Q1 2024 The Bank of Nova Scotia Earnings Call

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Operator: Please stand by. Your conference will begin momentarily. To ask a question, please wait for the moderator to start the conference, then press star 1. A system tone will be heard when your request has been accepted. To cancel your question, press star 2.

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

John McCartney: Please wait. Your conference will begin shortly. To ask a question, press star 1 after the moderator has begun the conference. Good morning, and welcome to Scotiabank's 2024 first quarter results presentation. My name is John McCartney, and I'm head of investor relations here at Scotiabank. Presenting to you this morning are Scott Thompson, Scotiabank's President and Chief Executive Officer, Raj Viswanathan, our Chief Financial Officer, and Phil Thomas, our Chief Risk Officer. All in all, in our comments; we will be glad to take your questions.

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Good morning, and welcome to Scotia, Bank's 2024 first quarter results presentation.

My name is John Mccartney and I'm head of Investor Relations here at Scotiabank presenting to you. This morning are Scott Thompson Scotia banks, President and Chief Executive Officer, Raj Viswanathan, Our Chief Financial Officer, and Phil Thomas Our Chief Risk Officer.

Following their comments, we will be glad to take your questions.

John McCartney: Also present to take questions are the following Scotiabank executives: Eris Bogdanaris from Canadian Banking, Jackie Allard from Global Wealth Management, and Francisco Aristegueta from International Banking. Before we start, and on behalf of those speaking today, I will refer you to slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to you.

Also present to take questions are the following Scotiabank executives Arris Buck Daenerys from Canadian banking, Jackie alerts from global wealth management, and Francisco Arista Gate Us from international banking.

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

Scott Thompson: Thank you, John, and good morning, everyone. Welcome to our first call of 2024 and, importantly, our first set of results since we shared our refresh strategy at our Investor Day in December. We are off to an encouraging start to the year, and our results are consistent with our expectations. It is still early in the execution of our strategy, but we are realizing benefits of our enterprise-wide efforts by way of disciplined capital allocation, focusing on investments that deliver returns, maintaining a strong balance, focusing on deposit growth, and building primary client relationships that enhance profitability and cost efficiency. The bank reported adjusted earnings of $2.2 billion, or $1.69 per share, in the quarter.

Thank you John and good morning, everyone.

Welcome to our first call of 2024 and importantly, our first set of results since we shared our refreshed strategy at our Investor Day in December.

We are off to an encouraging start to the year and our results are consistent with our expectations.

It is still early in the execution of our strategy, but we are realizing benefits are enterprise wide effort by way of a disciplined capital allocation focusing on investments that deliver returns maintaining a strong balance sheet.

Focus on deposit growth and building primary client relationships that enhanced profitability and cost efficiency.

The bank reported adjusted earnings of $2 2 billion or $1 69 per share in the quarter.

Scott Thompson: Strong revenue growth coupled with disciplined cost performance across our businesses allowed us to improve profitability quarter over quarter despite higher credit provision. We further strengthened our balance sheet and liquidity profile in keeping with our commitment to build capital over time. Our 71 ratio, at 12.9%, reflects our efforts to extend our balance sheet thoughtfully to business segments and clients where we see the opportunity to build holistic and profitable long-term relationships. Our liquidity coverage ratio strengthened to 132% year-over-year, lessening our reliance on market source funding with a reduction in our wholesale funding ratio to 20.3%.

Revenue growth, coupled with disciplined cost performance across our businesses allowed us to improve profitability quarter over quarter, Despite higher credit provisions.

We further strengthened our balance sheet and liquidity profile in keeping with our commitment to build capital over time.

Our <unk> ratio at 12, 9% reflects our efforts to extend our balance sheet thoughtfully the business segments and clients, where we see the opportunity to build a holistic and profitable long term relationships.

Our liquidity coverage ratio strengthened to 132% year over year lessening, our reliance on market source funding with a reduction in our wholesale funding ratio to 23%.

Scott Thompson: Assets across the bank grew marginally year over year, reflecting our disciplined approach to growth in a more muted Canadian residential mortgage market environment. The impact of our ongoing portfolio repositioning in the global banking and markets business was offset by growth in other personal and commercial lines of business. We continue to execute on risk-weighted asset optimization opportunities by reducing our exposure to less profitable relationships where we don't see the opportunity for acceptable risk-adjusted returns on our shareholders' capital. Our risk-weighted assets have been managed down by 4% year-over-year as a result of portfolio repositioning and optimization efforts.

Assets across the bank were up marginally year over year, reflecting our disciplined approach to growth and a more muted Canadian residential mortgage market environment.

Impact of our ongoing portfolio repositioning the global banking and markets business was offset by growth in other personal and commercial lines of business.

We continue to execute on risk weighted asset optimization opportunities by reducing our exposure to less profitable relationships, where we don't see the opportunity for acceptable risk adjusted returns on our shareholders' capital.

Our risk weighted assets have been managed lower by 4% year over year as a result of portfolio repositioning and optimization efforts.

Scott Thompson: However, we did see growth sequentially in conjunction with a significant improvement in our return on risk-weighted assets, which we believe is an important metric in driving shareholder value. Our organizational focus on core deposits continues to show progress, with deposits up on an all-bank basis and strong growth in the P&C businesses, with 9% deposit growth in Canadian banking and 5% deposit growth in international banking. The result of our efforts to thoughtfully manage growth on both sides of the balance sheet has resulted in a loan-to-deposit ratio that is down over 600 basis points to 110% on a year-over-year basis, turning into the Economic Outlook. Although the Canadian economy has shown more resilience in response to the significant monetary policy tightening over the past two years, interest rates are having the desired impact on consumer sentiment and spending, which should allow for rate cuts later this year.

However, we did see growth sequentially in conjunction with a significant improvement in our return on risk weighted assets, which we believe to be an important metric and driving shareholder value.

Our organizational focus on core deposits continues to show progress with deposits up on an all bank basis and strong growth in the P&C businesses with 9% deposit growth in Canadian banking and 5% deposit growth in international banking.

The result of our efforts to thoughtfully manage growth on both sides of the balance sheet has resulted in a loan to deposit ratio that is down over 600 basis points to 110% on a year over year basis.

Turning to the economic outlook.

Although the Canadian economy has shown more resilience in response to the significant monetary policy tightening over the past two years interest rates are having the desired impact on consumer sentiment and spending which should allow for rate cuts later this year.

Scott Thompson: This quarter's results reflect an increase in credit provisioning given the incremental financial strain that sustained higher interest rates are having on our clients. We expect the Canadian economy to underperform both the U.S. and or key Latin American countries early this year but show some growth reacceleration in response to policy easing and more active residential real estate markets in the back half of the year. We are expecting Mexico to show the strongest growth among the larger economies in the Americas in 2024, with some volatility expected leading into this summer's presidential election.

This quarter's results reflect an increase in credit provisioning given the incremental financial strain that sustained higher interest rates are having on our clients.

We expect the Canadian economy to underperform, both the U S and our key Latin American countries early this year, but show some growth re acceleration in response to policy easing and more active residential real estate markets in the back half of the year.

We are expecting Mexico to show the strongest growth among the larger economies in the Americas in 2024, with some volatility expected leading into this summer's presidential election.

Scott Thompson: Our official forecasts are no longer calling for recessionary conditions in any of our operating geographies over the next few years. However, we remain well positioned to manage through more difficult economic scenarios, should they unfold. A few highlights in terms of performance and strategic progress within each of our business lines. Our Canadian banking business had a strong start to the year, delivering 7% revenue growth and 3% expense growth, resulting in positive operating leverage. Loan growth in our domestic business reflects a less active residential mortgage market, as well as our own deliberate actions to focus on primary clients.

Our official forecasts are no longer calling for recessionary conditions in any of our operating geographies over the next few years. However, we remain well positioned to manage through more difficult economic scenarios should they unfold.

A few highlights in terms of performance and strategic progress within each of our business lines.

Our Canadian banking business had a strong start to the year, delivering 7% revenue growth and 3% expense growth, resulting in positive operating leverage.

Loan growth in our domestic business reflects a less active residential mortgage market as well as our own deliberate actions to focus on primary clients.

Scott Thompson: Lower growth in mortgages has been offset by continued growth in business banking and strong credit card momentum, which allows us to continue to diversify our business network. Deposit growth continues to track well at 9% in the period, contributing to margin expansion and favorable trends in terms of our loan-to-deposit ratios. In our retail business, Eris and his team are focused on client primacy, deposit growth, client acquisition, and relationship deepening across the portfolio. The continued strength of the Seen Plus Loyalty Program, now 15 million members strong, provides a significant opportunity to acquire new payment clients, an important step to a longer-term primary relationship with the bank. Over 40% of new-to-bank clients through the ScenePlus partnership already have a multi-product relationship with the bank. As mentioned, our approach to the mortgage business has evolved. We are having good success with our bundled offer.

Lower growth in mortgages has been offset by continued growth in business banking and strong credit card momentum, which allows us to continue to diversify our business mix.

Deposit growth continues to track while at 9% in the period contributing to margin expansion and favorable trends in terms of our loan to deposit ratios.

In our retail business, Eric and his team are focused on client privacy deposit growth client acquisition and relationship deepening across the portfolio.

The continued strength of the <unk> plus loyalty program now 15 million members strong provides a significant opportunity to acquire new payment clients and important step to a longer term primary relationship with the bank.

Over 40% of new to bank clients through the <unk> plus partnership already have a multi product relationship with the bank.

As mentioned our approach to the mortgage business has evolved we are having good success with our bundled offerings, our mortgage plus product.

Scott Thompson: Our MortgagePlus product represented 70% of deals done in the quarter, resulting in an average of 3.2 additional products per new-to-bank client. Primary client count was up by 42,000 in the quarter on the back of better cross-sell and proactive engagement. We are closely tracking client relationship depth and see progress as the number of clients with 3-plus banking products has seen a 50 basis point increase since the start of the fiscal year. Loan growth in our commercial and small business lines continues in the mid to high single-digit range, with our teams focused on balancing loans and deposits, targeting growth and lead bank relationships, and expanding returns on risk-weighted assets. Tangerine delivered its highest quarterly earnings ever of $107 million, up 9% year-over-year.

Represented 70% of deals done in the quarter, resulting in an average of $3 two additional products for new to bank clients.

Primary client count was up by 42000 in the quarter on the back of better cross sell and proactive engagement.

We are closely tracking client relationship depth and saw progress as the number of clients with three plus banking products has seen a 50 basis point increase since the start of the fiscal year.

Loan growth in our commercial and small business lines continues in the mid to high single digit range with our teams focused on balancing in loans and deposits.

<unk> growth in lead bank relationships and expanding returns on risk weighted assets.

Tangerine delivered its highest quarterly earnings ever of $107 million up 9% year over year.

Scott Thompson: Tangerine's differentiated digital offering and expanded product capability continues to be a unique driver of additional primary clients. Tangerine continues to lead the market in mobile adoption, with mobile onboarding up 12 points to 62% of all signups, and overall mobile adoption up 4 points to 73% in the quarter. Global wealth earnings of $374 million reflect the strength of our asset management franchise, the power of our diversified domestic client advisory channels, rebounding market performance in recent months, and strong momentum in our international wealth business. In domestic wealth, our well-established advice channels are integrated with our industry-leading private banking business and are designed to deliver the type of complete solutions that define primary client relationships. In our asset management business, I will reiterate our opportunity to penetrate our own branch network as well as Tangerine more effectively. Only 10% of our Scotiabank retail banking clients have purchased our mutual fund products. This penetration lags behind peers.

