Q3 2024 The Bank of Nova Scotia Earnings Call
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Speaker Change: Press star 1 after the moderator has started the conference. A system tone will confirm that your request has been accepted. To cancel your question, press star 2. This conference is being recorded. Good evening and welcome to Scotiabank's third quarter 2024 earnings presentation. My name is John McCartney and I am the Head of Investor Relations here at Scotiabank. Presenting this morning are Scott Thomson, President and CEO of Scotiabank, Raja Swanathan, our Chief Financial Officer, and Phil Thomas, our Chief Risk Officer. Following our comments, we will be happy to take your questions. Also present to take your questions are the following Scotiabank executives: Eris Bogdanaris, from Canadian Banking, Jackie Allard, from Global Wealth Management, Francisco Aristegueta, from International Banking, and Travis Machin, from Global Banking and Markets. Before we begin, and on behalf of those speaking today, I invite you to the first part of our presentation, which contains Scotiabank's forward-looking statements disclaimer. With that, I will now turn it over to Scott. Thank you, John , and good morning everyone. We are pleased to share our third quarter results, which demonstrate another quarter of progress and focused execution against our strategy. Through a challenging environment, we have achieved quarter-over-quarter EPS growth and continued positive operating momentum. Our results reflect the strength of our balance sheet, demonstrating revenue acceleration driven by the performance of our Canadian Banking business and positive momentum in global wealth. Importantly, we are seeing the benefits of profitability from our shift in focus from volume to value. Let me take a moment to recap some key business initiatives. Growth in personal and commercial deposits. We remain very focused on creating primary relationships with clients, and while we expect this to be an ongoing and increasing journey, we are very focused on growing personal and commercial deposits in our Canadian and international businesses by 7% per year. Since we started this journey 18 months ago, deposits in our Canadian Banking business are over $43 billion. Capital discipline. We are deploying our capital increasingly to our priority businesses, in line with our medium-term objectives. We are beginning to see the benefits of this repositioning with strong capital growth in Canadian Banking and Wealth, and a heightened focus on revenues in GBM and International Banking. Today's results demonstrate our ability to generate capital growth while focusing on disciplined capital deployment to priority client segments. Costs and process efficiencies. Our efforts to increase our productivity will be an important contributor to achieving our medium-term profitability metrics. Positive capital deployment across all banks, driven by cost discipline and Canadian and International Banking, will be an important driver for future results.
Speaker Change: This conference has been recorded, set conference in Registria.
Speaker Change: Good morning and welcome to Scotia Banks 2024, third quarter results presentation.
John McCartney: My name is John McCartney, and I'm head of Investor Relations here at Scotiabank.
Speaker Change: presenting to you this morning, or Scott Thompson, so which makes President Chief Executive Officer, Rajaswanaathen, or Chief Financial Officer, and Phil Thomas, or Chief Risk Officer.
Speaker Change: Following our comments, we'll be glad to take your questions. Also, present to take your questions or the following Scotia Bank executives.
Speaker Change: Harris Bogdanaris from Canadian Banking, Jackie Alard from Global Wealth Management, Francisco Aristigata from a international banking and Travis Machen from Global Banking in markets.
Speaker Change: Before we start, we have our most speaking today, a free dislike to of our presentation, which contains Scottish Banks caution regarding forward-looking statements. With that, I will now turn the call over to Scott.
Scott: Thank you, John, and good morning, everyone.
Scott: We are pleased to share our Q3 results which demonstrated another quarter of progress and focused execution against our strategy.
Scott: Through a challenging market environment, we achieved quarter of a quarter EPS growth and continued positive operating leverage.
Speaker Change: Our results reflect the strength of our balance sheet while demonstrating revenue acceleration, led by performance in our Canadian banking business, and ongoing positive momentum and global wealth.
Speaker Change: Importantly, we're seeing the profitability benefits of our shifting focus from volume to value.
Speaker Change: Let me take a moment to recap a few key enterprise initiatives.
Speaker Change: Personal and Commercial Deposit Growth.
Speaker Change: We remain laser-focused on developing primary-fiant relationships, and while we expect this to be an ongoing and incremental journey, we're well underway with P&C to pause and grow across our Canadian and international retail businesses up 7% on a year over year basis.
Speaker Change: Since we started this journey 18 months ago, deposits on our Canadian banking business are up 43 billion dollars.
Speaker Change: Capital Discipline, we are deploying our incremental capital to our priority businesses, in line with our medium-term objectives.
Speaker Change: We're starting to see the benefits of this repositioning with strong revenue and earnings growth and Canadian banking in wealth and the sharpened focus on returns in GBM and international banking.
Speaker Change: Today's results demonstrate our ability to generate earnings growth while focusing on discipline, capital deployment to priority client segments.
Speaker Change: Cost and process efficiencies.
Speaker Change: Our efforts to increase our productivity will be an important contributor to meeting our medium term profitability metrics.
Speaker Change: All Bank Positive Operating Leverage, driven by cost is with winning Canadian International Banking. We'll be an important driver of results going forward.
Speaker Change: And finally, maintaining a strong balance sheet remains an important priority. Over the past 18 weeks, we have strengthened our balance sheet with SETI capital, ACL coverage, and liquidity metrics, all at significantly improved levels. Returning to our Q3 results, the Bank reported adjusted revenues of 2.2 billion, or $1.63 per share, for the quarter. The Bank reported solid top-line revenue growth again this quarter, driven by higher interest income and non-interest income. We are executing on productivity initiatives that are already underway at the Bank. Specifically, in our international and Canadian businesses, our productivity ratio improved by 210 basis points and 130 basis points, respectively, on an annual basis. Credit costs are in line with our previously communicated range, as we see the impact of strong growth on our commercial portfolios. In our international markets, we expect credit conditions to begin stabilizing in response to monetary easing over the past quarters, and we remain focused on favorable risk-adjusted revenues and margins. Despite higher credit costs, it is important to note that risk-adjusted margins are currently higher in both the Canadian and international banks. Taxes have evolved sequentially in the Canadian bank, in line with our strategic objective of deploying capital to our priority businesses and profitable core relationships. Tax balancing tends to decline in the international bank and GVM. This credit discipline, combined with rapid advancement and what will be a relentless effort to strengthen our deposit franchise, is already showing clear progress. The reduction in our investment fund taxes has been reduced by 33 billion euros over the year, resulting in a 250 basis point reduction in our investment fund ratio. Some performance highlights across each of our businesses. We were pleased with the strong performance of our Canadian banking business, which delivered 1.1 billion euros in revenue for the quarter, up over 6%. Pre-tax and pre-provision earnings increased by 11% year over year. We are making good progress towards our goal of growing by one million new primary customers domestically and 500,000 new primary customers in Tangerine. To date, we have added 143,000 net new primary customers in our Canadian retail and Tangerine franchises. Even though balances in the Canadian residential mortgage portfolio have gradually decreased, we have clearly reached an inflection point, and the success of our multi-product Mortgage Plus offerings has resulted in sequential residential mortgage growth. Specifically, 82% of mortgage originations in Q3 were Mortgage Plus offerings with new customers, which yielded an additional 3.1%. Mortgage portfolio retentions also improved by 190 basis points year over year to over 90%. The improvement in the profitability of our Canadian banking franchise will be a key driver of shareholder value creation. I have been encouraged by the 150 basis point sequential improvement in the Canadian bank's return on equity this quarter. Global growth contributed a very strong 415 million this quarter as a result of the continued momentum of the franchise in our Canadian growth business, driven by the growth of our advisory channels, as well as double-digit growth in international growth.
Speaker Change: And finally, maintaining the strong balance sheet remains a high priority. Through the challenging rate environment over the past 18 months, we have strengthened our balance sheet with steady-one capital, ACL coverage and liquidity metrics all significantly improved levels.
Speaker Change: Turning to our Q3 results, the bank reported adjusted earnings of $2.2 billion or $63 per share in the quarter.
Speaker Change: The bank delivered solid top line revenue growth again this quarter, driven by higher net interest income and non interest revenue
Speaker Change: We are realizing on the productivity initiatives that are already underway at the bank.
Speaker Change: Specifically, in our international and Canadian retail businesses, our product-tipdy ratios improved by 210 basis points and 130 basis points respectively on a year-to-date basis.
Speaker Change: Credit costs are at the high end our previously communicated range as we see the impact of sustained higher rates on a retail portfolio.
Speaker Change: In our International Markets, we expect to see credit conditions begin to stabilize and response to the monitoring easy over the past few quarters.
Speaker Change: and we remain focused on delivering favorable, risk-adjusted margins and returns.
Speaker Change: Despite higher credit costs, it is important to note that risk adjusted margins of trended higher year to date in both Canadian and international banking.
Speaker Change: Loan's Bruce sequentially in the Canadian Bank, in line with our strategic objective to deploy capital to our priority businesses and with our profitable primary relationships.
Speaker Change: Lone Balance is Treaded Lower in International Banking in GVM.
Viswanathan: Viswanathan Discipline coupled with early success and will be a relentless ongoing effort to strengthen our deposit franchise is already showing clear progress.
Viswanathan: Our whole self funding requirement has been reduced up to the past year by $33 billion, resulting in a 250 basis point reduction in our whole self funding ratio. Ratio.
Viswanathan: A few performance highlights across each of our businesses.
Viswanathan: We were pleased with the strong performance of our Canadian banking business, which delivered $1.1 billion of earnings in the quarter up to 6%.
Viswanathan: Pre-Tax Pre-Fvision earnings grew 11% year over year.
Viswanathan: We're making good progress towards our medium-term 1 million new primary client growth objective in domestic retail and 500,000 primary client growth target and tangerine.
Viswanathan: We've added 143,000 net new primary clients in our Canadian retail and Tangerine franchises.
Viswanathan: Although balances in the Canadian residential mortgage portfolio are down slightly year over year, we have clearly reached an inflection point as we've seen the success of our multi-product mortgage plus offerings, resulting in sequential residential mortgage growth.
Viswanathan: Specifically, 82% of mortgage originations in Q3 were mortgage plus offerings with new clients, average in additional 3.1 products.
Viswanathan: Mortgage portfolio retention rates have also improved 190 basis points year over year to over 90%.
Viswanathan: Enhancing the profitability of our Canadian banking franchise will be a key driver of shareholder value creation.
Viswanathan: I was encouraged by the sequential 150 basis find improvement and Canadian banking return on equity this quarter
Viswanathan: Global wealth delivered a very strong contribution of 415 million this quarter, as a result of continued franchise momentum in our Canadian wealth business, led by Gross and our Vice-Channel as well as double-digit growth from international wealth.
Viswanathan: Our Canadian Wealth Management Advisory businesses saw a 19% increase in earnings year-over-year, led by very strong performance from Scotia McLeod and private banking. We continue to invest in advisor growth and technology within Scotia McLeod and have recently achieved a record assets managed in that channel. Our total wealth approach to providing full client solutions is driving growth in assets and relationship depth with new and existing clients. The financial plans in place, for example, which, as we know, reflect stronger relationships and, importantly, better results for our clients, are up over 29% year-over-year. Collaboration and the client process are more strongly marked as a clear priority for our domestic businesses that are invested today. We have seen good success in terms of partnership between our businesses, leading to a 21% year-to-date increase and closed information from the Canadian Bank for our wealth businesses. These are tangible and measurable metrics that confirm that our advisors are working more successfully with their clients and partners across our organization to bring more value to these clients. We hope to see similar and significant benefits from the partnership between global wealth and our commercial business. In our commercial and global commercial business, we reported solid earnings of $418 million this year, despite lower activity in the commercial and commercial business, offset by stronger results from the bank and U.S. businesses. I have been impressed by GBM's ability to earn substantially through the headwinds created by the elimination of the tax deduction and receipts this year. We have been encouraged by strong growth in our housing businesses. Registration and advisory fees increased by more than 30% year-over-year, benefiting from the continued build-out of our productive capabilities in the U.S. commercial business. A critical element of our primary client strategy is a more connected transaction banking capability across our primary markets to generate higher deposit growth. Scotia Connect, our new cash management platform, will elevate our capabilities in Mexico and Canada, with our focus now on enhancing capabilities in the U.S., to make it easier for our multinational, corporate, and commercial clients to do business with us. In our international banking business, we delivered strong revenues of around 6% or 9% PPPT growth year-over-year, representing a 14% return on equity, despite high credit costs and more normalized GBM LATAM results compared to previous quarters. We continue to reposition the capital deployed in our international view. Client deposits increased by 4% year-over-year, while loans were managed 2% lower. The resulting loan-to-deposit ratio in international banking decreased by 9 points to 126% over the period. We are pleased with the results of past productivity efforts, deposit control, and capital repositioning in our business. We are confident that the business client segmentation initiatives and our plans to develop a more regionally standardized operating model will position our international banking business well for better efficiency and greater profitability in the future. Our international banking business is doing more with less, generating impressive capital growth with lower capital deployment.
