Q2 2025 The Bank of Nova Scotia Earnings Call

Good morning, welcome to Scotia Bank's 2025, Q2 results call. My name is money Grubbing Lin head of Investor Relations here at Scotiabank presenting to you. This morning are Scott Thompson Scotia banks, President and Chief Executive Officer, Raj Viswanathan, Our Chief Financial Officer Thomas are cheaper.

Speaker Change: Officer following their comments, we'll be glad to take your questions also present to take questions are the following scotiabank executives, Eric and Eric from Canadian Banking Jackie Award from Global Wealth Management Francisco Arista from International banking and Travis matching from global banking and markets before we start and on behalf of those speaking today.

I will refer you to slide two of our presentation, which contains scotiabank caution regarding forward looking statements with that I'll now turn the call over to Scott.

Scott Thompson: Thank you Manny and good morning, everyone.

Scott Thompson: In what remains a period of global economic uncertainty, we continued to execute on our strategy focusing on areas, we can control, including strengthening our balance sheet investing in our business, while delivering positive operating leverage.

Scott Thompson: On revenue opportunities as they emerge.

Scott Thompson: We delivered adjusted earnings in the quarter, a $2 1 billion or $1 52 per share.

Scott Thompson: This included a significant performing built in Canada, reflecting our conservative estimate on the potential impact of the evolving macroeconomic backdrop driven by tariffs.

This quarter, we continued to invest in our Canadian banking franchise as we execute on our strategy to grow our primary client base and deepen client relationships, we demonstrated strong expense discipline and international banking grew our wealth earnings and delivered strong results in our global banking and markets franchise led by impressive growth in fee income.

Underpinning all of this is our continued commitment to strong balance sheet metrics, which positions us well to support clients through this period of uncertainty.

Scott Thompson: Our steady one ratio was 13, 2% up 30 basis points quarter over quarter, and our liquidity metrics remain strong.

Scott Thompson: We built almost $200 million of allowances this quarter for a cumulative build $1 8 billion since the end of 2022.

Scott Thompson: While we have not seen a meaningful deterioration in credit.

Scott Thompson: Base case forward looking indicators have worsened.

The outlook continues to evolve and we are operating in a unique environment.

Against this dynamic scenario and overlay of expert credit judgment contributed to our provision approach this quarter.

Scott Thompson: Our strong balance sheet allows us to remain focused on driving forward, our key strategic objectives, delivering growth and shareholder value over the long term.

Moving to a brief review of our strategic priorities.

Scott Thompson: First is our continued focus on disciplined capital allocation.

Scott Thompson: We announced our return to growth in our quarterly dividends, increasing our quarterly dividend by four cents to $1 10 per share.

Scott Thompson: This morning, we also announced the launch of a share buyback program for 20 million shares.

Scott Thompson: This demonstrates our confidence in the trajectory of internal capital generation and the strength of our capital ratio.

Scott Thompson: We expect to use the CIB is one of the tools in our tool kit to allow us optionality to return capital to our shareholders our valuation remains depressed.

Scott Thompson: Second we remain focused on our north star, earning client privacy, a growing core deposits.

Scott Thompson: The bank continues to improve its loan to deposit ratio to 104% the 10th consecutive quarter of improvement.

Scott Thompson: Clients are cautious in this environment and we are seeing this in their deposit behavior with deposits up year over year across most business lines.

Scott Thompson: Since we launched our strategy we have added approximately 392000, new retail primary clients across the bank.

Scott Thompson: Although primary client growth has decelerated in Canada due to the immigration of slowdown we are focused on converting near primary clients and are seeing improved client retention rates compared to the prior period.

Scott Thompson: International banking continues to execute on our segmentation strategy and we expect to see privacy accelerate once this is fully deployed.

Scott Thompson: Our primary clients contribute more than five times the revenue of non primary clients and we're seeing continued growth and privacy across our priority segments.

Scott Thompson: Our focus on privacy means we are having more conversations with clients, particularly when it matters most.

Scott Thompson: In Canadian retail, our advisers are making 20% more calls to clients compared to the prior quarter.

Scott Thompson: Our Canadian wealth business delivered over 4000 financial plans year to date, and we continue to build out our team up retail specialist advisers up 8% this year.

Scott Thompson: In addition, our small business banking team added 17000 clients in Q2 alone contributing to a robust net client acquisition rate of 5% year to date well above the market.

Scott Thompson: Third we continue to demonstrate operational excellence and return discipline.

Scott Thompson: We delivered positive operating leverage for the fifth straight quarter, while continuing to invest in our businesses to drive longer term sustainable growth and improving client experience.

Scott Thompson: We continue to invest in AI to drive productivity.

Scott Thompson: For example, in Canada over 70% of commercial client emails received by our business Service Center are now processed by AI to create structured case files delivering faster service and at a lower cost.

Scott Thompson: Yeah.

Scott Thompson: While year to date ROE was down slightly compared to the prior period. This was driven by the significant Q2 performing allowance build we.

Scott Thompson: We remain steadfast in our focus to achieve 14% plus Roe over the medium term.

Scott Thompson: We feel good about the momentum we have heading into the second half of the year and are confident that we'll be able to grow EPS by 5% to 7% in fiscal 2025.

Scott Thompson: Now I will briefly turn to highlights from our business lines.

Scott Thompson: Global wealth management continued its positive momentum delivering 405 million of earnings which is up 17% year over year with strength across all of our businesses.

Scott Thompson: Our global asset management business continues to expand its offerings by adding new private asset solutions.

Scott Thompson: Our expanding active ETF product suite is resonating with clients as we are seeing strong asset growth in knee solutions despite market volatility.

Scott Thompson: Our Canadian wealth business saw strong growth in fee based assets driven by sales momentum in our advisory channels, while market volatility drove higher trading volumes, particularly in high trade.

Scott Thompson: Our private bank continues to innovate and this year, we launched our signature banking offering tailored to a wider segment of high net worth clients with a service focused banking solution.

Scott Thompson: We are delivering on our commitment to provide holistic solutions to clients with closed referrals between our Canadian wealth retail and commercial businesses at $6 7 billion year to date up 6% year over year.

Scott Thompson: We are seeing continued momentum on our retail advice strategy in partnership with Canadian banking with year to date net inflows of one up $1 6 billion compared to the prior year.

Scott Thompson: Global banking and markets delivered earnings of $413 million as we continue to generate better results with less capital.

Scott Thompson: In Canada, we maintained the number wildly table ranking in debt capital markets.

Scott Thompson: Capital markets activity was strong in the first two months slowing down in April at the tariff uncertainty escalated.

Scott Thompson: Our M&A business generated near record revenue this quarter fees for the first half of fiscal 2025 already exceed the full year of 2024.

Scott Thompson: Despite observing a slowdown in announced M&A due to the market uncertainty our pipeline remains strong and we are ready to capitalize when activity resumes.

Scott Thompson: We remain focused on our balance sheet velocity and continue to deliberately grow our capabilities in strategic products, such as mortgage capital markets leveraged finance structured credit.

Scott Thompson: Canadian banking continues to diversify its business mix, while executing on its privacy strategy.

Scott Thompson: Canadian banking deposits were up 5% year over year in our retail business continues to see strong retention of maturing term deposits driven by advice led strategy.

Scott Thompson: We continue to deliver enhancements to our Scotia, smart investor solution, which helps clients plan and manage their savings and retirement targets.

Scott Thompson: We are also making it easier for clients to bank, how and where they want by continuing to grow our virtual advice for clients.

Scott Thompson: While mortgage growth is slowing our mortgage plus solution a major driver of client privacy accounted for 88% of our originations this quarter and mortgage renewal retention rates remain high.

Scott Thompson: We are also seeing traction in our card strategy with almost 26% of the 15 million seen plus members now holding a payment product.

Scott Thompson: Same class members are seeing the value of the loyalty program as key metrics such as active users voice issuances and redemptions grew year over year.

Scott Thompson: This engagement should contribute to client acquisition as rewards are amplified foreseen plus members, who hold scotiabank payment solutions.

Scott Thompson: In partnership with private banking Canadian banking also launched a new premium credit card tailored to high net worth clients, combining the value of <unk> plus with exclusive benefits for cardholders.

Scott Thompson: Moving to international banking earnings were $681 million driven by another quarter of strong expense discipline and lower impaired loan loss provisions.

Scott Thompson: Return on equity improved both year over year and quarter over quarter as earnings grew while capital attributed was lower.