Tangerines differentiated digital offering an expanded product capability continues to be a unique driver of additional primary clients.

Tangerine continues to lead the market in mobile adoption with mobile Onboarding up 12 points to 62% of all sign ups and with overall mobile adoption up four points to 73% in the quarter.

Global wealth earnings of $374 million reflect the strength of our asset management franchise. The power of our diversified domestic client advisory channels rebounding market performance in recent months and strong momentum in our international wealth business.

In domestic wealth are well established advice channels are integrated with our industry, leading private banking business and are designed to deliver the type of complete solutions the defined primary client relationships.

And our asset management business I will reiterate our opportunity to penetrate our own branch network as well as Tangerine more effectively.

Only 10% of our Scotiabank retail banking clients have purchased our mutual fund products this penetration lags peers.

Scott Thompson: A stronger partnership between our award-winning fund business and our retail networks will deliver meaningful upside to our current results. Jackie and Eris are partnering to actively implement action plans to address this sizable upside opportunity. Our international wealth business contributed $65 million in the quarter, up 18% year over year, an increasingly meaningful contributor to our wealth results. Mexico specifically represents the largest opportunity as positive mutual fund inflows and strong fund performance are driving highly accretive growth in this business. Our global banking and markets business reported a solid quarter with earnings of $439 million. The business remains focused on maintaining top-tier status in key Canadian wholesale products and continues to organically build U.S. capabilities.

A stronger partnership between our award winning fund business and our retail networks will deliver meaningful upside to our current results.

Jackie and Arris are partnering to actively implement action plans to address the sizable upside opportunity.

Our international wealth business contributed $65 million in the quarter up 18% year over year, an increasingly meaningful contributor to our wealth results.

Mexico, specifically reserve represents the largest opportunity is positive mutual fund inflows and strong fund performance are driving highly accretive growth in this business.

Our global banking and markets business reported a solid quarter with earnings of $439 million.

The business remains focused on maintaining top tier status and key Canadian wholesale products and continues to organically build U S capabilities.

Scott Thompson: Our U.S. GBM business delivered 13% earnings growth on 3% revenue growth year-over-year, reflecting our focus on return discipline and fee income through a rigorous client selection and profitability evaluation process. In GBM, our upside opportunity is based on return optimization by driving more ancillary fee revenue as a percentage of loan exposure through deliberate client selection and relationship deepening, aligning our capabilities with client needs. It is important to note that our wholesale business in Canada will face a profitability headwind going forward because of a pending change in Canadian tax legislation related to the elimination of the corporate dividend deduction. Our international banking business delivered exceptionally strong results this quarter, with earnings contributions of $752 million.

Our U S. GBM business delivered 13% earnings growth on 3% revenue growth year over year, reflecting our focus on return discipline in fee income through a rigorous client selection and profitability evaluation process.

In GBM, our upside opportunity is based on return optimization by driving more ancillary fee revenue as a percentage of loan exposure through deliberate client selection and relationship deepening aligning our capabilities with client needs.

It is important to note that our wholesale business in Canada will face a profitability headwind going forward because of our pending change in Canadian tax legislation related to the elimination of the corporate dividend deduction.

Our international banking business delivered exceptionally strong results this quarter with earnings contribution of $752 million.

Scott Thompson: Solid revenue growth across segments, good expense discipline, and a particularly strong performance by our GBM LATAM business drove the results. The business delivered a substantial overall improvement in profitability, up 35% from the prior quarter, supported by almost 400 basis points of improvement in the productivity ratio, with no increase in capital deployed. We believe we have more than sufficient capital and product capabilities in place to capitalize on the opportunities in these markets when favorable market conditions and client activity allow, as evidenced by our results in this past quarter. However, on the retail side of the business, we remain overly reliant on the secured residential mortgage business, and we are too often a single product provider to the client, which is the opportunity ahead. We are closely monitoring primacy as a percentage of overall relationships in each of international banking retail, commercial, and wholesale, with a focus on product penetration and deposit growth. We have already seen a modest uptick from early actions taken. The retail repositioning will require a sustained effort over the next few years to show meaningful results.

Solid revenue growth across segments, good expense discipline, and a particularly strong performance by our GBM Latam business drove the result.

The business delivered a substantial overall improvement in profitability up 35% from the prior quarter supported by almost 400 basis points of improvement in the productivity ratio with no increase in capital deployed.

We believe we have more than sufficient capital and product capabilities in place to capitalize on the opportunities in these markets when favorable market conditions and client activity allow as evidenced by our results in this past quarter.

On the retail side of the business, we remain overly reliant on the secured residential mortgage business and we are too often a single product provider to the client which is the opportunity ahead.

We are closely monitoring privacy as a percentage of overall relationships in each of international banking retail commercial and wholesale with a focus on product penetration and deposit growth. We have already seen a modest uptick from early actions taken.

The retail repositioning will require a sustained effort over the next few years to show meaningful results.

Scott Thompson: The growth agenda in commercial banking and our plan to deliver stronger cross-border coverage to multinational clients operating throughout the region will require further investment in support infrastructure and enhanced cash management capability. I look forward to the evolution of this business under Francisco's leadership as we build a more coordinated regional operating model and orient the business toward the sizable North American corridor opportunity we believe we are so well positioned to capitalize on. In summary, the first quarter was an encouraging start to the year. We are now in the early stages of execution against plans to deliver on our key strategic objectives, earning client primacy, growing and scaling in identified priority markets, making it easier to do business with us, and winning as one team. We have gone through an exhaustive and collaborative exercise to establish the key performance indicators for each business, many of which were shared at our Investor Day.

The growth agenda in commercial banking and our plan to deliver stronger cross border coverage to multinational clients operating throughout the region will require further investment and support infrastructure and enhanced cash management capability.

I look forward to the evolution of this business under Francisco's leadership as we build a more coordinated regional operating model and Orient the business towards a sizable north American quarter opportunity. We believe we are so well positioned to capitalize on.

In summary, the first quarter was an encouraging start to the year. We are now in the early stages of execution against plans to deliver on our key strategic objectives, earning client privacy growing and scaling and identified priority markets, making it easier to do business with us and winning as one team.

We've been through an exhaustive and collaborative exercise to establish the key performance indicators for each business many of which were shared at our Investor day, and we will provide progress updates to you on the most impactful kpis in future financial reporting periods.

Raj Viswanathan: And we will provide progress updates to you on the most impactful KPIs in future financial reporting periods. With that, I will turn it over to Raj for a more detailed financial review of the quarter. Thank you, Scott, and good morning, everyone.

With that I will turn it over to Raj for a more detailed financial review of the quarter.

Thank you Scott and good morning, everyone.

Raj Viswanathan: All my comments that follow will be on an adjusted basis for the usual acquisition-related costs. The 2023 competitive figures have been restated to reflect the adoption of IFRS 17. Moving to slide six for a review of the first quarter results, the bank reported quarterly adjusted earnings of $2.2 billion and diluted earnings per share of $1.69.

All of my comments that follow will be on an adjusted basis for the usual acquisition related costs.

The 2023 competitive figures have been restated to reflect the adoption of <unk> 17.

Moving to slide six for a review of our first quarter results.

The Bank reported quarterly adjusted earnings of $2 2 billion and diluted earnings per share of $1 69.

Raj Viswanathan: Return on Equity was 11.9%, and Return on Tangible Common Equity was 14.6%. Revenues were up 6% here over the year, driven by increases in both net interest income, which was up 5%, and non-interest income, which was up 8%. All bank net interest margin expanded 8 basis points year-over-year and 4 basis points quarter-over-quarter from higher margins in international and Canadian banking, partly offset by lower contribution from asset liability management activities and increased levels of lower-margin, high-quality liquid assets. Non-interest income was $3.7 billion, up 13% quarter over quarter, mainly due to higher trading revenues, banking fees, and wealth management revenues. Provision for credit losses was $962 million, and the BCL ratio was 50 basis points, up 17 basis points year over year. Quarter to quarter, expenses were flat as seasonally higher share-based compensation and increased employee benefit costs were offset by lower professional fees and other staffing-related costs. Expenses grew 6% year-over-year, or 4% excluding the unfavorable impact of foreign currency translation, reflecting higher share-based compensation, technology The productivity ratio was 56% this quarter, a decrease of 370 basis points quarter over quarter, while operating leverage was flat.

Return on equity was 11, 9% and return on tangible common equity was 14, 6%.

Our revenues were up 6% year over year driven by increases in both net interest income that was up 5% and noninterest income that was up 8%.

All banks net interest margin expanded eight basis points year over year, and four basis points quarter over quarter from higher margins in international and Canadian banking, partially offset by lower contribution from asset liability management activities and increased levels of lower margin high quality liquid assets.

Noninterest income was $3 7 billion up 13% quarter over quarter, mainly due to higher trading revenues banking fees and wealth management revenues.

Provision for credit losses were at $962 million and the PCL ratio was 50 basis points up 17 basis points year over year.

Quarter over quarter expenses were flat as seasonally higher share based compensation and increased employee benefit costs, but offset by lower professional fees and now this toughing related costs.

Expenses grew 6% year over year or 4%, excluding the unfavorable impact of foreign currency translation.

Reflecting higher share based compensation technology costs.

And business axis.

The productivity ratio was 56% this quarter, a decrease of 370 basis points quarter over quarter, but operating leverage was flat.

Raj Viswanathan: Moving to slide 7, which shows the evolution of the common equity tier 1 ratio and risk-weighted assets during the quarter. The Bank's 81% capital ratio was 12.9% as of January 31, 2024, a decrease of approximately 10 basis points from the prior quarter. The CET1 ratio benefited 45 basis points from earnings, share issuances from the bank's shareholder dividend and share purchase plan, and Fair Value through OCI gains driven by stronger debt and equity markets during the quarter, offset by higher risk-weighted assets of 48 basis points. The RWA increase was primarily driven by the adoption impacts of the revised Basel III FRTB market and CBA capital requirements and the 2.5% increase in the capital floor, adding to The RWA optimization initiatives taken during the quarter, including client deselection, reduced the impact to 48 basis points.

Moving to slide seven that shows the evolution of the common equity tier one ratio and risk weighted assets during the quarter.

The bank CET, one capital ratio was 12, 9% as of January 31, 2024, a decrease of approximately 10 basis points from the prior quarter.

The CET one ratio benefited 45 basis points from earnings.

Share issuances from the bank's shareholder dividend and shape of Chase plans and.

And fair value through OCI gains driven by stronger debt than equity markets during the quarter.

Offset by higher risk weighted assets of 48 basis points.

The <unk> increase was primarily driven by the adoption impacts after otherwise Basel III, <unk> TB market and CVA capital deployment.

The 2.5% increase in the capital floor, adding to approximately 70 basis points.

The audibly optimization initiatives taken during the quarter, including client deselection reduce the impact of 48 basis points.

Raj Viswanathan: We expect the RWA optimization efforts to continue during the year in line with our capital allocation strategy to reduce the impact of the floor. Turning now to the Q1 business line results, beginning on slide 8. Canadian banking reported earnings of $1,096 million, an increase of 1% year-over-year as a result of higher revenue, partly offset by higher provision for credit losses and expenses.