Viswanathan: Our Canadian Welfth Management Advisory Businesses saw 19% increase in earnings year over year, led by very strong performance from Scotion Applied and Private Banking.
Viswanathan: We continue to invest in advisory growth and technology within Scotion Applied and have recently achieved a record asset managed in that channel.
Viswanathan: Our total wealth approach to providing full client solutions is driving growth and assets and relationship depth with new and existing clients.
Viswanathan: Financial Plions in place, for example, which we know reflects stronger relationships and importantly better outcomes for our clients are up 29% year over year.
Viswanathan: Stronger collaboration and client-cross-sell were highlighted as a clear priority for our domestic businesses that are invested in.
Viswanathan: We've seen good success in terms of the partnership between our businesses, driving a 21% year-to-date increase in close referrals from the Canadian retail bank to our wealth business.
Viswanathan: These are tangible, measurable metrics that confirm our advisors are working more successfully with their clients and with partners across our organization to bring more value to those clients.
Viswanathan: We expect to see similar significant benefits from the partnership between global wealth and our commercial banking business going forward.
Viswanathan: In our global banking and markets business, we reported solid earnings of 418 million this quarter, despite lesser activity in the capital markets business, offset by stronger corporate banking and U.S. business results.
Speaker Change: I have been impressed by GVM's ability to substantially earn through the headwind created by the elimination of the dividend received deduction this year
Speaker Change: We were encouraged by strong growth in our feed businesses.
Speaker Change: Underwriting and Advisory Fees, we're up over 30% on both a year-over-year and year-to-date basis, benefiting from the continued build-out of our product capabilities in the U.S. capital markets business.
Speaker Change: A critical component of our client-primacy strategy is a more connected transaction banking capability across our primary markets to generate higher deposit growth.
Speaker Change: Scotia Connect, our new cash management platform will elevate our capabilities in both Mexico and Canada, with our focus now squarely on enhancing capabilities in the U.S. to make it easier for our multinational, corporate and commercial clients to do business with us.
Speaker Change: In our International Banking Business, we delivered strong earnings up 6% or 9% PTTT growth year over year, representing a solid 14% return on equity despite elevated credit costs and more normalized GBM Latam results compared to prior quarters.
Speaker Change: We continue to reposition capital deployed within our International Footprint.
Speaker Change: Customer deposits grew 4% year over year while loans were managed 2% lower. The resulting loan to deposit ratio in international banking was down 9.226% over the period.
Speaker Change: We are pleased with the early results of our productivity efforts, expense control and capital repositioning in this business.
Speaker Change: We are confident that the retail client segmentation initiative is underway and our clients to develop a more regional standardized operating model will position our international banking business well for improved efficiency and greater profitability coming forward.
Speaker Change: Our International Banking Business is doing more with less, generated in impressive earnings growth with lower capital deployed.
Speaker Change: and others. Since the beginning of the year, the risky assets deployed by the region have decreased by 6.7 billion dollars. However, in the current economic environment, the price increases over the past two years are now being borne by consumers and, to some extent, by our commercial and corporate clients. In Canada, we expect the economy to improve modestly in response to the increase in monetary easing, but to remain below historical average economic rates for the foreseeable future. We expect economic rates in Canada to improve slowly by the middle of next year, allowing for a rapid reduction for Canadian consumers and likely leading to a rebound in the sale of homes and vehicles. Recent U.S. data in recent weeks has resulted in a repricing of the entire economic curve, suggesting much lower economic rates in the foreseeable future than expected a few months ago. This will be a benefit to our revenues in 2025. The largest economies in our Latin American framework are now well into a period of monetary accommodation. Central bank rates in Chile, at 5.75%, and in Peru, at 5.5%, have continued to decline from last year's double-digit levels, and Mexico and Colombia have also recently lowered their economic rates. The Latin region has experienced relative political stability and stronger-than-anticipated growth this year due to proactive political action in this cycle, and should increasingly benefit from the strengthening global economy. We do not expect recessionary conditions in any of our key operating geographies in the foreseeable future. In closing, I would like to provide some additional insights on the recent announcement of our agreement to purchase approximately 14.9% interest in Keycorp, a central regional commercial banking franchise. This investment is consistent with our commitment to reallocating money to develop markets, with a focus on the North American corridor. Our investment in Keycorp represents a low-cost, low-risk approach to deploying money in the U.S. banking market at a time when values are favorable and the regulatory and competitive environment is evolving. The additional primary capital will allow Keycorp to optimize its revenue and be more forward in developing its business, which will also result in more taxes for Scotiabank over time. This capital-efficient transaction is expected to add more than $0.25 to EPS in the first year of activity and approximately 45 basis points to Scotiabank's return on equity. As an investor, we have confidence in our capital plan and greater clarity on future capital requirements. We have evaluated a range of money deployment options, including shared revenues. The investment in Keycorp represents 65% more taxes to EPS and 20 basis points more in terms of tax to EPS. The capital impact of a full transaction will be approximately 50 to 55 basis points. We believe that in the current environment, a 12.5% ratio relative to CET1 represents an appropriate level of capital at which Scotiabank can operate, 100 basis points above the regulatory minimum. Therefore, investors need not worry about Scotiabank holding excess money if we continue to execute our North American corridor strategy. Our investment in Keycorp is financially attractive to our partners in the long term and adds strategic value in terms of optionality for the development of U.S. platforms in the long term.
Speaker Change: Since the beginning of the year, risk-weighted assets deployed by the region are lower by $6.7 billion.
Speaker Change: Turning to the current economic environment, interest rate increases over the past two years are now weighing on consumers and to a lesser extent on our commercial and corporate clients.
Speaker Change: In Canada, we expect the economy to improve modestly and respond to further monetary easing but remain below average historical growth rates for the foreseeable future.
Speaker Change: We do expect policy rates in Canada to trend gradually lower into mid next year, providing welcome early release to the Canadian consumer and driving a likely rebound in home and vehicle sale activity.
Speaker Change: U.S. data in recent weeks has resulted in a repricing of the entire yield curve, suggesting much lower policy rates in the near term than we expected a few months ago.
Speaker Change: This will be a benefit to our earnings in 2025.
Speaker Change: The larger economies in our Latin American footprint are all now well into a period of monetary accommodation.
Speaker Change: Central Bank policy rates in Chile at 5.75% and peru at 5.5% have continued lower from double-digit levels last year, and Mexico and Colombia have more recently lowered policy rates as well.
Speaker Change: The Latin region has experienced relative political stability and stronger growth and anticipated this year because the proactive policy action is cycle and should benefit further going forward from a strengthening global economy.
Speaker Change: We are not anticipating in recessionary conditions in any of our key operating geographies in the foreseeable future.
Speaker Change: In closing, I would like to provide a few additional thoughts on the recent announcement of our agreement to purchase an approximately 14.9% interesting key corp, a leading U.S. regional commercial focus banking franchise.
Speaker Change: This investment is consistent with our commitment to reallocate capital from developing to develop markets with a focus on the North American corridor.
Speaker Change: Our investment in T-Corp represents a low cost, low risk approach to deploying capital in the U.S. banking market at a time when valuations are favorable, and is the regulatory and competitive environment of all.
Speaker Change: The additional primary capital will allow T-Corp to optimize their balance sheet and be more front-footed and growing their business, which will also result at increased income to Scotia bank over time.
Speaker Change: This capital efficient transaction is expected to add greater than 25 cents to EPS in the first full year ownership and approximately 45 basis points to Scottish banks return on equity.
Speaker Change: Given both confidence in our capital plan and greater clarity on future capital requirements, we evaluated a range of capital deployment options, including ShareBuybacks.
Speaker Change: The investment in tea is 65% more EPS accreted than the buyback alternative and 20 basis points better from an hourly perspective.
Speaker Change: The capital impact of the full transaction will be approximately 50 to 55 basis clients.
Speaker Change: We believe that in the current environment, a 12.5% steady-one ratio represents an appropriate capital level at which to run the bank. 100 basis points above the regulatory minimum.
Cheryl: Therefore, Cheryl is need not be concerned about Scotia Bank holding excess capital as we continue to execute on our North American corridor strategy.
Speaker Change: Our investment in T is financially attracted to our shareholders in the near-term and as strategic value in terms of optionality on future US platform growth in the long-term.
Speaker Change: It is also important to note that our organic growth plans within our well-established U.S. global banking and markets business remain unchanged. We continue to enhance our U.S. capital markets product offering in highly rated market segments. Our recent mortgage capital market team hire within our structured credit business is the most recent example. In summary, I am pleased with the bank's results this quarter in terms of delivering positive earnings progression while at the same time building balance sheet strength despite a challenging economic backdrop. We are making measurable progress against our strategic plan and our performance in 2024 sets a strong foundation for the resumption of organic earnings growth in 2025 in line with our Investor Day commitments. 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. All my comments that follow will be on an adjusted basis which exclude the following items. The loss mostly relating to goodwill associated with the sale of Credit Scotia, a consumer finance business in Peru which the bank expects to receive regulatory approval in fiscal 2025. A legal provision related to certain value added tax assessed amounts relating to certain client transactions that occurred prior to the bank acquiring the Peruvian subsidiary. And the usual acquisition related impassable amortization amounts. Moving to slide six for a review of the third quarter results. The bank reported quarterly earnings of $2.2 billion and diluted earnings per share of $1.63. Return on equity was 11.3% and return on tangible common equity was 13.7%. Revenues were up 5% year-over-year as net interest income grew 6% driven by net interest margin expansion while non-interest income grew 4% year-over-year. The all-bank net interest margin expanded four basis points year-over-year. Margin was down three basis points quarter-over-quarter driven mainly by lower margins in international banking and Canadian banking as well as higher levels of low-yielding liquid assets. We expect the margin to modestly improve in Q4 and expand beyond Q4 as the benefits of the rate cuts are fully realized. Non-interest income was $3.6 billion up 4% year-over-year primarily from higher wealth management revenues, underwriting and advisory fees and the positive impact of foreign exchange. The provision for credit losses was approximately $1.1 billion and the PCL ratio was 55 basis points up one basis point quarter-over-quarter. Expenses grew 5% year-over-year driven by higher personal costs from inflationary adjustments and amortization and other technology-related costs that support business growth. Quarter-over-quarter, expenses were up a modest 1% driven by amortization and other technology-related costs and professional fees. The productivity ratio was 56% this quarter in line with the prior quarter and year-to-date operating leverage was a positive 0.9%.
Speaker Change: It is also important to note that our organic growth plans within our well established U.S. global banking and markets business remain unchanged.
Speaker Change: We continue to enhance our U.S. capital markets product offering in highly rated market segments.
Speaker Change: Our recent mortgage capital market team hire within our structured credit business is the most recent example.