Scott Thompson: Our productivity ratio improved to 51% and we remain on track to achieve our medium term run rate savings commitment of 800 million with significant components of our regionalization strategy complete by the end of the fiscal year.

Scott Thompson: We continue to execute on our retail segmentation strategy with leadership roles for the regional structure largely in place.

Scott Thompson: Looking ahead, we expect to rollout a tailored value proposition for priority segments by the end of the fiscal year across our core markets.

Scott Thompson: In commercial our segmentation efforts are complete clients had been partnered with relationship managers best suited to their needs and we are starting to see the benefits.

Scott Thompson: We are also driving an improved client experience and have deployed an enhanced onboarding solution across our key markets, allowing us to onboard clients in one third of the time.

Scott Thompson: In International banking GBM earnings were up 8% year over year, driven by capital markets as the bank capitalized on strong market activity.

Scott Thompson: Looking ahead with the Canadian election, now behind US I am optimistic the country has entered a period of relative political stability and can now focus on our growth first agenda.

Scott Thompson: This will require candidates tackle as underlying productivity issues address the obstacles that stand in the way of big infrastructure projects and realize the country's potential as a natural resources powerhouse.

Scott Thompson: It also includes creating the conditions for strong and mutually beneficial economic growth across Canada, the United States and Mexico.

Scott Thompson: We intend to work with stakeholders across the country to execute on the growth agenda as a country focus is on supporting that as producers manufacturers builders and innovators and creating jobs building affordable homes, producing what the world needs and getting those goods to global markets.

Scott Thompson: In summary, while weaker consumer and business confidence is impacting near term loan growth and capital markets activity the future looks bright for Canada, and our team remains focused on executing on our strategic priorities.

Scott Thompson: We remain committed to building deeper more advice, driven client relationships and positioning ourselves to capitalize on growth opportunities that drive shareholder returns.

Raj Viswanathan: I will now turn it to Raj for a more detailed financial review of the quarter.

Raj Viswanathan: Thank you Scott and good morning, everyone.

Scott Thompson: My comments that follow will be on an adjusted basis, which includes the usual amortization of acquisition related intangibles.

Scott Thompson: Moving to slide six for a review of the second quarter results.

Scott Thompson: <unk> reported quarterly earnings of $2 one.

Scott Thompson: $1 billion in diluted EPS of $1 52 centers.

Scott Thompson: They're doing an equity was 10, 4% down 90 basis points year over year, primarily driven by higher performing PCL.

Scott Thompson: Revenues grew a strong 9% year over year.

Scott Thompson: Net interest income grew 12% year over year, primarily from a higher net interest margin and loan growth, which included the impact of the bankers acceptance conversion.

Scott Thompson: All banks net interest margin expanded 14 basis points year over year.

Scott Thompson: Quarter over quarter, NIM expanded eight basis points, driven by lower funding costs as a result of rate cuts and higher margins in international banking.

Scott Thompson: Noninterest income was $3 8 billion.

Scott Thompson: Up 5% year over year, primarily due to higher income from associated costs.

Scott Thompson: <unk> Commission revenues and wealth management revenues, partly offset by lower banking revenues.

Scott Thompson: Expenses grew 8% year over year, driven by higher technology personal costs, including performance and stock based compensation.

Scott Thompson: And professional fees to support strategic and regulatory initiatives.

Scott Thompson: As a result pretax pre provision profit grew 10% year over year.

Scott Thompson: The provision for credit losses of approximately $1 4 billion.

Scott Thompson: <unk> ratio was 75 basis points up 15 basis points quarter over quarter, primarily due to higher performing loan provisions.

Scott Thompson: Quarter over quarter expenses were down 1% driven by seasonally lower share based compensation and three fewer days, partially offset by unfavorable impact of foreign exchange and higher professional fees.

Scott Thompson: The bank generated year to date positive operating leverage of 2%.

Scott Thompson: The productivity ratio was 55, 7% and influenced improvement of 50 basis points.

Scott Thompson: I think in the prior year.

Scott Thompson: The bank's effective tax rate increased to 21, 3% and 25% last year due to the implementation of the global minimum tax and lower income in lower tax jurisdictions that were partially offset by favorable adjustments related to prior periods.

Scott Thompson: What are the quarterly effective tax rate decreased due to lower taxes in the us for banking.

Scott Thompson: Yeah.

Scott Thompson: Moving to slide seven which shows the evolution of the CET, one ratio and risk weighted assets during the quarter.

Scott Thompson: The bank's CET one capital ratio was 13, 2% an increase of 30 basis points quarter over quarter.

Scott Thompson: Earnings less dividends contributed 12 basis points, while lower regulatory capital deductions relating to the highest performing PCL ACL belt contributed eight basis points.

Scott Thompson: A decline in risk weighted asset contributed four basis points this quarter, while FX impact was two basis points.

Scott Thompson: The total risk weighted assets was 459 billion down $1 billion from the prior quarter, excluding the 8 million impact from foreign currency translation.

Scott Thompson: This was driven primarily by benefits from retail LCD parameter updates.

Scott Thompson: To close off credit Scotia.

Scott Thompson: Partly offset by higher book size, mainly from retail growth.

Scott Thompson: Operational risk capital.

Scott Thompson: Looking ahead, the bank remains committed to maintaining strong capital and liquidity ratios in 2025.

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

Scott Thompson: Canadian banking reported earnings of $613 million down 31% year over year.

Scott Thompson: The earnings were impacted by significant performing pcl's, while pre tax pre provision profit was down only 1% year over year.

Scott Thompson: The average loans were up 4% year over year.

Scott Thompson: With real estate secured lending was up 6%, while the credit box grew a modest 4%.

Scott Thompson: We continue to see to Boston.

Scott Thompson: Year over year deposits grew 5% outpacing loan growth driven by an increase of 8% and non personal deposits, mostly in demand and 3% in personal deposits.

Scott Thompson: Net interest income grew 2% year over year, primarily from solid asset and deposit growth and the benefit of the VA conversion.

Scott Thompson: The net interest margin, however declined by four basis points quarter over quarter, and 14 basis points year over year, driven by deposit margin compression due to rate cuts.

Scott Thompson: Noninterest income was up 1% year over year, primarily due to higher insurance income and mutual fund fees, partially offset by lower banking fees, including the impact of the VA conversion.

Scott Thompson: The PCL ratio was 72 basis points up 32 basis points year over year, and 25 basis points quarter over quarter, primarily due to higher performing loan provisions.

Scott Thompson: The expenses increased 4% year over year, primarily due to technology costs.

Scott Thompson: The new systems, and infrastructure and increased project spend supporting strategic and regulatory initiatives.

Quarter over quarter expenses declined 2% due to three fewer days in the quarter.

Scott Thompson: The year to date operating leverage for the segment was negative 2%.

Scott Thompson: Turning now to global wealth management on slide nine.

Scott Thompson: Earnings of $405 million were up 17% year over year as Canadian earnings were up 19%.

Scott Thompson: And by higher revenues from <unk> and growth across asset management and advisory businesses.

Scott Thompson: Trade volumes and strong private banking loan growth.

Scott Thompson: Revenues were up 12% year over year from higher mutual fund fees brokerage revenues and investment management fees and higher net interest income driven by loan and deposit growth.

Scott Thompson: Expenses were up 10% year over year from higher volume related expenses.

Scott Thompson: Allergy costs and sales force expansion.

Scott Thompson: Yesterday operating leverage was positive two 4%.

Scott Thompson: Spot <unk>.

Scott Thompson: <unk> increased 9% year over year to 380 billion and <unk> grew 6% over the same period to over $710 billion driven by market appreciation and higher net sales.

Scott Thompson: International wealth management generated earnings of $57 million up 7% year, it'll be driven by growth in Mexico.

Scott Thompson: Offset by the impact of foreign currency translation.

Scott Thompson: Turning to slide 10, global banking and markets.

Scott Thompson: Global banking and markets has delivered earnings of $413 million that was up 10% year over year.

Scott Thompson: Revenue increased 18% year over year, driven by higher performance in both capital markets and doesn't banking.

Scott Thompson: Underwriting and advisory fees grew a strong 26% year over year.

Scott Thompson: Revenues increased decreased 136 million or 9% quarter over quarter from lower trading related revenues in equities and fixed income.

Scott Thompson: The net interest income increased 49% year over year due to higher corporate lending margins lower trading related funding costs and the positive impact of foreign currency.

Scott Thompson: Loan balances declined 16% year over year.

Scott Thompson: The market conditions and continued balance sheet optimization.

