basis points quarter to 25 basis points.

90 day delinquency levels were three basis points quarter over quarter to 25 basis points and were up 10 basis points year over year.

Speaker 3: Quarter-to-quarter we saw deterioration in HEK key locks and auto increasing 9 and 6 basis points respectively.

<unk> over quarter, we saw deterioration in helix and auto increasing nine and six basis points respectively.

Speaker 3: In Canadian business banking, we are cognizant of uncertain macroeconomic conditions.

Canadian business banking Canadian business banking, we were cognizant of uncertain macroeconomic economic conditions.

Speaker 3: Included in our ACL coverage is an additional build for a real estate portfolio which includes impacts to collateral value.

Included in our ACL coverage is an additional build for our real estate portfolio, which includes impacts to collateral values.

Speaker 3: Our exposure to US real estate is largely to investment grade borrowers and as disclosed in the investor presentation, our US office exposure is immaterial.

Our exposure to U S. Real estate is largely to investment grade borrowers and as disclosed in the investor presentation. Our U S office exposure is immaterial.

Global banking and markets provisions for credit losses were $39 million or 11 basis points. This quarter and included a performing allowance build of $30 million.

Speaker 3: Global banking and markets provisions for credit losses were $39 million or 11 basis points this quarter and included a performing allowance billed of $30 million.

Total PCL as an international banking were $512 million or 119 basis points up one basis point from the prior quarter total retail PCL decreased $17 million quarter over quarter to bring the PCL ratio to 211 basis points driven by lower allowance.

Speaker 3: Total PCLs in international banking were $512 million, or 119 basis points, up one basis point from the prior quarter. Total retail PCLs decreased $17 million quarter over quarter to bring the PCL ratio to 211 basis points, driven by lower allowances in increases in Colombia and Chile.

<unk> increases in Colombia, and Chile.

Speaker 3: performance in these markets have started to stabilize with improving macroeconomic outcomes.

Performance in these markets have started to stabilize with improving macroeconomic outlook.

Speaker 3: Central banks have paused interest rate hikes in Colombia and in Chile they have started reducing rates.

Central banks have paused interest rate hikes in Colombia, and in Chile, They have started reducing rates.

Mexico continues to perform within expectations supported by a resilient underlying economic fundamentals.

Speaker 3: Mexico continues to perform within expectations supported by resilient underlying economic fundamentalite!

Speaker 3: Headwinds persist in Peru with delinquencies remaining elevated and GDP contracted. Peru entered a recession and will likely be further impacted by the upcoming El Niño. Contingency plans and loss mitigation tools are ready and have been deployed where needed.

Headwinds persistent Peru with delinquencies remaining elevated and GDP contracted Peru entered a recession and will likely be further impacted by the upcoming El Nino.

<unk> C plants and loss mitigation tools already and have been deployed where needed.

Speaker 3: Looking to fiscal 2024, we expect a challenging environment will persist for consumers and businesses.

Looking to fiscal 2024, we expect a challenging environment will persist for consumers and businesses.

Speaker 3: Canadian GDP growth is expected to remain muted and inflationary pressures on households is expected to persist with the outlook for rate cuts uncertain.

And GDP growth is expected to remain muted and inflationary pressures on households is expected to persist with the outlook for rate cuts uncertain.

Speaker 3: We expect PCLs in 2024 to be in the 45 to 55 basis point range, assuming no significant changes to our expected economic scenarios. With that, I'll pass the call back to John . Great, thanks, Phil. Operator.

We expect <unk> in 2024 to be in the 45 to 55 basis point range, assuming no significant change.

Changes to our expected economic scenarios with that pass the call back to John.

Great. Thanks, Phil operator could you open the lines for questions.

Thank you.

Speaker 4: Please press star 1 at this time if you have a question. There will be a few calls for our participants, but just for questions, we thank you for yourmanagement focused listen.

Please press star one at this time, if you have a question.

That will it will be small for all participants register for questions. We thank you.

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

Speaker 4: Our first question is from Ibrahim Poonawalla from Bank of America. Please go ahead.

Hey, good morning.

Speaker 5: So I guess maybe Raj you went through a lot in terms of the outlook for next year. I just want to make sure we heard you right. It sounds like you're guiding for PPPP to be up either year over year and from fourth quarter levels, given revenue growth should exceed expense growth.

So I guess, maybe Raj you went through a lot in terms of the outlook for next year and I just want to make sure we heard you right.

It sounds like you're guiding for <unk> to be up.

The year over year and from fourth quarter levels.

Revenue growth should exceed expense.

And do you have any growth driven by NIM expansion.

Speaker 5: and revenue growth driven by NIM expansion. So if you don't mind just quantify the level of margin expansion you expect at the all bank level if we don't see any action from Bank of Canada from here on. And what's the expense growth that we should think about would be the right way for 24 either year over year or relative to fourth quarter expense run rate. Thank you.

If you don't mind, just quantify the level of margin expansion you expect at the all bank level. If we don't see any action from bank of Canada from Euro and what does the expense growth that you should think about would be the right.

24, <unk> year over year or ended up the fourth quarter expense subject. Thank you.

Thanks, Hey, Brian miles stock margin.

Speaker 2: Thanks, Ibrahim. I'll start. Margin expansion should continue for the whole bank in 2024, Ibrahim.

Pension should continue for the whole bank in 2024 Ebrahim couple of reasons. One is repricing of our loans has already commenced as you saw this quarter frankly, you saw it in the last couple of quarters across our portfolios and that should continue in 2024, we know our deposit margin contribution to 2023 will be muted in 'twenty.

Speaker 2: Couple of reasons, one is re-pricing of our loans has already commenced as you saw this quarter. Frankly, you saw it in the last couple of quarters across our portfolios. And that should continue in 2024.

Speaker 2: We know our deposit margin contribution to 2023 will be muted in 24 because there's been lots of deposit growth. And I said in my prepared remarks that deposit growth is expected to be lower than what we saw in 2023.

Because there's been lots of deposit growth and I said in my prepared remarks that deposit growth is expected to be lower than what we saw in in 2023. The net of it is you should see pretty decent margin expansion from where we finished Q4 2023, both in the business lines as well as across a bank like you pointed out with the bank of Canada.

Speaker 2: The net of it is you should see pretty decent margin expansion from where we finished Q4 2023, both in the business lines as well as across the bank, like you pointed out with the Bank of Canada and the US Fed expected to stop rate increases. Obviously if they do increase it will be a headwind to this bank.

And the U S fed expected to stop rate increases obviously, if they do increase it'll be a headwind to this bank. So I think margins would be a good news story. That's why would we expect net interest income to grow next quarter in my prepared remarks, what I talked about.

Speaker 2: I think margins will be a good news, Shourey. That's where we expect net interest income to grow next quarter and my prepared remarks what I talked about.

Expenses as Q4 tends to be seasonally higher I think it's not unusual for us like Q1 next year will be higher because we have what we call eligible to retire cost that comes through our business lines, which gets.

Recorded in Q1 across our employee base.

Speaker 2: But for the whole year, like I mentioned, we expect to generate positive operating leverage for the bank, i.e. revenue growth exceeding expense growth by some margin. We know that the Canadian Bank has to invest, so there we think our revenue growth will be strong and offset the expense growth that is expected as we look forward. International Bank will continue to generate positive operating leverage as it did this year. And the wealth and GBM businesses, you know, it depends a bit on the markets, but I think for the whole bank we expect to generate positive operating leverage.

But for the whole year like I mentioned, we expect to generate positive operating leverage for the bank or your revenue growth exceeding expense growth by some margin. We note that the Canadian bank has to invest so that we think our revenue growth will be strong and offset the expense growth that is expected.

As we look forward International Bank will continue to generate positive operating leverage as it did this year.

The wealth in GBM businesses.

A bit on the markets, but I think for the whole bank, we expect to generate positive operating leverage expense growth will be significantly lower than what you saw this year adjusted for FX like I said it was about 7% for the whole year.

Speaker 2: expense growth will be significantly lower than what you saw this year. You know adjusted for effects like I said it was about 7% for the whole year.

Speaker 2: And next year we're going to benefit from the productivity initiatives that we took as well. You know, part of it is expected to come through in 24 and the full year benefit should come through in 25. So all that points to an expense growth I would call in the low end of the mid-single digit range is what we expect next.

And next year, we're going to benefit from the productivity initiatives that we took as well part of it is expected to come through in 'twenty, four and the full year benefits should come through in 'twenty five so all of that points to an expense growth I would call. It in the low end of the mid single digit range as what we expect next year.

That is helpful. Thank you and just on a separate question George you laid out the 75 basis point impact to CET, one from the Basel <unk> CVA change is it in the fuel factor in <unk>.