Speaker Change: In summary, I am pleased with the bank's results this quarter in terms of delivering positive earnings progression, while the same time building balance sheet strength despite a challenging economic backdrop.
Speaker Change: We are making measurable progress against our strategic plan and our performance in 2024 sets a strong foundation for the
Speaker Change: With that, I will turn it over to Raj for a more detailed financial review of the poor.
Raj: Thank you, Scott and good morning, everyone.
Raj: All my comments that follow will be on an adjusted basis which exclude the following items.
Raj: The loss, mostly relating to goodwill associated with the sale of credits, co-share, a consumer finance business in Peru, which the bank expects to receive regularly approval in fiscal 2025.
Raj: A legal provision related to certain value added tax assessed amounts relating to certain fine transactions.
Raj: that I could prior to the bank equating the proven subsidiary.
Raj: and the usual acquisition related infancipal democratization amounts.
Speaker Change: Moving to slide thanks for a review of the third quarter results.
Speaker Change: The bank supported quarterly earnings of $2.2 billion and the illiterate earnings per share of $1.63
Speaker Change: The turn on equity was 11.3% and the turn on tangible common equity was 13.7%.
Speaker Change: Revenue is over 5% year over year as an electricity income grew 6% driven by net interest margin expansion, while non-intros income grew 4% year over year.
Speaker Change: The All-Banks net interest margin expanded for basis points year to year.
Speaker Change: Martin was down 3 basis points quarter quarter driven mainly by low margins in international banking and Canadian banking as well as higher levels of low yielding liquid assets.
Speaker Change: We expect the margin to modestly improve in Q4 and expand beyond Q4 as the benefits of the rate cuts are fully realized.
Speaker Change: Non-intrus income was 3.6 billion dollars, up 4% year over year, primarily from higher wealth management revenues, underwriting and advisory fees and the positive impact of our next change.
Speaker Change: The provision for current losses was approximately $1.1 billion and the PCL ratio was 55 basis points up 1 basis point quarter quarter.
Speaker Change: The expenses grew 5% year a year, driven by high personal costs, from inflationary adjustments, and amortization, and other technology related costs that support business growth.
Speaker Change: Water over quarter, expense over up a modest 1% driven by amortization and other technology related costs and professional fees.
Speaker Change: The productivity ratio is 56% this quarter in line with a prior quarter and year-to-date operating leverage was a positive 0.9%.
Speaker Change: Moving to slide 7, which shows the evolution of the C81 capital ratio and risk-weighted assets during the quarter. The bank's C81 ratio was 13.3%, an increase of 10 basis points quarter over quarter and 60 basis points year over year. Total risk-weighted assets was $454 billion, up from $450 billion in the prior quarter, driven by growth in balance sheet assets and undrawn commitments, but quality changes that were partly offset by lower market risk. Earnings contributed 16 basis points, the DRIP contributed 11 basis points, and the revaluation of securities through OCI contributed a further 7 basis points. This was offset partly by higher risk-weighted assets consuming 11 basis points and effects and other impacts of another 11 basis points. As a reminder, the Q3 dividend that the bank announced this morning will be the last dividend eligible for the DRIP discount. Expenses increased 5% year over year, primarily due to higher technology, professional and personal costs. Quarter over quarter expenses grew a modest 1%, primarily due to the impact of two more days in the quarter, higher professional fees that were offset by good expense management controls.
Speaker Change: Moving to slide 7, which shows the evolution of the C-1 capital ratio and was created as a student in the quarter.
Speaker Change: The bank seat you want to ratio was 13.3% and increase of 10 basis points quarter to a quarter and 60 basis points year over Europe.
Speaker Change: Total Resquited Assets was $454 billion, up from $450 billion from the Prime Quarter, driven by growth and speed-office and on-road commitments.
Speaker Change: Book quality changes that will partly offset by lower market risk.
Speaker Change: Earnings contributed 16 basis points.
Speaker Change: The drip contributed 11 basis points and the revaluation of security through OCI contributed for the 7 basis points.
Speaker Change: This was offset partly by higher-resquainted assets consuming 11 basis points and effects in other impacts of another 11 basis points.
Speaker Change: As a reminder, the Q3 dividends that the bank announced this morning will be the last dividend eligible for the Drupal Stomp.
Speaker Change: Turning now to the business find was off beginning on slide 8.
Speaker Change: Canadian banking deported earnings of 1.1 billion and increase of 6% here over year as higher revenues were partly offset by higher loan loss provisions and expenses.
Speaker Change: The business generated another quarter of positive operating leverage resulting in year-to-date positive operating leverage of 3.1%.
Speaker Change: Average loans and acceptances were up 1% quarter of a quarter and roughly in line with a prior.
Speaker Change: Business loans grew 7% year over year for the car balances grew 16% while residential mortgage balances
Speaker Change: Decline 2%
Speaker Change: We continue to see the positive growth as year-over year deposits grew 8% including an increase in personal deposits of 5%.
Speaker Change: The loan to deposit ratio improved to 120% compared to 129% in Q32023
Speaker Change: Net interest incoming increased 11% year over year, primarily from solid deposit growth, margin expansion, and the benefit from conversion of bankours, exceptances due to the cessation of seed ore.
Speaker Change: [inaudible]
Speaker Change: Margin was down 4 basis points quarter to a quarter, as Asset Margin expansion was moved and offset by lower deposit margins, reflecting the impact of rate cuts and makes shifts.
Speaker Change: Non-interesting come was down 1% year earlier. I'm only due to banked lower banking fees, impacted by the bank as acceptance is converting to loans.
Speaker Change: Poshley of said by higher deposit and mutual fund fees and insurance revenue.
Speaker Change: The PCL Ratio with 39 basis points, down one basis point for the rule of law firm.
Speaker Change: Expenses increased 5% year over your climate-related Ohio technology, professional and thoughtful costs.
Speaker Change: Quarter-all-quarter expenses grew a modest 1 percent. I'm only due to the impact of two more days in the quarter, higher professional fees that were offset by good expense management controls.
Speaker Change: Turning now to global wealth management on slide 9. Earnings of $415 million were up 11% year-over-year, driven by higher brokerage revenues and net interest income in Canada and higher mutual fund fees across the Canadian and international wealth businesses, partly offset by higher expenses, largely volume-related. International wealth management earnings of $68 million were up 11% year-over-year, driven by higher mutual fund fees, primarily from Mexico, and strong deposit and loan growth across Latin America. Reflecting market conditions and management's continued focus on balance sheet optimization. Net interest income increased 16% year-over-year, primarily due to higher corporate lending and deposit margins and higher loan fees. Non-interest income, however, was down 4% year-over-year due to lower trading-related revenue, including the impact from dividend-received deduction, partly offset by higher FX. Expenses were up 5% year-over-year, due mainly to higher personal costs and technology costs to support business growth, as well as the impact of foreign exchange. Quarter-over-quarter expenses were up a modest 2%, largely driven by higher personal costs. The U.S. business generated strong earnings of $244 million, up 12% year-over-year, driven by higher corporate and investment banking revenue, equities revenues and lower funding costs, partly offset by higher expenses.
Speaker Change: Turning now to global wealth management on slide 9.
Speaker Change: Oning's of $415 million, what up to 11% year over year, driven by high brokerage revenues and net interest income in Canada and high mutual fund fees across the Canadian and international bug businesses.
Speaker Change: Parkly Offset by Higher Expenses, largely volume-related.
Speaker Change: Watered over quarter earnings were up 7% primarily due to high brokerage revenues and mutual fund fees and net interest income partly offset by high expenses.
Speaker Change: Revenue is a $1.5 billion, who are up 10% year over year, driven by high brokerage revenues and and it is a sitcom as well as high mutual fund fees driven by AUM growth.
Speaker Change: Expenses were up 9% year over year.
Speaker Change: Due to higher volume-related expenses, sales force expansion and high technology cost, this support business growth.
Speaker Change: The spot AUM increased 10% year over year to $364 billion. As market appreciation was partly offset by net redemption.
Speaker Change: AOA, group 10% of the same period to 694 billion from market appreciation and higher net sales.
Speaker Change: International Health Management Learnings of 68 million who are up 11% year over year, driven by high immune to fund fees primarily from Mexico and strong deposit and loan growth across Latin America.
Speaker Change: Donning to slide 10.
Speaker Change: Global Banking & Markets in RID earnings are $418 million, down 4% year of year, significantly impacted by the denial of the dividend-received deduction.
Speaker Change: Capital Markets revenue was down 8% year over year, primarily from lower fixed income revenues that were partly offset by higher effects.
Speaker Change: Watered over quarter, capital markets revenue was down 5% from low fixed income revenues partly offset by higher equities and for next change revenues.
Speaker Change: Business Banking revenues grew 8% year over year and 9% quarter of quarter
Speaker Change: Due to high COVID and investment banking, including higher underwriting and advisory fees.
Speaker Change: Lones and acceptances were down 5% quarter of quarter to $109 billion. Reflecting market conditions and management continued focus on balance sheet optimization.
Speaker Change: 9% income increased 16% year over year, primarily due to higher corporate lending and deposit margins
Speaker Change: and Hyatt Lowlepees.
Speaker Change: Non-enters income however was down 4% year over year due to lower trading related revenue, including the impact from dividend-received deduction, popular offset by higher fee and commission revenues.
Speaker Change: expenses were up 5% year over year, due mainly to high personal costs and technology costs. The support business growth is one of the same factor for an exchange.
Speaker Change: Waterloo court expenses were up to modest 2% last week driven by higher personal costs.
Speaker Change: The U.S. business generated strong earnings of 244 million dollars, up 12% year over year, driven by higher corporate and investment banking revenue, equity revenues and lower funding costs, partly offset by higher expenses.
Speaker Change: GBM Latin America, which is reported as part of international banking, reported earnings of $285 million, down 9% compared to the prior year and down 2% compared to the prior quarter. 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 $674 million. That was up 6% year-over-year. Revenue was up 6% year-over-year, as net interest income was up 7%, mainly in Chile, Mexico, and Peru. Net interest margin expanded 33 basis points year-over-year. NIM was down 5 basis points quarter-over-quarter, mainly due to lower inflation benefits in Chile and the impact of rate cuts that reduced asset margins in excess of lower cost of funds. The loan-to-deposit ratio improved to 126% from 135% in the prior year. The provision for credit losses was $589 million, translating to 139 basis points, up only 1 basis point quarter-over-quarter. The annual operating leverage was a very strong 4.6%. Returning to slide 12. The other segment reported an adjusted net loss attributable to equity holders of $465 million, compared to a loss of $421 million the previous year. Net interest income was in line with last year, and is expected to improve in the future, benefiting from price cuts. Non-interest income decreased, mainly due to higher non-domestic expenses. I will now pass it over to Phil to discuss risks. Thank you, Raj. Good evening, everyone. All Bank PCLs were 55 basis points, slightly higher than last year, and are expected to remain at this level for the year 2024. Looking towards the end of 2024, we continue to maintain our prudent approach and respond to the evolving macroeconomic plan, but we are encouraged by the following reasons. Delinquency rates in Canada have stabilized, despite high spending on employment and household expenses. Non-interest income is in line with All Bank PCLs, despite the mixed macroeconomic environment.
Speaker Change: GBM Latin America, which is reported as part of international banking, reported earnings of 285 million dollars, down 9% compared to the prior and down 2% compared to the prior quarter.
Speaker Change: Moving to slide 11 for a review of international banking.
Speaker Change: My comment said follow, I don't know just yet, and constant dollar basis.
Speaker Change: The segment delivered earnings of $674 million that was up 6% year over year.
Speaker Change: Revenue was up 6% here over year as net interest income was up 7% mainly in Chile, Mexico and Peru
Speaker Change: Lenin Truss-Majil expanded 33 basis points year over year.
Speaker Change: Nambo's down 5 basis points quarter of a quarter mainly due to lower inflation benefits in Chile and the impact of rate cuts that reduced asset margins in excess of lower cost of funds.