Scott Thompson: Noninterest income was up 106 million, 11% year over year due to a higher underwriting and advisory fees trading related revenue from fixed income equities and FX and the impact of foreign currency translation.

Scott Thompson: The expenses were up 15% year over year, mainly due to higher personnel costs, including performance based compensation Hyatt neurology cost to support business growth and the negative impact of FX.

Scott Thompson: The operating leverage was a strong six 2% year to date.

Scott Thompson: Moving to slide 11 for the reopening transfer banking my.

Scott Thompson: My comments that follow on an adjusted and constant dollar basis.

Scott Thompson: The segment delivered earnings of $681 million up 2% sequentially and 4% year over year.

Scott Thompson: Revenue was flat year over year as noninterest income.

Scott Thompson: 12%, driven by higher trading revenues, and Chile, Peru and Mexico.

Scott Thompson: Net interest income was down 4% year, it'll be driven by lower business loan volumes in Brazil and Mexico.

Scott Thompson: The net interest margin expanded by four basis points year over year, mainly in Chile, and Mexico, driven by changes in business mix.

Scott Thompson: Net interest margin was up 10 basis points quarter over quarter, driven by lower funding costs and inflation benefits in Mexico and Chile.

Scott Thompson: Year over year loans went down 3%.

Scott Thompson: Business loans declined, 8%, partially offset by 3% growth in retail loans.

Scott Thompson: Deposits were down 2% year over year.

Scott Thompson: Personal deposits grew 1% non personal deposits declined 3%.

Scott Thompson: The provision for credit losses was $550 million translating to 137 basis points down nine basis points quarter over quarter.

Scott Thompson: Expenses were in line with the prior year and were down 3% quarter over quarter.

Scott Thompson: And by lower depreciation and amortization and seasonality in expenses in Jamaica last quarter.

Scott Thompson: The operating leverage year to date was <unk>, 9%.

Scott Thompson: The effective tax rate decreased by 220 basis points quarter over quarter to 95% due to higher inflationary adjustments in Chile, and favorable adjustments related to prior periods.

Scott Thompson: True.

Scott Thompson: GBM International baking generated earnings of $308 million up 8% year over year, primarily from growth in Peru, Mexico and Chile.

Scott Thompson: Turning to slide 12, the other segment reported an adjusted net loss of $80 million, an improvement of $97 million compared to the prior quarter.

Scott Thompson: This was mainly driven by higher revenues from net interest income.

Scott Thompson: That was higher by $147 million quarter over quarter benefiting from lower funding costs and a full quarter of keycorp earnings contribution.

Scott Thompson: I'll now turn the call over to Phil to discuss list.

Phil: Thank you Raj and good morning, everyone.

Speaker Change: There is still significant uncertainty on the path for the global economy in Canada in particular.

Scott Thompson: As a result, we remained thoughtful and our posture and continue to proactively manage our credit exposures.

Scott Thompson: Against this backdrop of increased uncertainty and a deterioration in our base case economic outlook All bank PCL. This quarter were approximately $1 4 billion or 75 basis points up.

Scott Thompson: $236 million quarter over quarter.

Scott Thompson: The increase from last quarter was driven entirely by performing provisions as impaired PCL fell $12 million.

Scott Thompson: This quarter, we had significant performing tcl's, a $346 million or 18 basis points up 13 basis points from Q1.

Scott Thompson: It's performing build was driven by deterioration in our forward looking indicators and the use of expert credit judgment to reflect trade uncertainty.

Scott Thompson: The last quarter, our base case scenario also incorporates the impact of higher tariffs.

Scott Thompson: In retail the performing build was driven by weaker <unk>.

Scott Thompson: Primarily lower GDP growth and higher unemployment, we use expert credit judgment to increase the allowances further.

Scott Thompson: And our non retail portfolio, we conducted a comprehensive review of our portfolio to identify more trade sensitive industries and again use expert credit judgment to increase our allowances.

Scott Thompson: Turning to Canadian banking, PCL are $805 million or 72 basis points up 25 basis points quarter over quarter, and retail PCL for $613 million up $190 million quarter over quarter, driven primarily by an increase in performance revisions across portfolios.

Scott Thompson: Retail performing PCL increased $175 million quarter over quarter, driven by a weaker macroeconomic economic outlook higher delinquencies and the ECJ overlay mentioned before.

Scott Thompson: Our retail impaired PCL ratio was up three basis points quarter over quarter to 45 basis points driven by higher net write offs in our unsecured portfolios and auto.

Scott Thompson: 90 day mortgage delinquencies remained stable at 24 basis points as delinquency in our variable rate clients continued to stabilize on the back of Central bank rate cuts.

Scott Thompson: Looking at our Canadian commercial portfolio P C L or $192 million up $77 million quarter over quarter, driven by a performing build a $97 million skewed towards industry is more likely to be impacted by tariffs such as auto agriculture and manufacturing.

Scott Thompson: Impaired commercial Tcs were down $14 million quarter over quarter due to elevated PCL as the prior quarter.

Scott Thompson: A single account.

Scott Thompson: Moving international banking PCL were down nine basis points quarter over quarter, resulting in our PCL ratio of 137 basis points impaired PCL fell $52 million quarter over quarter are performing provisions were flat.

Scott Thompson: Looking specifically at retail total Tcs were down $55 million quarter over quarter were down $68 million, excluding FX driven by lower impairments across most of our retail footprint.

Scott Thompson: Performing retail tcl's fell slightly by $2 million quarter over quarter due to improved credit quality across Colombia unsecured portfolios in Peru portfolios.

Scott Thompson: However, Mexico soft performing provision of $17 million to reflect the weaker macroeconomic outlook more specifically, we have increased the total Mexico ACL by $94 million or 16% in the last two quarters.

Scott Thompson: Commercial PCL for $92 million up a modest $2 million quarter over quarter.

Scott Thompson: Looking at GBM, PCL increased $22 million quarter over quarter, mainly due to a single impaired accounts.

Scott Thompson: In closing.

Speaker Change: I really look at the beginning of the year. It did not contemplate the current operating environment and the associated uncertainty. Since then trade tensions have further escalated.

Speaker Change: Given this continued uncertainty we expect our impaired PCL ratio will remain at or slightly above the Q2 level of 57 basis points for the balance of the year.

Speaker Change: In international banking, our impaired ratio has trended down since Q3 of 2024 and 146 to 131 basis points as we continued to execute our strategy focusing on client privacy collections and helped by the sale of credit Scotia in Peru.

Speaker Change: In Canadian banking impaired PCL has continued to rise but growth has slowed as clients continue to benefit from rate cuts.

Speaker Change: Clearly in variable rate mortgages, and a similar focus on collections effectiveness and driving client privacy.

Speaker Change: Total impaired PCL ratio this quarter was 44 basis points up just one basis point quarter over quarter.

Speaker Change: This segment by segment analysis gives us confidence in the trajectory of our impaired PCL ratio for the remainder of 2025, our outlook is reinforced by the significant performing provision we took this quarter to address the underlying uncertainty.

Speaker Change: Our performing provision build this quarter.

Speaker Change: With our performing built performing provision build this quarter, we increased our all bank ACL ratio to 95 basis points up four basis points quarter over quarter to seven 3 billion.

Speaker Change: This represents a cumulative build at $1 $8 billion since the end of 2022, approximately 70% of which is feeding into our performance.

Speaker Change: Forming allowances.

Speaker Change: While there continues to be uncertainty around the macroeconomic outlook we believe.

Speaker Change: The build in allowance this quarter combined with a well capitalized balance sheet and strong liquidity positions. The bank to navigate this challenging period, while ensuring we are there to support our clients.

Manny: With that I will pass it back to Manny for Q&A.

Manny: Thanks, Phil before we open the line for questions. As a reminder, please limit yourself to one or two questions and then re queue.

Operator: Operator, we're ready for the first question.

Operator: You can press star one at this time if your other question.

Speaker Change: It would be a very small smiles participants with just a couple of questions. Thank you for your patience.

Speaker Change: And we wouldn't take the first question from Ryan when I went off on Bank of America. Please go ahead.

Ryan: Hey, good morning.

Ryan: I guess, maybe a question for Phil.

Speaker Change: So significant performing PCL build I think you mentioned deterioration in macro indicators.

Speaker Change: Judgment, just if you don't mind, but it get down put us around fundamentally I think you said embedded pieces could be slightly higher and I think what we're trying to and investors are trying to figure out is what's the fundamental deterioration that has already taken place and what do you see realistically happening.

Speaker Change: Over the coming weeks and months as you think about write offs and we're embedded PCL could 26 would be even worse unimpaired D. C has been 25, yes.

