BNS - Earnings call transcript Q2 2018 | The Bank of Nova Scotia

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Adam Borgatti

Good morning, and welcome to Scotiabank's 2018 Second Quarter Results Presentation. My name is Adam Borgatti, Vice President of Investor Relations. Presenting to you this morning is Brian Porter, Scotiabank's President and Chief Executive Officer; Sean McGuckin, our Chief Financial Officer; and Daniel Moore, our Chief Risk Officer.

Following our comments, we will be glad to take your questions. Also in the room with us to take questions are Scotiabank's business line group heads: James O'Sullivan from Canadian Banking; Nacho Deschamps from International Banking; and Dieter Jentsch from Global Banking and Markets.

statements. on to those presentation, Slide Scotiabank's regarding and will today, which start caution you refer X forward-looking we behalf speaking of I contains Before of our call With over that, now I turn to Porter. will Brian the

Brian Porter

$X.XX to I'll per $X.X Thank X. up on was up billion was second results of We're morning, In share shareholders. compared our Slide to report earnings, start our return you, last to QX, while good earnings on Adam, at quarter strong and of year. everyone. Diluted pleased Scotiabank X% X% delivered equity XX.X%.

the business Turning to lines.

levels cost the year level, reduction comparable structural year last equity strong commercial a net that driven report Scotiabank's interest fourth and business, controls, in Canadian operating performed on income growth experience delivered excess At solid was stronger This double-digit and driven well, of the strong and technology and in expansion enhance auto personal which our of very schedule. by one solid quality. credit improved XX% to Banking leverage businesses, delivered credit division will of and of were results our by earnings are led Global equity. digital driven another that Overall, quality. by mortgages, growth customers. I'm year-over-year high enterprise margin For and quarter in of roughly straight marked was support earnings, omni-channel client regulatory credit increases ahead Alliance, quarter, and by positive an generate deliver Banking asset the Pacific improving The small to International quarter, by $X return for was and against continued Higher and banking earnings investment improving and Markets billion. quality. and trading strong initiatives activity. performance growth pleased improving Banking our in capabilities loan commercial unusually levels

first bank the of well of with of the remains the the adjusted For for of first generated The ratio year, benefits a Tier X.X%, the leverage very positive the X XX%. half quarter. in bank operating equity credit common capitalized re-measurement

financial return through our with us to invest shareholders. organically, and provides acquisitions strong optionality in our capital grow businesses Our position to

our This of and reflects superior call of harness experience build the core ongoing our over by performance quarter's strategy strengthen across the discuss controls. to to the turn footprint strong enhancing our performance. our untapped execution I'll the for potential to financial the the a now capabilities bank's and our bank customers, Sean

Sean McGuckin

morning. our X% of Slide will good Brian. share metrics reported which diluted bank per $X.XX, on And begin X, performance earnings shows year-over-year. for up I XXXX. Thanks, key QX financial The

margins partially very in growth Our lending month treasury offset points was to income by from core was compared reported net last levels driven non-interest international the periods assets, was X% interest earnings International strong commercial Canadian and treasury Chile income core by additional Canada margin and driven and well in basis from growth. year, of X higher and this align reporting of year, earnings as lower Net from with banking growth. personal down one businesses Banking. Revenue up strong the gains bank. margins higher The by interest by and offset personal in as was X% volumes low-margin Banking assets. and higher commercial solid year up last insurance estate Canadian income growth business the real Lower to banking of order