Speaker 5: That is helpful, thank you. And just on a separate question, Raj, you laid out the 75 basis point impact to CET1 from the Basel FRTP CVA changes and the floor factor in 1Q. So as we get to 1225, remind us where you want to be on CET1 as we think about the drip. And are there any actions that you can take to materially optimize the balance sheet to reduce that drag either on the market risk side or on floor factor. Thanks.

So as we get to 225 remind us where you want to be on CET, one as we think about the tape and <unk>.

Are there any actions you can take to materially optimize the balance sheet to the deals that are either on the market side on sort of a factor.

Thanks.

Thank you, Brian I think as far as capital ratio goes we'd like to run around the 12, 5% range for the rest of 2024 and the drip as a contributor to that without any doubt.

Speaker 2: Thank you, I think as far as capital ratio goes, we'd like to run around the 12.5% range for the rest of 2024. And drip is a contributor to that without any doubt. A lot of the actions that you refer to on muting loan growth, you've already seen it, you've seen our you know, we've been targeted about where we want to deploy our capital. And we've been pulling back capital from certain parts of the business where it has not been providing the appropriate returns in a capital constrained environment with higher cost of capital coming at us.

A lot of the actions that you referred to on muting loan growth you've already seen it you've seen.

Being targeted about where do we want to deploy our capital and we have been pulling back capital from certain parts of the business, where it has not been providing the appropriate returns in a capital constrained environment with higher cost of capital coming out of house.

So 250 is what we expect to run for 2024, obviously it also depends on what else people do on some of the other regulatory changes that can come across starting to somewhat eight we want to be prudent we want to run at one 5% and.

Speaker 2: So 1250 is what we expect to run for 2024. Obviously, it also depends on what OSFI will do and some of the other regulatory changes that can come across starting December 8th. We want to be prudent, we want to run at 1.5%. And we'll revisit all the actions that we need to take or not as we see how the regulatory environment evolves through 2024.

And we will revisit all the actions that we need to take or not as we see how the regulatory.

Environment evolves through 2024.

Speaker 2: Beyond that, we'll talk about it at investor day to see what is the right capital levels that this bank should be running at, but for 24 that's what you should expect from us.

Beyond that we'll talk about it at Investor day to see what is the right capital levels at this bank should be running at about 424, that's what you should expect from us.

Thank you.

Yes.

Speaker 4: Thank you. The following question is from Gabriel Deschenes from National Bank Financial. Please go ahead.

Thank you.

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

Speaker 6: Good morning. I just want to put a fine tune on the outlook commentary there. I've heard a few things from Scott and then the MDNA of course.

Good morning, I just wanted to.

To put a fine tune on the outlook commentary there.

I heard a few things from.

Scott.

D&A of course.

Suggesting that earnings growth will be marginal in 2024.

Speaker 6: earnings growth will be marginal in 2024.

Speaker 6: That's off of the full year adjusted base from 2023, I assume. And if we're, you know.

That's all for the full year adjusted base from 2023 or are you assume and if were you know.

Speaker 6: looking at it from an earnings per share standpoint. You know, you've got marginal earnings growth, then you've got the drip, which might be...

Looking at it from a earnings per share standpoint, you know when you've got marginal earnings growth, then you've got the drip which might be.

Speaker 6: ongoing for the full year, we're probably going to see lower than marginal EPS growth. Is that a reasonable interpretation?

Ongoing for the full year.

We're pregnancy lower than marginal EPS growth was up you know.

You know a reasonable interpretation.

No I think gave us charter stock might have a comment or two on that I think on an EPS basis, you should see.

Speaker 2: No, I think Gabe will start and Scott might have a comment or two on that. I think on an EPS basis you should see

Speaker 2: growth like marginal growth right from the $6.54 that we reported this year.

Like margin growth rate from the $6 54, <unk> reported this year.

Speaker 2: The drip definitely increases the share count as you point out Gabe. That's inclusive on the comment that I made. If you just look at net income growth, it will be greater than the EPS growth because you know the drip contribution which tends to be between eight and nine million shares a quarter this this year and I suspect it will continue through in 2024 will be an offset but offsetting that we think will have marginal growth.

The drip definitely increase associate count as you point out Gabe that's inclusive on the comment that I made.

If you just look at net income growth it will be greater than the EPS growth because you know the drip contribution.

$8 9 million shares a quarter. This this yet and I suspect. It will continue to in 2024 will be an offset but offsetting that we think will have marginal growth in EPS.

Okay, Great and then let me just let me make a couple of comments on that I mean, recognizing this has been a difficult year I think the one year anniversary and we wanted to move quickly to address them.

Speaker 1: Okay, great. And then, let me just let me make a couple comments on that. I mean, recognizing this has been a difficult year, I think the one year anniversary and we want to move quickly to address a lot of these issues around capital liquidity costs through the restructuring charge.

A lot of these issues around capital liquidity costs through the restructuring charge.

Speaker 1: allowances and we've done that and that gets you the 654 and the guidance we're giving is conviction around growing earnings from here and that's an important message to take away.

Allowances and we've done that and that gets you the 654.

The guidance, we're giving us conviction around growing earnings from here.

That's an important message to take away.

Speaker 6: Okay, then well on the building allowances front, I mean one way to look at it is you're you know being quote-unquote conservative and I think investors appreciate that but the other way to look at it is that from a performing ACL ratio standpoint if I look at it

Well on the building allowances front I mean, one way to look at it those are all being quote unquote conservative and I think investors appreciate that but the other way to look at it as that.

Oh from a performing ACL ratio standpoint, if I look at it.

Speaker 6: including mortgages or excluding mortgages, you're just at your pre-COVID level. So it's a bit of a catch-up in that regard. As the outlook or if the outlook remains challenging, which undoubtedly will be, could we see additional optic to your performing ACL, beyond the run rate we had before Q4?

Including mortgages or excluding mortgages youre just at your pre.

Pre COVID-19 levels, so it's a bit of a catch up payment in regard.

The outlook or if the outlook remains challenging.

Which undoubtedly will be.

Could we see additional.

Uptick to your performing ACO like beyond the.

The run rate we had before.

Q4.

Thanks, David sell here, great to great to hear you and thanks for the question.

Speaker 3: Thanks Gabe, it's Phil here. Great to hear you and thanks for the question. If I look forward to 2024, we're guiding towards, and I said it in my prepared remarks, 45 to 55 basis points.

The if I look forward to 2024.

<unk> towards and I had said it in my prepared remarks, 45 to 55 basis points.

Speaker 3: The portfolio that we have today, we liked and we've done a great job over the last few years really building a strong portfolio. You know, there's still pockets where we need to focus on in the international bank, but we've really turned a lot of the portfolio that we had pre-pandemic is not the portfolio that we have now, especially with the strong focus on affluent growth in the international banking platform.

The portfolio that we have today, we liked and we've done a great job over the last few years really building a strong a strong portfolio.

There are still pockets, where we need to focus on in the international bank, but we've really turned a.

A lot of the.

Portfolio that we had pre pandemic is not the portfolio that we have now, especially with the strong focus on our affluent growth in the international banking platform.

Speaker 3: and the change in mix shift from unsecured to secured. And so that is giving a different profile.

And the change in mix shift from unsecured to secured and so that is giving a different profile.

Speaker 3: We built these allowances because we were thoughtful about the macroeconomic outlook. We wanted to continue to strengthen the balance sheet as both Scott and Raj said. And it's really a forward-looking perspective for us, but I'm not seeing a ton of weakness in our portfolios. We're going to be mindful of the macroeconomic shifts throughout the year and if we need to build further performing allowances, we will, but the portfolio is strong.

We built these allowances because we were thoughtful about the macroeconomic outlook. We wanted to continue to strengthen the balance sheet as both Scott and Raj said.

<unk>.

It's really a forward looking perspective for us, but I'm not seeing a ton of weakness in our portfolio, we're going to be mindful of the macroeconomic shifts throughout the year as the year and if we need to build further performing allowances, we will but the portfolio is strong.

Speaker 6: Right, no, no, I'm not suggesting otherwise. Just from a management standpoint, where you see the increase in your ratio next year, is it more from the impaired or more from the performance?

No no I'm, not suggesting otherwise just from a management standpoint.

Where do you see the.

The increase in your ratio next year or is it more from the impaired or more from the performing <unk>.

Speaker 3: It'd be more from the impaired with the usual run rate of our performing allowance.

More from the the impaired with the usual run rate of our performing allowances.

Speaker 6: Got it. Thank you and you know, happy holidays coming up.

Got it thank you.

Happy holidays coming up.

Thanks Gabe.

Thank you.