Speaker Change: Any realistic scenario basis, how do you think about it.

Speaker Change: I appreciate the question. Thank you.

Scott Thompson: Let me, let me break it down for you Ebrahim, if I look at Canadian banking, where we've seen the increase in impaired.

Speaker Change: We're only up one basis points to 44 basis points quarter over quarter, and if I double click band on Canadian retail.

Speaker Change: We're up three basis points to 45 basis points and what we've been seeing over the last three quarters as impaired starting to slow or are increasing rather at a slower rate.

Speaker Change: And if you go in to look at page I think it's page 38 of the Investor slides you can see the 90 day delinquency and you can see there.

Speaker Change: Things are looking relatively relatively stable.

Speaker Change: And so as we look out the next two quarters and forecast with our forecast we're seeing things relatively.

Speaker Change: Stable at the current rates that we have in Q2, maybe slightly elevated from here, but we're confident that we're gonna be sort of in and around where we are today in tariffs for the remainder of the year, we're not seeing any major pockets of strain in our in any of our portfolios.

Speaker Change: And we're feeling quite confidence as I look at the Canadian book.

Speaker Change: That mortgage delinquencies are stabilized I'm seeing auto delinquencies stabilized, we're watching credit cards very very carefully.

Speaker Change: And with that.

Speaker Change: As I mentioned in my prepared remarks, a big focus on collections and we've been investing in new tools technology and people in that space just to make sure that we were prepared coming into this.

Speaker Change: This environment.

Speaker Change: And then just turning to IV because I think it is important to look at it from an all bank perspective, because we are seeing some really positive credit trends in international we saw the sale of credit Scotia coming through this quarter in Peru.

Speaker Change: I think Francisco and his team are doing a wonderful job on client pharmacy, which is driving down some.

Speaker Change: Some of the some of the.

Speaker Change: Single product deterioration that we've seen in the past in that portfolio. So all that gives me confidence that as they look for the next two quarters. We're feeling good that we can give guidance sort of in and around the current rate for the remainder of the year.

Speaker Change: That's helpful. And then if I can follow up just on that maybe.

Speaker Change: Scott for you as we think about customers picking up activity. What are we looking forward into the positive headline coming out of Mark Carney and the white house around the trade issues like what would get customer activity going and avoid way you would see less worried or your customers would be less worried about the macro outlook.

Speaker Change: Yeah sure thanks ever have I mean a.

Speaker Change: A couple of things I think.

Speaker Change: Making some progress on U S. M C. I would be helpful for sure and hopefully that happens over the next six months here, but what I would say is we've already seen a little bit more certainty in Canada.

Speaker Change: Navigated this kind of prime ministerial transition and you have a prime minister pardon me now enroll with his cabinet enroll.

Speaker Change: Natural resources Minister as an example, who's out in Calgary last week talking about the need to get things done.

Speaker Change: That is resonating very well with the business community and so we have seen softness we have seen uncertainty, but as we look to the back half of this year and into 26 I do think there's a moment here, where you're going to see an inflection point with a little bit more loan growth. So I am optimistic, particularly as you look out to 2026.

Speaker Change: Things will be better than where we are today.

Speaker Change: That's helpful. Thank you.

Speaker Change: Thank you. The next question is from double yellow the same National Bank financial. Please go ahead, hey, good.

Speaker Change: Morning, just a technical one here on the condo exposure if I look at your mortgage portfolio breakdown on slide.

Speaker Change: Slide 17.

Speaker Change: 17% of your book is in condos.

Speaker Change: You know, we're hearing stories about the borrowers backing out of pre construction and stuff like that is there anything you're blending your exposure to that type of Uh huh.

Speaker Change: I can give you I guess.

Speaker Change: Yes sure Great question.

Speaker Change: Condos represent 20% of our mortgage portfolio.

Speaker Change: If I look at the if I.

Speaker Change: I looked at it on the developer side.

Speaker Change: We are obviously, it's a there's a lot of headlines in the news and we've been watching very carefully I would say over the last number of years, we've been very deliberate.

Speaker Change: Focusing on tier one developers with experience through down cycles in tier one and tier.

Speaker Change: Tier one cities and so we don't feel whereas exposed potentially to some of the headlines that we see there and.

Speaker Change: Look at it they'll also condo developers only represented about 6% of the commercial real estate portfolio in Canada.

Speaker Change: It's quite small and about 80% of that is investment grade so not to say that we're not monitoring it but it's not one of my none of my top concerns right now okay, great and then while I guess stick with this our mortgage business.

Speaker Change: For one I saw the.

Speaker Change: I heard rather.

Speaker Change: You talk about the no credit performance delinquency rates stable and your mortgage portfolio because rates are being cut and.

Speaker Change: We know where your portfolio a little bit different in that sense that all makes sense.

Speaker Change: But when I look at the.

Speaker Change: Stage two classifications, there was up 9 billion quarter over quarter more than 100% of that was in the Canadian residual book, which also in this context makes sense, but it is of a divergence I'm just how do you determine.

Speaker Change: When a mortgage goes from the stage, one low risk low risk whatever category to hey, there's a bit more a bit more risk or is it regional southern Ontario was at we've looked up the borrowers and what industry, they're working in its et cetera.

Speaker Change: Does that shift take place.

Speaker Change: Thanks, Thanks, David you're right if it is technical.

Speaker Change: We looked at coming into this quarter obviously.

Speaker Change: The models, we're very focused on kicking out of the <unk> increase is related to unemployment and GDP and so we did have ended up having to build up quite a big E. C. J for the cord in a lot of that was into the into the reservoir portfolio. Some of that a significant amount wasn't the rest of the portfolio.

Speaker Change: But as we did that we were not and I wanted I want to stress. This we're not seeing any areas of deterioration in any particular postal code.

Speaker Change: This was sort of a broad.

Speaker Change: The addition to the to the Russell.

Speaker Change: The Russell stage, two that we decided to do as a D C J.

Speaker Change: And I think while we're on the topic of stage two I also want to stress that we built about $302 million in stage two since Q4.

Speaker Change: $200 million of this was in retail and about $100 million of this was in non retail. So we're not just focused on that okay. We've been we've been very focused on.

Speaker Change: Where we could potentially see I'll come in.

Speaker Change: A negative vote them hopefully.

Speaker Change: <unk> speaking it doesn't come but we just wanted to be thoughtful and conservative as we are as we built the allowances this quarter.

Speaker Change: Kind of I don't know, whether you've looked at Toronto, 10% unemployment, that's where your expert judgment comes in is that a simple up or maybe we can take it offline.

Speaker Change: But more practical yeah happy to chat with you offline I mean, obviously, we've been talking about GVA and GTA for awhile now in terms of the in terms of exposures.

Speaker Change: But for the purposes of what we built in D. C. J here it wasn't directed at any sort of geography or region.

Speaker Change: Sorry for the three questions are.

Speaker Change: Okay.

Speaker Change: Thank you next question is from Mario Mendonca TD Securities. Please go ahead. Good morning, Phil can we stick with with you there. So your comments about.

Mario Mendonca: Credit conditions, not charity as abrupt leaves us to slow down I think Scotts comments early on that credit still looks good all of that is in direct contrast to what appears to be a lot of stress for the Canadian consumer and I'm, referring to the equifax numbers any number of articles.

Speaker Change: That I've read about the Canadian consumer.

Speaker Change: And you've got every economist in Canada talking about how unemployment is moving higher GDP growth is slowing.

Speaker Change: But we're just simply not seeing it in the bank results. The two banks that have reported so far.

Speaker Change: I don't understand that I don't understand how.

Speaker Change: The banks that account that account for I don't know 85, and 90% of auto lending in Canada could not be seeing the same stress that we're seeing in the aggregate that is or is there something I'm missing here.

Speaker Change: So Mary I think you were one of the best analysts on the Street you don't Miss much so.

Speaker Change: I can tell you what I know and what I'm seeing in my portfolio and I look at the Trans Union data the same way the same way you do because it's it's a good indication of how you know what I'm seeing in the isn't in the economy, but also how my peers are trending.

Speaker Change: You know I have to say you know coming into this year, we were more optimistic that we would see 2025 being 2024.

Speaker Change: Obviously, when you have the level of uncertainty that you have.

Speaker Change: <unk>.

Speaker Change: It's going to it's going to result in some sort of a stress, though what we're seeing at the customer level right now if I, if I drill down and look at some of the analytics there.