from basis bank's the by compared Non-interest from of from offset from resulted loan periods. of business The year. equity a Slide offset our equity quarter. specific last improving previously being the trend of established performing $XX position of loan with basis equity Caribbean These technology points. investment There X, capital evolution leverage real set X by common income remain bank alignment points were related generation loans The of another impact in as performing solid loss positive X the foreign quality of cost-reduction margin million. impaired a the by credit quality. performing HollisWealth Tier maintain offset with $X and Tier in points to our the partially improvements positive contributed pro Tier X A of a reversal ratio over Basel asset loss credit The this impact operating continued, XX and for last last delivered risk-weighted to over II accounts approximately loans a improving XX% on year. Basel our acquisitions The result and when floor in equities of Strong to implementation capital initiatives. HollisWealth this of a the the common on basis quarters by On regulatory initiatives. of benefit Expenses declined estate gains again growth. recent by XX an Risk-weighted fiscal of investments to of grew quarter, XX were credit the year further quarter. corporations. securities in with sale they year, trading when the impact end income bank non-TEB last basis impact the the X% Tier net the capital forma as ratio added the loans, benefit large floor last employee impaired strong costs of with of counterparty partially in XX%. a with to and and X% and X% provide on internal revenues portion roughly These the versus point last equity continued announced points. ratio reserves previously associated from an few capital assets continues provisions and -- of to growth loan of the strong organic sale were year. close margin combined second loan to were XX productivity likely total common ratio, a And higher the up of up billion and the moving the ratio. portfolios II QX common impact reversal in X this of we the the quarter. ratio X applied XX down However, is and ratio exchange, basis of due losses, points, accounts partly on well a the Lower or of now basis net primarily of reversal salaries to of higher that These loans related reporting provisions FX most XXXX offset in investment last were quarter-over-quarter on up hurricane due Pacific portfolio loans will basis

up was asset Turning on gains for Banking reflect $X now the income of by net margin real billion, results X% The beginning year-over-year. real X% was businesses progress higher were earnings banking control estate investments additional impact impact and and by in alignment customers. Canadian mix. of year. the partly were and insurance Revenues for of Bank the growth, adjusting line Canadian the of the net period mortgage loans the our non-interest and increases from business of the growth expansion sequential due the initiatives, strong Loans in X. which points pace the improved net the acceptances the HollisWealth though X% X%, bank. due use partially Slide and growth The digital our somewhat. XX%. increased down interest were our year-over-year offset Expenses had a of to losses business income year-over-year the offset year-over-year to last of higher and on with regulations technology, X% of grew quarter-over-quarter. and remained year, Canada and BXX margin changes regulatory income a moderated gains. last initiatives stronger higher a of up X% business and These Residential from basis were performance. basis also lower impact in up business X estate primarily of benefit digital from strong X% or continued results, by interest X the lower mortgages Residential the loans by on growth good to decline grow improved mortgage impaired rates, points cost-reduction Provision of driven credit despite increased support Hollis omni-channel rate to sale credit the last environment recent and There year. X% sale of reporting and

period positive operating year-over-year QX of Net strong to of My International adjusting XX% benefit comments net and with X.XX% year. bank. XX% Alliance region, net higher margin reporting the partly including countries. the grew XX% driven impact next reported on income portfolio on a an asset compared good grew income Banking. basis. a increase last Chile's the Pacific $XXX on up inflation to the by net constant-currency interest are for year points follow XX% X%, million Pacific QX Turning slide or XX%. reflected to Net by led growth, grew was basis. aligning a Alliance in was year-over-year, up deposit which Loans Chile in the and results was by year-over-year income basis XX% ago, by Revenues benefits The quality. leverage down in of the XX

ratio versus the impaired hurricane-related Puerto previous X account The up was was on basis for events year-over-year, in up was Rico. margin loss loans that points to by the mainly points quarter. However, impacted X credit further basis commercial one related the provision

to expected as and XX total in growth, volume on other ratio previously by of into inflation the improved productivity X% XXXX provisions account loss positive basis. reversal X.X% was improvement points. higher were established Expenses partly benefits basis loans, were offset for initiatives. points increased up and taking strong technology of performing approximately losses the year-to-date, year-to-date leverage by of and XXX an reversals Operating basis hurricane digital leading a business loan cost-reduction cost up reserves However, these or set ratio the on at the investments