We expect the <unk> optimization efforts to continue during the year in line with our capital allocation strategy to reduce the impact of the floor.

Turning now to the Q1 business line results beginning on slide eight.

Canadian banking reported earnings of 1090 $6 million, an increase of 1% year over year as a result of higher revenue, partially offset by higher provision for credit losses and expenses.

Raj Viswanathan: Year-over-year revenues grew a strong 7% while expense growth was a modest 3%, resulting in positive operating leverage of approximately 4%. While average loans and acceptances were down about 1% from the prior year, the portfolio mix has changed. We saw continued growth in our high-yielding portfolios as business loans grew 9%, credit cards increased 18%, and personal loans grew 2%. This was offset by a decline of 5% in the residential mortgage balance. We continue to see deposit growth primarily in term products, with average deposits of 2% quarter over quarter. Year-over-year deposits grew 9%, and the loan-to-deposit ratio improved to 123% from 136% last year. Non-interest income was down 5% year-over-year due to elevated private equity gains in the prior year and a loss of income from the sale of our equity interest in Canadian Tire Financial Services.

Year over year revenues grew a strong 7% while expense growth was a modest 3%, resulting in positive operating leverage of approximately 4%.

While average loans and acceptances were down about 1% from the prior year the portfolio mix has changed.

We saw continued growth in our highly linked portfolios as business loans grew 9% credit cards increased 18% and personal loans grew 2%.

This was offset by a decline of 5% in residential mortgage balances.

We continued to see deposit growth primarily in film products with average deposits up 2% quarter over quarter.

Year over year deposits grew 9% and the loan to deposit ratio improved to 123% from 136% last year.

Noninterest income was down 5% year over year due to elevated private equity gains in the prior year and loss of income from the sale of our equity interest in Canadian tire financial services.

Raj Viswanathan: Net interest income increased 11% year over year, primarily from solid deposit growth and margin expansion. The net interest margin expanded 30 basis points year-over-year and 9 basis points quarter-over-quarter, benefiting from high loan and deposit margins and changes in business mix. The PCL ratio was 34 basis points, primarily from unpaid loan provisions, and risk-adjusted margin was 2.2%, up 15 basis points year-over-year. Expenses increased 3% year-over-year primarily due to higher technology, personal costs, and costs to support business; however, quarter-over-quarter expenses declined 1%.

Net interest income increased 11% year over year, primarily from solid deposit growth and margin expansion.

The net interest margin expanded 30 basis points year over year, and nine basis points quarter over quarter benefiting from high loan and deposit margins and changes in business mix.

The PCL ratio was 34 basis points, primarily from impaired loan provisions and risk adjusted margin was two 2% up 15 basis points year over year.

Expenses increased 3% year over year, primarily due to higher technology personnel costs and cost to support business growth.

Quarter over quarter expenses declined 1%.

Raj Viswanathan: Turning now to Global Wealth Management on slide 9, earnings of $374 million declined 4% year-over-year as strong 18% growth within international wealth was offset by Canadian results declining 8%, largely due to higher expenses and lower trading volume, offset by growth and asset management. However, net income grew a strong 12% quarter-over-quarter, reflecting improving market conditions. Revenue grew 3% year over year, due primarily to higher mutual fund fees across the international businesses and higher brokerage revenues in Canada. Expenses were up 8% year-over-year due primarily to the expansion of the sales force, volume-related expenses, and costs to support business growth.

Turning now to global wealth management on slide nine.

Earnings of $374 million declined 4% year over year, a strong 18% growth with an international wealth was offset by Canadian results declining 8%.

Largely due to higher expenses lower trading volumes.

Offset by growth in asset management.

However, net income grew a strong 12% quarter over quarter, reflecting improving market conditions.

Revenue grew 3% year over year, due primarily to higher mutual fund fees across the international businesses and higher brokerage revenues in Canada.

Expenses were up 8% year over year due primarily to the expansion of the sales force.

Volume related expenses and costs to support business growth.

Raj Viswanathan: Spot AUM increased 5% year-over-year to $340 billion as market appreciation was partly offset by net redemption. AUA increased 8% over the same period to $655 billion from higher net sales and market appreciation. Investment fund sales in Canada continue to be under pressure with approximately $13 billion in net redemptions this quarter.

Spock.

<unk> increased 5% year over year to $340 billion as market appreciation was partially offset by net redemptions.

<unk> increased 8% over the same period to $655 billion.

From higher net sales and market appreciation.

Investment fund sales in Canada continued to be under pressure, but approximately $13 billion in net redemptions this quarter.

Raj Viswanathan: However, the majority of Scotia Global Asset Management funds remain in the top two quartiles over a five-year period. International wealth management generated earnings of $65 million, up 18%, driven by higher mutual fund revenues in Mexico and strong loan and deposit growth across our footprint. AUA and AUM grew by 15% and 18%, respectively, year over year. Turning to slide 10, Global Banking and Markets. Global market markets generated earnings of $439 million, down 15% year-over-year but up 6% quarter-over-quarter.

However, the majority of Scotia Global asset management funds remain in the top quartile over a five year period.

International wealth management generated earnings of $65 million up 18% driven by higher mutual fund revenues in Mexico, and strong loan and deposit growth across our footprint.

And <unk> grew 15% and 18% respectively.

Over here.

Turning to slide 10, global banking and markets.

Global banking markets generated earnings of $439 million down, 15% year over year, but improved 6% quarter over quarter.

Raj Viswanathan: The U.S. business generated strong earnings of $237 million, up 13% year-over-year. However, capital markets revenue was down 12% year over year as fixed income revenues were down 22%. However, quarter-over-quarter capital markets revenue grew 12% while earning through the one-month impact of the proposed Canadian tax rules change to deny the dividend-received deduction of approximately $40 million, which is also expected to impact future quarters. Business banking revenues declined 5% both quarter over quarter and year over year as loans were down 7% year over year. Non-interest income decreased 2% year over year primarily due to lower fixed income trading related revenue, partly offset by higher underwriting and advisory.

The U S business generated strong earnings of $237 million.

Up 13% year over year.

Capital markets revenue was down 12% year over year as fixed income revenues were down 22%.

However quarter over quarter capital markets revenue grew 12%, we're learning through the one month impact of the proposed Canadian tax law change to deny the dividend received deduction of approximately $40 million, which is also expected to impact future quarters.

Business banking revenues declined 5% both quarter over quarter and year over year as loans were down 7% year over year.

Noninterest income decreased 2% year, it'll be up primarily due to lower fixed income trading related revenue, partially offset by higher underwriting and advisory fees, however quarter over quarter noninterest income grew 7%.

Raj Viswanathan: However, quarter over quarter, non-interest rate income grew 7%. However, net interest income was down 22% year-over-year and 11% quarter-over-quarter as a result of lower loan and deposit volumes, lower lending margins, and higher trading-related funding costs. Expenses were up a modest 3% quarter-over-quarter, mainly due to seasonally higher share-based compensation. However, on a year-over-year basis, expenses were only up 4%, due mainly to higher personal costs and technology investments to support business growth. The provision for credit losses decreased $34 million quarter over quarter to $5 million. GBM Latin America, which is reported as part of international banking, reported earnings of $372 million, up 24% compared to the prior year, as a result of strong revenue growth in capital markets and fee income from business banking across all countries.

Net interest income was down 22% year over year, and 11% quarter over quarter as a result of lower loan and deposit volumes lower lending margins and higher trading related funding costs.

Expenses were up a modest 3% quarter over quarter, mainly due to seasonally higher share based compensation.

On a year over year basis expenses were only up 4% due mainly to higher personal cost and technology investments to support business growth.

The provision for credit losses decreased $34 million quarter over quarter to $5 million.

GBM Latin America, which is reported as part of international banking reported earnings of $372 million up 24% compared to the prior year as a result of strong revenue growth in capital markets and fee income from business banking.

All countries.

Raj Viswanathan: Moving to slide 11 for a review of International Bank, my comments that follow are on an adjusted and constant dollar basis. The segment delivered earnings of $752 million, up 35%, and $196 million quarter over quarter. Revenue was up 9% year-over-year, driven primarily by higher revenues from capital markets. Strong retail revenue growth benefited from margin expansion and 8% higher fees and commissions. However, year-over-year loans were down 2%, primarily in Peru, Chile, and Colombia.

Moving to slide 11 for a review of international banking.

My comments that follow are on an adjusted and constant dollar basis.

The segment delivered earnings of $752 million up, 35% and $196 million quarter over quarter.

Revenue was up 9% year over year, driven primarily by higher revenues from capital markets.

Strong retail revenue growth benefited from margin expansion and 8% higher fees and commissions.

Year over year loans were down, 2%, primarily in Peru, Chile and Colombia.

Raj Viswanathan: Retail loans grew 4%, with mortgages up 6%, while business banking loans decreased 6%. Deposits grew a strong 5% year over year, with personal deposits growing 2% and non-personal deposits growing 7%. The loan-to-deposit ratio improved to 129% from 140% in the prior year. The net interest margin expanded 19 basis points quarter over quarter driven by higher asset yields and higher deposit margins. The provision for credit losses was 135 basis points, or $574 million, up 16 basis points quarter over quarter. This translated to a risk-adjusted margin of 3.23%, an improvement of 7 basis points year-over-year and quarter over quarter. Expenses were up a modest 4% year-over-year, driven by business and capital taxes, technology expenses, and salaries and benefits.

Retail loans grew 4% with mortgages up 6%, while business banking loans decreased 6%.

Deposits grew a strong 5% year over year with personal deposits growing 2% and non personal deposits growing 7%.

The loan to deposit ratio input to 129% from 140% in the prior year.

Net interest margin expanded 19 basis points quarter over quarter, driven by higher asset yields and higher deposit margins.

The provision for credit losses was 135 basis points or $574 million up 16 basis points quarter over quarter.

This translated to a risk adjusted margin of three 3% an improvement of seven basis points year over year and quarter over quarter.

Expenses were up a modest 4% year over year, driven by business and capital taxes technology expenses and salaries and benefits.

Raj Viswanathan: Expenses were up 3% quarter over quarter driven by seasonally higher business taxes in the Caribbean and Communication Expansion. However, operating leverage was a positive 6%. Turning to slide 12, the other segment. The other segment reported an adjusted net loss attributable to equity holders of $474 million, a slight improvement of $13 million compared to the prior quarter, mainly due to lower expenses. With that, I'll now turn the call over to Phil to discuss. Thank you, Raj. Good morning, everyone.

Expenses were up 3% quarter over quarter, driven by seasonally higher business taxes in the Caribbean and.

And communication expenses operating leverage was a positive 6%.

Turning to slide 12, the other segment.

The other segment reported an adjusted net loss attributable to equity holders of $474 million, a slight improvement of $13 million compared to the prior quarter, mainly due to lower expenses with docs I will now turn the call over to Phil to discuss with us.

Thank you Raj and good morning, everyone.

Phil Thomas: Limited economic growth and higher household expenses persisted through Q1 as a result of sticky inflation. This quarter, all bank PCLs were 50 basis points higher, driven by the following. One Canadian Commercial Exposure in the Transportation Industry, Stage 3 Migration in our Canadian Retail Portfolio, and Persistent Challenging Market Conditions in Peru and Colombia. Higher delinquencies across most of our retail portfolios this quarter reflect a challenging macroeconomic environment. Total PCLs of 50 basis points, or 962 million, are down 294 million quarter over quarter. The performing PCL was $20 million, or one basis point, reflecting both lower loans quarter over quarter and no material change in macroeconomic outlook. Impaired PCLs were 942 million or 49 basis points, up 140 million quarter over quarter, largely driven by deterioration in Canadian automotive finance, Colombia, and Peru.