Speaker Change: Is and maybe related to some of the deposit account growth we've been seeing we're not seeing the level of spend that we would've.

Speaker Change: Probably helped too and then you can see that in even or even in our credit card receivables.

Speaker Change: No, we're not seeing foreign travel necessarily and so we are seeing customers.

Speaker Change: And we're also seeing people switch from sort of higher end to budget.

Speaker Change: Groceries, so people or people are being thoughtful about the macro.

Speaker Change: You know talking to some broke mortgage brokers, they're seeing people being a little bit slower to hit the bid on a on a new home because they're not sure about.

Speaker Change: How their employment is going so you do see some of that slowing down but it's it's you know it's not showing up in the in the day to day impact.

Speaker Change: Certainly right now.

Speaker Change: And the bottom line is this is why we just did an 18 basis point performing allowance build to make sure that we're prepared for that eventuality. If it does come about that unemployment continues to spike up and we do see layoffs and.

Speaker Change: And it does significantly impact the Canadian.

Speaker Change: Canadian consumer.

Speaker Change: Absolutely.

Speaker Change:

Speaker Change: Arris here I just wanted to just touch upon like Phil said, so what what I'm seeing in the Canadian Bank are our two effects really youre seeing just.

Speaker Change: A reduction in general demand to take on debt you see it in the auto business you see it in the card you see it you see it in the unsecured so you're seeing diminished demand. That's one aspect and then you're also seeing on the other side people starting to.

Speaker Change: Hold more cash and not invest in mutual funds. So that trend was kind of interrupted and people are just cautious they are cautious in their spending is still set on the discretionary side and in the purchase volumes. We're seeing on the card book, So you're just seeing hesitation out there not yet materializing in a lot of additional stress.

Speaker Change: On the on the delinquencies, but just caution caution in terms of activity, that's how I would categorize it alright.

Speaker Change: Alright.

Speaker Change: Totally different type of question.

Speaker Change: Thinking about wholesale and international loan growth now.

Speaker Change: There has been a prolonged period here, where the bank simply isn't growing and I get it I get I understand the sort of North star focus are going to focus on client privacy.

Speaker Change: There come a time when you can grow those two loan books again is it like 25 is it 2026 or is there is this period of shrinking.

Speaker Change: Persists much longer.

Francisco Arista: Thank you for the question Francisco here.

Speaker Change: Ben.

Speaker Change: Laser focused and deliberate of the outcomes that you're seeing.

Speaker Change: When you see the trajectory on a reduction on auto what you way we have been number one extremely selective on how we do it and do it being very mindful of how through that exercise.

Speaker Change: We create the appropriate robustness in terms of sustainable results. So what do you have seen is that in spite of the reduction it out all your allocation to a certain clients on the international business, we have been able to maintain a.

Speaker Change: Strong earnings growth and that is expected to continue.

Speaker Change: We're moving from being primarily a lender.

Speaker Change: Through a relationship bank client centric and we're reintroducing the whole back in every conversation.

Speaker Change: And that brings a very different dialogue with clients.

Speaker Change: Which youre seeing resulting and those relationships that we have been tackling.

Speaker Change: Reducing how do we wait while we introduced other products intuit relationship youre going to see growth, but we're not there yet we see 2025 still a transitional year, where more needs to be done in terms of cleaning up the book from a mono line clients primarily lending.

Speaker Change: While we grow other components of the DBM portfolio.

Speaker Change: However, very confident that in every conversation we're having with these clients. They are very open to do more with us and they want to grow their relationship with us as we ask for our cigarette business around on lending activity and that is what you're seeing across the rest of the products in the portfolio.

Speaker Change: So that's that's the way we're managing it.

Speaker Change: Across IBM and we see that as I said throughout 'twenty five 'twenty, six, though youre going to begin to see a more broad deployment, particularly around G. T. B as the engine for growth internationally around the <unk> portfolio as well as investment banking <unk> capital markets.

Speaker Change: So both both portfolios international commercial and capital markets portfolios could start to grow in 'twenty six that's the plan yes.

Speaker Change: This is Travis I would just echo everything Francisco said, Oh, we're completely aligned on this I would say there's two other components kind of taken place from the GBM standpoint, one remember most of our portfolios.

Speaker Change: Investment grade and utilization still remain really low they've been trending downwards for the last two years. So that that you see that playing out in the loans outstanding where clients just aren't utilizing their lives as much as there's diminished demand for for some of the lending products to as we transitioned from a lending only strategy.

Speaker Change: For some of our class set up that that that total relationship strategy that Francisco mentioned, we are largely through that and we do expect to start growing our loan portfolio, depending on the economic conditions.

Speaker Change: And then the last piece I would lay out there as new initiatives like mortgage capital markets.

Speaker Change: Initiatives like that will continue to help us grow our loan portfolio.

Speaker Change: Excuse me.

Speaker Change: And a much better economic value proposition for the banks.

Mario Mendonca: What I was really pleased with Mario seat of fee growth as an example in GBM. So yes, you have lower capital deployment, you have significantly higher fees.

Mario Mendonca: Which as you know changing that mix of it. It's the relationship model that we're trying to go after value over volume and you're starting to see that those results come through at a higher Roe.

Mario Mendonca: In the International Bank.

Mario Mendonca: Better fee income in our wholesale bank.

Mario Mendonca: Alright, thank you.

Speaker Change: Thank you. The next question is from John Kim Jefferies. Please go ahead.

John Kim: Thanks, I wanted to focus on on the buyback.

Speaker Change: No in normal times, it's basically level of capital and relative valuation of the share price, but considering that.

Speaker Change: What he is.

Speaker Change: Softer economic growth some concern about what the full impact is how much does the economic impact.

Scott Thompson: Impact how conservative or how aggressive you are on the buyback moving forward Hey, John It's Scott. Thanks for the question you know obviously, we have to be thoughtful about the economic environment, and how will that economic outlook will determine the pace and magnitude but to put it in perspective.

Scott Thompson: Seth we're comfortable running the bank at that 12, 5% cap.

Scott Thompson: Capital range 70 basis points of upsetting one ratio was three $5 billion and 20 million shares as part of that $1 billion. So theres lots of flexibility to deploy through capital.

Scott Thompson: Share buybacks to help.

Scott Thompson: Take advantage of what we think is a depressed valuation multiple and so we will use that as part of the toolkit. We have been very consistent on that going forward and of course, we'll keep the macro in mind as we deploy that through the rest of the year.

Speaker Change: Thanks, Scott very clear and since I have you on the line can I just ask you in terms of I know this is very early days, but in terms of the strategic investment in key Corp, any lessons learned or anything that we can expect coming down the pipeline in terms of potential synergies from that investment.

Speaker Change: Yeah.

Scott Thompson:

Scott Thompson: So what youre seeing in the first quarter with the full impact of it I think.

Scott Thompson: We are pleased to see their balance sheet repositioning out.

Scott Thompson: There growth in NII going forward, which will contribute I think it was $68 million in the quarter. So that will contribute going forward I think what we're learning is the regulatory environment in the U S is changing pretty dramatically.

Scott Thompson: And I think from a supervisory perspective from a capital perspective, what we're going to see in the U S as tailwind for the banking sector.

Scott Thompson: And I think that will be helpful for keycorp. It will be helpful for our earnings and key Carpenter will also I think it'd be helpful for the Canadian regulatory landscape, because I think the regulators in Canada would be pretty focused on maintaining a level playing field and so I'm optimistic that that's been a great tailwind for the banking sector across North America, which we will benefit from.

Scott Thompson: Fantastic. Thanks, Scott I appreciate it.

Scott Thompson: Thank you. The next question is from Matthew Lee Canaccord Genuity. Please go ahead.

Matthew Lee: Hi, guys I think seen my questions maybe.

Matthew Lee: Maybe one more on international T cells are a bit better than expected both underperforming impaired.

Scott Thompson: Can you maybe dig into what indicators, you're seeing that would make you comfortable in your language is that you built.

Scott Thompson: In those countries, just particularly given the fact that there's a.

Scott Thompson: The global macro economics and calm.

Scott Thompson: Comments made about Canada is the implication that there is less uncertainty there right now.

Scott Thompson: Yeah, I'll start and Matt.

Scott Thompson: Thank you for the question itself.

Scott Thompson: You know, it's it's interesting we were some of US are down in Chile, a couple of weeks ago, and just speaking to corporate clients. There is definitely not the same feeling of holding back and angst of the impact of the trade and trade uncertainty.

Scott Thompson: And you can start to see that in the quality of the portfolio that you know in the releases that we've had this quarter and the impaired book in Colombia, Peru.