Speaker Change: Year over year, loads were down to percent, formerly in Chile and Peru.
Speaker Change: Total Business Rones declined 7% partly offset by 5% throughout in residential mortgages.
Speaker Change: The deposits grew 4% year over year, primarily in Mexico, Chile and Colombia.
Speaker Change: 9% of the possible screw 5% while personal deposits screw 1% here over here mostly term
Speaker Change: The local deposit ratio improved to 126% from 135% in the prior.
Speaker Change: The provision for credit losses was $500 and $89 million translating to $139 basis points, up only one basis point quarter over quarter.
Speaker Change: The expenses were up 4% year over year driven mainly by highest salaries and employee benefits and technology costs
Speaker Change: Quater World Quarter expenses were flat as the business continues to see the benefits of re-structuring, crude and expense management and the focus on regional levations that offset the challenges of operating in a high inflationary environment.
Speaker Change: Here today, operating leverage was a very strong positive 4.6%.
Speaker Change: Turning to Slice there, 12
Speaker Change: The other segment reported an adjusted net loss attribute to build equity holders of $465 million, compared to a loss of $421 million in the prior quarter.
Speaker Change: Net Inter-Sinkham was in line with last quarter and is expected to improve going forward benefiting from great cuts.
Speaker Change: The Norman Trust revenue declined, mainly due to lower, lower into revenue and higher expenses.
Speaker Change: I'll now turn the call over to Phil to discuss for us.
Phil: Thank you, Raj. Good morning, everyone. All bank PCLs were 55 basis points, slightly above last quarter, and are expected to remain around this level for Q4.
Speaker Change: As we look to finish 2024, we continue to maintain our prudent approach and respond to the responding to the evolving macroeconomic landscape, but we are encouraged by the following friends.
Speaker Change: Dable Delinquency rates in Canada, despite elevated unemployment and household expenses. Flat net write-offs in guilds, quarter-reporter in international banking, despite a mixed macroeconomic environment.
Speaker Change: It is a healthier balance plan for our clients who buy, with spending by neighborhood and year by year, growing faster than the laws. The result of the all-bank PCL of about 1.1 billion euros is above 45 million dollars quarter by quarter. We continue to maintain sufficient alliances for credit losses. Over the past 4 quarters, we have increased the total alliance by about 800 million dollars, which corresponded to 500 million for performance laws, bringing our ACL display ratio to 89 basis points above 11 basis points from last year. The Canadian bank PCL of about 435 million euros is above 7 million dollars, but above 1 basis point quarter by quarter, as increased precautions for performance laws were partially offset by lower precautions. The Canadian bank PCL of about 435 million euros is above 7 million dollars, with lower precautions offset by a total alliance of 84 million dollars. Canadian bank clients continue to show their resilience and manage their budgets prudently, as discretionary spending has increased by about 20% of total spending over the past 6 quarters. The repair of experienced taxes will apply. Product performance remains strong at this time. The number of experienced taxes in our experienced tax portfolio continues to improve sequentially and represents less than 1% of our total tax balance. The bank has put in place laws to cover experienced expenses on these accounts. The 90-day delinquency in our experienced tax portfolio has increased by about 2 basis points quarter by quarter. Our experienced tax portfolio has maintained a 90-day delinquency of 15 basis points, and the performance of our experienced tax portfolio gives us confidence in the credit quality of our books. We are comfortable with the number of experienced taxes in our experienced tax portfolio. Back to the international bank. The international bank's experienced taxes were 589 million, which corresponds to a ratio of 139 basis points. The international bank's experienced taxes were stable and in line with expectations. We are encouraged by the performance of our experienced tax portfolio, as delinquency has returned to a basis point quarter by quarter for the first time in two years. Our clients remain resilient regarding the macroeconomic environment of the region. We remain confident in the resilience of our clients, as central banks continue to manage inflation through our basis point. The experienced tax portfolio continues to perform as expected, and we remain at the end of our vision for the year 2024. With that, I turn it over to John for the Q&A. Very well. Thank you, Phil. Operator, please ask your questions. Thank you. The first question comes from Ibrahim Poonawalla of Bank of America. Please go ahead, your line is open. Hello. I think maybe, Raj, for you, regarding the net tax benefit, I heard your earlier comments. If we get a series of interest rate hikes from the Bank of Canada, which is expected at this time, give us a sense of the trajectory, where you see the Canadian name playing over the next four or six quarters, and the consolidated name, and I assume the corporate segment has to play a role somewhere in there, with the financing costs of the tax.
Speaker Change: Healthier Balanchee for our borrowing clients with both quarter of a quarter and year of a year deposit growing faster than loans.
Speaker Change: The resulting all bank PCLs approximately 1.1 billion was up, $45 million for the report.
Speaker Change: We continue to maintain sufficient allowances for credit losses.
Speaker Change: Over the last four quarters, we have increased total allowance is by approximately $800 million, of which 500 million was for performing loans, bringing our ACL coverage ratio to 89 basis points up 11 basis points from last year.
Speaker Change: Canadian banking PCLs of 435 million were up the modest 7 million, but down one basis point quarter of a quarter, at the increased provisions for performing loans were partially offset by lower impaired provisions.
Speaker Change: Canadian retail PCLs were flat quarter recorder with decreased impaired provisions offset by an $84 million performing built.
Speaker Change: Canadian retail clients continue to show resilience and are managing their budgets prudently as discretionary spending hovered around 20% of total spending for the last six quarters.
Speaker Change: Accepted rate relief will serve as a tail width. Product performance remains strong in the meantime.
Speaker Change: The number of tail risk clients are mortgage portfolio continued to improve sequentially and represents less than 1% of our total retail loan balances. The bank has set aside allowances to cover expected losses on these accounts.
Speaker Change: 90 day delinquency in our variable rate mortgage portfolio has increased by a modest two basis points, quarter of a quarter.
Speaker Change: Our fixed rate mortgage portfolio has maintained a stable 90 day delay and can generate a 15 basis points and a variable rate mortgage performance gives us confidence in our books credit quality.
Speaker Change: We are comfortable with the amount of allowances for the six-rate mortgage portfolio.
Speaker Change: Turning to International Banking, International Bank from PCLs for 589 million translating to a PCL ratio of 139 basis points.
Speaker Change: Total retail PCLs were stable and in line with expectations.
Speaker Change: We encourage by the performance in our retail portfolio is the Lincoln Sea Remain flat quarter quarter for the first time in two years.
Speaker Change: Our clients remain resilient to give them the macroeconomic environments in the region.
Speaker Change: We remain confident in our clients' resilience, a central banks continue managing inflation across our footprint.
Speaker Change: The overall portfolio continues to perform as expected and we continue to remain within the top end of our outlook for the full year on E24. With that, we'll pass it back to John for Q&A.
John McCartney: Great, thank you, Philip, operator to please queue up questions.
Speaker Change: Thank you, the first question is from Ibrahim Punawala from Bank of America. Please go ahead. Your line is open.
Ibrahim Punawala: Good morning.
Speaker Change: I guess maybe Raj for you just around the net into Smaging Outlook.
Ibrahim Punawala: So, I heard you comment earlier.
Speaker Change: If we get a series of rate cuts from the Bank of Canada, which is expected at this point.
Speaker Change: I'm assuming the corporate segment has to play a role somewhere in there which holds his funding cost coming down.
Speaker Change: Thanks. Yeah, good morning, Ebrahim. Happy to do that. A couple of points before I start on you, where this would go. So, we disclose in our analyst saying every 25 basis points is about a hundred million dollars of benefit in the NII over a full fiscal year. To be clear, it doesn't go as, you know, equal each month, you know, a little bit back ended because of our assets and liabilities reprise. The second thing is, you know, we've seen two rate cuts in Canada. High in the full quarter benefit of it shows through our wholesale funding benefits that come from cost of funding's reduction. So over there, as you know, most of these are not 90 day reprising schedule. So we'll see some benefits in Q4 in the other segment, but we'll see the full quarter benefits starting from fiscal, you know, first quarter and fiscal 2025 and through and likewise for every rate cut that will happen both in Canada and the United States. Our current focus is we should have two more rate cuts in Canada before the end of the calendar year. And likely, you know, starting in the United States in September , two rate cuts for the remainder of the calendar year and four more rate cuts for 2025 and so on in both countries. So all of these benefits should show up in the other segment as you point out. Even this quarter, if you look at the other segment, Abraham, the NII number, the loss is exactly the same as the last quarter. So it's plateaued in our opinion and the benefits should start showing up starting next quarter. The Canadian banks division them will continue to show some level of decline because deposit margins will go down in a declining rate environment as you know. But it will pick up as the asset reprising starts happening in line with, you know, the fixed rate mob is as the schedulers, you know, 2025 and 2026. But likely towards the latter part of 2025. So that's the dynamic you will see in the business line. The international banking name I suspect would be around the range that we operated this quarter. And as you know, it moves around a little bit, you know, multiple factors, different countries, inflation, many things that impact IP them. But I think it'll be around the level that you saw this quarter. So the summary would be we should start seeing NII and NIM benefits modestly in Q4 and then see it accelerate through 2025. Got it. And I guess maybe a separate question, maybe if you use Scott, the investment you made, I think caught. Folks by surprise, just I think to me, the fact that Scotia was back to playing offense. And this was wondering if you could give us an update like the two core pieces in terms of the strategic sort of priorities one. Give us a mark to market on where we are and improving the deposit franchise within Canada. Like early signs of success, like outside of rates coming down, what's actually happening from an execution standpoint. And then with Travis coming on in the capital markets business, is there kind of a heightened focus in terms of growing the US dollar business going forward. Thanks. Sure. So there's there's three parts of that. So I'll start with the key investment. I'll give it to Eris on the deposit franchise and then Travis, maybe you can talk about the fee business in the US. So on the key investment, we've gotten increased confidence over the last quarter in terms of the capital site, the capital peak in terms of what we need to run from the steady one ratio with the basil deferrals and frankly the strength of our balance sheet. And so we evaluated a whole bunch of redeployment options, the capital and the investment in key was the most financially attractive than best for our shareholders. And there's a page in the investor day, which highlights the differences relative to a sherry purchase. So that's first and foremost. I think the second aspect of that, however, is it's a low cost, low risk way to get into the US market. In a market that's very uncertain right now both from a political regulatory and economic perspective. And so the ownership interest in key, which you know has a five year stand still allows us to dip our toe in the water, learn about the market and actually get the benefits of NII from developed market earnings over time, which has been part of the strategy in the North American corridor. We are going to continue to focus and Travis will come to this on growing our US GBM business, particularly through the fee side of that business. So with that maybe Travis, you can start on I'll look for the US business then we'll come to Arizona deposits. Sure, I think this is Travis. Thanks for the question. You know, it's got mentioned we see great opportunities in the US. Obviously, one of the largest markets we see increased connectivity between our Canadian and US clients where we can capitalize on some of the fee opportunities that they come across. And you saw a week or so ago, we did announce an investment in a new team there. So as we start to build our expertise and our products, I think you'll see, you know, continued growth in the US above some of other markets within GBM.
Raj: Yeah, good morning, Abraham, happy to do that. A couple of points before I start on you, where this would go. So we disclose in our analysts that saying every 25 basis points is about $100 million of benefit in the NII.
Raj: Over a full fiscal year, to be clear it doesn't go as, you know, equally each month, you know, a little bit back ended because of our assets and liabilities reprised.
Raj: The second thing is, you know, we've seen two red cuts in Canada, and the full quarter benefit of it shows lower wholesale funding benefits that come from cost of funding's reductions over there.
Raj: As you know, most of these are on a 90-day reprisings schedule, so we'll see some benefits in Q4 in the other segment, but we'll see the full quarter benefits starting from fiscal, you know first quarter in fiscal 2025 and through and likewise for every red cut that will happen both in Canada and the United States.