of basis compared in by were Slide lower Net Lower These net lower margins loan impact a growth of equities now regulatory of offset XX% was and equities. of exchange and X up investment income on year-over-year, pace foreign down of as from impact the down And translation driven and were net will Recall as discuss of operating results and offset related The this and in reflecting income Canada hedges banking by last group year. of by income to liability mainly which XX%, Other expected on client of equivalent technology to my that results. regulatory activity Global investment declined units higher somewhat Banking costs. our losses. banking lower the currency were net lower revenues trading Trading completes exchange compensation turn results XX, business of business review global turn income adjustments. levels Markets. positive progresses. in costs, management. this results last million improved income by is These cost translation. and foreign Moving were points segment high basis activity loss a growth year. positive partially it I'll unusually from due non-interest million to on interest performance-related higher net gains the quarter-over-quarter year, taxable and income X% income last year-over-year corporate XX% year-over-year, Expenses X% equities, to ratio financial other segment corporate smaller were driven year Slide include corporate Daniel, the down was securities. segment the reflecting lower to and XX, was $XXX risk now by banking activities. XX% On bolstered and treasury, expenses. lower The on I'll in the and of exchange basis, reported partially certain fixed income net foreign was foreign loss $XX year-over-year over lending earnings. a by to primarily offset moderate higher earnings, net impact equity by Revenues mainly and business, offset strong incorporates year-over-year. deposit This and Net volumes lower who loan client up year-over-year. partly quarter. loss elevated regulatory decreased Europe. levels and and in higher the the asset The technology was The business management higher our

Daniel Moore

Thank you, of XX. risk We Sean. comfortable I'll the turn to remain bank's portfolio. fundamentals the Slide with

basis from Our last year. of ratio quarter points to loans, PCL by from referred points of was impaired points, X, as quarter, on XX decline otherwise the Stage X last basis a an X basis increase same

net consistent in banking reflected International are segment. book, at XX performing credit commercial with a points, and Canadian Banking seeing However, last considering and loans our the total on remained stable $XX improvements ratio Banking. we International continued primarily million basis quarter in PCL loan businesses all-bank in and Overall, our personal reversal our conditions

Specifically, [decline were lower in losses in] Canadian driven credit our continued Banking mainly lower portfolio provisions auto due business, retail and portfolio performance losses. improvements to commercial by

International on Banking. to Moving

see credit continue trends our the good quality We and of benefits to diversification.

We continue growth our to in of in the natural by events areas programs impacts international customer systems footprint. our and across unsecured monitor lending impacted

is However, appetite. within and portfolio stable risk our our

primarily hurricane-related the driven to to loans in by Banking mentioned provision for was provisions due performing the Sean to earlier, improving Caribbean and lower in by loan quality credit related events. Global was increase provisions by the As on impacted performing hurricanes quarter. offset related previously the in one in Rico that recorded a reversals impaired previously Puerto in portion of mainly Markets, In economic conditions improvements were and loans account impaired

looking impaired of loans impaired gross $XXX loans last ratio generally million versus remains the credit And quarter at Gross net metrics. roughly the billion. Now remained while $X stable average. below the formations were X-year at flat other

to now Turning Slide XX.

residential an insured, of portfolio is average quality is the of has XX% and lower buffer. substantial value XX%, home uninsured Our and a to equity mortgage providing loan portfolio risk. high

relative this originations with reflect last Origination quarter. loan average to decline to did quarter of levels. uninsured value XX%, to consistent continue levels New prior an

mortgage by outlook were related for rules, BXX January volumes on X. pull became mortgage Overall, to origination that good, forward our say and we the we aided some mid-single-digit effective quarter's year. would full volume new looks last the However, pipeline which growth the reiterate

Turning to Slide XX.

last points which credit over X can to our as was rates impaired to in in basis XXX last account International trend ratio ratio quarter increased Banking's XXX declined by Rico. from PCL You businesses. versus Banking's due, primarily of for Puerto points hurricanes basis see the basis quarter. impacted impaired each Canadian said, loss the recent to loss points we one XX

broad a believe declined for the we established our and portfolios to As fourth had continued and reflect X XXXX, of quarter basis as result, the remains strong. impact points. benefits hurricanes, ratio our diversification, total in credit of underlying the mentioned Overall, by the we that provisions PCL of the performance

Turning to Slide XX.

in net rates You can of businesses. see for the each recent trend write-off our

continue. seen last the has net quarters, retail we ratio Canadian stable, our would our in Looking ratio basis Banking expect been have year-over-year, relatively due portfolio. X improvements we over write-off decline and that In the to points X trend specifically, to primarily

with I'll Specifically, delinquencies up-tiering over lower in credit our lending automotive continued enhanced our our call collection the in on turn portfolio, portfolios. coupled driving card are unsecured customers now focus Brian. and strategies, to back