Scott Thompson: And in Chile.

Scott Thompson: <unk> been focusing our build really on Mexico, and so since Q4, we've we've increased ACL in Mexico by but $89 million most of that in in retail and if you look at the last two quarters in terms of D. C. L. A we've increased by about 16%.

Scott Thompson: And this is partially almost more or less in line in what we've done in Canada as well so which.

Scott Thompson: Which is which was around 17% increase in Canadian retail and so we're seeing this diversion in Mexico, where you have maybe a bit of a trade impact and the trade tensions starting to take hold but we're seeing a very different situation in Peru, Chile and Colombia.

Speaker Change: Do you feel what I would add is just for fiscal <unk>.

Scott Thompson: Fox the first.

Scott Thompson: The power of being diversified in emerging markets is showing in this quarter and will continue to show in the remainder of the year, where we see how Chile, Peru the Caribbean.

Scott Thompson: <unk> are performing in lieu of the uncertainty associated with tariffs is quite different.

Scott Thompson: You are seeing in Mexico, and Youre seeing about an economic GDP growth firms. So we're seeing Chile are very much in line with our anticipated two and a half per cent for the year, we're just seeing through improving towards the 3% growth. This year and you see continued stability in the Caribbean and beyond while we're seeing Mexico slowing down to a negative growth.

Scott Thompson: GDP this year.

Scott Thompson: That that significant diversification for us is important and reflected in the way, we're showing bcf performance for the remainder of the year. The other element to highlight is that we have worked very diligently on deliberately and segmenting, our approach and retail and that segmentation towards bringing a very client centric.

Scott Thompson: Our strategy.

Scott Thompson: Around privacy and how we build more products into our relationship have become stickier and moves up in the priority wallet of the client is reflected on better performance overall.

Scott Thompson: That has given us the confidence to continue to see improvement in PCL throughout the remainder of the year and international Bank. So it is the combination of those two elements that shows contrast to some other pieces of the portfolio, particularly in North America.

Speaker Change: Right and then maybe to that end I mean, you've mentioned before that you won't even 90% of incremental capital towards the focus geographies, but I mean, if some of these markets and then becoming better opportunities on a risk adjusted basis more quickly.

Speaker Change: Would you maybe consider investing more heavily in the Peru, and Chile relative.

Speaker Change: Relative to maybe the Mexico and the United States.

Speaker Change: The strategy remains the same right on the power of what we're trying to do is this is a long term journey of optimizing our performance and generating shareholder value and we're not moving away from that or are you beginning to see is the execution of the strategy reflected in higher returns when you see our return on risk weighted assets now at two <unk>.

Speaker Change: 15% ROE of 15% that is the power of what we're executing against but we are very much at the beginning of the journey. What we explained at Investor Day, and we continue to see it. The same way is that we have the resources, we need we don't need necessarily to divert our capital into these countries to deliver the power of our.

Speaker Change: Franchise, we have what we need what we're now through regionalization is optimizing the way we spend.

Speaker Change: That optimization is bringing consistency of the platform for us leveraging that only what we do internationally, but also in Canada and that path will continue to deliver more privacy more competitive solutions, but all at scale that is the consistency. We're looking for and we believe that we are properly set up to capture that value over the next three to five years.

Speaker Change: Okay. That's helpful. Thanks, I'll pass the line thank.

Speaker Change: Thank you.

Doug Young: The next question is from Doug Young Michel Bank capital markets. Please go ahead.

Speaker Change: Good morning, and hopefully this will be relatively quick but raj.

Speaker Change: Capital one the set one ratio just two things just hoping to get a little color you talked a bit about parameter updates in a decent positive impacts on the set one this quarter and then there was you know.

Speaker Change: Houston operational or that'd be way, just curious what that related to and then maybe if you can round. It out was just kind of is there any other levers you can pull.

Speaker Change: To bolster the set one ratio.

Doug Young: Yes, sure Doug Good morning, I think on the LGD parameters.

Speaker Change: I wouldn't call it out because anything different you don't update ophthalmic doesn't regularly if you go back last three four quarters, we actually put up more capital for BD updates. So it can go in our favor, but again go by absorbing more capital and in this quarter. It was a BD.

Speaker Change: Loss experience, which gets reflected in L. G D and in the rest of the parameters primarily so that's good you know the photo not billing that you saw and from time to time. It can help us like I said, where it could go against us from a capital ratio.

Speaker Change: I'll finish on risk weighted asset improvement is there any sort of increase is really not meaningful it's a little over $1 billion is driven by a couple of things right based on the standardized approach that we have today depends on the earnings that we have and some of the operational near misses on losses that we might incur on from time to time.

Speaker Change: Progress for example, in fact goes into those numbers and so on.

Speaker Change: Directionally I would think that you know as the bank grows and some of the operations become more complicated on the earnings growth and operation of a thought of live and consume a little bit more capital not meaningfully higher Buck you know a few basis points each quarter unless what are you seeing this quarter.

Speaker Change: I'll just leave Us go.

Speaker Change: You guys have lots of levers and I do not view synthetic restaurants are twice as you know in the last two years, we'd be opportunistic, but it will always be driven by what is the utilization of that capital. If you believe it's a good trade how we can deploy that capital and make a superior returns, we'd always be happy to do that and that's the benefit of having a very high quality.

Speaker Change: The corporate loan book.

Speaker Change: It has the ability to be securitized and produce a capital, which as you know economically meaningful.

Speaker Change: 13.2% I don't think we need any of those we are actually looking to see how we can deploy capital and funding improve the returns of the company.

Speaker Change: And just a follow up Scott you said youre comfortable taking the ratio down to 12, 5% is that kind of the bottom end of the range.

Speaker Change: Yeah, I think so I mean, I think that's the right.

Speaker Change: Capital ratio for this bank. We started this journey we were at 11 three were down 13.

Speaker Change: Been able to execute on the Columbia transaction at the Keybanc transaction and our share repurchase and so obviously sensitive to the macro but running into that kind of 12 out of 13% range is the right capital ratio for this bank in my opinion.

Speaker Change: Okay, and then just lastly, Phil can you quantify the total expert credit judgment care trade overlay that you had in your ACL and yeah that you've done the last few quarters and whatever way you want to kind of mature yet.

Speaker Change: And maybe just focus on this quarter, if I look at it well look I'll do both quarters, it's probably it's north of 60%.

Speaker Change: B would be E C J.

Speaker Change: North of 60% of the performing built in the last two quarters correct E C J, yes.

Speaker Change: Okay perfect. Thank you very much.

Speaker Change: Thank you. The next question is from Paul Holden CIBC. Please go ahead.

Speaker Change: Thank you and good morning couple.

Paul Holden: Couple of questions on Canadian P&C banking, I guess first off in terms of the.

Paul Holden: The investments the bank is making in digital and technology understand the requirement for them just wanted to get a better understanding of the cadence of how we should be thinking about the productivity ratio.

Speaker Change: Is this something that can improve in 'twenty six following the investments of 25 or is this sort of maybe a little bit of a longer term game.

Speaker Change: Game plan here in terms of the ultimate efficiency improvements.

Speaker Change: Hi, Pat.

Eric: I mean, it's Eric here. So let me let me take you back quickly.

Speaker Change: So what we committed to during Investor day, we committed to two things we committed to one strengthening our balance sheet and the second thing we committed to was driving more customer depth and on strengthening the balance sheet. Since that time, we've added 36 billion in deposits and a U N compared to a more.

Speaker Change: Modest 14 billion in lending.

Speaker Change: And that is vastly improved our loan to deposit ratio second up.

Speaker Change: Also really enhanced our pricing governance over the period and you see that reflected in the higher asset names for most of our product lines.

Raj Viswanathan: Third thing and you heard earlier from Phil and Raj. We've also increased our balance sheet acl's, adding $600 million again to improve the coverage ratios in our retail and commercial banking books.

Speaker Change: On the customer that side.

Speaker Change: We've added 375000 primary customers 75000 in the first half year alone. This year and then you start to see those debt metrics play out in the number of customers with three plus products you see attrition coming down you see the mortgage volume 66 billion in mortgage.

Speaker Change: <unk> at least originated have come with three plus products since the program began.

Speaker Change: Then again on the debt you see day to day balances increasing sequentially annually, you see saving balances increasing so this whole idea of depth and balance sheet strengthening.

Speaker Change: It's continuing to materialize that said.