Speaker 4: Thank you. Following question is from Mario Mandonca from TD Securities. Please go ahead.

<unk> question is from Mario Mendonca from TD Securities. Please go ahead.

Good morning, this might be too simple Roswell, maybe you could help me.

Speaker 7: Good morning. This might be too simple, Raj. So maybe you could help me. The fundamental review of the trading book was meaning, is going to be meaningful at 45 basis points. The next two years, should we, is it appropriate to assume that the hit would also be about 45 basis points each year for the next two years as we get to the full 72.5 in 2026? Or is that too simple approach to the equation?

The fundamental review the trading book was meaning there's going to be meaningful at 45 basis points.

The next two years should we is it appropriate to assume that the hit would also be about 45 basis points each year for the next two years as we get to the full.

Full $72 five in 2026 or is that too simple approach to the to the equation.

Speaker 2: No, I think the fundamental review of the training book should not repeat, right? So it's a one time hit like you. I'm sorry, I was referring to the floors. Sorry, Raj, I meant the floors, my mistake. Got it. No problem. I think the floor, the mathematical calculation will tell you that. Page 96, regs, repackage, disflows, what is our standardized first graded assets. If it remained at those levels, yeah, 2 1 1 2% of that will be around the 45 basis points that you're referring to in 25 and 26, Mario.

No I think the fundamental review of the trading book should not repeat right. So it's a one time hit like you I'm, sorry, I was trying to the Florida, sorry, Raj I'm at the Florida My mistake sorry.

Got it no no.

No problem I think the Florida mathematical calculation will tell you that.

Based 96 ranks up back we disclose what is a standardized risk weighted assets.

If it remained at dose levels, yet going off of that would be around the 45 basis points that you're referring to in 'twenty five 'twenty six Mario.

Speaker 2: The flip side to it is, we'll continue to work on optimizing the portfolio. That's what we've been doing through 2023, frankly, and we'll make some deliberate choices on how we allocate capital to the various portfolios to ensure we're getting paid for the additional capital that we have to put up. But at this time, that's probably the best estimate you have.

The flip side to it is a matter of will continue to work on optimizing the portfolio. That's that's what we've been doing through 2023, frankly, and we'd make some deliberate choices on how we allocate capital to the various portfolios to ensure we're getting paid for the additional capital that we have to put up but at this time, that's probably the best estimate you have.

Okay.

Speaker 7: This next question might be more for Jake either Roger or for Jake. The fundamental review trading book, it's in the title, it's fundamental. Is there anything in there that has you rethink Scotia's product throughout the company, Lat Dem or Canada, does the fundamental review book, fundamental review of the trading book have an effect on your appetite in that business?

Question might be more project, either Roger or predict well find out under the trading book.

And that's in the titles fundamental.

Is there anything in there that had you rethink scotia's product.

Throughout the company Latam or Canada, there's a fundamental review bulk none of them are the trading book have an effect on your your appetite in that business.

Yes, I think you've heard it a couple of times scenario, the new regulatory changes, whether it's F. R. A T b or the floor is making us be more thoughtful about how we allocate capital and Scott may want to add in whether its by business by product by customer by segment that disciplined capital allocation and very thoughtful will be a plan moving forward it doesn't lead to any.

Speaker 7: Yeah, I think you've heard it a couple times, Mario. The new regulatory changes, whether it's FRTB or the floor, is making us be more thoughtful about how we allocate capital. And Scott may want to add in, whether it's by business, by product, by customer, by segment, that disciplined capital allocation and very thoughtful will be a plan moving forward. It doesn't lead to any exit of products at this stage though. So we won't be changing.

Exit of products at this stage, though.

So we won't be changing our product suite materially.

Speaker 3: So Jake, you wouldn't then the weakness in trading this quarter, you wouldn't tie that into the fundamental view of the trading book in any way then? No, not at all. Okay. Then my final question, if I could go to deposits for a moment. The loan to deposit ratio has come down. It's meaningful. I've certainly noticed it, but I've also noticed and you described it clearly in your presentation that it's coming primarily from term.

Thank you Ben.

The weakness in trading this quarter, you wouldn't tie that into the fundamental the fundamental review the trading book in any way that.

No not at all okay.

Okay and then my final question, if I could go to deposit Tomorrow Blah blah.

The loan to deposit ratio has come down it's meaningful I've certainly noticed that but I have also noticed in <unk>.

Describe the clearly in your presentation that it's coming primarily from Tom.

Can you talk a little bit about your confidence that that those term deposits that were gathered this quarter, maybe talk about where it's coming from is a digital as it otherwise.

Speaker 7: Can you talk a little bit about your confidence that those term deposits that were gathered this quarter, maybe talk about where it's coming from, is it digital, is it otherwise, and your confidence that this is going to be sticky, this is going to stay with you over the long term.

And your confidence that this is this is going to be sticky. This is going to stay with you and all of the long term.

Yes ill talk Mario it's Raj on the on the term deposits.

Speaker 2: Yeah, I'll start Mario, on the term deposits. You're absolutely right, right? It's customer preferences when you see this kind of rate increases over the short period of time. That's the right thing, what we would advise customers frankly, and what customers want.

Okay right right, it's customer preferences. When you see this kind of rate increases over the short period of time and that's the right thing what we would advise customers frankly and what customers want.

Speaker 2: But a little bit of data. As far as the retail bank in Canada goes, we have seen it both in the retail bank as well as in Tangerine. We have seen the shifted term.

But a little bit of data as far as the retail bank in Canada goes we have seen it both in the retail bank as well as intangible range, we have seen the shift to time the.

Speaker 2: The deposits grew 32 billion dollars in the retail bank in Canada. And obviously a lot of it was term, right? About two-thirds of it came from term, as well as some movement between what we would call day-to-day accounts to term that happened through the year, which has significantly slowed down in Q4.

Deposits grew $32 billion in the retail bank in Canada, and obviously a lot of it was to them right about two thirds of it came from to them as well as some movement between what we would call day to day of gone Saddam that happened through the year, which has significantly slowed down in Q4.

Speaker 2: You know, big, big increases in the beginning, little less right now.

Big Big increases in the beginning little less right now, but the core deposit mix, what we call. Non told me. If you want to use that phrase is still you know meaningfully higher to over 42% in the Canadian Bank.

Speaker 2: But the core deposit mix, what we call non-term, if you want to use that phrase, is still meaningfully high. It's over 42% in the Canadian bank.

Speaker 2: Likewise, business banking too within the Canadian bank, there's a lot of shift to term as corporates and lower C. Commercial accounts also want to benefit from the rate situation and we've seen the term deposits and the commercial bank has become now about 26% of the book which used to be about 15% prior to this.

Likewise business banking too within the Canadian Bank is a lot of shift to Tomas corporate sand lowest C.

Commercial accounts also want to benefit from the rate situation than we have seen.

Term deposits in the commercial bank has become to about 26% of the book, which used to be over 15% prior to this tangent, but like I referred to again core deposits is down to 65%. So tangible does have a lot of really good quality deposits, but it's down from 72% of the previous year. So that tells you that data.

Speaker 2: Tangerine, like I referred to, again, co-deposits is down to 65%. So tangerine does have a lot of really good quality deposits, but it's down from 72% the previous year. So that tells you that there is same shift that we are seeing value customers, right, who are tangerine customers.

Tim shifts that we're seeing value customers right, who are our tangerine customers. We think that shift has likely slowed down quite significantly perhaps even may have stopped now as we look forward into 2024.

Speaker 2: We think that shift is likely slowed down quite significantly, perhaps even may have stopped now, as we look forward into 2024.

Speaker 2: But a lot of the term that we've been taking, Mario, has been at the shorter end. You know, it's between the two and three year points as we sell more GICs and so on in that space rather than perhaps in the five year term. Pretty much to match what we're doing specifically on the fixed rate mortgage book, which happens to be between two and three years fixed rate. So we're trying to balance it out as best as we can.

But a lot of them that we have been taking Mario has been at the shorter rent you don't it's between the two and three year points as we sold more Gi season, so on and Dod space, rather than perhaps in the five year term pretty much to match, what we're doing specifically on the fixed rate mortgage book, which happens to be between two and three years fixed rate. So we're trying to balance that out as best as we can but.

Speaker 2: But we believe that the shifted term is likely slowed down, perhaps it will stop in 20...

We believe that the shifted to them has likely slowed down perhaps a stop in 'twenty four I guess, the only thing I'd add Mario is what you don't see is the internal work to focus on client profitability and both sides of the balance sheet and that kind of focus around incentives. How we're allocating our time, how we're allocating resources, how we're enabling the teams to cigna.

Speaker 1: I guess the only thing I'd add Mario is what you don't see is the internal work to focus on client profitability and both sides of the balance sheet.