Limited economic growth and higher household expenses persisted through Q1, as a result of sticky inflation.

This quarter all bank Pcl's were 50 basis points driven by the following one.

Canadian commercial exposure in the transportation industry stage III migration in our Canadian retail portfolio and persistent challenging market conditions in Peru and Colombia.

Higher delinquencies across most of our retail portfolios this quarter reflect the challenging macroeconomic environment.

Total PCL, as a 50 basis points points or $962 million or down $294 million quarter over quarter.

Performing PCL was $20 million or one basis point, reflecting both lower loans quarter over quarter and no material change in macroeconomic outlook.

Impaired PCL were $942 million or <unk>, 49 basis points up $140 million quarter over quarter, largely driven by deterioration in Canadian automotive finance, Colombia and Peru.

Phil Thomas: Additionally, Chile has returned to run rate PCL levels, now in line with historic norms. We continue to maintain strong allowances on loans, and the ACL coverage ratio increased by one basis point to 86 basis points for the quarter. In Canadian banking retail, 90-plus day delinquency levels are up one basis point quarter over quarter and eight basis points year over year to 26 basis points. This is due to increased household expense pressures and borrowing costs. Delinquency is up across all retail products year over year. Despite this, credit quality continues to remain strong, and average FICO scores remain relatively flat year-over-year at 790. With the cumulative inflation and interest rate pressures on households, Canadian consumers continue to ease discretionary spending, reversing an uptick seen during the holidays.

Additionally, Chile has returned to run rate PCL levels now in line with historic norms.

We continue to maintain strong allowances on loans in the ACL coverage ratio increased one basis point to 86 basis points for the quarter.

In Canadian banking retail 90, plus day delinquency levels are up one basis point quarter over quarter, and eight basis points year over year to 26 basis points.

This is due to increased household expense pressures in borrowing costs delinquency is up across all retail products year over year.

Despite this credit quality continued to remain strong and average FICO scores remained relatively flat year over year at 790.

With the cumulative inflation and interest rate pressures on households, Canadian consumers continued to ease discretionary spending reversing an uptick seen during the holidays.

Phil Thomas: We continue to monitor the number of vulnerable customers in our retail portfolios, which have remained relatively flat quarter over quarter. Turning to our mortgage portfolio, we remain confident in the performance of our variable rate mortgage product, which has maintained strong credit performance despite unprecedented increases in borrowing costs. Our variable rate mortgage clients have experienced an average increase in mortgage payments of over 50% since rate increases began. Notably, VRM multiproduct clients have lower delinquency across their household balance sheets versus single service and fixed rate mortgage clients. Fixed rate mortgage clients have been relatively unimpacted as the majority of renewals occurred in 2025 and 2026.

We continue to monitor the number of vulnerable customers and our retail portfolios, which have remained relatively flat quarter over quarter.

Turning to our mortgage portfolio, we remain confident in the performance of our variable rate mortgage product, which has maintained strong credit performance despite unprecedented increases in borrowing costs.

Our variable rate mortgage clients have experienced an average increase in mortgage payments of over 50% since rate increases began notably VRM multi product clients have lower delinquency across their household balance sheets versus single service and fixed rate mortgage clients.

Fixed rate mortgage clients have been relatively uninfected as the majority of renewals occur 2025 and 2026.

Phil Thomas: Pandemic-driven excess deposits for variable rate mortgage clients have returned to run rate levels with an average of two times deposit cushion. We are confident in our credit practices, and our variable rate mortgage portfolio serves as a strong indicator of credit quality across our fixed rate portfolio as the renewal cycle plays out over the next two to three years. Turning to international banking, macroeconomic and geopolitical pressures continue to weigh on our international banking footprint. However, having said that, central banks across the region have started to reduce policy rates, and expected growth in Mexico remains strong. International Banking's PCLs were $574 million, or a PCL ratio of 135 basis points. The increase in PCLs was primarily attributed to retail portfolios across most markets and, in particular, Peru and Colombia.

Pandemic, driven excess deposits for variable rate mortgage clients have returned to run rate levels with an average of two times deposit cushion.

Yeah.

We are confident in our credit practices and our variable rate mortgage portfolio serves as a strong indicator of credit quality across our fixed rate portfolio as the renewal cycle plays out over the next two to three years.

Turning to international banking macroeconomic and geopolitical pressures continue to weigh on our international banking footprint.

Having said that central banks across the region and started to reduce policy rates and expected growth in Mexico remains strong.

International Banking's, PCL were $574 million or our PCL ratio of 135 basis points.

The increase in <unk> was primarily attributed to retail portfolios across most markets and in particular, Peru and Colombia.

Phil Thomas: As mentioned earlier, Chile saw an expected increase coming off lower provisions in Q4 2023 as the portfolio normalized this quarter. Mexico, as a highly secured retail portfolio, remains resilient with PCL's down quarter over quarter and expected strong persistent growth through 2024. As I mentioned earlier, in business banking, the increase in impaired PCLs and GILs this quarter was primarily driven by a single exposure in Canadian commercial real estate, while GBM experienced a net recovery. Our commercial real estate portfolio continues to perform well, and we continue to monitor the market closely. Heading into 2024, there was optimism that rate cuts in Canada may materialize earlier in the year. However, it appears that forecasted rate cuts may come later and potentially at a slower pace.

As mentioned earlier, Chile saw unexpected increase coming up lower provisions in Q4 2023 as the portfolio normalized this quarter.

Mexico is a highly secured retail portfolio remains resilient with PCL is down quarter over quarter and expected strong persistent growth through 2024.

As I mentioned earlier in business banking the increase in impaired PCL and gills. This quarter was primarily driven by a single exposure in Canadian commercial while GBM experienced a net recovery.

Our commercial real estate portfolio continues to perform well and we continue to monitor the market closely.

Heading into 2024, there was optimism that rate cuts in Canada may materialize earlier in the year. However, it appears that forecasted rate cuts may come later and potentially at a slower pace.

Phil Thomas: In our key international markets, we have seen the central banks take action with rate cuts in Peru, Chile, and Colombia. This is starting to provide rate relief to clients. In the near term, specifically in Peru and Colombia, delinquencies are expected to increase, with economic recovery expected to be more challenging.

In our key international markets, we have seen the central banks take action with rate cuts in Peru, Chile and Colombia.

This is starting to provide rate relief to clients.

In the near term, specifically in Peru, and Colombia delinquencies are expected to increase its economic recovery expected to be more challenged.

Phil Thomas: We are actively monitoring the portfolio and proactively managing our exposure. We expect provisions for credit losses to remain within our full year guidance of 45 to 55 basis points on a full year basis. With the cumulative build of $1.1 billion in total allowances for credit losses over the last six quarters, we remain comfortable with our coverage levels given the secured focus of our retail book and the investment-grade quality of our corporate and commercial book. With that, I will pass the call back to John for Q&A. Great. Thank you, Phil.

We are actively monitoring the portfolio and proactively managing our exposures.

We expect provisions for credit losses to remain with our within our full year guidance of 45 to 55 basis points on a full year basis.

With the cumulative build of $1 1 billion in total allowances for credit losses over the last six quarters, we remain comfortable with our coverage levels given the secured focus of our retail book and the investment grade quality of our corporate and commercial books.

With that I will pass the call back to John for Q&A.

Great. Thank you Phil.

John McCartney: Operator, please queue up questions on the line. Thank you. Good morning.

Operator, please queue up freshness on the line.

Thank you. Your first question is from Paul Holden from CIBC. Please go ahead. Your line is now open.

Paul Steep: I'm going to ask one quick one to start. Given the strong result on set one for the quarter and ongoing capital optimization, any kind of updated thoughts on when you may turn off that? Hey, Paul, it's Raj.

Yeah. Thank you good morning, I'm going to ask one quick one to start off given the strong result on Sept, one for the quarter and ongoing capital optimization any kind of updated thoughts on when you may turn off that that drip discount.

Hey, Paul its strides good morning. Thanks for your question, Yes, our capital ratio is very strong at 12, 9%, but as we indicated price both in our Q4 call and as well as in other other statements. We've made in conferences, we'd like to see what <unk> does in June as it.

Raj Viswanathan: Good morning. Thanks for your question. Yes, our capital ratio is very strong at 12.9%. But as we indicated prior both in our Q4 call as well as in, you know, other other statements we've made in conferences, we'd like to see what OSPI does in June as it relates to the domestic stability buffer, and you know we'll be guided by that to turn off the drip discount that we have in place but our optimism has definitely increased as we have seen our capital actions you know feed into the common equity tier one ratio being strong and we think that once we hear from the super mint in June we'll be in a much more confident position to turn the drip off which we expect to be quicker than what we thought prior. Great, okay.

It relates to the domestic stability buffer.

And we will be guided by a doctor to an off the drip discount that we have in place, but our optimism is definitely increased as we have seen not capital actions feed into the common equity tier one ratio being strong and we think that once we hear from the Superman and in June we will be in a much more confident position to turn the drip.

<unk>, which we expect to be quicker than what we thought process.

Okay.

Paul Steep: And then the second one for me is with respect to the NIM expansion, obviously a good result this quarter. Just thinking about as you're seeing sort of that funding mix change and then, you know, modest loan growth and the way you've continued to position your Treasury book to benefit from lower rates. Is there any reason to think that similar NIM expansion will not continue for the remaining quarters of 2024? Yeah, once again, Paul, it's Raj.

And then second one for me is with respect to.

The NIM expansion, obviously, a good result this quarter.

Just thinking about as Youre seeing sort of that funding mix change and then you know modest loan growth in the way you've continued to position your treasury books to benefit from lower rates like is there any reason to think that similar NIM expansion will not continue for the remaining quarters of.

Of 'twenty 'twenty four.

Yes, once again, Paul it's Raj I'll try to see if I can help you with it.

Raj Viswanathan: A little bit of color on how we saw the NIM expand during the quarter. Canadian Bank's NIM went up nine basis points, almost equally between asset margin expansion and some deposit margin expansion, which we think will be muted going forward. You know, as you know, that is dependent on administrative rate changes, which we don't expect to, you know, start happening till Q4. So that should remain flat, maybe a little bit negative compared to what we saw this quarter, as it's deposit pricing and terms and all that keeps evolving. I think the so the margin that the Canadian bank reported 256 basis points will be at or about that range. I don't think it's going to expand too much in the short term. The other component is international banking.

A little bit of color on how we saw the NIM expand during the quarter Canadian banks NIM went up nine basis points almost equally between asset margin expansion and some deposit margin expansion, which we think will be muted going forward.

As you know that is dependent on administrative rate changes, which we don't expect to see.

Not happening until Q4, so that should remain flat, maybe a little bit negative to what we saw this quarter as deposit pricing and term and all of that keeps evolving.

I think the.

So the the margin that the Canadian Bank reported 256 basis points will be at or above that range. I don't think it's going to expand too much in the short term Paul.

The other component is the international banking International banking significant growth in NIM as you saw a 19 basis points quarter over quarter lot of it coming because cost of funds have come down quite rapidly across all of those countries big rate cuts in Chile. As you saw great cost also happened in Peru, and definitely Colombia as well so cost of funds as of <unk>.