Raj: Our current focus is we should have to moderate cuts in Canada before the end of the calendar year and likely starting in the United States in September to rate cuts for the remainder of the calendar year and for more rate cuts for 20-25 and so on in both countries. So all of these benefits should show up in the other segment as you point out.
Speaker Change: Even this quote, if you look at the other segment A-frame, the N-I-I number, the loss, is exactly the same as the last quarter. So it's plateaued in our opinion and the benefit should start showing up starting next quarter.
Speaker Change: The Canadian banks division them will continue to show some level of decline because the offset margins will go down in a declining rate and bymenders you know.
Speaker Change: But I will take up as the asset reprisage starts happening in line with, you know, the fixed rate mortgages, the schedulers, you know, 2025 and 2026
Speaker Change: but like it was a latter part of 2025.
Speaker Change: So, that's the dynamic you will see in the business line. The international banking name my suspect will be around the range that we operated this forward. And as you know, it moves around a little bit. You know, multiple factors, different countries, inflation, many things that impact I've been in, but I think it'll be around the level that you saw this forward.
Speaker Change: So, the summary would be we should start seeing NI and NIM benefits, modestly it Q4 and then see it will rate to 20.25.
Speaker Change: Godhead. And I guess maybe a separate question, maybe if you use God, the investment you made I think God.
Speaker Change: I think to me, the fact that Scotia was back to playing off-fence.
Speaker Change: and this was wondering if you could give us an update like the two core pieces in terms of the strategic sort of priorities one.
Speaker Change: Give us a mark to mark it on where we are in improving the deposit franchise within Canada. Like early signs of success, like outside of great coming down, what's actually happening from an execution standpoint. And then with Travis coming on in the capital markets business.
Speaker Change: is there kind of a heightened focus in terms of growing the U.S. dollar business going forward. Thanks.
Speaker Change: Sure, so there's three parts so that's all start with the key investment. I'll give it to Eris on the deposit franchise and then Travis, maybe you can talk about the fee business.
Eris: and the U.S. on the key investment.
Speaker Change: We've gotten increased confidence over the last quarter in terms of the capital site, you know, the capital peak in terms of what we need to run from the study one ratio with the basal deferrals and frankly the strength of our balance sheet. And so we evaluated a whole bunch of redeployment options in capital.
Speaker Change: and the investment in key was the most financially attractive and the best for our shareholders and there's a page in the investor day which highlights the differences relative to a shared purchase so that's first and foremost I think the second aspect of that however is it's a low cost, low risk way to get into the US market.
Speaker Change: in a market that's very uncertain right now, both from a political or regulatory and economic perspective.
Speaker Change: The ownership and trust and key which you know have a five-year stand still allows us to.
Speaker Change: You know, dip our toe in the water, learn about the market and actually get the benefits of NII from developed market earnings over time, which has been part of the strategy of the North American corridor. We are going to continue to focus and travel as we'll come to this on growing our USGBM business.
Speaker Change: particularly through the feed side that doesn't so with that maybe Travis you can start on. I'll look for the US business, then we'll come to Arizona deposits.
Travis: Sure I had that, this draft, thanks for the question, you know it's got mature, we see great opportunities in the US, obviously it's one of the largest markets we see
Travis: Increased in a kick and activity between her Canadian and US clients where we can capitalize on some of the opportunities that they come across.
Travis: and then you saw a week or so ago, we did announce an investment in a new team there. So as we start to build our expertise in our products, I think you'll see, you know, continue growth in the US above some of other markets within GBM.
Travis: Aris, do you want to talk about the expense? Of course. We have evolved, and it's a bit like this, last year, we added more than 28 billion euros in expenses for the Canadian company, and you mainly see it in the housing expense ratio which decreased, I think, from 130 to 120, or 8 or 9 points. And it's something I mentioned at Investor Day, about building a more balanced company, and we are starting to see that now, quarter after quarter. I think what I particularly want to highlight is that in the third quarter, we experienced day-to-day banking reforms, and it's a new development, but it's the display of all the work we have done, whether it's the allocation of our housing, the origin of our housing, and getting the most housing, and driving investment strategies first and day-to-day banking strategies when we return. This is what we see in the commercial business, the commercial business, the trade. And so, you start to see day-to-day banking reforms, despite the difficulty of the market and the consumer, we see these reforms developing. We added, I think, 60,000 day-to-day banking clients in the third quarter. So, the strategy is in motion, and it's a continuous focus for us and all our channels, to build this day-to-day banking deposit muscle, and then send it back. I think today, 56% of our day-to-day banking clients have a day-to-day banking account, and conversely, 46% of our deposit holders have a day-to-day banking account. So, this continues to be the focus, and it will continue to be the focus for next year. And we will build more product muscles, we will build more incentives in the branch network. We are also focusing, as I mentioned, on the day-to-day deposit, to get more mutual sales from the branch network. And it also shows early signs of success. Mutual sales coming from our branches have increased by 44% in terms of growth, year over year. Again, we continue to push on this balanced business model, and we see successes, and we will continue to go there. Thank you very much. Thank you. The next question comes from Gabriel Deschênes of National Bank Financial. Please go ahead, the line is open. Good morning. On the international front, I believe you were saying that the margin will be at this level for the future. I don't know if you said something similar regarding the tax loss ratio. It's Gav. It's Phil. I hope you are well. It's good to hear from you. In general, we see things in line with this quarter.
Travis: and Eric, do you want to talk about the vlogger?
Speaker Change: We grew and it's kind of looped to this. In the last year we've added more than 28 billion in deposits for the Canadian business and you see it primarily in the loan to deposit ratio is gone down I think from 130 to 120 or 8 or 9 points.
Speaker Change: and this is something I mentioned back at the best of day about building a more balanced business and we start to see that now quarter on quarter. I think what I particularly want to highlight is in the third quarter we actually saw day-to-day banking balances grow and that is a new development but it's a...
Speaker Change: is an offshoot of all the work we've done, whether it's booking our mortgage originating our mortgages and getting the mortgage plus and driving deposit for strategies and day-to-day banking strategies when we land. We see it in the commercial banking business, small business retail.
Speaker Change: And so you're starting to see day-to-day battles, despite the difficulty in the market In the consumer we're seeing these battles as grow we added I think 60,000 net
Speaker Change: Day-to-day banking clients in the third quarter, so the strategy is working and it's a continuous focus of ours and all our channels to build this deposit.
Speaker Change: Daily Day Banking Muscle and then lend on the back of it. I think today...
Speaker Change: 56% of our mortgage customers have a day-to-day banking account.
Speaker Change: and Conversely.
Speaker Change: 46% of our term deposit holders have a day-to-day banking account. So this continues to be the focus, and we'll continue to be the focus going into next year. And we'll build more product muscle, we'll build more...
Speaker Change: Incentives in the branch network, we're also, of course, focusing as I mentioned, also during
Speaker Change: Investor Day, to get more mutual funcels out of our branch network, and that also showing early signs of success the mutual funcels coming out of our branches increased on a gross basis 44%.
Speaker Change: Year on here. So again this balanced business model we continue to push and we're seeing success as well continue going to the fallen quarters.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: The next question is from Gabriel Dishain, from National Bike Financial, please go ahead and let me open.
Gabriel Dishain: Good morning on the international segment that thank you were saying that the margin is going to be kind of in and around this level for the foreseeable future. I don't know if you said anything similar about the long loss ratio.
Speaker Change: at Gave It Phil. I hope you're well, good to hear you.
Speaker Change: The we are, as I said earlier, really encouraged by what we're seeing in I.D. Gills flat.
Speaker Change: Uh-huh
Phil: Yeah, that right off flat, so that's an early, early positive sign
Speaker Change: I'll give you guidance into Q4 and then happy to come back next quarter and sort of give more clear guidance into 25 but we're generally seeing things as I look into next quarter in line with in line with this quarter.
Speaker Change: Transcription by ________________________________________________ of our action plan, and we are encouraged by what we see, and I think there is more to come for me next year on Outlook. I wasn't as precise, but thank you for that. Good luck. Thank you. Thank you. The next question comes from Paul Holden, from CIBC. Please go ahead. Your line is open. Thank you. Good evening. A few questions, maybe just to continue with the international. I think if you look at the macro framework, particularly in Chile and Peru, it seems to be improving. And then also, you know, there is a focus on customer primacy. So, what I'm trying to determine is that the demand environment is improving for the laws, but I put that against your strategy. How should we think about the growth of the balance plan for international in 2025? Is there a place where the balance plan will still be flat, or can we expect decent growth next year? Thank you. Thank you for the question. This is Francisco here. A few thoughts. The first is that 2025, in return to our commitment and Invest Today, was part of our transition year. So, you will see throughout 2025, as you have seen in 2024, the combination of a refocus on our penetration effort on existing relationships, particularly on the top of mass, the emergence of AFLAN and AFLAN, while the client selection exercise leads to a re-profiling of our balance plan. So, the net effect has been a reduction in the reduction of ROUA. It is a completely deliberate exercise, completely entitled, focusing on the right clients and the right revenues. This exercise will continue through 2025, where we will be very deliberate about where we place the balance plan, as retail, commercial, and GVM, ensuring that we have a balanced relationship, where borrowing is not the driver or anchor, but rather the ability to transact daily with our clients. So, you will see on the commercial and GVM side a deliberate focus on money management penetration, and on the retail front, it is about a balanced relationship where borrowing, investment, insurance, and ultimately transactional credit drive the relationships. So, you will see 2025 as a balanced year, just because of the net effect of client selection and the rethinking of our balance plan.
Speaker Change: Okay, now if I look further ahead and you know you're you're lost right now is kind of
Speaker Change: in lineish with historical levels, there's been obviously some volatility there over the years, but kind of eyeballing it, looks at a normalized level, if you will.
Speaker Change: Yet, your consumer portfolio, not the mortgage, but the most guaranteed consumers is still, you know, nearly 20% below where it was.
Speaker Change: and the pre-COVID days. Just wanting why maybe, you know, be on next quarter. If you factor in the rate cuts, you factor in the portfolio, the taste of the portfolio mix. Why that loss rate couldn't actually trend lower in the segment or is there some other factor I'm not considering?
Speaker Change: No, I think you listen, you've done a thorough analysis there, you know Francisco and I have been very focused on.
Speaker Change: Developing High Quality.
Speaker Change: in our portfolios, been very focused on primary customer acquisition, we're focusing on sort of our mass and top of mass segments. And so we're encouraged by what we're seeing gave, and I think there's more to come from me next quarter on Outlook.
Speaker Change: Morning, I wasn't that thorough actually but thanks for that Have a good one Thanks
Speaker Change: Thank you, but next question is from Paul Holden from CBC, please go ahead, your line is open
Paul Holden: Thank you, good morning. A couple questions, maybe just continuing with international. I think if you look at the macro.
Paul Holden: Backtrop, particularly in Chile and Peru seems to be improving and then also, you know, there's the focus on the client primacy. So what I'm trying to figure out is as the demand environment improves for loans, but put that against sort of your strategic strategy.
Speaker Change: How should we think about balance sheet growth for international and 20-25s this somewhere where balance sheet will still be flat-ish or can we expect some decent growth next year? Thank you.
Speaker Change: Well thank you for the question.
Speaker Change: This recipe go here. A couple of thoughts. The first is 2025, going back to our commitment and invest today was part of our transitional year.
Speaker Change: So, you're going to see throughout 2025 up to you seeing in 2024 the combination of a refocusing of a targeted penetration effort on existing relationships on particularly top-of-mass emerging affluent and affluent.
Speaker Change: while on exercise of client desolation.
Speaker Change: Drives a reprofiling of our balance sheet. So the net effect has been an overriding reduction of our railway UAE. All the liver, all intended doors.