Speaker 1: and that kind of focus around incentives, how we're allocating our time, how we're allocating resources, how we're enabling the team.

Speaker 1: significant and so this shift of deposits is not a one-year thing it's a 10-year journey and you're starting to see the impact of that I said in my opening comments new day-to-day account acquisition up 6% year-over-year scenes a massive engine for that you're seeing the mortgage product you know mortgage profitability up

And so this shift of deposits is not a one year thing it's a it's a <unk>.

10 year journey, and Youre, starting to see the impact of that I said in my opening comments, New day to day account acquisition up 6% year over year seeing a massive engine for that youre seeing the mortgage product mortgage profitability up in the quarter significantly as we actually bundle.

Speaker 8: in the quarter significantly as we actually bundle away from just a monoline mortgage opportunity. Real focus on auto in terms of cross selling. And so this last year has been foundation building in terms of getting that client profitability focus across the organization and that's going to pay dividends long term for us. Thank you again. Thanks, Mayor.

Way from just a mono line mortgage opportunity real focus on auto in terms of cross selling and so this this last year has been the foundation building in terms of getting that client profitability focus across the organization and that's going to pay dividends long term for us.

Thank you again.

Thanks Meyer.

Thank you.

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

Speaker 9: Go ahead. Thank you. Good morning. I actually want to continue with that discussion point on deposit growth because I hear the message that it remains important for the bank and totally understand why and it should, but in the same time, you provided 2024 guidance that deposit growth will slow relative to 2023. So I guess I just want to understand that message on slowing growth is just because

Thank you good morning, so actually I wanted to continue with that discussion point on deposit growth because I hear the message is that it remains important for the bank and totally understand why and it should but at the same time you provided 24 guidance that deposit growth will slow relative to 2023, and so I guess I just wanted to understand that.

Message on slowing growth or is it just because and 23 you had outsized growth I'm just simply won't repeat at the same pace or is it related to pricing dynamics, maybe in the deposit market.

Speaker 9: in 23 you had outsize growth and just simply won't repeat at the same pace or is it related to pricing dynamics maybe in the deposit market? Just help us maybe understand that 2024 guidance again relative to the long-term importance of growing deposit.

Help us maybe understand that 2024 guidance again relative to the long term importance of growing deposits.

Speaker 2: Completely. I'll start Paul. I think the deposit growth, what you should expect from us is to grow in line with loans, which is why we talk a lot about loan to deposit growth in this bank, both in the Canadian bank and in international banking. So that will continue.

Completely I'll start Paul I tried I think the deposit growth. What we you should expect from US is to grow in line with loans, which is why we talk a lot about loan to deposit growth and the bank both in the Canadian Bank and in the international banking So that will continue.

Speaker 2: The reason I quoted the deposit growth to be muted is we're coming off a year where we grew deposits 10%. That's a lot. They talked about the 32 billion in the retail bank and so on in Canada.

The reason I quoted the deposit growth to be muted as we're coming off a year, where we grew deposits 10%. Okay. That's a lot they talked about the 32 billion in the retail bank and so on in Canada.

Speaker 2: We know that savings levels have started coming down in Canada. You know, inflation is a factor. So it's also about availability of cash with our consumers and so on. And if we expect to grow in the low single-digit range, it's what I think it will be in Canada specifically next year from the pro-profit plan, you know, numbers that we have. We think that still is strong growth considering that the loan growth is expected to be muted. So it's all about balancing both sides of the consumer balance sheet. And likewise, we're doing with commercial costs.

We know that savings levels have started coming down in Canada. You know inflation is a factor. So it's also about availability of cash with our consumers and so on and if you expect to grow in the low single digit range is what I think it would be in Canada, specifically next year from the for profit plan numbers that we have we think that's still a strong growth considering that the loan.

Growth is expected to be muted. So it's all about balancing both sides of the consumer balance sheet and liquids, we're doing with commercial customers. It's about managing capital on the other side and likewise, managing our liquidity ratios to ensure that we have stable deposits funding our loan growth as we look forward. So I wouldn't read it as significantly lower than 2020 today I will.

Speaker 2: It's about managing capital on the other side and likewise managing our liquidity ratios to ensure that we have stable deposits funding our loan growth as we look forward. So I wouldn't read it as significantly lower than 2023. I would talk about it as 2023 was a lot of growth, very targeted and deliberate, and we want to manage it appropriately in line with our loan growth as what you should do.

Talk about it as 2023 was a lot of growth, but he targeted and deliberate and we wanted to manage it appropriately in line with our long ago. That's what you should see going forward.

Speaker 9: Understand. Okay. This isn't due to competitive pricing.

Understand okay. This isn't due to competitive pricing dynamics no I think they've been very very thoughtful on pricing Paul I referred to earlier call earlier person question clearly about managing both to them as well as how we price both sides of the balance sheet and that discipline that we expect to make this okay.

Speaker 2: No, I think we've been very, very thoughtful on pricing, Paul. I referred to the earlier call, earlier person.

Speaker 2: question clearly about managing both terms as well as how we price both sides of the balance sheet and that discipline that we expect to make.

Speaker 9: Okay, got it. Second question then is going back to the performing ACLs. So, just want to understand a little bit better the mechanics in terms of what drove the increase.

Got it.

Second question is going back to the performing.

<unk>. So just wanted to understand a little bit better the mechanics in terms of what drove the increase.

Speaker 9: Is it changes in model inputs? Is it some additional management overlay? Is it a bit of both? Maybe you can kind of just walk us through the specifics in terms of why the ACLs went up this chord.

Is it no changes in model inputs is it some additional management overlay.

Is it a bit of both maybe you can kind of just walk us through the specifics in terms of why the Acos went up this quarter.

Speaker 3: Yeah, there's probably three things to look at there, Paul. Number one, changes to models from a higher for longer perspective.

There's probably three things to look at there Paul number one changes to models from a higher for longer perspective.

Speaker 3: some changes as it relates to more pessimistic scenarios, but there was a significant amount of expert credit judgment that we leveraged in the quarter. Just given our thoughtfulness around where the economy is headed, the uncertainty around interest rates, and then looking forward in terms of how fixed rate mortgage customers are gonna start to reprice in the Canadian environment over the next year or two years.

Some changes as it relates to more pessimistic scenarios, but there was a significant amount of expert credit judgment that we leveraged in the quarter, just given our thoughtfulness around where the economy is headed.

The uncertainty around interest rates.

And then Lee.

Looking forward in terms of how fixed rate mortgage customers are going to start to reprice in the Canadian the Canadian environment over the next step the next year or two years.

Speaker 9: Okay, I'll leave it there. Thanks for your time. Thanks, Paul. Thank you.

Okay.

I'll leave it there thanks for your time.

Okay. Thanks, Paul.

Q.

Speaker 4: following question is from Doug Young from Desjardins Capital Markets.

Following question is from Doug Young from Desjardin capital markets. Please go ahead.

Hi, Good morning, maybe Phil just sticking with you and I get to your explanation around the Canadian performing allowance build.

Speaker 7: Hi, good morning. Maybe Phil, just sticking with you, and I get your explanation around the Canadian performing allowance build. You know, I guess the question is, like, maybe you can talk a bit about why we shouldn't expect something similar on the international book. Is there, you know, various items that give you more confidence that you've already taken the appropriate builds on the international banking book, or maybe you can kind of delve into why we shouldn't be expecting.

I guess the question is like maybe you can talk a bit about why we shouldn't expect something similar on the international book is there.

It's items that gives you more confidence that you've already taken.

Build appropriate builds on the international banking book or maybe you can kind of just delve into why we shouldn't be expecting something similar to that yes. Thanks, Paul Great question.

Speaker 3: Yes, thanks Paul, great question. We have been building ACL and performing ACL particularly in International Relastics Corps. It's around $200 million.

We have been building ACO in.

Performing as sales, particularly in international over the last six quarters, it's around $200 million.

Speaker 3: We have been thoughtful. We started building in Peru, for example, performing ACL about three quarters ago as we looked forward to El Niño.

We have been thoughtful we started building in Peru for example, performing ACL about three quarters ago, as we look forward to El Nino.

Speaker 3: If I look at the different markets, we're starting to see some green shoots in Chile, 225 basis point reduction in interest rates over the last few quarters.

I'm, if I, if I look at the different markets.

We're starting to see some green shoots in Chile too.

225 basis point reduction in interest rates over the last few quarters.

Speaker 3: and strong performance there. Chile remains a bit of a conversation point for us, but we're well provisioned there. We're very happy with how things are going in Mexico. I'm very bullish about that market from a risk perspective.

Strong performance, there, Chile remains a bit of a conversation point for us, but were well provisioned there.