Raj Viswanathan: International banking, significant growth in NIM, as you saw, 19 basis points quarter over quarter, a lot of it coming because the cost of funds has come down quite rapidly across all those countries. You know, big rate cuts in Chile, as you saw; rate cuts also happened in Peru, and definitely Colombia as well.

Raj Viswanathan: So cost of funds is a big factor. We'll see how the rate cuts happen, and that might help with the international banking NIM. But as far as we think, you know, next quarter and beyond, we think it'll be around the numbers that you saw now, which is about 436 basis points. Asset repricing is definitely helping the international banks as their assets continue to reprice at higher rates.

Factor, we'll see how the rate cuts happened in Doc might help with international banking NIM, but as far as we think you know next quarter and beyond we think it'll be at all.

Most of you saw on now which is about 436 basis points asset repricing is definitely helping the international bank as did assets continue to reprice at higher rates. So that's a good progress we have seen this quarter.

Paul Steep: So that's good progress we've seen this quarter. All the bank NIMs you saw are four basis points higher quarter over quarter. We think there might be some marginal improvement, but the biggest improvements will start coming, Paul, when we see actual rate cuts happen, which we think is likely going to be in Q4. So until then, I think NIM will slowly expand in the bank, maybe a basis point or two quarter after quarter, but not as significantly as it will happen when the rate cuts actually do happen. I got it.

All bank NIM, you saw up four basis points quarter over quarter waiting there might be some marginal improvement, but the biggest improvements will start coming Paul when we see actual rate cuts happen, which we think is likely going to be Q4. So until then I think NIM will slowly expanding the bank.

Maybe a basis point or two a quarter after quarter, but not as significantly as it will happen when the right conceptually.

Got it that's very helpful. I'll leave it there. Thank you.

Paul Steep: That's very helpful. I'll leave it there. Thank you. Thank you, Paul.

Thank you Michael.

Thank you. The next question is from Doug Young from <unk> Capital markets. Please go ahead. Your line is now open.

Doug Young: Thank you. The next question is from Doug Young from Desjardins Capital Market. Please go ahead. Your line is now open. Hi, good morning.

Hi, Good morning, Raj, maybe just sticking with you on the all bank NIM and where I'm trying to go with this is you know I think you've been repositioning treasury to get away from Directionally, taking a view on rates.

Raj Viswanathan: Raj, maybe I'm going to stick with you on the All Bank NIM, and where I'm trying to go with this is, you know, I think you've been repositioning Treasury to get away from taking a directionally view on rates, but your sensitivities show that you're going to benefit from lower rates. So I'm trying to get a sense of, like, how long that adjustment takes. So clearly, if rates come down this year, you're going to benefit. But when does that repositioning end? Like, for how long are these hedges in place?

Your sensitivity showed that youre going to benefit from lower rates and so I'm trying to get a sense of like how long does that adjustment takes so clearly if rates come down. This year, you are going to benefit like when does that repositioning and like how long are these hedges in place for just trying to get a sense of when that pivot is going to eventually car or is this just going to not change.

Raj Viswanathan: Just trying to get a sense of when that pivot is going to eventually occur, or is this just going to not change? I think I'll try to help you with that. I think as far as the positioning that we had before where we had positioned it, you know, through our treasury actions to benefit more when rates come down, as you know, two quarters back or last year in Q2, we reset it back to being neutral to rate cuts across the curve. Obviously, that's a hundred basis point shift that we talk about, you know, and we disclose externally. So we're kind of neutral on that.

Yeah. Thanks, I think I'll try to help you with that I think as far as the positioning that we had before where we had positioned it throw out treasury actions to benefit mode. When rates come down as you know two quarters back our loss last year in Q2, we reset it back to being neutral to rate cuts across the club.

Obviously, thats, a 100 basis points shifts that we talk and we disclosed externally. So we're kind of neutral to that.

Raj Viswanathan: Where I think the benefits will start coming is when rate cuts actually happen, like I mentioned. But as far as the hedge benefits go, you know, we had a lot of benefits that we monetized in 2020, and that their life is ending sometime in 2024. So year over year, when you look at it, that tends to be a headwind because we had bigger benefits as the swaps expired, say 12 months ago, some of them, and some of them will kind of finish towards the end of this year. So I don't think it's going to be a big headwind going forward.

And I think the benefits will start coming is when rate cuts actually happened like I mentioned, but as far as the hedge benefits go we had a lot of benefits that we monetized in 2020 and dock life is ending sometime in 'twenty four or so year over year. When you look at it that tends to be a headwind because we had bigger benefits us as swaps expired say 12.

Once back some of them and some of them will kind of finish towards the end of this year. So I don't think it's going to be a big headwind going forward, but when you look at it from this quarter to say same quarter last year, that's definitely a headwind which shows up in the other segment.

Raj Viswanathan: But when you look at it from this quarter to say the same quarter last year, that's definitely a headwind, which shows up in the other segment. The other segment, you know, the $474 million loss will benefit when our wholesale funding cost comes down, which will track the administrative rate declines. The hedging program, like you mentioned, is going to be more about how we protect margin going forward and not be as opportunistic as we've been in the past. So we'll position the bank as close to neutral as possible.

The other segment $474 million loss will benefit when our wholesale funding cost comes down, which I, which will track, though administered rate declines.

Hedging program like you mentioned is going to be more about how do we protect margin going forward and not be as opportunistic as we have been in the past so well positioned the bank as close to neutral as possible and then as our balance sheet evolves, we expect to be positioned much better than what had been in the past.

Raj Viswanathan: And then as the balance sheet evolves, we expect to be positioned much better than we were in the past. Okay, so there's still some benefit from lower rates, but it's not going to be as much as it was before. And really, the focus is to kind of protect margin and then directionally take it. That's correct.

Okay. So theres still some benefit from lower rates that could be as much as it was before and really the focus is to kind of protect margin directionally ticket position. Thus.

Scott Thompson: But I think the benefit will come when the short end of the rate curve comes down, so we're not talking about parallel shift now, which is what should happen because the curve is inverted, but banks will continue to benefit meaningfully, which will show up through the other segment when the actual rate. Okay, and then Scott, you mentioned in your prepared remarks the need to invest in an international banking support structure, and I think there are some other items in there. I guess you know. My question is, should we be expecting more expenses to be flowing through international banking over the coming year or two years as you reposition that portfolio? Sure, let me start, and then Francisco can add on.

That's correct, but I think the benefit when the short end of <unk> common stock. So we're not talking about parallel shift which is what should happen because the curve is inverted.

Bank, who will continue to benefit meaningfully which will show up to the other segment of an actual rate cuts happen.

Okay, and then Scott you mentioned in your prepared remarks and need to invest in international banking support structure and I think there was some other items in there I guess you know.

I guess my question is should we be expecting more expenses to be flowing through our.

National banking over the coming year or two years as you reposition that portfolio.

Sure. Let me start and then Francisco can add on to that I mean, one one of the things that I was most pleased about this quarter was the international performance.

Scott Thompson: I mean, one of the things that I was most pleased about this quarter was the international performance. And if you think about the productivity initiatives that we're on and the ability to increase operating leverage to the extent we did on the back of not deploying more capital, I mean, it was just a fantastic result in the quarter. What we talked about a lot was growing our commercial IB business, which we hadn't been focused on before, and also growing a multinational business and taking the international business and looking at it through a regional lens. And so I think there's a lot of cost opportunity, but there will also be incremental investments that we'll have to make, particularly around cash management, as an example. But Francisco, maybe you want to add more on that?

And if you think about the productivity initiatives that we're on and the ability to increase operating leverage to the extent we did on the back of not deploying more capital I mean, it was just a fantastic result in the quarter what.

What we talked about a lot was growing our commercial business, which we haven't been focused on before and also growing our multinational business and taken the international business and taking looking at throw a regional lens and so I think there's a lot of cost opportunity, but there'll also be incremental investments that will have to do particularly around cash management as an example, but <unk>.

Cisco, maybe you want to add more I'm sure Scott and thank you for the question Doug a couple of thoughts just reiterating what we explained at Investor day.

Francisco Aristegueta: Sure, Scott. And thank you for the question, Doug. A couple of thoughts. Just reiterating what we explained at InVEST today. In the international bank, we have the capital and the resources we need to execute our five-year plan.

In the International Bank, we have the capital and the resources, we need to execute our five year plan. So you should not expect.

Francisco Aristegueta: So you should not expect any increases in expenses but a redirection and optimization of both. Capital allocation for higher returns, and certainly expenses for the right client segmentation. Where you will see investments are for global initiatives that will have a corresponding benefit on the international bank. And in that regard, we highlighted, particularly, two of interest and great benefit to international banking. One is multinational banking as a corporate organization providing a differentiated service to a particular set of clients that operate with us in multiple countries.

Any increases in expenses, but a redirection and optimization of both capital allocation for higher returns and certainly expenses for the right client segmentation.

Where you will see investments are for global initiatives that we will have a corresponding benefit in the international bank.

That regard, we highlighted particularly two of interest and great benefit to international banking, one is multinational banking as a corporate organization, providing a differentiated service through a particular set of clients that operate with us in multiple countries and we expect to increase our share of wallet with our clients segments sustainably.

Francisco Aristegueta: And we expect to increase our share of wallet with that client segment sustainably over the five-year program. And that, again, will benefit not only international but certainly Canadian clients as well, as we focus on the North America corridor. The other one is international cash management, or what we've defined internally as transaction banking.

Over the five year program.

And that again will benefit not only internationally, but certainly Canadian clients as well as we focus on the North America corridor. The other one is international cash management or what we have defined internally as transaction banking and there we intend to build capabilities that allow us to serve these multinational clients with the extension.

Francisco Aristegueta: And there, we intend to build capabilities that allow us to serve these multinational clients with more flexibility as we connect the onshore capabilities we already have in most of the markets we operate in with international capabilities around cash management. So those will be two areas of investment for the group globally that will have a corresponding benefit in international banking. Now, finally, what I would say. If you look at the five-year plan, we committed to a rolling rate reduction of our expenses in international banking of $800 million. Q1 was a very good example of execution around that expense discipline as we transition into a regional operating model. Appreciate the color, thank you, for you.

As we connect the onshore capabilities, we already have in most of the markets. We operate in with international capabilities around cash management. So those would be two areas of investment for the group globally that will have a corresponding benefit in international banking.

Now finally, what I would say if you look at the five year plan, we committed to a roll rate reduction of our expenses in international banking of $800 million Q1 was a very good example of execution around that expense discipline as we transition into our regional operating model.

I appreciate the color. Thank you.

Yeah.

Thank you.

The next question.

Mario Mendonca from TD Securities. Please go ahead. Your line is now open.

Doug Young: Mr. Mendoca, your line is now open; you may proceed. Hi there. Sorry about that. Can you hear me now?

Mr. <unk>. Your line is now open you May proceed.

Hi, there sorry about that can you hear me now yes, we can.

Mario Mendoca: Yes, we can. So Phil, this question is for you. I appreciate you reiterating the guidance on PCLs of 45 to 55 basis points for the full year. I did, however, feel, listening to your comments, that we could see some near-term deterioration. Is that correct? Would that be an appropriate way to characterize what you're expecting in the near term, some weakness and maybe an improvement in the second half of the year? Is that plausible? Yeah, that's probably the way to think about it, Mario.