Speaker Change: We're cognizant of the challenges on the revenue side, where we see obviously with falling rates and deposit names getting compressed and revenues structurally coming down and you also have sluggish loan demand.

Speaker Change: And so we have to react to a certain extent.

Speaker Change: On the productivity side and here is where we're working very hard we've actually not added ftes over the last 12 months to drive productivity in this environment that's it.

Speaker Change: We want to continue to invest in our privacy strategy here you see investments in cloud.

Speaker Change: Technology, what I call the channel mix of trying to shift from the assisted channels physical to digital.

Speaker Change: As I talked about also on Investor day, So those investments are critical to two.

Speaker Change: Getting that policy strategy are in place are so in terms of the loan to deposit ratio and in terms of the cost to income we manage it but we also manage our strategy and so in terms of going forward.

Speaker Change: We will continue to invest but we will continue to be very prudent in how we add people and where we add people and how we manage the cost base. So that's correct.

Speaker Change: So given the current macro outlook roughly when would you expect the efficiency ratio to stabilize or what.

Speaker Change: Hi, Rod I think.

Speaker Change: Raj Might've mentioned, we expect that NIM compression to probably stabilize by year end and then starting next year.

Speaker Change: As things start to materialize, we can expect the productivity ratio to start to come back down so you're going to see that in 2026.

Speaker Change: Thank you.

Speaker Change: One other quick question on the CET one.

Speaker Change: Ratio maybe this question for for Raj just wanted to better understand the impact coming from the.

Speaker Change: From the two P cells or the credit impact that boost to the CET one.

Speaker Change: This quarter, maybe you can kind of walk me through how that how that worked.

Speaker Change: Sure Paul I'm happy to do that.

Speaker Change: Expected losses far.

Speaker Change: For capital purposes, or based on what he called it'll just cycle C. D. So it's like a 30 year average and the loan.

Speaker Change: The loss given default or the LGD downturn, LGD say supposed to take the.

Speaker Change: The worst case AC analyze you've probably don't works on point in time, PD and LGD zombies drawn out on loss experience so different basis.

Speaker Change: What Basel rule requires is if they expected loss calculation is greater than the accounting losses that we have it sit deduction for common equity tier one and if the Congress is truly Tonight factor tier two capital. So we have had a deduction for sometime last quarter was $535 million. So the bill like Sun was talking about in the ACL.

Speaker Change: This quarter is all based on expert credit judgment or 60% as he talked about so it doesn't come through the problem windows, It's a lot of overlays to the parameter outcomes.

Speaker Change: Essentially what it does on capital as the $535 million introduction, we had last quarter is now down to about 153 minutes on the increasingly easier against absorbed by the capital that is already suffering from the $535 million. The delta between the two is eight basis points pick up so what we gave up on earnings we had only 12 basis points of capital.

Speaker Change: <unk>.

Speaker Change: Really eight basis points of it we get back to the disease versus ECM deduction.

Speaker Change: 20 basis points, that's typically what people agenda during the quarter.

Speaker Change: Got it okay. That's helpful. Thanks for that.

Speaker Change: Thank you. The next question is from Lamar Prasad Tomas. Please go ahead.

Speaker Change: Yes. Thanks, My first question is for Raj.

Speaker Change: Can you talk about the outlook for margins at the all bank level and then at the segments I guess negative trend in domestic retail international it looks like it's towards the upper end of what we should expect and then the other segment NII approaching neutral so would it be fair to say that perhaps we're approaching the end in terms of all bank NIM expansion or am I kind of thinking.

Speaker Change: About this wrong.

Speaker Change: I think in the Martin you Havent, mostly right I think the all bank margin has gone up 16 basis points. In this last two quarters a lot of it almost all of it benefiting from lower funding costs because of rate cuts in Canada.

Speaker Change: And as you probably know you don't that aren't exposed to the U S. So that's the other way.

Speaker Change: It's moved out or not it doesn't have an impact to our net interest margin.

Speaker Change: 131 basis points, that's closer to the top end for this time, because as you know theres a big mortgage portfolio of fixed rate mortgage portfolio that is coming up for renewal, we have about 25 billion.

Speaker Change: For the remainder of fiscal and then we have twice that amount in 2026 and 27% of those are all going to be accretive to the margin as we think about 2020 six.

Scott Thompson: What does that do to us from an earnings perspective, you know you heard Scott say just referred to marks five years to 7% I think is it's kind of data and a lot of it is coming towards the margin benefits that you've already seen in the other segment reflected and then of course double digit.

Speaker Change: EPS expansion, we still expect in 2020 six foot all of them.

Speaker Change: All the reasons that 2025 was impacted by in the first half of the year.

Speaker Change: Segment margins are.

Speaker Change: I think Eric mentioned, it just now that hits.

Speaker Change: The Canadian banking margin should be at its trough in my opinion, you know a basis point or two doesn't matter bucket was shocked expanding back again to the mortgage expansion and as well as the deposit margin compression stopping it comes from banking models, the 450 basis points, it's really good.

Speaker Change: We like it but didn't pull 45 for 50, some inflation benefits helped us that's very healthy and all the rate cuts you know if you look at Chile. For example, it's a dominant rates for those that Domino races, no more rate cuts that I expected, maybe a little bit in Mexico. So I think second margin should be fine with definitely the FTP as you know when you decided it so going forward all of the.

Speaker Change: Benefits in the module you should see it in the segments and that should translate to margin expansion for the bank as a whole.

Speaker Change: That's perfect and then my second question.

Speaker Change: Maybe for Scott I noticed the change in verbiage, and how you're talking about the 5% to 7% EPS growth for 2025, and I guess last quarter. You mentioned it was towards the upper end of that 5% to 7% before keycorp is that now is that 5% to 7% now inclusive of keycorp did I hear that right. Yeah. I mean, if you think about our.

Speaker Change: Projections at the start of the year in the last quarter, we said, 5% to 7% before key end before tariffs and now what I'm, telling you it was 5% to 7%.

Speaker Change: And everything so including the PCL build that you saw this quarter and including key and so essentially the key benefits are offset by the big performing though that we weren't expecting at the start of the year through tariffs.

Speaker Change: So start first half of the year or kind of flat earnings.

Speaker Change: See that accelerate in the third quarter fourth quarter to get us a 5% to 7% and then as you look at a normalized PCL environment to the benefits of rate cuts the business momentum that we're seeing across all of our businesses you get to the consensus analyst estimates for 2026 with double digit EPS growth. So we're feeling good about the momentum that we.

Speaker Change: Have you in the back half of the or in 2026.

Speaker Change: Offset by the PCL built we had today.

Speaker Change: Associated with tariffs and uncertainty.

Speaker Change: And not to put too fine a point on it but that five to seven is that including buyback activity now.

Speaker Change: No that was not including buyback activity. That's a good that's a good.

Speaker Change: That's a good call out okay.

Speaker Change: Okay I appreciate the time.

Speaker Change: Thank you. The next question is from Vasco minutes of D. C. Please go ahead.

Speaker Change: Alright. Thank you. Good morning, Thanks for squeezing me in here I have two questions for for Arris.

Speaker Change: On Canada, I know you get little bit granular here, I apologize, but I really want to understand.

Speaker Change: The trend that I'm seeing.

Speaker Change: And so the first is on the asset side within Canada.

Speaker Change: Quarter over quarter.

Speaker Change: The one place where I see you doing really well and that's in mortgages are up one, 4% and TD vaccine down 80 basis points better.

Speaker Change: But in every other category.

Speaker Change: I mean markedly weaker.

Speaker Change: And so the question arises from.

Speaker Change: Think about that.

Speaker Change: Things that have changed one is president Trump and.

Speaker Change: So, possibly this is a deliberate strategy to move towards mortgages.

Speaker Change: And sort of <unk>.

Speaker Change: Not necessarily grow other more risky call it loan categories in the face of tariff uncertainty.

Speaker Change: The second thing, but also happened at Scotia was you changed your funds transfer pricing mechanism.

Speaker Change: And I'm wondering if possibly that is also at play here.

Speaker Change: And if that's causing sort of pricing changes.

And therefore, you are losing share.

Speaker Change: In other categories all of this aimed arris and understanding.

Speaker Change: This kind of trend should continue.

Speaker Change: Continue to see Scotia diverge from peers.

Speaker Change: Mortgages.

Speaker Change: At a higher pace and everything else at a lower pace relative to peers.

Doug Young: Hi, Doug Thanks for the question, let me just walk through starting with a.

Speaker Change: So mortgages so in mortgages, what we're seeing.

Speaker Change: As you correctly pointed out we had solid year on year growth I think 6% in quarterly growth 1%.