Very happy with how things are going in Mexico, I'm very bullish about that market from a risk perspective and.

Speaker 3: So overall, and I would also add I think the shift in strategy that Francisco has brought focusing on primary acquisition, acquisition of primary customers gives me a lot of great confidence from a risk perspective that we're moving the right way as we look at building that franchise.

So overall.

I would also add I think the the.

The shift in strategy that that Francisco has brought focusing on primary acquisition acquisition of primary customers gives me gives me a lot of great consequence from a risk perspective that we're moving in the right way.

As we look at building that franchise.

Okay, and then just thinking about the looking at your stats on your macro assumptions for the Canadian book on Slide 31, and I'm, just really going to simplify this and you can tell me if I'm way off base or its a fair assumption, but in your current ECL for Canada for the performing loan side can we just assume that the unemployment rate has been.

Speaker 7: Okay, and then just thinking about the looking at your stats on your macro assumptions for the Canadian book on slide 31. And I'm just really going to simplify this and you can tell me if I'm way off base or it's a fair assumption, but in your current ACL for Canada for the performing loan side.

Speaker 7: Can we just assume that the unemployment rate is about 7 to 8%? Is that essentially within the probability weighting for the different scenarios? And then can you talk a bit about, I think unemployment is one of the bigger drivers of this. Is it 40% of the variables that caused the change here or is it 50% plus? I'm not sure if there's a way you can kind of quantify that.

78% is that essentially within the probability weighting from the different scenarios.

And then can you talk a bit about like unemployment is one of the bigger drivers.

Does it is it 40% of the variables that could cause the change here or it's at 50% plus I'm not sure. If there's a way you can kind of quantify that.

Speaker 3: Yeah, I mean unemployment rate has a significant impact on our models, but I would also look at the interest rate impact and that's the result of hire for longer, particularly on some of the retail models. But again, I mean if you step back and look at the overall build, like a good chunk of it or majority of it frankly was in the ECJ section. So a lot of this is our management decision to, you know, to create stuff.

<unk> unemployment rate has a significant impact on our models, but.

Also look at the interest rate impact.

And.

And that's the result of higher for longer, particularly on some of the some of the retail models.

But again I mean, if you step back and look at the overall build.

A good chunk of it are majority of it frankly was in the ECJ section. So a lot of this is our management decision to to freight.

Speaker 3: just on our thoughtfulness rather on the macro and how we're moving forward in 2020.

Just just on our thoughtfulness, rather on the macro and how we're moving forward in 2024.

Can you quantify the expert credit judgment.

Speaker 7: Can you qualify the expert credit judgment or is that something that you'd be willing to get?

Anything that you'd be willing to go.

It's about if I if I were to look if it's about 50 50.

Speaker 3: It's about 50-50 model and ECJ. And the ECJ will be more weighted towards the...

Model N.

C J.

And the ECJ will be more weighted towards the <unk>.

Towards the business banking side.

And just a clarification. So my assumption that the unemployment rate built in here is that if I look at it.

Speaker 7: And just a clarification, so my assumption that the unemployment rate built in here is that, you know, if I look at it and eyeball it 78% is that a reasonable? Yes, it is.

Paul It 7% to 8% is that a reasonable.

Yes. It is yes, yes, yes, okay.

Okay. Thank you very much.

Thank you.

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

Speaker 4: The following question is from Dr. Mulek from RBC Capital Markets.

Hi, Thank you good morning, I have some credit quality questions before I go there I just wanted to clarify one thing.

Speaker 10: I think you good morning. I have some credit quality questions before I go there. I just want to clarify one thing

You mentioned in your remarks that you are planning to operate around 12, 5% common equity tier one range.

Speaker 10: mentioned in your remarks that you're planning to operate around 12.5 percent on the Equity Run Range for 2024. What is your assumption there with respect to the

For 2024, what is your assumption there.

With respect to the regulatory environment, whether or not.

If theres any pressure for higher capital.

Hum.

Darko, It's Raj I think we know the domestic stability buffer can be raised up to a maximum of 50 basis points. So that's what's left in the framework. So that takes the minimum to 12% from a regulatory perspective, and that's why the 12, 5% I, obviously have no insight into what will happen on December eight or beyond the 'twenty 'twenty four.

Speaker 2: Darko is Raj. I think we know the domestic stability buffer can be raised up to maximum of 50 basis points. That's what's left in the framework. So that takes the minimum to 12% from a regulatory perspective and that's why the 12 and a half.

Speaker 8: I obviously have no insight into what will happen on December 8th or beyond in 2024, but it's a prudent way to manage it. More importantly for us, right, you'll hear more about it at the investor day, how we want to thoughtfully reallocate capital, which means we have to start the efforts well in advance of that so that the strategy can be implemented in the timelines that we want to do it. So just to be clear, Raj, then...

But it's a prudent way to manage it.

More importantly for US right, you'll hear more about it at the Investor day I'll be wanted to thoughtfully reallocated capital, which means we have to talk to airports well in advance of that so that's the strategy can be implemented in the timelines that we want to do it.

So just to be clear Raj than what you're suggesting is.

Even if the.

So the DSP were raised 50 basis points is considered to be an adequate buffer even with the uncertainty in the environment.

Speaker 10: the DSB were raised, 50 basis points is considered to be an adequate buffer.

Speaker 2: Yeah, from our perspective, we think it's reasonable. Obviously, if we see signs that we need to run a higher capital ratio, we will dark over at this time.

Yeah from our perspective, we think it's reasonable obviously, if we see signs that we need to run a higher capital ratio, we will darko, but at this time, we think that's appropriate.

Okay. Thank you just a couple of quick questions for Phil.

Speaker 10: Thank you. Just a couple of quick questions for Phil on the...

On the.

On the credit when.

Speaker 10: When we look at the increase in delinquency...

When we look at the.

The increase in delinquencies and in mortgages could you maybe give us an idea is this predominantly coming from the arm portfolio.

Speaker 10: mortgages. Can you maybe give us an idea, is this predominantly coming from the ARM portfolio? And when we think about

And when we think about.

Characteristics.

Speaker 10: um... are there any defining characteristics or trends that you could point to and i suppose it could be random but my suspicion is there are some things that or there are some characteristics and i wonder if you could just share those with us and and as i think about the fixed report

Are there any defining characteristics or trends that you could point to on them and I suppose it could be random, but my suspicion is there are some things that or there are some characteristics and I wonder if you could just share those with us.

And as we think about the fixed rate.

Our mortgage portfolio.

Speaker 10: mortgage portfolio renewing in...

Renewing in in 2024.

Speaker 10: What we can sort of think about extrapolating from what we're seeing in the arm portfolio into the fixed rate.

We can sort of think about extrapolating from what we're seeing in the arm portfolio into the fixed rate I mean, any help on that would be it would be.

Very helpful. Thanks, sure and Youre spot on Darko because this is how kind of has is how we've been looking at things too so happy to happy to share.

Speaker 3: Sure, and you know you're spot on Darko because this is how we've been looking at things too, so happy to share. I mean we have been seeing 91 plus on the variable rate mortgage portfolio increasing year over year and we've been monitoring that portfolio very closely. Maybe just a few little tidbits of information there. We still.

<unk> been seeing 91, plus on the variable rate mortgage portfolio, increasing our year over year and we've been monitoring that portfolio very very closely.

Maybe just a few little tidbits of information that we still.

Speaker 3: despite the fact that we've seen customer consumer deposits decreasing or savings buffers decreasing, there's still a two times payment buffer on the VRM portfolio today.

Despite the fact that we've seen.

Customer consumer deposits decreasing your savings buffers decreasing theres still a two time savings payment are two times payment buffer on the VRM portfolio today.

Speaker 3: But as I said in my prepare remarks, we're also seeing for those customers with the RM, their total spend is actually also down 11% here every year. So what we're seeing is those customers are feeling the pinch now and they're making trade-offs. So, and then if I look at FIC.

But as I said in my prepared remarks, we're also seeing for those customers with CRM.

Their total spend is actually also down 11% year over year. So what we're seeing is those customers are feeling the pinch now and theyre, making tradeoffs so.

And then if I look at fixed.

Speaker 3: That payment buffer that I said was 2 for VRM is actually at 3.5 for FIT.

That payment buffers that I said was two for VRM is actually at three five for fixed and so the fixed rate customers holding onto a little bit more of a payment buffer, but we're very conscious of the fact that in 'twenty. Four we have about a 10% of our of our fixed rate portfolio is repricing and that moves into 20% and in 2012.

Speaker 3: And so the fixed rate customer is holding on to a little bit more of a payment buffer.