So for all those questions for you I. Appreciate you are reiterating the guidance on <unk> sales of 45 to 55 basis points for the full year. It did however field listening to your comments that we could see some near term deterioration is that.

Would that be an appropriate way to characterize what you're what you're expecting in the near term some weakness and maybe an improvement in the second half of the year is a plausible.

That's probably the way to think about it Mario is if you look at international we saw rate cuts happened a few quarters ago. So, we'll probably see a PC.

Phil Thomas: If you look at international, we saw rate cuts happen a few quarters ago, so we'll probably see PCL start to peak in Q2 and a little bit into Q3. Then if you look at Canada, obviously, we're going to be reliant upon rate cuts here, so I think it's a tale of two halves of the year. We'll probably see things starting to improve towards the latter half of the year, into Q3, Q4, and then into the early part of 2025. And then in capital markets, just two quick ones there. Could you talk about the dividend, the change in dividend? Happy Holy Week. Mario, you got cut off a little bit. It's Raj.

<unk> start to peak in.

In Q2, and a little bit into Q3, but then if you look at Canada.

Obviously, we're going to be reliant upon rate cuts here. So I think it's a tale of two quarters two halves of the year, we will probably see things starting to improve towards the latter half of the year into Q3 Q4, and then into the early part of 2025.

And then and capital markets, just two quick ones there.

Talk about what the dividend.

The change in dividend.

Hi, Mario.

Maria you got cut off a little bit. It's Raj can you repeat the question on capital markets. Mario Please sure I'm interested in how the activity in in that business. The business that's impacted by the change of the taxation of Canadian dividends. What activity has been like has it has the activity really dried up or are there other products or is the activity.

Mario Mendoca: Can you repeat the question on capital markets, Mario? Sure. I'm interested in how the activity in that business, the business that's impacted by the change in the taxation of Canadian dividends, has been like? Has the activity really dried up, or are there other products, or is the activity... No, thank you, Mario.

Continued.

No. Thank you Mario I think it impacts the equity equities business as you would imagine because it's the equity dividend that has been eliminated for financial services or do we expect it to be eliminated effective January 1st the bill is not yet fully passed so this quarter had a one month impact it's about $40 million to GBS revenue, primarily the equities.

Raj Viswanathan: I think it impacts the equities business, as you would imagine, because it's the equity dividend that has been eliminated for financial services, or we expect it to be eliminated effective January 1st. The bill is not yet fully passed. So this quarter had a one-month impact. It's about $40 million to GBM's revenue, primarily in the equities business in Canada, which they've earned through in the business, and obviously, it's benefited the bank. And for the rest of the year, we think this will be roughly about $180 million to $200 million of NIAID that we have to earn through. We're optimistic that with the good start we've had in the first quarter, that helps in supporting the marginal EPS growth, which we still expect for the whole year. You know, the outlook that we talked about. But definitely, you know, more work to be done to ensure that we're able to find the offsets for the, you know, like I said, $180 to $200 million of NIAID that we need to find for the next three quarters. I appreciate that, Raj.

<unk> in Canada, which they wound through in the business and obviously its benefit at the bank.

And for the rest of the year. We think this will be roughly about $180 million to $200 million of <unk> that we have to learn through we're optimistic that with the good start we have had in the first quarter that helps in supporting the marginal EPS growth, which we still expect for the whole year and on the outlook that we talked about <unk>.

Definitely more work to be done to ensure they are been able to find the offsets for the you know like I said $180 million to $200 million.

And I asked that we need to find for the next three quarters.

I appreciate that Raj I think you were talking there about the tax implications, what I'm thinking more about as client activity our clients still active in that equity structured products business that benefited from the from the tax structure.

Mario Mendoca: I think you were talking there about the tax implications. What I'm thinking more about is client activity. Are clients still active in that equity-structured products business that benefits from the tax structure?

Raj Viswanathan: Yeah, I think it's a bit of both Mary. I think some are waiting for the actual dividend laws to be passed, and the activity will definitely come down. And that's why we think that, you know, there might be some impact on revenue, but the biggest impact is on the tax line. Because most of the clients do it because they need the hedging program, right, as you can think about, and so the cost attached to it will not go up substantially for the benefit that we have had. And we expect that to impact us in the tax line. It was very interesting.

I think it's a bit of both Mario I think some are waiting for the actual dividend laws to be past the activity will definitely come down and that's why we think that there might be some impact of the revenue, but the biggest impact is to the tax line because most of his clients do it because they need the hedging program right as you can think about and so the <unk>.

Cost attached to it and not go up substantially for the benefit that'd be a pattern, we expect that to impact us in the tax line mostly.

Interesting. Thank you.

[laughter].

Yeah.

Thank you. The next question is from Nigel D'souza from advantages investments. Please go ahead. Your line is now open.

Mario Mendoca: Thank you. The next question is from Nigel D'Souza from Averages Investments. Please go ahead, the line is now open. Thank you. I had a minor follow-up on NII sensitivity.

Thank you I had.

And a follow up on.

NII sensitivity I noticed that the benefit you expect to NII from a 100 basis points decline that benefit is a bit lower this quarter versus your estimates the prior quarters, just trying to understand why that items seem to be moving around when the declined in Ireland.

Nigel D'Souza: I've noticed that the benefit you expect to NII from a 100 basis point decline, that benefit is a bit lower this quarter versus your estimate and that of Brian Porter. Just try to understand why that item seems to be moving around when the declined NI, when rates go up, that's staying relatively stable. Just try to understand both sides of the interest rate sensitivity. Sure, Nigel. It's Raj.

So that's been relatively stable.

To understand both sides of the interest rate sensitivity here.

Raj Viswanathan: Let me see if I can help you with that. As you can imagine, the balance sheet changes every day, as we borrow money and we lend money out, and it depends on the term we do and, you know, whether it's a variable rate or a fixed rate. So that will have a natural change on the structure of the interest rate positioning of the bank. Forget about hedging and how we manage it at the Treasury level, where we talked about how we want to protect the margin, and we want to keep the bank neutral to 100 basis points, a parallel shift over there. So you'll see some of it from time to time, and that's all we're seeing this time.

<unk>, let me see if I can help you with that as you can imagine the balance sheet evolves everyday right as we borrow money and we lend money out and depends on the tone will be doing that.

Whether it's weighted rate fixed rate so that will have a natural change to the structure of the interest rate positioning of the bank forget about hedging and how we manage it at the at the Treasury level, where we talked about how we wanted to protect the margin and we wanted to keep the bank neutral to the 100 basis points.

Parallel shift over there so youll see from time to time some of them and Thats obvious seeing this time. It is simply about you know more term deposits for example in Canada less mortgages business mix shifts happened not just here, but also in non corporate commercial book as well as all of these only move it around there is nothing else looked at myself.

Nigel D'Souza: It is simply about, you know, more term deposits, for example, in Canada, and fewer mortgages. Business makes shifts happen not just here but also in our corporate commercial book as well. All these only move it around.

Aris Bogdanaris: There's nothing else to look at there, Nigel, and this is a question about deposit trends. You're seeing an increase in deposit balances in Canadian banks, and you noted lower discretionary spending. Any comments on what you're seeing in terms of the savings rate for households in Canada? Do you expect that to continue to build, or is there a point where that flips and you start seeing a more meaningful drawdown or runoff like deposits as rates remain elevated? Hi Aris here. It's nice to talk to you.

And then just a question on deposit trends Youre seeing a decrease in deposit balances in Canadian banking.

Lower discretionary spending.

Any comments on what Youre seeing in terms of the savings rate or households in Canada and.

Do you expect that to continue to build or is there a point where that flips in and we start seeing a more meaningful drop.

Draw down a run off of deposits as rates remain elevated.

Arris here, a nice nice to talk to so on deposits what we're seeing.

Aris Bogdanaris: So on deposits, what we're seeing, last year we saw growth, and you heard it from Raj, I think $30 billion in Canada year-on-year and $6 billion quarter-on-quarter. But what we're seeing is on the day-to-day banking balances and on the savings balances, we're seeing the rotation into term. And that accelerated last quarter, but it's starting to slow down, and we expect to see that continue over the coming quarters as we see consumers increasingly dipping into their day-to-day balances. So on a per-customer basis, those balances are shrinking. But overall, the pie is growing, as you see, and the rotation into term, as people lock in with the anticipation of rates coming down in the latter part of the year, they're trying to lock in. Okay, that's all for this interview. Thank you. Thank you. Our next question is from Gabrielle Duchesne from National Bank Financial. Please go ahead; your line is now open. Good morning.

Last year, we saw the growth and you heard it from Raj I think $30 billion in Canada year on year, and 6 billion quarter on quarter, but what we're seeing is on the day to day banking balances and on the savings balances, we're seeing the rotation into term and thats that that accelerated last quarter, but it's starting to.

Slow down.

And we expect to see that continue over the coming quarters.

As we see consumers increasingly dipping into their day to day balances so on a per customer basis those balances are shrinking.

But overall the pie is growing as you see and the rotation into term as people lock in with the anticipation of rates coming down in the latter part of the year. They are trying to lock into term.

Okay. That's helpful. That's it for me thank you.

Okay.

Thank you.

The next question is from Gabriel <unk> from National Bank Financial. Please go ahead. Your line is now open.

Gabrielle Duchesne: Just want to ask about the GBM LATAM performance. You called it out, $372 million, maybe a record quarter. I just want to, you know, address this obvious sustainability question about performance, what was going on in the market. And then when I juxtapose that performance against your stated objective of reducing capital to those activities, I'm just wondering how repeatable this performance is, if at all. Yeah, thanks, Gabe. It's Raj

Good morning, just wanted to ask about the GBM Latam.

Performance, you called out $372 million.

Maybe a record quarter.

I just wanted to.

Dresses obvious sustainability questions about the performance what was going on in the market.

When I would juxtapose the performance against your stated objective of reducing capital to that Oh activities I'm, just wondering how repeatable is performance.

Raj Viswanathan: I'll start on this. Absolutely, you're right. It is a record quarter, $372 million. Fantastic performance across all the countries, you know, Mexico, Peru, Chile, Colombia, Brazil, everywhere.

Al.

Yes, Thanks, Gabe it's Raj I'll start on this absolutely you're right. It is a record quarter of 372 million fantastic performance across all the countries.

Mexico, Peru, Chile, Colombia, Brazil everywhere and what that reflects Gabe is not capital increase it actually has remained flat to lower you can see it in our disclosures that our loans are actually down $2 billion in GBM lifetime, and that's part of our capital allocation strategy as we've talked about so we're not deviating from that.

Raj Viswanathan: And what that reflects, Gabe, is not capital increases. It actually has remained flat to lower. You can see it in our disclosures that our loans are actually down $2 billion in GBM's lifetime. And that's part of our capital allocation strategies that we talked about. So we're not deviating from that.

Raj Viswanathan: This is about having capabilities on the ground, which we have invested in over many years, and harvesting opportunities when they come by. There have been a lot of interest rate changes in those markets, as you know. There's been a lot of FX moments that have happened, which gives us the opportunity to both grow capital markets, revenue, and derivatives, as well as an FX trading operation over there, client-driven, obviously. The third component is that there is also, you know, significant fee-based income that we have had to, you know, we have had the ability to harvest over there. So, it's showing up both in business banking revenues as fee income and in capital markets revenues for the activities that I described. It's expected to come back.