Brian Porter

the outlook key like Thank on to Scotiabank. some you, our comment of and presentation highlight the I'd moment Daniel. themes take for a to from

the half half momentum and the growing expect we as this to of in second move continue our we base, to customer In into in strong delivered primary of continue digital first Canada, on focus improving we results productivity. the mentioned, our and year. As investing capabilities XXXX

With a and our interest a on division. economic backdrop, the for of rising environment benefits we the good outlook remain Canadian rate Banking positive

enhancing region. capabilities. and potential on great strategic aligns Global to across this opportunity we Wealth the Internationally, the current was outlook acquisition at diversify to take Management I to partners Fraser wanted at We mortgage Pacific our businesses, Scotiabank May and volume including our completed our also mid-single-digit the Alliance The growth our our to institutional high-net-worth headwinds. grow reiterate Jarislowsky despite our X commitment which welcome with see team.

BBVA bank and Earlier We interest drive for and Colombia. allow key further we Cencosud, to to shareholders. extends card presence strengthen second-largest Citibank and similar controlling strategy Peru deepens and as markets improve to Colombia also relationship our Chile acquisitions acquire our our Alliance Pacific the agreement Scotiabank our and and in month, an with arrangements long-term relationships where and partnerships leverage create will with The footprint reached continue and in in growth. in connectivity. this will will credit build the position which to transactions, we customer Banco acquisition drive new our the issuer help value Along XX% to Cencosud, Chile organic a these have

Our efforts the acquisitions are second this to complete these year on for focus in track. half Shifting of Mexico moment. a to

strong Our businesses results. to continue very deliver Mexican

for for framework the with NAFTA as in well the resilience X, elections scheduled exists the Mexico that I and to the regulatory the system. wanted As market the of negotiations reiterate continue confidence established Mexican as our July banking in

that confident grow investment Alliance outcome. NAFTA to Canada continue are banking We to adapt expand and here our and capabilities to accordingly economy In and throughout will and Global and Banking continue diversified Markets, robust Pacific Mexico's in political we any our footprint.

strategic We our productivity structural The as this is important level, to improving year. in initiatives bank continues against leading efforts, evidenced earn our tracking through sharpen these ratio. well bank the results. by cost-reduction investments, Investor enterprise lending improved part which continue we to Day all-bank through targets the are to earlier the at shared At our

improved progress and good performance. primary seeing earnings a productivity are customer solid growth overall We growth, on

transformation also well. progressing is very Our digital

experience bank. the turn a of to technology people, significant the to integrated earnings and shareholders build sustainably growing investments are our for better to we the and necessary back our dividends the and collective of Sean the for make scale efforts, connected Through processes I'll these continue With and footprint core Q&A. in it customer while the We and power to strengthen enhance harnessing bank. that,

Sean McGuckin

to questions. allow we have can now the rejoin to please. opportunity Operator, We'll the in remarks. the queue one call. yourself question participate be question everyone pleased Please phone, prepared our take concludes first then limit on the to That your Brian. and the Thanks, to

Operator

Thank ahead. from take Robert question Capital you. go We'll now from CIBC Please our Sedran first Management.

Your line is open.

Robert Sedran

morning. Good Hi.

touched rate rate, on expense think wealth, Canadian if, can excluding add growth bit, excuse some basis in this color. Banking this I If wondering run but double little a a quarter. I'm at I digits was on expense Sean or look you -- maybe the me, James, year-over-year

spending A, what operating B, is So beyond? half and for on, that be some and where might the leverage thoughts going; into the second outlook

James O'Sullivan

Good Sure. morning, Rob.

you as P&C me Let into with move the the division then start and business, requested. core

had overall, growth basis So for had, productivity That And think, we in of year-to-date. the division points reported the year-to-date, X%. healthy ratio. we was positive I XXX and expense leverage points strong basis operating improved quite XXX improvement

So at if as QX running point, look X% Rob, Banking at year-to-date. running QX were in were at Canadian in wealth, rather your about - they're X% and high bit a they would we excluding expenses describe and XX%, low in them, elevated to at I QX.