Speaker 3: But we're very conscious of the fact that in 24, we've put a 10% of our fixed rate portfolio is reprising. And that moves into 20% in 2025 and another 20% in 2026. So we're watching the consumer trends and the consumer behaviors in the VRM and being able to extrapolate some expectations of what may happen on the fixed rate book.

Five and another 25% to 20% in 2026, so we're watching the consumer trends in the consumer behaviors in the VRM and being able to extrapolate some expectations of what may happen on the fixed rate book.

We are optimistic that we will see interest rates start to decrease at the latter half of 2024, so thats built into some of our thinking as well.

Speaker 3: Now, we are optimistic that we'll see interest rates start to decrease at the latter half of 2024. So that's built into some of our thinking as well. And then maybe lastly, I can't remember who asked me about tail risk in one of our previous discussions, but maybe just to give an update on where the tail risk is in the mortgage portfolio. You know, we have about of the less than

And then maybe lastly.

I can't remember, who asked me about tail risk at one of our previous discussions, but maybe just maybe just to give an update on where the tail risk is in the mortgage portfolio.

We have about less than.

Speaker 10: 1 million customers we have with mortgages in Canada, the tail risk is about 2,500 today. And that's up from about, that's up about 200 customers quarter over quarter and about 1,000 customers year over year. Just to give you a sense of sort of people are, people are managing through, but they're making trade-offs and some choices, and difficult choices obviously. Thank you for that. And I just want to confirm the way I should think about your variable rate portfolio.

1 million customers, we have with mortgages in Canada.

The tail risk is about 2500 today and that's up from about that's up about 200 customers quarter over quarter and about 1000 customers year over year, just to give you a sense of sort of people or people are managing through.

But but but theyre, making tradeoffs and.

Some choice and difficult choices obviously.

Thank you for that and just to confirm the.

The way I should think about your variable rate portfolio.

Or is that they have a higher <unk>.

Score.

Speaker 10: and generally underwritten a bit tighter than your fixed rate portfolios.

And generally underwritten a bit tighter than your fixed rate portfolio is that still true.

Speaker 3: Yeah, I mean we definitely at Origination see higher FICO scores, but we also find the VRM customer tends to be a sophisticated customer because they've been playing the right game within the market so there's perhaps a little bit more stuff.

Yeah, we definitely had origination see higher FICO scores, but we also fund the VRM.

Customer tends to be a sophisticated customer because they have been playing the right game within the markets.

Perhaps a little bit more savvy, okay and is there any other characteristics you can share for example, postal code or something like that.

Speaker 10: And is there any other characteristic you can share, for example, Postal Code or something like that? Like the higher, higher, higher, uh, uh, dealing with...

A higher higher AR higher.

Delinquencies.

Speaker 10: something is there anything else you could you could provide on on any other defining

Is there anything else you could you could provide on any other defining characteristic here it is.

Speaker 10: No, it's interesting. I asked the question of my team last week, what are we seeing from a regional perspective, and there's no regional trends across the country on this. Okay, great. Thank you very much.

Interesting I asked the question on my team last week, what are we seeing from a regional perspective, there's no regional trends across that across the country. On this okay. Great. Thank you very much. Thank you.

Speaker 4: Thank you. Our following question is from Sorab Movahady from BMO Capital Markets. Please go ahead.

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

Okay. Okay. Thanks for going over time here, just two quick ease hopefully Phil a couple of times when you talked about expert credit judgment.

Speaker 11: Okay, thanks for going over time here. Just two quickies, hopefully, Phil, a couple of times when you talked about expert credit judgment.

Speaker 11: I think you mentioned business banking. Is there a specific pocket within business banking or industry group or a particular area that's concerning you?

You mentioned business banking is there a specific bucket within business banking.

Our industry group or a particular area that that's concerning you.

Speaker 3: No, I mean our portfolio, we have a good portfolio. We've been conservative in our underwriting and criticized for such at some points in time. But you know, we are thoughtful about real estate as I think everybody is in the market and we have built specifically for real estate. As I mentioned in my prepared remarks, we don't have

No I mean, our portfolio we have.

We have a good portfolio, we've been conservative in our underwriting and.

Criticized for such at some points in time, but.

We are thoughtful about of our real estate and I as I think everybody is in the market and we have built specifically for for real estate as I mentioned in my prepared remarks.

We don't have.

Speaker 12: any significant exposure in US office. But we're thoughtful about the markets here in Canada and we've been building appropriately in the performing side for that.

Any significant exposure in U S.

U S.

Office, but we're thoughtful about the markets here in Canada, and we've been building appropriately in the performing side for for for that.

Speaker 11: But that would be specific to the Canadian Business Banking portfolio. And the Secret Judgment that was exercised.

But that would be that would be specific to the Canadian business banking portfolio.

It would be significant judgment that was exercised correct.

Okay.

Speaker 13: And Raj, I know we've talked over the past couple of years, I suppose, about the importance of moderation in the overall rate environment, just given the way you are positioned from an asset liability management perspective. Can you remind us, if we were just going to take a shortcut and take a look at either the 10-year Canada's or the 10-year US, around what shorter level?

And Raj I know I know, we've talked over the year or past couple of years I suppose about the importance of that.

Moderation in the overall rate environment.

Given the way you are positioned from an asset liability management perspective can you remind us if we were just going to take a short cut them take a look at either that.

10 year, Canada does or the 10 year U S like around what sort of levels.

Speaker 13: Are you, you know, would you hit the inflection point where this drag turns into a positive? Like I know it becomes less of a drag, I suppose, with declining rates. But what do we have our eye on? Do we want to get back down to a 10 year, three and a half? Is that nirvana?

Are you would you hit the inflection point, where the strike turns into a positive like I know it becomes less of a drag.

Suppose.

With declining rates, but what are we what do we what do we have our island do we want to get back down to a 10 year three and a half is that.

That is that's nirvana.

Speaker 2: That'll be nice, Saurabh, as you know. I think, so we took some actions in Q2, right, in 2023 to position the bank to be appropriately, depending on the rate situation being higher for longer. And I think that's actually paid off in space because we have done the right thing. It has reduced the level of drag we could have had otherwise based on the positioning that the bank had prior to that. So today we're positioned neutral to the rate curve in one respect.

So that'll be nice Sohrab as you know I think so we took some actions in Q2 right in 2023 to position the bank to be appropriately depending on the rate situation being higher for longer and I think thats actually paid off in spades, because we have done the right thing he does it reduce the level of drag there.

<unk> had otherwise based on the positioning that the bank had prior to that so today, we are positioned neutral to debate Cove in one respect.

Speaker 2: The expectation is, if the forward rates play out, maybe that's an easier way to think about it. So, Rob, at this time, we're gonna see some reasonably meaningful benefits to the net interest income line through 2024 and beyond. That's the best we've, we have.

But the expectation is if the forward rates played out maybe that's an easier way to think about it. So we're up at this time, we're going to see some reasonably meaningful benefits to the net interest income line through 2024 and beyond that's the best we have at this time.

Speaker 2: But the 3.5% that you quote is when interest rates completely stabilize. And you know how long that will take is anybody's guess. I think the market's pricing is somewhere around 20-25 from what I know. But these things do tend to change quite a bit. But at this time I think we are in my mind and in our minds positioned the best we can be based on the structure of our balance sheet and how we see the forward rates play out, which is being neutral to it at this time.

305% that you quote is been interest rates completely stabilized and you know how long that will take is anybody's guess I think the market's pricing at somewhere around 20 to 25 from what angle, but these things do tend to change quite a bit and at this time I think we are in my mind and in our minds position the best we can.

Based on the structure of our balance sheet and how we see the forward rates play out which is being neutral and do it at this time higher for longer through good part of 'twenty four is likely going to be the outcome and after that as you point out run rate cuts come they are going to benefit.

Speaker 2: Higher for longer through good part of 24 is likely going to be the outcome. And after that, as you point out, we're going to benefit.

I appreciate the color. Thank you.

Oh.

Speaker 4: Thank you. Our following question is from Mike Risvanovic from KBW Research. Please go ahead and type in your name and address.

Thank you.

Following question is from Mike Meadowbank from K B W. Research. Please go ahead.

Speaker 14: Good morning, once you go back to Phil and I'm just looking for a very high level guidance here on one specific number so

Want to go back to fill and I'm, just looking for a new high level guidance here on one specific number so.

Speaker 14: In looking at your mortgage book, I think you're sitting at a 49 loans about them. Just trying to better understand how much of that gets eroded by the process of taking over home and selling it. So between commissions, legal, and then any other costs related to that process.

In looking at your mortgage book I think you were sitting at a 49 loans for 1000, I'm just trying to better understand how much of that gets eroded by the process of taking over home and selling it so between commissions legal admin any other costs related to that process.