This is about having capabilities on the ground, which we have invested over many years and harvesting the opportunities when they come by Theres been a lot of interest rate changes in those markets. As you know there's a lot of FX movements that have happened, which gives us the opportunity to both grow our capital markets revenue in derivatives as well as in FX trading operations over there.

Driven obviously.

We're confident is that is also you know cigna.

Significant fee based income that we have had to be at the ability to harvest over there. So it's showing up both in business banking revenues as fee income and capital markets revenues for the activities that I described it is expected to come back I think our normal run rate expectation for this business is somewhere between $275 million, maybe as high as $300 million in a normal quarter.

Raj Viswanathan: I think our normal run rate expectation for this business is somewhere between $275 million and maybe as high as $300 million in a normal quarter. We'd love to repeat this quarter, every quarter if possible, but we know that, you know, it depends on market opportunities, but it's not about deploying more capital in that region. But I would add a couple of thoughts, Francisco, here real quick. One...

We'd love to repeat this quarter every quarter as possible mhm must be noted that you know it depends on market opportunities, but it's not about deploying more capital in that region.

Okay got it.

As a coupla Fox Francisco here real quick one.

Francisco Aristegueta: This is not a deviation from our strategy. During the quarter, we had fantastic execution of a very strong pipeline on the fee side, but we also had good trading volatility, allowing us to capture P&L, particularly around effects and rates. And that shows the readiness of the team, as Raz mentioned, many years of investment in building these capabilities that we intend to continue to develop on the ground and differentiate ourselves. The important element also here to highlight is that decline activity in the quarter was very strong.

This is not a deviation from our strategy. So during the quarter, we have fantastic execution of a very strong pipeline on the fee side, but we also had good trading volatility, allowing us to capture P&L, particularly around infection rates and that shows the readiness of the team.

Ross mentioned many years of investment in building these capabilities that we intend to continue to develop on the ground and differentiate ourselves. The important element also here to highlight is the decline in activity in the quarter were very strong if that were to repeat again, we will be ready again to capture that opportunity with a focus of continued optimization of.

Francisco Aristegueta: If that were to repeat again, we would be ready again to capture that opportunity with a focus on continued optimization of our capital returns. And that's why you don't see an increase in capital allocation to Latin America this quarter. Okay, great. My next question is for Phil on the credit. You know, you called out Colombia and Peru in your commentary.

Our capital return. So that's why you don't see an increase in capital allocation to Latin America this quarter.

Okay great.

My next question for.

For Phil on the on the credit you know when you called out the.

Colombia, and Peru, and in your commentary I'm wondering about Canada actually because that's where we saw the biggest.

Gabrielle Duchesne: I'm wondering about Canada, actually, because that's where we saw the biggest increase in impaired loan loss provisions. And, you know, the delinquency rates are moving higher, 20 basis points on mortgages. And I don't think they're necessarily related, but the variable rate mortgage book, is there any connection at all between the higher delinquency rates and maybe the affordability of the other credit products that they have? And if not, can you maybe provide some broader commentary on why the auto loan delinquency rates are picking up? I mean, I know it's higher rates and all that, but if there's any nuance that you can provide to explain that trend and why it might not get worse, because it seems like I see that now, why won't it repeat next quarter and the one after that? Sure, Gabe.

The increase in impaired.

Loan loss provisions.

The delinquency rates are moving higher or 20 basis points on mortgage in.

Okay.

I don't think they're related necessarily but the variable rate mortgage book is there any connection at all between you know the higher delinquency rates and maybe the affordability of the other credit products that they have Uh huh.

If not can you maybe provide some broader commentary on why the auto loan delinquency rates are picking up and I mean, I know higher.

Higher rates and all that but.

You know if there's any nuance that you can provide.

Provide.

To explain the trend and why it might not get worse because it seems like most of you don't know what why won't repeat next quarter and we went after them.

Phil Thomas: Happy to take that. There's a lot there to unpack. Yeah, sorry. It's okay.

Sure Gabe, but happy to happy to take that Theres a lot there.

Gabrielle Duchesne: I'll try to remember the different components, but maybe just go to VRM first because it is a good bellwether for what's going on from a mortgage perspective for Canada and for Canadian banks. So delinquency is up. You are seeing 90-day delinquency rates up in our mortgage portfolio. It's still below, if you go back to 2020-2019, it's still below that period, but starting to creep up, as you mentioned. One of the things we were doing as the results came in was really double-clicking on where the stress is coming from.

So it's okay I'll try to remember the different components, maybe just to go to VRM at first because it is it is a good bellwether for what's going on.

Mortgage perspective, and for Canada for the Canadian banks.

<unk> and <unk>.

Delinquency is up you are seeing 90 day delinquency up in our mortgage portfolio. It's still below if you go back to sort of 2000 22019, it's still below that period, but starting to creep up as you as you mentioned.

One of the things we were doing.

As the results came in it was really double clicking on where the stress is coming from and it is interesting to note that the VRM customers with other products at the bank have actually have lower delinquency than the portfolio averages. So what we're finding is the VRM customers still holding onto a deposit.

Phil Thomas: And it is interesting to note that the VRM customers with other products at the bank actually have lower delinquency rates than the portfolio averages. So what we're finding is the VRM customer is still holding on to a deposit cushion. It's about two, as I mentioned in my prepared remarks, two times the deposit cushion now, but they seem to be managing the balances between their payments quite well. And so delinquency is lower on VRM customers with multi-product than it is across the portfolio. It's sort of maybe just a pivot there to the second part of the question you asked, which is really around auto and that, you know, the interesting, the interesting thing in that As you recall, during the pandemic, we had a lower supply of new cars, and so as a result, there was a pivot to do more use.

<unk> two as I mentioned in my in my prepared remarks, two times the deposit cushion now.

But they seem to be managing the balances between their payments quite well and so delinquency is lower on VRM customers with multi product than it is than it is across the across the portfolio.

It sort of maybe just a pivot there the second part of the question you asked which is really around auto and then the.

Interesting.

The interesting thing in that portfolio for you would be.

As you recall during the pandemic, we had lower supply of new auto and so as a result, there was a pivot to do more used what were seeing now is a higher.

Phil Thomas: What we're seeing now is higher delinquency rates coming from the used portfolio rather than the new portfolio. Now that paradigm has shifted as supply chains have come back, and so the portfolio at origination has shifted back more towards new origination, but we're still working through the cohort that was acquired during the pandemic for used customers. And, you know, one of the things I think we have a benefit of is really learning and developing some of our tools, particularly around the collections activities from our SDA book, which has obviously a large used component to that portfolio. And so we've been really digging in, leveraging collections best practices from SDA. We've deployed a number of digital tools that are really, really helping customers.

A higher delinquency rates coming off.

The used portfolio rather than the new portfolio now that paradigm has shifted our supply chain have come back and so the portfolio at origination has shifted back more towards new origination, but we're still working through the cohort that was acquired during the pandemic for use customers.

And what are the things I think we have a benefit of us really learning and developing some of our tools, particularly around the collections.

The activities from our SDA book, which has a obviously a large use component to that portfolio and so we've been really digging in leveraging collections best practices from SDA. We've deployed a number of digital tools that are really really helping customers and we've seen a four times improvement in some of our repayment.

Phil Thomas: And we've seen a four times improvement in some of our repayment rates since we've been deploying these tools. So there are a lot of activities going on, as you can imagine, but I think the sentiment of your question is the right one. If I sneak another one auto-related, any signs of stress in your dealer customers on the commercial side? I mean, I'm seeing a lot of F-150 Lightnings on the lots these days. Not the single O Ford, but you know.

<unk> since we've been deploying these tools.

So there's a lot of activities going on.

You can imagine, but I think the sentiment of your question is the right one.

Sneak another one auto related.

Signs of stress in their dealer customers on the commercial side I mean, I'm seeing a lot of F 150, Lightnings Momo once we've booth.

Another thing going forward.

Gabrielle Duchesne: Not a problem. No problem there. There's nothing of any significance on my desk in the commercial portfolio.

Not a not a problem no problems theres nothing of any significance on my desk on the commercial portfolio alright. Thanks.

Darko Mihelic: All right, thanks. Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead, your line is now open.

Okay.

Thank you the.

The next question is from Darko <unk> from RBC capital markets. Please go ahead. Your line is now open.

Phil Thomas: Hi Phil, just a couple of quick follow-ups on that. So sticking with you, with respect to when you mentioned that the variable rate mortgage has a two times deposit cushion, what exactly does that mean? Does that mean that their deposits are still two times what they were pre-pandemic? Or do you mean something else?

Hi, Thank you just a couple of quick follow ups on that sale. So sticking with you with respect to the Oh when you when you mentioned that the.

The variable rate mortgage has two times deposit cushion what exactly does that mean does that mean that their deposits are still two times, what they were pre pandemic or do you mean something else.

Phil Thomas: Now, this means that they have two payments in their deposit account. Okay, okay, that's it. And, sorry, go ahead.

It means that they have two payments in their deposit account okay.

Phil Thomas: And maybe, no, no, I was just going to say, and maybe, as another sort of indicator, on the fixed side, it's about three and a half. OK. But you mentioned that the delinquency statistics are such that there are very few of the variable rate mortgage customers in the delinquency pool, so they're really coming from the fixed rate. No, actually, where we're seeing this is on single service customers. So those customers with one product with the bank tend to have, that's where we're seeing the highest level of stress. And actually, as I was thinking through this, it's actually testament to the strategy that we put forward last quarter, really focusing on primacy, because actually, what we're seeing is primary customers are running, even through this stress period, with much less delinquency than single service customers.

Okay. Okay.

And then sorry go ahead.

They're just going to say and maybe is it as another sort of indicator in on the fixed side its about three and a half.

Okay.

But you mentioned that the delinquency statistics are such that there's very few of the variable rate mortgage.

Customers in the delinquency pool, so they are really coming from the fixed rate.

Actually we are risky.

No actually where we're seeing it is on single service customers. So those customers with one product with the bank tend to have that's where we're seeing the highest level of stress and actually it is.

As I was thinking through this it's.

It's a testament to the strategy that we put forward last quarter really focusing on privacy because actually what we're seeing is primary customers are running even through this stress period, which with much less delinquency than single service customers.

Phil Thomas: So single service customers, and broadly speaking, those are fixed rates. No, I would say customers with one product with the bank outside of the outside of the mortgage portfolio. Okay, but the delinquency numbers are then a mix of variables. I'm just trying to understand if we're saying it's 20 basis points of delinquency. What you're suggesting is it's for single-service customers, but I still don't understand if the breakdown is a variable rate or fixed. Sorry, Darko.

So single service customers.

Broadly speaking those are fixed rate.

No I would say customers with one product with the bank outside of the outside of the mortgage portfolio.

Okay, but.

The delinquency numbers are then a mix of there I'm just trying to understand if we're saying, it's 20 basis points of delinquency.

What you're suggesting is it's single service customers well.

I don't I still don't understand what the breakdown is variable rate or fixed now sorry, Derik because I think there's two there's two components here one.

Phil Thomas: I think there are two components here. One, as I explained, what we're seeing is there's the entire portfolio, and then there's the mortgage portfolio. If I could focus on the mortgage portfolio for a second, we're seeing VRM at 90-plus, at 26 basis points, fixed at $17,000. So just to give you a sense of where the delinquency is coming from, but my point on multi-product is more at the portfolio level. If I step back away from customers without mortgages, it's the single service customers where we're seeing stress in the portfolio. Okay, okay. That's helpful.