Speaker Change: A lot of what we're seeing in the mortgage market now we're seeing the purchase.

Speaker Change: Volume coming down and smart refi and more switches and we're dealing with a massive increase as you know.

Speaker Change: The renewals and we've done well the portfolio renewal rate is over 90% and we're holding the margins on those renewals were also.

Speaker Change: Managing these renewals digitally I think 20% now of these renewals are coming through digital channels. So that's a productivity play given that renewals will increased 70% in the third quarter, it's going to continue to climb on the other lending products I think and I alluded to it earlier in terms of the tariffs and the uncertainty we're starting to see a flattening.

Speaker Change: <unk> of the growth.

Speaker Change: It could be expected in commercial in <unk>.

Speaker Change: Auto in cards.

Speaker Change: So that's more market driven not any strategic seeing nothing to do with pricing nothing on that front. It's just what the market is giving us.

Speaker Change: That said on the deposit side.

Speaker Change: I would I would say that we're actually making good progress as well.

Speaker Change: The term a term or 10 bucks coming up for renewal, 90% plus of that volume is staying within the bank. We are managing the day to day accounts and the day to day balances are growing which has been our primary strategy for us savings balances are also growing substantially so we're actually executing on our.

Speaker Change: Plan and our plan has been to maintain the margins on the asset side, which we've been doing and to grow the privacy business, which comes with all the deposits that I've mentioned so.

Speaker Change: I think we are on track and what we're doing again, a lot of what's being random in terms of the volumes you're seeing is actually market driven and we're not going to chase volume, we're going to stay disciplined on our margins in a couple of things to start with that I would add I mean business makes us one of the biggest opportunities for us in our Canadian bank to improve the.

Speaker Change: The total return on the ROE at the bank. So that has not changed at all in terms of the Northstar do you look at the last eight quarters, we've grown our credit card.

Speaker Change: Revenue higher than peers, this quarter, a little bit weaker but higher than peers.

Speaker Change: Small business were significantly higher up here. So that's a good thing I think on the mortgage piece. If you go back to 2022, which we had the high volume of mortgages coming through relative to peers and now we're seeing that renewal.

Speaker Change: That's why we're growing and others may be shrinking because we have that big bubble coming through and that's actually good news if you could actually renew those mortgages at a lower acquisition cost associated with three plus products, we should be growing a little bit higher so I think that business fits description of what's going on on the asset side, along with the deposit growth.

Speaker Change: On the loan side, both day to day savings and overall P&C deposits is a good news story that we need to continue to execute on.

Speaker Change: Okay, great. Thank you I appreciate the time.

Speaker Change: Do you have a question on deposits, though arris.

Speaker Change: I understand that you're really focused on them, but it still seems like a.

Speaker Change: There's a bit of a struggle here with term versus demand what is it that you intend to do in the back half of the year if anything.

Speaker Change: To really focus on the demand side of the deposit equation.

Speaker Change: I ask this again, just because relative to peers, but you may be doing better than you used to do it at Scotia, but still relatively weak. It appears right. So you correctly pointed out the structure of our deposit book has always been a bit higher in terms of the GIC versus the noninterest bearing so correctly.

Speaker Change: That's true what we're focusing on is of course, and then when you want to raise deposits and you want to raise the core deposits, you've got them work and to and that means frontline we've changed.

Speaker Change: The incentives at the frontline in terms of driving more deposit growth with our clients and more cross sell the second thing is the marketing you've got to increase awareness and share of voice out there to drive more traffic into your channels third is the investments we're going to make in the product shelf and part of the <unk>.

Speaker Change: <unk> that have.

Speaker Change: They have been materializing is how do we improve our savings products and not only improved the product features but improve them. So they can be a quiet digitally from our clients and then of course ive talked about mortgage plus and when I say that 90% of our mortgages originating upcoming with multiple products.

Speaker Change: Stay today and that's very critical for US also to get this this debt in our in our lending business through this mortgage plus a program. So all these things put together of course retention to another one and how we retain those deposits and I mentioned that 90%.

Speaker Change: The deposits that are coming off are staying within the bank 60 per cent of pulling back into term. So it's a multiplicity of many things that we're working on to catch up of course, and so again I'm very encouraged by what we've seen in the last quarter and over the last months and again, it's a constant battle, especially when rates come down it becomes.

Speaker Change: Harder, but this is a focus of the organization and what are we going to continue to press.

Speaker Change: And therefore, mostly at 26 kind of story on deposits or do you think this could accelerate even in Q3 I think it will continue to accelerate again. This is our number one priority for this organization for the Canadian Bank, we have everyone on deck from front to back working on improving our deposit mix and this is a critical.

Speaker Change: Piece for us.

Speaker Change: Okay. Thank you for that.

Speaker Change: Thanks Jackie.

Speaker Change: I would like to just talk about you were calling for it anyway.

Speaker Change: We talked about we tell them nothing advice and mutual fund penetration also being a key part of the cycle I think youre seeing that play out as well as we focus on primary client on the first half of the air we saw year to date net sales increased by 285%.

Speaker Change: Penetration kind of Investor day, It's also improved almost 200 basis points in terms of that the proportion of retail clients coming back with us I think youre seeing that playing out as well.

Speaker Change: Okay. Thank you for that too Jackie and I'll come back to you on.

Speaker Change: More recent developments in the marketplace given the volatility anything changed.

Speaker Change: Got it.

Speaker Change: It's a good point certainly if you have a quarter that we've had it's been a very volatile quarter in terms of the markets they sort of anchored.

Speaker Change: In February we really strongly talk was a really good markets.

Speaker Change: Obviously, we can in March with based.

Speaker Change: Basically the carpet outlets in the U S. And then you saw probably back in the latter half of the quarter. It was bottoming out early in April so notwithstanding that we've seen notwithstanding the market volatility we still grew earnings in wealth management.

Speaker Change: By 17% year over year.

Speaker Change: I think what you saw is.

Speaker Change: A bit of a moderation in terms of fee based.

Speaker Change: Earnings in the second quarter offset by a really strong growth in private banking and cash balances and they're not trading volume and I try. It. So you know looking at that as far as I think we're going to continue to see volatility in the market until we see some stabilization from a tariff.

Speaker Change: Activity.

Speaker Change: We continue to focus on what we can control, which is getting out with clients putting them through.

Speaker Change: Through these volatile times and I'm really confident that can continue to see strong growth in wealth advisory and private banking.

Speaker Change: Okay, great. Thank you very much appreciate that operator, we have time for one last question. Thank you. Our last question is from Sohrab <unk> BMO capital markets. Please go ahead.

Speaker Change: It's got a quick answer Scott lots of reference back to the Investor day at the Investor Day, you had talked about.

Speaker Change: Probably more of a 12% plus CET one ratio now you're talking about 12 of them have understandably. So.

Speaker Change: The environment has changed what sort of bearing does that have on the ROE target that you had communicated at Investor day capital.

Speaker Change: Sorry, Thanks for that I mean, as you recall from Investor Day, We said, 14% plus and I actually the capital that had been embedded in our plans was.

Speaker Change: Significantly in excess of 12%.

Speaker Change: Delta and buffer not only on that 14% plus but also the amount of capital that we would deploy it so that 14% that we talked about at Investor day is still what we're trying to achieve and I feel confident about that if you'd think about.

Speaker Change: Where we are the bank wealth is exceeding expectations in international banking.

Speaker Change: Exceeding expectations and we said this was going to be a transition year and they're essentially flat. So when you look at the 2020 sector to see growth there as you listen to Francisco and I think our wholesale bank is also.

Speaker Change: Ahead of schedule as we look at the Canadian Bank more work to do for sure around deposits that we talked about the privacy strategy and also rep productivity.

Speaker Change: And if we can address the productivity.

Speaker Change: Execute on collections to see the impaired loans come down you're going to see.

Speaker Change: A great outcome for this back in 2026.

Speaker Change: And getting closer and closer to that 40% plus Roe target.

Speaker Change: Thank you for squeezing me in.

Speaker Change: Thank you I would now like to tell them anything over to Raj Viswanathan. Please go ahead.

Speaker Change: On behalf of fan time management team I want to thank everyone for participating in our call today.

Speaker Change: We look forward to speaking again Q3 call in August.

Speaker Change: Second quarter results call have a great day.

Speaker Change: Thank you the conference has no idea. Please disconnect your lines at this time and we thank you for your participation.

Speaker Change: This conference is no longer being recorded.

Speaker Change: Please also as you see.