Speaker 14: what's a good proxy that we should use based on a percentage of the home price? Like is 10% a reasonable number? I get asked this question quite a bit by clients.

Whats a good proxy that we should use based on a percentage of the whole price like a 10% a reasonable number I get asked this question quite a bit by by.

Clients I just want to get your insights on that.

Speaker 12: I can start by saying our recovery rates are quite strong in that portfolio and that's why you don't see higher gross impaired loans coming off the secured portfolio. In terms of holding me to a certain number, I can't give you that number.

I mean, I can start by saying our recovery rates are quite strong and in that portfolio and Thats why you don't see higher gross impaired loans coming off the secured portfolio.

In terms of holding me to a to a certain number I can't give you that number.

Speaker 14: Okay, does 10% sound unreasonable? I mean, the commission alone would probably be close to half of that. It doesn't sound, it doesn't sound...

Okay, there's 10% sound unreasonable I mean, the commission alone would probably be close to half of that.

It doesn't sound it doesn't sound unreasonable, Okay fair enough and then just in light of the finance Minister's recent public comments about that.

Speaker 14: Okay, fair enough. And then just in light of the finance minister's recent public comments about the renewal cycle, I wanted to also ask about the hardship rule and should we now maybe assume that it will be applied more loosely when people do need it? Is it going to, it's kind of divisive, I hear people say that it's very difficult to get the hardship rule applied to your situation and others say that it's probably not so hard. Do you have any thoughts on that and how that might change in light of the finance minister's comments?

The renewal cycle I wanted to also ask about the hardship rule and should we now maybe assume that it will be applied more loosely when people do need it.

Is it going to.

It's kind of device and I hear people say that it's very difficult to get the hardship rule.

Apply to your situation and others say that it's probably not so hard do you have any thoughts on that and how that might change in light of the finance Minister's comments.

Speaker 12: No, I don't have any thoughts on that. I'm not going to comment on that right now.

I don't have any I don't have any thoughts on that I'm not going to comment on that right now.

Okay, and then maybe just a quick one for maybe for Raj just on the dividend payout ratio.

Speaker 14: Okay, and maybe just a quick one for maybe for Raj, just on the dividend payout ratio, you're a little bit north of 60. I'm wondering, has anything changed for you? Are you comfortable holding to that level that that's comfortably above your targeted 40 to 50 range? If you're going to be in that high 60s range for an extended period of time, potentially, is that does that raise any issues for you at all?

You're a little bit north of 60.

I'm wondering has anything changed for you or are you comfortable holding to that level that that will come.

Comfortably above your targeting 40 to 50 range, if youre going to be in that high sixteens range for an extended period of time potentially is that does that raise any issues for you at all.

Speaker 2: No mic at charge, I think we do expect to be outside of the range like you've seen in 23 and 24 as well And we're quite comfortable with that

No Mike It's Raj I think we do expect to be outside of the range like <unk> seen in 'twenty, three and 'twenty four as well and we are quite comfortable with that the payout ratio, we want to get back to 40% to 50%, but we know it will take couple of years, because we're going to go through this strategic refresh and how we wanted to thoughtfully reallocate capital and to US that's fine because.

Speaker 2: The payout ratio, we want to get back to 40% to 50%, but we know it will take a couple of years.

Speaker 2: Because we're going to go through this strategic refresh and how we want to thoughtfully reallocate capital.

Speaker 2: And to us that's fine because the 40 to 50% range to keep it there and hopefully achieve it in the next two to three years gives us confidence that the earnings power is going to come back for this company and therefore the ratio will fall within the range. And it's also a confidence that we're investing wisely and will continue to invest wisely looking forward.

The 40% to 50% range to keep it there and hopefully achieve it in the next two to three years gives us confidence that.

The earnings power is going to come back for this company and therefore, the ratio will fall within the range and it's also a confidence that we're investing wisely and we'll continue to invest wisely looking forward too.

Speaker 2: to continue to reduce that payout ratio to achieve, like I said, the 40 to 50 percent. So for one, we won't change it. We want to achieve that. It'll take us a couple of years, and we're quite comfortable operating outside the range until we get there.

To reduce that payout ratio to achieve like I said, the 40% to 50%. So for one we won't change it we want to achieve that it'll take a couple of years and we're quite comfortable operating outside that range until we get there.

Okay. Thank you for the color.

Speaker 4: Thank you. Our following question is from Nigel DeSouza from Veritas Investment Research. Please go ahead.

Thank you. Our following question is from Nigel D'souza from semi test investments research. Please go ahead.

Good morning. Thank you for taking my question I wanted to touch on the residential mortgage book and on the decline in the balance as we've seen in that portfolio.

Speaker 7: Good morning. Thank you for taking my question. I wanted to touch on the residential mortgage book and on the decline in the balances we've seen in that portfolio in Canada. Could you comment on how much of that was driven by an increase in discharges, perhaps from individuals who on the adjustable side are experiencing payment increases?

Could you comment on how much of that was driven by.

An increase in discharges, perhaps from individuals who are on the adjustable side are experiencing payment increases in Alaska.

Speaker 7: electing to sell the property instead of going delinquent versus lower origination over the last, let's say, year and a half to the rising rate. Any color there would be helpful.

The last thing to sell the property instead of.

Going delinquent versus all of our origination over the last let's say year and a half due to rising rate any color there would be helpful.

Sure Nigel it's Raj I'll talk to that it is not about discharges and you know realizing on security and so on like fellow pointed out the portfolio has been actually performing quite well people are paying down. So it's not about delinquencies. It's motorboat, our deliberate actions in response to slowing mortgage growth I think that's across the industrial world.

Speaker 2: Shona, it's Raj. I'll talk to that. It is not about discharges and you know, realizing on security and so on, like Phil pointed out, the portfolio has been actually performing quite well, people are paying down. So it's not about delinquencies. It's more about our deliberate actions in response to slowing mortgage growth. I think that's that's across the industry over here. So we're not unique, but we have taken deliberate action to improve the profitability as we ration out capital.

So we don't want unique, but we have taken deliberate action to improve the profitability as we had rationale with capital.

Speaker 2: as you know across the bank, not necessarily to the mortgage portfolio. So the 4% decline in the mortgage balances is not something that we are concerned about at this time. It's the approach that we want to take to ensure that we are thoughtfully allocating capital for the highest return that we can achieve from our, you know, for our investors from the loan book that we put out there. And it's about growing both sides of the balance.

Across the portfolio across the bank not necessarily to the mortgage portfolio. So the 4% decline in the mortgage balances is not something that we are concerned about at this time.

The approach that we want to take to ensure that we are thoughtfully allocating capital for the highest return that we can achieve from our.

For our investors from the loan book that we put out there that's about growing both sides of the balance sheet, we wanted to be sure that.

Speaker 2: We want to be sure that we have a multi-product relationship. It starts with the mortgage, which is a very important product for us.

We have a multi product relationship it starts with the mortgage which is a very important product for us.

Speaker 2: But the actions that we have taken, I think Scott referred to it, that we have net interest margin expansion in the mortgage book. Some of it driven by the actions we have taken, some of it driven by re-pricing. But it's not about quality of the book or any sort of delinquency that drove the decline.

But the actions that we've taken I think Scott referred to it that we have net interest margin expansion in the mortgage book some of it driven by the actions we have taken some of it driven by repricing, but it's not about quality of the book or any any sort of delinquency that drove the decline Nigel.

Speaker 7: That's helpful and just following up on the provisions on the mortgage book, I think there was a comment on taking into account collateral values and just trying to understand why collateral values would be at play given your healthy LTV ratios. It's only a from my understanding 2021 2022 vintage is that would be at risk.

That's helpful and just following up on the provisions on the mortgage book I think there was a comment on taking into account collateral values and I'm just trying to understand why collateral values.

It would be at play given your healthy LTV ratios.

Only if I'm understanding <unk> 2021 2022 vintages that what's the address.

Speaker 12: having a lump to value closer to 100%. So is that what you're expecting in terms of what you're modeling in and why would those individuals be susceptible to default if they're not adjustable given that the renewal is still a couple years off?

Having a loan to value closer to 100%. So is that what you're expecting in terms of what you're modeling in in and why would those individuals' be susceptible to default.

They're not as profitable given that the renewal was still couple of years off.

Sure just to just to be clear Nigel the comment I made in my prepared remarks was related to business banking.

Speaker 12: Sorry, just to be clear, Nigel, the comment I made in my prepared remarks was related to business banking.

Speaker 12: and our real estate, our commercial real estate portfolio, not the mortgage portfolio.

And the real estate or commercial real estate portfolio not the not the mortgage portfolio.