As I explained it what we're seeing is so theres the entire portfolio and then there's the mortgage portfolio if I could focus on the mortgage portfolio for a second.

We're seeing VRM it at 90, plus six at 26 basis points.

Fixed at 17, so just to give you a sense of where the delinquencies coming from but my point on multi product is more at the portfolio level. If I, if I step back away from customers without mortgages. This is a single service customers that where we're seeing stress in the portfolio.

Okay. Okay. That's helpful. Thank you and really quickly then just going back to what you had mentioned about Colombia.

Phil Thomas: Thank you. And really quickly, then just going back to what you mentioned about Colombia and Peru potentially having some issues, you said you were proactively managing exposures. Can you just give a little color on that?

And Peru, potentially having some issues you said you were proactively managing exposures can you just put a little color on that and what should we expect should we expect lower balancing some NII impact. We're really this is just about.

Phil Thomas: And what should we expect? Should we expect lower balances, some NII impact? Or really, this is just about some sort of portfolio trimming and really just working towards a lower PCL, but no revenue impact? That's exactly right.

Some sort of.

Portfolio trimming and really just working towards a lower PCL, but no revenue impact.

That's exactly right and I think what.

Phil Thomas: And I think what you know, Francisco, and myself, working with the team, have been very focused on collections activities, account management activities. So there has been some tightening at the point of origination. We've been focused on certain tactics as it relates to account management.

Francisco myself working with the team has been very focused on collections activities account management activities. So there has been some tightening at the point of originations we've been focused on a certain tactics as it relates to account management and there's a heightened focus on specialized collections teams did.

Phil Thomas: And there's a heightened focus on specialized collections, teams, digital offers, loss mitigation tools, and enhanced analytics around segmentation in these markets. But I would say when we look at the numbers, we have seen improvements in risk-adjusted returns and risk-adjusted margins in these portfolios quarter over quarter. So it does seem like we're getting paid for the risk. Okay, great. Thanks very much. Thank you. Good morning.

<unk> offers loss mitigation tools enhanced analytics around segmentation in these markets.

And.

But I would say when we look at the numbers, we have seen improvements in the risk adjusted returns and risk adjusted margins in these portfolios quarter over quarter. So it does it does seem like we're getting paid for the risk.

Great. Thanks very much.

Okay.

Thank you. The next question is from Abraham Pune Wildlife from Bank of America. Please go ahead. Your line is now open.

Phil Thomas: Just one, I guess Phil is sticking with you on credit. I think you mentioned that you expect PCLs to peak in the first half, given by international, just talk to us in terms of ex-international in Canada, how you expect PCLs to trend, and what are you assuming in terms of the unemployment rate at the end of the year, and shouldn't PCLs, impaired PCLs in Canada, continue to worsen through the rest of the year in 2025? Yeah, I'll just reiterate that we expect to be within the full year guidance of 45 to 55 basis points for the year. I think impaired loans will definitely be impacted by interest rates.

Hey, good morning.

One I guess sticking with you on credit.

I think you mentioned that you expect PCL to peak in the first half driven by international.

Just talk to us in terms of ex international in Canada, How you expect the ECL spending and what are you assuming in terms of the unemployment rate.

At the end of the year and <unk> embedded in seals, and Canada continued to worsen to the rest of the year into 2005.

Yeah, I'll, just reiterate that we expect to be within the full year guidance of 45 to 55 basis points for the year.

I think the impaired loans will just it will definitely be impacted by.

Phil Thomas: And I think as we start to see rate decreases, there'll be a bit of a lag, and then we'll start to see that benefit clients, the same way we're seeing it in Latin America. In terms of unemployment, in the sub-pack here, it's at 6.4, but we did have a revision down to 6.1. And I think the full-year forecast we have, which we're using in our models right now for the base case, is around this sort of 6.4, 6.5 range. As I look at it, I'm not sure unemployment is going to be the major driver here because there's a lot of moving parts with immigration. And so we're trying to look beyond the unemployment number and just trying to look at how customers are behaving. We've been using a lot of our behavioral analytics models to model out consumer behaviors and consumer patterns.

Buy rates.

I think as we start to see rate decreases that will be there'll be a bit of a lag and then we will start to see that.

Benefit clients the same way, we're seeing it in Latin America.

In terms of unemployment in.

In the in the sub pack here it is.

At $6 four but we did have a revision down to six one and I think the full year forecast. We have we're using in our models right now for the base case is around the sort of 6465 range.

As I look at I'm not sure unemployment is going to be the major driver here is because it.

We see there's a lot of moving parts.

With immigration and so we're trying to look beyond the unemployment number and just trying to look at how customers are behaving we've been using a lot of our behavioral analytics models to model out consumer behaviors in consumer patterns.

Phil Thomas: And we've also been looking at just sort of spend patterns, what people are spending on, and how they're transitioning their spending. So there are a lot of variables we're looking at beyond just the unemployment rate right here, just given some of the idiosyncratic events happening in the Canadian macroeconomic landscape. As I said earlier, to answer one of the other questions, I suspect we'll start to see relief in Canada, probably Q3 into Q4 with a more normalized run rate into the latter half of the year and into the beginning of 2025.

We've also been looking at just sort of spend patterns, what people are spending on and how they're transitioning their spend so there's a lot of variables. We're looking at beyond just the unemployment rate here.

Just given some of the idiosyncratic events happening in the Canadian macroeconomic landscape as I said earlier to one of the other answer to one of the other questions I suspect, we'll start to see relief in Canada, probably.

In Q3 into Q4 with with a more normalized run rate into the latter half of the year and into the beginning of 2025 and.

Phil Thomas: And one quick follow-up, Phil, in terms of the variables. How much do you look at the five-year part of the curve versus the overnight rate? Like, what we've been having conversations about is if the five-year stays where it is today despite the POC rate cuts, does that keep the pressure on consumer spending, etc., through next year? Just so you can talk about the sensitivity between those two rates. Thank you. It's a good question.

And one quick follow up in terms of the variables.

How much is how much do you look at the five year part of the global Sis the overnight rate.

We've been having conversations is it the five year stays where it is today. Despite POC data cuts does that keep the pressure on the consumer spending et cetera.

Up to next year, just if you can talk to the sensitivity between those two rates. Thank you.

It's a good question.

Phil Thomas: You know, I think what we'll see is, you know, I suspect, maybe step back and look at it from a credit perspective, I suspect with the VRM book, you'll start to see some further stress in that portfolio into Q2 and Q3. And it'll be really the Bank of Canada rate decreases that will start to pull in and have the biggest impact on the client. Good. Thank you. Thank you. The next question is from Saurabh Mohaidi from BMO Capital Markets. Please go ahead; your line is now open.

I think what we'll see is.

I suspect maybe step back and look at it from a credit perspective, I suspect with the VRM book Youll start to see some further stress in that portfolio into Q2 into Q3 and it will be really the the bank of Canada rate decreases that will start to pull in and have the biggest impact too.

To the clients.

Thank you.

Thank you.

The next question is from Sohrab <unk> from BMO capital markets. Please go ahead. Your line is now open.

Saurabh Mohaidi: Okay, thank you for squeezing me in too quickly, Roger. The overall tax rate has been under 22% for a couple quarters. What is the right number, do you think, looking ahead? I think, you know.

Okay. Thank you for squeezing me in two cookies, Roger overall tax rate has been under 22% where a couple of quarters. What is the right number or do you think looking ahead.

I think.

Raj Viswanathan: We should get to around 21%, I think in the next couple of quarters, so for the whole year, it will still be probably between 20 and 21%, lots of moving parts right across. Okay. Yeah. And then you call that revenue growth, Euro VR 5%. What do you think that revenue growth is going to look like for the balance of the year? And what would be the contributors?

We should get to around 21% I think in the next couple of quarters are up so for the whole year, so it'll be probably between 20 and 21%.

Lots of moving parts right across okay.

Yeah.

And then Ned.

You called out revenue growth.

It'll be a 5% what do you think that revenue growth is going to look like balance of year and what would be the contributors you know, there's obviously puts and takes you've got a balance sheet kind of maybe.

Saurabh Mohaidi: You know, there's obviously puts and takes, you've got balance sheet kind of RWA optimization, you know, what's happening with fees, NIM, just get a sense of what that revenue growth ought to look like. I think revenue growth should continue to be positive, and I think about it sequentially, obviously, you know, shorter quarter, next quarter and all, ignoring that bit. Because we talked about net interest margin continuing to improve in the bank, a basis point on, you know, $800 billion of earnings is simple math over there. We don't expect too much loan growth, you know, in Q2, but we expect the second half to be, you know, stronger than the first half, sequential growth both in Canada as well as in international banking. So that should help with NII.

Optimization, you know what's happening with fees NIM, just get a sense of what that revenue growth ought to look like balance sheet.

I think revenue growth should continue to be positive and I think about it sequentially, obviously in our charter, Florida next quarter on all ignoring that bad because we talk about net interest margin continuing to improve the bank a basis point on <unk> $800 billion of earnings is a simple math over there. We don't expect too much loan growth you know in Q2, but we expect the second half.

Have to be.

Stronger than the first half sequential growth both in Canada as well as in the international banking, so that should help with NII NII out like you mentioned fee income and trading operations completely depend upon market opportunities. We've had a great start to the year, which would helpful. As we think about the whole year, but sequentially, that's a little hard to predict as you can.

Raj Viswanathan: NIR, like you mentioned, fee income and trading operations completely depend upon market opportunities. We've had a great start to the year, which would help for, you know, as we think about the whole year. But, sequentially, that's a little hard to predict, as you can imagine.

Raj Viswanathan: But revenue growth is something that we expect to see for the remaining three quarters across the business lines and therefore benefit the bank as a whole. GBM is the only one I would be a little cautious about because it depends on market activity, but the one I would really call out is really Wealth Management. You know, as the markets have improved, we have seen quarter-over-quarter improvement in wealth, particularly in imminent Q1. I think that will continue as the markets remain, and hopefully get better, particularly with the rate situation, helping our debt portfolio and the assets under management. And the equity market is very mainstream; that will help with wealth revenues.

Margin, but revenue growth is something that we expect to see for the remaining three quarters across our business lines and therefore benefit the bank as a whole GBM.

GBM is the only one I would I would be a little cautious because it depends on market activity, but the one I'd call out really as wealth management.

As the markets have improved we have seen quarter over quarter improvement in volatile as it had been in Q1.

I think that will continue as the markets remain hopefully get better, particularly with the rate situation, helping our debt portfolio and the assets under management and the equity market is that it may sound Dr. Outflows of about five years, so it should be.

Saurabh Mohaidi: So it should be good news. Thank you very much. Thank you, there are no further questions on the line. I would like to turn the meeting over to Mr. Raj Vishwatnath. Well, thank you very much. On behalf of the entire management team, I want to thank everyone for participating in our call today. We look forward to speaking to you again on our Q2 call in May. This concludes our first quarter results call. Have a great day. The conference has now ended. Disconnect your lines at, and we thank you for your cooperation.

Thank you very much.

Thank you there are no further questions on the line.

I would like to turn back the meeting over to.

Mr. Raj this what Nathan.

Well. Thank you very much on behalf of the entire management team I want to thank everyone for participating in our call today.

We look forward to speaking to you again at our Q2 call in May. This concludes our first quarter results call and fabrics right Dave.

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