Speaker Change: focusing on the right clients and the right returns. That exercise will continue throughout 2025, where we're going to be very deliberate on where we place balance sheet.
Speaker Change: Both on retail, commercial and GVM, ensuring that we have a balanced relationship where lending is not the driver or the anchor, but rather the ability to transact on a day-to-day basis with our clients.
Speaker Change: So you will see on the commercial and GBM side a deliberate focus on cash management penetration and on the retail front it will be about a balanced relationship where payroll, investments, insurance and ultimately transactional credit drive the relationships.
Speaker Change: So you will see 2025 as a flourished pound machine year, just because of the net effect of the selection and we focus in our portfolio.
Speaker Change: Thank you for that. Second question, and I guess it's for Phil. If I look at slide 34, it shows Canadian retail PCL trends, and what I see here is sort of, I think it's suggesting that, you know, the impaired are actually starting to improve, while I think you're pretty conservative still on total provision. So, does that suggest that at a point in time when macroeconomic forecasts start to improve, there's potential for performing allowance releases? Would that be a correct assessment? Thank you. Okay, that's it for me. Thank you. Thank you. The next question is from Julie Shea from UBS. Please go ahead. Your line is open. Good morning. Thanks so much for taking the question. For Raj, I appreciate all the colour on the margin dynamics, and just hoping to follow up on the corporate segment more specifically. You had the adjusted bottom line results coming at the negative $4.65 this quarter, which was in line with the guidance that you laid out previously. Just wondering if you could put a finer point on how to think about bottom line results as we move forward and get policy rate cuts. Yeah, thanks, Jill. I think the corporate segment is something that earlier we have talked about. Somewhere around the $475 million range, bottom line is the right number for this year, and it's going to improve significantly next year. It's in line with the NII improvements, you know, driven by the rate cuts that we talked about a little earlier and the wholesale funding benefits that will translate and show up in the corporate funding segment. And, you know, the investment gains have been, you know, fairly small in the last few quarters because we've been holding on to it for NII income, and that's kind of the change in philosophy on how we want to manage the portfolio going forward. But market to market gains are a little hard to predict, particularly in a volatile environment. So near term, I think this will be about the right number, somewhere around the $450 to $475 million range. And we'll talk in November, but directionally it should be significantly better in 2025.
Speaker Change: I'm just upset that the helpful answer, thank you for that.
Speaker Change: Second question, and I guess it's fulfilled. I look at slide 34, show, Canadian retail, PCL trends, and what I see here is sort of, I think it's suggesting that...
Speaker Change: You know, the the impaired are actually starting to improve, well, I think you're pretty conservative still on to hodel
Speaker Change: Provision, so let's adjust that at a point in time when macroeconomic forecasts start to improve there's potential for performing allowance releases with that be a correct assessment. Thank you.
Speaker Change: It's a great question, Paul, and obviously something we're spending a lot of time thinking about right now. I have to say, I...
Speaker Change: The numbers came in as we had expected a quarter of a quarter, but I continued to be impressed by how resilient the Canadian consumer has been through this period, the trade-offs that they continued to make. You know, we see that coming through our BRM.
Speaker Change: Our VRM portfolio for sure. I think I've been signaling auto stress in the auto portfolio for about a year now and I was really encouraged this quarter to see We're finally stable as it relates to net write-offs and in that portfolio. So have we turned to Porter?
Speaker Change: You know, one quarter is not a trend, but I'm really encouraged by what I'm seeing for this quarter. And as even as I look into next quarter, I see stability in these portfolios moving forward.
Speaker Change: Okay, that's it for me, thank you. Thank you, the next question is from Jill Shae from UBS, please go ahead, your line is open.
Speaker Change: i
Jill Shae: Good morning. Thanks so much for taking the question. For Raj, you appreciate all the color on the margin dynamics and just hoping to follow up on the corporate segment more specifically. You had the adjusted bottom line results coming at the negative 465 this quarter, which was in line with the guidance that you played out previously. Just wondering if you could put a finer point on how to think about bottom line results as we move forward and get policy rate cuts.
Raj: Yes, thanks, Chil. I think the corporate segment is something that only we've talked about somewhere around the 475 million dollar range. Bottom line is the right number for this year.
Raj: and his current improved significantly next year. It's in line with the NII improvements, you know, driven by the rate cuts that we talked about a little earlier on the wholesale funding benefit circle. Frowns late and show up in the corporate funding segment. I think just new term next quarter, likely around this range.
Speaker Change: A couple of other comments on the corporate segment. It's got multiple conferences you probably know in the by now. You know there is a lot of surprising movements that happen between the corporate segment and others.
Speaker Change: There's the investment gain sometimes, you know, this Mark the market gains that happen.
Speaker Change: Highly difficult to predict over there and you know the investment gains have been
Speaker Change: You know, very small is the last few quotas because we've been holding on to it for NII in common, that's kind of the change in philosophy on how we want to manage it for, for you're going forward But Mark to mark it gains a little hard to predict particularly in a volatile environment
Speaker Change: So near to my think this would be about the right number somewhere around the 450 to 470 family dollar range and we'll talk in November but directionally to be significantly better in 2025
Speaker Change: Okay. Thank you for that. Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is open. Good morning, Phil. Help me understand what proportion of your business and government loan book would be on your watch list. And I'm curious as to what that is currently versus what it's been in the past. Yes. Thanks, Mario. It's a good question. You know, we continue to focus on high investment grade corporate lending. Business and government, we have very little on the watch list right now. There's maybe – there's a few things that I'm watching mostly on the commercial side of the business, but I'm feeling really good about where we are in the corporate side. Obviously, you know, we're a very disciplined organization from a credit perspective. We are very conservative in terms of how we approach these segments. You know, there's – we're seeing, you know, downgrades, some downgrades higher than upgrades, obviously, during this period. But I've got no major file on my desk that I'm working out right now. You know, we are looking at – there's a couple pockets of softness in Canada on the commercial side. You know, agriculture would be one of them, transportation. And then we're watching, you know, some pockets in some of our Latin American markets as well. But there's nothing that's standing out to me that I'm losing sleep on on the corporate side right now. Would it be fair to say that it would be well below, what, like far less than 5% of your corporate – of your business and government loan book, the watch list that is, like well below 5%? Yes. Okay. Yes. Maybe sort of a follow-up question on the auto side. I, like others, have been waiting for unsecured Canadian consumer credit to accelerate materially at some point and drive every bank's PCLs higher. And it just seems like that's not happening. And I guess what I want to ask you, you said that you've been surprised or encouraged by the resilience of the Canadian consumer. Do you think that rates have dropped sufficiently, or maybe the outlook for rates have – has – the outlook for rates is that they will be lower over the next, say, 12 months? Is that sufficient that we could be looking at a bit of a no-landing scenario for the unsecured Canadian consumer, that we will never see that spike in losses? Is that a possibility now? It's a really interesting question. You know, I have been a proponent of the soft landing as I sort of look through what – you know, how the Canadian economy is performing. And, you know, interestingly enough, you know, when I look at our credit card repayments – I mean, we've got a really small credit card portfolio compared to our peers, but credit card payments have actually been improving. And, you know, as people have been saving money, they've actually been paying off their credit card fairly regularly, which is encouraging. You know, again, I mentioned auto before. That's always been the bellwether. You know, we focused really – our credit card portfolio, we focused on sort of the higher prime, super prime FICOs in terms of our origination strategies there. But, you know, I've got – you know, honestly, Mary, I'm not seeing any major concerns coming through the Canadian unsecured credit card portfolio. I mean, we're looking at our lines of credit really closely as it relates to our people drawing down on those lines to make payments to their mortgages, that sort of thing. But, again, I'm super encouraged by the fact that this quarter, you know, those levels of delinquency or any stress seem to be leveling off.
Speaker Change: So, thank you for that
Mario Manunka: Thank you. The next question is from Mario Manunka from TD Security. Please go ahead. Your line is open. I'm sorry, Phil, help me understand what proportion of your business and government loan book would be on your watch list. And I'm curious as to what that is currently versus what it's been in the past.
Speaker Change: Yeah, thanks very, it's a good question, we continue to focus on high investment grade corporate lending.
Viswanathan: Viswanathan got government, we had very little on the watch list right now. There's maybe, there's a few things that I'm watching mostly on the commercial side of the business, but I'm feeling really good about where we are in the corporate side.
Viswanathan: Obviously, we're a very disciplined organization from a credit perspective. We are very conservative in terms of how we approach these segments.
Viswanathan: You know there's we're seeing you know downgrades, some downgrades higher than not crazy obviously during this period
Viswanathan: But I've got no major file on my desk that I'm working out right now.
Viswanathan: We are looking at there's a couple pockets of softness and canada on the commercial side, you know, agriculture would be one of them transportation and then we're watching, you know, some pockets in some of our Latin America markets as well, but there's nothing that's standing at it to me that I'm losing sleep on on the corporate side right now.
Viswanathan: There'd be fair to say that it would be, well, below what, like less, far less than 5% of your corporate, of your business and government loan book.
Speaker Change: The watch list that is like well below. Maybe sort of a follow-up question on the auto side. I like others that have been waiting for unsecured Canadian consumer credit to accelerate.
Speaker Change: Materially at some point and drive every bank's PCL's hire. And it just seems like that's not happening. And I guess what I want to ask you, you said it, you've been surprised or encouraged by the resilience of the Canadian consumer.
Speaker Change: Do you think that rates have dropped sufficiently, or maybe the outlook for rates has, the outlook for rates that they will be lower over the x-hate 12 months?
Speaker Change: is that sufficient that we could be looking at a bit of a no-landing scenario for the unsickered Canadian consumer that we will never see that spike in losses. Is that a possibility now?
Speaker Change: but it's a really interesting question.
Speaker Change: I have been a proponent of the soft landing as I sort of look through what how the Canadian economy is performing. And you know, interestingly enough, you know, when I look at
Speaker Change: Our credit card repayments. I mean we've got a really small credit card portfolio compared to our peers.
Speaker Change: but credit for our payments.
Speaker Change: have actually been improving and you know that there are as people have been saving money, they've actually been paying off their credit card fairly regularly, which is encouraging.
Speaker Change: I mentioned auto before, that's always been the bell letter, we focused really our credit card portfolio and we focused on
Speaker Change: sort of the higher prime super prime flight those in terms of our origination strategies there.
Speaker Change: Um...
Speaker Change: But I've got, you know, I'll see Mary I'm not seeing any major concerns coming through the Canadian on secure credit card portfolio. I mean, we're looking at her.
Speaker Change: Our lines of credit really closely as it relates to our people drawing down on those lines to make payments to the mortgage, that sort of thing. But again, I'm super encouraged by the fact that this quarter, you know, those levels of delinquency are any stress seem to be leveling off.
Speaker Change: I'd just like to add to something that Phil said. It's Aris here. I think from my experience in unsecured, rates matter, but what matters most is unemployment and how that tracks. And I think when we look at unemployment, that's a real bellwether in how the unsecured book will perform. Obviously, rates matter, but I think you also have to look at the unemployment picture going forward. Thank you for that. Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead. Your line is open. Hi, thank you. Good morning. My question is directed to Francisco. I'm just trying to maybe get a gauge for where you are in your journey with respect to maybe the proper term is deselecting clients. And I just want to maybe think about that for a moment and get your perspective on whether or not there could be some revenue pressures coming up or whether or not you're far enough along the journey that maybe you don't have to do more. I don't know if there's a proportion. You can tell me. I don't think you ever actually told us how much revenues you expected to lose from removing certain books of businesses and so on and so forth. Hopefully, you get the idea of what I'm asking and you can give me some perspective on where revenues can go from here, knowing that maybe there's some pressures around the corner or maybe there isn't. Hopefully, my question makes sense, Francisco. It does. It does. Thank you for it. I think the first thing to position here is the decision-making process for us is about profitability and returns, given the amount of capital we have deployed in the region. To get to where we need to be, it has to be a combination of making the right decisions on the clients we can compete and win for business on a balanced relationship while being significantly more efficient in serving those clients. On the first portion of that, we have done a lot of work in understanding segmentation better, and that is generating our ability to tackle the wallet of those clients, be it in GBM, in commercial, in retail, or in wealth, on a more integral fashion. That is resulting in the performance you're seeing this year, which in spite of the fact that we have been restructuring and repositioning our organization, we have been able to capture a disproportionate amount of business coming our way, therefore having revenues grow at 6% in the quarter, 7% year-on-year. We believe that performance to be sustainable in that range. Now, the most important aspect of the progress is in expenses as well. We have been able to maintain expenses flat quarter-on-quarter, and when you look at year-on-year, 4% growth on an environment that has inflation north of 5% on average creates the opportunity to continue operating leverage while we're repositioning.