Okay. That's very helpful. Last question is just a 2020 for outlook on EPS growth does that assume PCL, but the midpoint of your guidance, so 50 basis points or 24.

Speaker 7: Okay, that's very helpful. Last question. Just a 2024 outlook on EPS growth. Does that assume PCLs at the midpoint if you're guided? So 50 basis points for 20...

Speaker 2: Yeah, that's about the assumption. I think Phil talked about 45 to 55. I think 50 basis points is a reasonable assumption to the EPS growth numbers I spoke about, Nigel. Yeah, that's it for me. OK.

Yes, that's about the assumption I think closed talked about 45 to 55, I think 50 basis points is a reasonable assumption to the EPS growth numbers I spoke about Nigel.

That's it for me thanks.

Thank you.

Speaker 4: Our following question is from Lamar Persaud from Comrade Securities. Please go ahead.

Our following question is from Nomura per song from <unk> Securities. Please go ahead.

Thanks, maybe for Roger Scott I think you guys mentioned in more modest first half of 2020 for an acceleration in the second half can you talk about what assumptions goes into that outlook like is the recovery in the second half hinged solely on lower interest rates.

Speaker 7: Thanks maybe for Roger Scott, I think you guys mentioned a more modest first half of 2024 and acceleration in the second half. Can you talk about what assumptions goes into that outlook? Like is the recovery in the second half hinged solely on lower interest rates? And you know, what happens if rates remain elevated?

What happens if rates remain elevated.

Speaker 2: Thanks, Namaraj. I think there's two factors. I'll speak about the first half and how it relates to Q4. I want to be clear that Q4 really is like a $1.50 quarter, right, if you take out the ACL bill. So building off that, we think you should see growth in Q1, Q2. One of the items is, you know, the other segment is expected to be slightly better than the $487 million that you saw this quarter, because there's a couple of one-off items relating to certain investments we had and lack of securities gains. So that should help with the...

Thanks, Omar it's Raj I think there's two factors I'll speak about the first half and how it relates to Q4, we wanted to be clear that Q4 really is like $1 50 quarter right. If you take out the ACL build so building off that we think that you should see growth in Q1 Q2, one off the items as you know.

The other segment is expected to be slightly better than the $487 million that you saw this quarter because it was a couple of one off items, leading to certain investments, we had and lack of securities gains. So that should help with the first half. The second half is not hinging too much on interest rate declines I think we have what it was a market has three rate cuts towards the latter end of.

Speaker 2: The second half is not hinging too much on interest rate declines. I think we have, whatever the market has, you know, three rate cuts towards the latter end of 2024, which doesn't have a meaningful impact to the results. What it does have...

2024, which doesn't have a meaningful impact to the resolved Florida does have is two things. One is we are going to have royalty expense savings, we talked about the productivity initiatives, which kind of kicks into the second half of the year to be meaningful because a lot of the exits are still going to be effective you know in the first half of the year. So that's a benefit and the second thing is.

Speaker 2: One is we're going to have a lot of the expense savings. We talked about the productivity initiative.

Speaker 2: which kind of kicks in the second half of the year to be meaningful because a lot of the exits are still going to be effective, you know, in the first half of the year. So that's a benefit. And the second thing is acid reprise.

<unk> asset repricing, what you've already seen in the mortgage book in the Canadian Bank as well as in the international banking for that matter that should continue to happen rate cuts are expected to be accelerated in the international banking space you already seen that margin expanded this quarter. So those benefits will come in in the latter part of year and that's why we feel like the second half will be better than the first.

Speaker 2: What you've already seen in the mortgage book in the Canadian Bank as well as an international banking for that matter, that should continue to happen. Rate cuts are expected to be accelerated in the international banking phase. You already seen that margin expand this quarter. So those benefits will come in in the latter part of the year and that's why we feel like the second half will be better than.

Jeff.

Gotcha.

Speaker 7: Gotcha. That makes sense. And then maybe turning over to Phil. Can you talk about what the biggest risks are?

Makes sense and then maybe turn it over to Phil.

Can you talk about why.

Biggest risks are.

Speaker 7: for PCOs coming in above that 45 to 55 range? Like based on where you sit today, would you suggest it's simply unemployment because that's obviously the most important input? But maybe you feel good about that assumption and maybe it's the uncertainty in the path of interest rates. So maybe talk about the inputs that give you the most forecast uncertainty and keep you up at night. And then secondly, what geographies are you most concerned with? I suspect you're gonna point to the international portfolio, but maybe it's domestic. Thanks.

Our PCL is coming in above that 45 to 55 range.

Based on where you sit today would you suggest that simply unemployment because thats, obviously, the most important inputs, but maybe you feel good about that assumption that maybe it's the uncertainty in the path of interest rates. So maybe talk about the inputs I can give you the most.

Forecast uncertainty and keeps me up at night, and then secondly, what geographies are you most concerned with I suspect suspect youre going to point to the international portfolio, but maybe it's a domestic thanks.

Thanks Lamar.

Speaker 12: You know, obviously, whenever you look at Canada, and whenever you look at uncertainty, you have to look at unemployment. And so you said you got it in one. I mean, we're laser focused on watching.

Obviously whenever you look at Canada.

Whenever you look at uncertainty you have to look at unemployment and so you said that you got it and one I mean, we're very we're laser focused and I'm watching.

Watching unemployment.

Speaker 12: We're also looking at the effects of higher rates. We're looking at the, you know, as I said in my earlier comments to Darko's question, you know, the variable rate mortgage portfolios and the fixed rate mortgage portfolios are performing very well right now. So I'm very thoughtful about trade-offs. We're looking at the effects of higher rates mortgage portfolios and the fixed rate mortgage portfolios are performing very well right now.

We're also looking at the effects of higher rates, we're looking at the as I said in my earlier comments to Darcos question, the variable rate mortgage portfolios and the fixed rate portfolios are performing very well right now so I am very thoughtful about trade offs, so our customers making.

Speaker 12: trading off paying another product to pay their mortgage and so we're very focused on looking at payment flows off us outside the bank and to see if customers are paying another product somewhere else and vice versa. So looking at the data, looking at payment flows, looking at how customers are weathering the higher for longer and obviously very very focused on interest rates. In terms of geography, I think IBs stabilize.

Trading off paying another product to pay their mortgage and so we're very focused on looking at payment flows off us outside the bank and to see if customers are paying another product somewhere else and and vice versa. So.

Looking at the data looking at payment flows looking at how customers are weathering the higher for longer and obviously very very focused on on interest rates in terms of geography, I think Ibs Ibs C.

Stabilize from where it was last year as I said I'm bullish about Mexico, I think there's great opportunity there.

Speaker 12: from where it was last year. As I said, I'm bullish about Mexico. I think there's great opportunity there. And right now, we're very, very focused on what's going on in the Canadian.

And right now we're.

We're very very focused on what's going on in the Canadian market.

Okay, and then is there any way that we can think about that.

Speaker 7: Gotcha. And then is there any way that we can think about the top end for the ACL ratio? Like, I think you guys touched 125 basis points at the peak of the pandemic. There are 85 currently. Maybe it's just an unreasonably high watermark, just given that, you know, that was a health crisis. That's clearly not what we're going into now. Like, is there any way we can kind of size up, you know, what that ratio could look like over time?

The top end for the ACL ratio.

You guys touched a 125 basis points at the peak of the pandemic.

85 currently maybe it's just an unreasonably high watermark just given that you know that was a health crisis, that's clearly not what where we're at work.

Going into now.

Is there any way, we can kind of size up what that ratio could look like overtime.

Speaker 12: Yeah, listen, I think we're comfortable with where we are right now. And as we look at expanding our business, as we look at our risk appetite, as we look at how our business develops, we'll take the appropriate performing ACLs in line with business growth moving forward. But I feel where we are right now is good.

Yeah.

I think we're comfortable with where we are right now.

And as we look at expanding our our business as we look at our risk appetite as we look at how our business develops.

We'll take performed the appropriate performing acl's in line with our inline with business growth moving forward and but.

I feel where we are right now is good.

Yeah. Thanks for the time guys.

Thanks, Laura.

Speaker 4: Thank you. We have no further questions on the line. Back to you.

Thank you.

No further questions on the line.

Thank you.

Speaker 2: Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today. We look forward to speaking again at our December 13 investor day.

Thank you on behalf of the entire management team I want to thank everyone for participating in our call today, we look forward to speaking again at the December 13th Investor Day.

Speaker 2: This concludes our fourth quarter results call. Have a great day.

This concludes our fourth quarter results call have a great day.

Thank you.

Speaker 4: The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.

The conference has now ended.

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

Thank you the conference has now ended.

Speaker 4: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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