Speaker Change: I just like to add to something to fill up.
Speaker Change: He said, it's ours here. I think from my experience in unsecured rates matter, but what matters most is unemployment and how that tracks. And I think when we look at unemployment, that's a real bell weather and how the unsecured book will perform. Obviously rates matter, but I think you also have to look at the unemployment picture going forward.
Speaker Change #100: Thank you for the love.
Speaker Change #100: Thank you. The next question is from Darko Vialich from RBC Capital Markets. Please go ahead.
Darko Vialich: Hi, thank you good morning. My question is directed to Francisco and I'm just trying to maybe
Darko Vialich: Get a gauge for where you are in your journey with respect to maybe the proper term is deselecting clients.
Speaker Change #102: When I look at your revenue growth and I go back to investor day and I think about kind of the way you were depicting it, there was a momentary point in time where there would be stress on your revenues because you were.
Speaker Change #102: Reducing certain portfolios or settling things.
Speaker Change #103: and I just want to maybe think about that for a moment and get your perspective on whether or not there could be some revenue pressures coming up or whether or not
Speaker Change #104: You're far enough along the journey that maybe you don't have to do more so I don't know if there's a proportion You can tell me I don't think you ever actually told us how much revenue you expected to lose
Speaker Change #104: from removing certain books of businesses and so on and so forth.
Speaker Change #104: Hopefully you get the idea of what I'm asking.
Speaker Change #104: and you can give me some perspective on.
Speaker Change #104: and where revenues can go from here knowing that maybe there's some pressures around the corner or maybe there isn't. Hopefully my question makes sense, Francisco.
Francisco: It does. It does. Thank you for it. I think the first thing too.
Francisco: Position here is the decision making process for us is about profitability and returns. Given the amount of capital we have deployed in the region.
Francisco: To get to where we need to be, it has to be a combination of...
Francisco: Making the right decisions on the clients we can compete at when for business, on a balance relationship, while being significantly more efficient in serving those clients.
Francisco: On the first portion of that, we have done a lot of work in understanding segmentation better.
Francisco: And that is generating our ability to tackle the wallet of those clients, be it in GBM, in commercial, in retail, or in wealth, on a more integral fashion.
Francisco: and that is resulting in the performance you're seeing this year, which in spite of the fact that we have been restructuring and repositioning our organization, we have been able to capture at this proportion of the amount of business coming our way. Therefore, having revenues grow at 6% in the quarter, 7% year and year.
Francisco: We believe that performance to be sustainable in our range. Now the most important aspect of the progress is in expenses as well.
Francisco: We have been able to maintain expenses flat quarter and quarter and when you look at year on year 4% growth on an environment that has inflation or at the 5% on average creates the opportunity to continue to operate in the leverage while we're repositioned
Francisco: So, overall, we are on track to where we need to be in terms of repositioning our client franchise for primacy and multiproduct, while on the five-year horizon, targeting the $800 million expense roll rate reduction. We are on track also to position our organization by the end of 2025 to be reorganized, refocused from the client perspective, and embracing a different level of efficiency. And when you look at our productivity, where we started the journey, at Investor Day, we were at 53. This quarter, we are at 50.9. We committed to be at 45. So, we're making powerful progress here across the three important components of our strategy. And so, specifically then, with respect to portfolios or businesses that you'd look to dispose of, would you say that you are kind of complete with that process, or could there be a continuation on that process? And I'm just thinking about potential revenue headwinds from some dispositions that may or may not be coming in the next, say, year. Yeah. Well, again, going back to the principles that are driving our decision-making, primarily returns and profitability, we're not done. We need to make sure that our portfolio across the board contributes to the higher ROE we targeted and sustainable return, revenue growth, and profitability. So, we are making progress in the assets or with the assets that have been underperforming. But as we committed on Investor Day, when we don't see a path to getting to where we need to be, we would redeploy. And that remains our disciplined way forward. That has not changed. Okay. Thank you. Thank you. The next question is from Lamar Persaud from Cormark Securities. Please go ahead. Your line is open. Yeah, thanks. My first question may be for Harris here. One of the things I've been watching closely is this evolution of mortgage growth at Scotia to kind of suggest that we might be moving past some of these profitability actions, let's say, in the domestic retail business. This quarter, you guys mentioned that you've turned the corner on mortgage growth sequentially. So, my question is this. Has Scotia then crossed an inflection point here in domestic P&C? Because it sounds like you're trying to go in that direction. Or should we just look at it as you're happy on the progress, but it could be a bumpy road as we move forward in Q4 and into 2025. So, thoughts there would be helpful. Okay. Thank you for the question. So, let me give you just a brief summary of the mortgage business to date. We added 5 billion spot in the third quarter in terms of volume growth net. That compares to 2 billion in the second quarter. So, you see from 2 to 5 as we start to ramp up a bit. This is obviously the mortgage market is heating up. Rates are coming down. There's activity there. You're right. July was an inflection point where the actual balances of our mortgage business are now starting to grow. And it will continue into the fourth quarter. I think Scott alluded to it earlier. 71% of our new originations are coming from our brokers. But more importantly, 90% of that volume is coming with additional products, day-to-day accounts, etc. But we're not driven by market share. We over-index on mortgages for many years. We're interested in strong relationships with our brokers, strong retention, multi-product and focusing on value over time. So, that is really the story. And so, have we turned the point? Yes. But we're just going to continue what we've been doing up to now and maintain this model that we're trying to build this balance.
Francisco: So overall we are on track to where we need to be in terms of repositioning our client franchise for primacy and multi-product while on the five year horizon targeting the $800 million expense rule rate reduction.
Francisco: We are on track also to position our organization by the end of 2025.
Francisco: to be reorganized.
Francisco: Refocus from the client perspective and embracing a different level of efficiency. And when you look at our productivity, where we started the journey, I'd invest today, we were at 53, this quarter, we are at 50.9, we committed to be at 45. So we're making powerful progress here across the three important components of our strategy.
Speaker Change #106: And so specifically then with respect to portfolios or businesses that you'd look to dispose of.
Speaker Change #107: would you say that you are kind of complete with that process or could there be a continuation on that process and I'm just thinking about potential revenue headwinds.
Speaker Change #108: from some disposition that may or may not be coming in the next.
Speaker Change #108: Take care.
Speaker Change #109: Well, again, going back to the principles that are driving our decision-making, primarily returns on profitability, we're not done.
Speaker Change #109: We need to make sure that our portfolio, across the board, on interviews to the higher ROI we targeted and sustainable if we turn revenue growth on profitability.
Speaker Change #109: So, we are making progress in the assets or with the assets that have been on the performing But as we commit it, on investigate when we don't see a path to getting to where we need to be, we would be deployed and that remains our discipline way forward. That has not changed.
Speaker Change #110: Okay, thank you.
Lamar Perso: Thank you. The next question is from Lamar Perso, from Karl Marx Security. Please go ahead. You'll end his open.
Lamar Perso: Yes, thanks my first question, maybe for Harris here.
Lamar Perso: One of the things I've been watching closely is this evolution of mortgage growth at Scotia. To kind of suggest that we might be moving past some of these profitability actions, let's say I'm the domestic retail business.
Lamar Perso: The story you guys mentioned that, you know, you've turned the corner on mortgage growth sequentially. So my question is, does this have scocia then cross an inflection point here in domestic P&C because it sounds like you're trying to go in that direction or...
Speaker Change #112: Should we just look at it as you're happy on the progress but you know it could be a bumpy road as we move forward and Q4 and into 2025 so thoughts there would be helpful.
Speaker Change #113: Okay, thank you for the question, so let me give you a just a brief summary of the mortgage business to date.
Speaker Change #114: We added 5 billion spot in the third quarter in terms of volume growth net. That compares to 2 billion in the second quarter. So you see from 2 to 5 as we start to ramp up a bit.
Speaker Change #114: This is obviously the mortgage market is heating up, rates are coming down, there's that pivoty there.
Speaker Change #114: You're right, July was an inflection point where the actual balances of our mortgage business are now starting to grow and it will continue into the fourth quarter I think Scott alluded to it earlier
Scott: 71% of our new originations are coming from our brokers but more importantly, 90% of that volume is coming with additional products and day to day accounts etc.
Speaker Change #115: We're focused on our branches on retention and retention rates we're seeing are very strong. We've also added
Speaker Change #115: something new virtual retention specialists. So, this is group of folks who are virtually based and are driving retention across the country.
Speaker Change #115: This whole idea that we've been talking about for a while now about value versus volume you see it actually in the mortgage P&L where revenue growth is...
Speaker Change #115: Double digit, 20% here on here, as we focus on margin, quality customers, etc. So, what is continued yet, we'll continue into the fourth quarter, we'll probably see us slightly.
Speaker Change #115: Higher Growth Race, slightly. But we're not driven by market share. We over in decks on mortgages for many years, we're interested in strong relationships with our brokers.
Speaker Change #115: Strong retention, multi product.
Speaker Change #115: and focusing on value over time. So that is really the story, and so have we turned the point, yes? But we're just going to continue what we've been doing up to now and maintain this model that we're trying to build this balance.
Speaker Change #115: Thank you very much. I hope that answers your question. Yeah, that's helpful. And then what about like earnings growth at your segment level? Like regardless of the mortgage business, just taking it up to the segment level. Should we expect, you know, increased earnings growth as we kind of move forward into 2025? Like I'm just trying to think through that as well. Well, again, earnings is driven by, of course, the volumes and revenue, the cost, the PCL. The PCL combination, as Phil talked about, it will be interesting. And we're watching how the PCLs will evolve. That will have a big impact on the profitability going forward. But I think what we continue to see, again, is day-to-day banking growing, retail customer primary growth continuing, good cost discipline. This is operating leverage three quarters in a row is positive as we really focus on our customer-facing channels to optimize them, branches, contact centers, mobile advisors. We're working all the levers is what I'm trying to say. And we continue to hopefully see the ROE improving and the RAM improving all the quality metrics that we monitor. Appreciate the time. Thank you. The next question is from Nigel Souza from Veritas Investment Research. Please go ahead. Your line is open. Good morning. Thank you for taking my question. I wanted to touch on the EPS accretion that you had on page 18, comparing the buyback versus key corps. Could you help me understand why $2.3 billion was used in that calculation rather than $3.9 for the buybacks and the $80 million in net funding costs, what that represents? Yeah, sure, Nigel. It's Raj. It's a good question. It's the $2.3 billion we used. That equates to the 50 to 55 basis points on capital if you want to do the comparison to the key transactions. So that's apples to apples. If I use the $3.9 billion, it will equate to about 70 to 75 base points of capital. Therefore, it's a different basis to use and likely not comparable for the outcome. So that's that. The $80 million is actually quite simple. It's really the funding cost of the $2.3 billion, or you can look at it as the opportunity cost. The $2.3 billion is invested in some securities worth the return that we would lose, and that's the after-tax number that we have calculated based on average. I think it will work out to somewhere between 4.8 to 5%, I think, if you did the math. Okay. I guess where I was going with that is, you know, I'm trying to understand why not look at the actual capital outlay, and then you look at the key accretion. Why isn't the opportunity cost netted off against that as well to reduce the benefit by $80 million? But maybe something to follow up on. Thank you. I can actually help you now because the key income that we have shown, the $300 million to $350 million, has got three components. It's the potential equity pickup that we will have, net of the cost of funds relating to what we are deploying, which is on the entire $3.9 billion proceeds that we will deploy, and it's got a benefit because of interest rate mark accretion that will come through after we do purchase rights accounting. So that's got cost of funds, too, included in it, and it's a net number.
Speaker Change #116: O'Plananches of Quest.
Speaker Change #117: Yeah, that's all for, and then what about like earnings growth at the your segment level? Like regardless of the mortgage business, it's just taking up to the segment level. Should be expect, you know, increased earnings growth as we kind of move forward into 20-25, like just trying to think that thinks through that as well.
Speaker Change #118: Well, again, earnings is driven by, of course, the volumes and revenue, the costs, the PCLs, they're all in the combination as still talked about. It will be interesting and we're watching how the PCLs will evolve, that will have a big...
Speaker Change #119: Impact on the trusted Billy going forward, but I think what we continue to see again is day-to-day banking growing.
Speaker Change #119: Retail Customer Primary Growth Continuing
Speaker Change #119: Good cost discipline, this is operating leverage three quarters in a row as positive as we really focus on our customer facing channels to optimize them branches contact centers.
Speaker Change #119: Mobile Advisors, we're working all the beavers is what I'm trying to say and we continue to hopefully see that are we improving and the RAM improving all the quality metrics that we monitor.
Speaker Change #120: Thank you for your sake of the time.
Speaker Change #121: Thank you.
Speaker Change #121: The next question is from Nigel Sousa from Veritas Investment Research. Please go ahead, your line is open.
Nigel Sousa: Good morning. Thank you for taking my question. I wanted to touch on the EPS accretion that you had on page 18, comparing the by-by-purchase key course.
Nigel Sousa: Could you have to understand why 2.3 billion was used in that calculation rather than 3.9 for the buybacks and the 80 million in that funding cost that represents.
Nigel Sousa: Yeah, sure, Nigel, it's Raj. It's good question. It's a 2.3 billion dollars we use. That equates to the 50 to 55 basis points on capital.
Speaker Change #123: If you want to do the comparison to the key transaction, so that's apples to apples. If I use the 3.9 billion in liquidable 7-75-based points of capital, therefore, it's a different...
Speaker Change #123: Paces to use and relatively not comparable for the outcome. So that's right.
Speaker Change #124: The 80 million dollars is quite simple. It's really the funding cost of the 2.5 million dollars Or you can look at it as the opportunity cost. The 2.3 billion dollars is invested in some securities What's the return that we would lose?
Speaker Change #124: and that's the offer tax number that we have calculated based on average. I think it will hit work over somewhere between 4.8 to 5%. I think if you did the math.
Speaker Change #125: Okay, I guess where I was going with that is, you know, I'm kind of understand why no look at the actual capital outlay and then you look at the key creation, why isn't the option you call it's made it off against that as well to reduce the...
Speaker Change #126: benefits by 80 million, but maybe something to follow up on. Thank you. I'd actually help you now, because the key income that we have shown the $350 million is got three components.
Speaker Change #127: It's the potential equity pick-up that we will have, net of the cost of funds relating to what we are deploying, which is on the entire 3.9 billion dollars process that we will deploy.
Speaker Change #127: and this got a benefit because of interest rate mark the Christians that will come through after we do purchase price accounting. So that's got cost of funds to introverted in the tenets and at number.
Speaker Change #127: That's helpful. Thank you. You're welcome. Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Your line is open. Okay. I appreciate that we have spent some time. Thank you for pressing me. I have two questions, hopefully quick. Scott, I think the 12.5% CTE is at a good level. Does this suggest that the optimization exercise at GBM is complete? I think this brings me to the key investment and some of the tangential benefits. Is the expectation here that some of the balance sheets will remain with Key, for example, and that you will have some credit businesses? Is this the way to think about it if it is executed at dream levels? Perfect. And, Scott, there are a few times, I believe, on this testimony, on August 12, you talked about the optionality that the long-term key, I believe, offers. Can you talk about a previous experience of the company with options like this and how the company has been attractive over time? Yes, I believe you are referring to how we entered Mexico, which, obviously, was a good result for the bank. I believe it is a 25% business and we are well positioned. It was not on my mind when I thought about this transaction. We thought about this transaction, again, financially accretive, good for the partners and long-term optionality. Remember that there is a five-year waiting period. It's a long way to go. Right now, we are going to focus on building our GBM business organically, with a focus on the sheets, optimizing the money we deploy for this business, to ensure the right revenues for our partners.
Speaker Change #128: Thank you.
Speaker Change #128: Yoke
Speaker Change #129: Thank you, the next question is from Sir Adm over Heady from Beam Old Capital Markets. Please go ahead, your line is open.
Speaker Change #130: Okay, I appreciate we've gone over time. Thank you for squeezing me and I have two hopefully quick questions
Speaker Change #131: but I think the 12 and a half percent see if you want being the right level and
Speaker Change #132: and so does that care suggest that the optimization exercise in GBM is complete now, we shouldn't expect to see further.
Speaker Change #133: Rashening of credit in order to be there. No, I mean, listen, I think the GBM optimization, I wouldn't actually put characterizes as an optimization. I would characterize as a focus on primary clients.
Speaker Change #133: with relationships where we can add value to the client and it's beneficial for the shareholder as well. And so we're going to continue.
Speaker Change #133: would be very disciplined on how we allocate our capital. That's going to allow us to continue to allocate capital to primary client relations where there's a mutual win win and it will continue to allow us to build capital for the overall bank which when we can then redeploy into other uses.
Speaker Change #134: So that would be a continuing strategy. Similar to what health friends let's go talk to what I did and somewhere I'll travel talk about the feedbacks and stuff we're talking about in the GBM.
Speaker Change #134: and so I guess that leads me into there.
Speaker Change #135: into the key investment and some of the ten potential benefits over there. So, it is the expectation here that some of the balance sheet would reside with key, for example, and you'll get some fee businesses. Is that the way to think about it if this is executed on?
Speaker Change #136: I'm going to dream about levels. No, not at all. I mean, the key investment I would separate from our GBM organic growth.
Speaker Change #136: Key Investment, as I talked about near-term accration, better than a share repurchase. Give us some optionality over time and a low-cost, low-risk fashion. In terms of our TVM business.
Speaker Change #137: you see what we're doing on a fee the feeside where were up thirty percent year-over-year thirty percent year-to-date continued tobuild up the capital markets capabilities and really attrtive businesses and you know the capital markets higher the travells referenced
Speaker Change #137: is another example, the C.L.O. Viswanathan is another example, so I would separate our GBM organic opportunities and that key investment. Those are different different strategic paths.
Speaker Change #137: and Scott, a couple of times, I think on this call on the August 12th, I think all you've talked about, the optionality that longer term, I think provides.
Speaker Change #138: Can you talk to prior experience of the bank with options like this and how shareholder creative they've been over time?
Scott: Yeah, I mean, I think you're referencing how we entered into Mexico.
Speaker Change #139: which obviously it's been a great help come for the bank, I think it's a 25% type R-Oe business and work position well.
Speaker Change #139: That wasn't in my mind as I thought about this transaction, we thought about this transaction again as
Speaker Change #139: Financial Accredits, you know, good for shareholders and optionality long-term. Remember there's a five-year standstill.
Speaker Change #140: and so, you know, that's a long way out right now. We're going to focus on building out our GPM business organically with a fee focus, optimizing the capital we deployed to that business to make sure we're getting good returns for our shareholders.
Speaker Change #140: Thank you for taking my questions. Thank you. The next question is from Doug Young from Dechaine Capital Markets. Please go ahead. Your line is open. I'll hopefully keep this relatively quick. Just focus on international banking. I guess there's two questions. One, there was or seems to be a bit of an uptick in PCLs in Mexico. I'm just hoping you can give a little bit of color. Is this impaired performing? Is this corporate or retail? Just so you can give some color. And then second, Colombia still continues to lose money. I'm just hoping that you can provide a bit of an update on the plans for this particular region. Hey, Doug, it's Phil. I'll start and then I'll hand it over to Francisco. In the case of Mexico, that's one account in the retail, one commercial account in the retail sector that's driving that increase. On Colombia, thank you for the question. Two things to keep in mind. First, we are a reflection of the markets we serve. The Colombian market has been challenged throughout last year. We continue to believe the challenge will remain for the next two to three years. As you look at the system performance, around half of the banks in the system are consistently losing money. And what we've done is focus on a number of decisions that allow us to improve our efficiency and performance in country. And to that effect, what we've done with great discipline is reduce expenses 2% year-on-year, generate positive operating leverage, and remain on a very disciplined approach as to how we deploy credit in a very challenged market. So that is the path forward, is continue to operate on a difficult environment, trying to improve our position consistently over time. We maintain our view that to the extent that there's no improvement, we will redeploy. And that is the principle we apply to all the businesses we run. Appreciate the comment. Thank you. Thank you. There are no further questions on the line. I will now turn the call back to Raj Rizwanathan. Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today. We look forward to speaking again at our Q4 call in December. This concludes our third quarter results call. Have a great day. Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
Speaker Change #141: Thank you for taking my questions.
Speaker Change #142: Thank you.
Speaker Change #143: The next question is from Doug Young from Deshaudani Capital Markets. Please go ahead. Your line is open.
Doug Young: I'll please keep this relatively quick, just focus on international banking and guess there's two questions.
Doug Young: You know, one, there was or seems to be a bit of an uptick in PCLs in Mexico, just hoping you can give a little bit of color as this impaired farming is a corporate or retail.
Doug Young: just so you can get some color and then second, you know Columbia still continues to lose money and just hoping to provide a bit of an update on the plans for this particular region.
Phil: Hey, Doug, it's Phil. I'll start and then I'll hand it over to Francisco. In the case of Mexico, that's from one account in the one commercial account in the retail sector. That's driving that that increase.
Speaker Change #145: here on Columbia thank you for the question.
Speaker Change #146: 2, thanks to Keep in mind first.
Speaker Change #147: We are a reflection of the markets we serve. The Colombian market has been challenged.
Speaker Change #148: Throughout last year we continue to believe the challenge will remain for the next to the three years. As you look at the system performance around half of the banks in the system are consistently losing money and what we've done is focus on a number of decisions.
Speaker Change #148: that allow us to improve our efficiency and performance in country and to benefit what we've done.
Speaker Change #148: with great discipline, is reduced expenses.
Speaker Change #148: 2% year and year.
Speaker Change #148: Generate positive work-grading leverage.
Speaker Change #148: and remain on a very disciplined approach as to how we resort credit.
Speaker Change #148: in a very challenged market.
Speaker Change #148: So that is the fast forwardest continue to operate on a difficult environment trying to improve our position consistently over time. We maintain our view that to the extent that there is no improvement, we will redeploy. And that is the principle we applied to all the businesses we run.
Speaker Change #149: Appreciate the call. Thank you.
Speaker Change #150: Thank you.
Rajasvanafam: is there are no further questions on the line, I will now turn to call back to Rajasvanafam.
Rajasvanafam: Thank you on behalf of the entire management team. I want to thank everyone for participating in our call today. We look forward to speaking again at our Q4 call in December. This concludes our third quarter results call. Have a great day.
Rajasvanafam: [inaudible]
Rajasvanafam: [inaudible]
Rajasvanafam: [inaudible]
Rajasvanafam: i
Speaker Change #152: Thank you, the conference is now ended. Please disconnect your lines at this time. And we thank you for your participation.
Speaker Change #152: [inaudible]