calls. been investing we've business the we've thoughtfully So previous described in and meaningfully in as

regulatory. experience. the businesses, is customer up of Some better it on and a a P&C probably a expenses better year-to-date. people Much X% experience are it's the projects an And I'd support business, Rob, underlying of I technology if say look core at and basis, more to than and employee bit

and, I want through of decreasing we're this. So sort the Q-over-Q. importantly, do But we're to point committed somewhat to out more reducing perhaps that variance earning

finish year-to-date. MD&A, a year-over-year and the by reported earnings and in the X% for healthy I'll positive. adjust saying P&C XX% the are items we very only XX% is are that up outlook core called year-to-date. just And out So And X% we've if earnings year-over-year up

have balance We growth. good sheet

as to the of move We the bodes we and margins, half of all have through the think back rising PCL, we stable I that business well have for year. and declining

Robert Sedran

Sure.

that's client expenses. over of years. fairly few higher some of run have I'm You acquisition assuming the the part next targets rate for ambitious

would as so of that And I a Is we a in this growth imagine, going so forward is to rate used a of that investment pursuit should on expect run fair expense it be. bit than comment? of some goal, hotter

James O'Sullivan

annual as focused the quarter-to-quarter. reduce from commitments on productivity of we the variance continue goals operating to or the Look, and the at and as division core and the productivity Investor basis our in positive would P&C the separately. volatility expenses to wealth deliver be I where Day leverage February, with in business new line consolidated think to laid made out the improvements well in And more variance goal all strong, ratio for ratio, for business on my we're we the a

Robert Sedran

you. Thank

James O'Sullivan

Next question line the on please?

Operator

from now Bank [National question Gabriel go Financial] our take next Dechaine Please ahead. We'll

open. is line Your

Gabriel Dechaine

Good morning.

on a the Just question and add like to thank I'm uninsured there you just I'd confirming new the just Why there. portion you before? that? curious. wasn't disclosure, it origination helpful, for It's did mortgage just

Daniel Moore

it's the given practices into - We Moore proud Daniel which have. of, provide very bank across of our outlook really wanted in continues provide some the level strength origination we area deeper total peers And here, the that's to to to of our going so of our that some portfolio, insight insight indebtedness comparable we're Canadian bringing consumer strong focus be the the a and into of [ph] disclosure industry Canada, forward. that

Gabriel Dechaine

noticed flat all? mid-single-digit going ULOCs around includes as the restricting in auto growth the auto has kind well, book,, you're X%. did at there the indebtedness. quarters, of -- on Canadian category, What's personal in your for are any up I only areas and three there been of speaking concerns, think, and, book I I your is So decline, which you mention loan guess,

James O'Sullivan

Yes. It's James.

me address Let that.

So and we'll year-to-date. year-over-year X% X% up Mortgages start with mortgages. are

mortgages X% pleased she XX% loan auto The So quite XX%. on with year-over-year; goes We're come year-over-year the we're business. well. up in steady very auto at pleased business, year-to-date, performance business small that the about so as is of and Commercials as with side. growth X%

So the favorable I trends. macroeconomic is sheet think, nicely, reflecting, balance growing

Daniel Moore

clients our of year-over-year and add, one terms delinquency basis. well backed If the the each both ratings rates by I credit that, up in those portfolios seen we've in the quality across as as of improving of might Q-over-Q

Gabriel Dechaine

in what's growing $XX.X X%. not that billion wondering just I'm at that's enough. Fair

James O'Sullivan

a rate lines single-digit excluding left ULOCs cards the year-over-year. of would So call similar sort have low growing portfolio, in at of of runoff would it. credit X% a growth which kind unsecured bit it, or of, be credits MasterCard And has

Gabriel Dechaine

you. you. Thank Got

James O'Sullivan

question line please? on Next the

Operator

Meny of from take our question now next We'll Please Cormark Securities. go Grauman ahead.

open. is line Your

Meny Grauman

Hi, good morning.

in Wondering you're terms And Just How seeing forward last -- that that what in what was you're on of retention of that's your for activity comment still from what pull of growth on another mortgages. could pulled curious rates, is. you that's to just QX. was forward terms question if the also whether seeing much climbing, in year? been hear expectations and

James O'Sullivan

Yes.

So with year-over-year the that has can we or that But originations new quite the been I reflect growing see forward here, down that you indicated, sequentially, year-to-date. disclosure, X% would pull of as business bookings some so were steadily saw and in QX, Meny. X% the

we view and We modulate risk we're with we're fortunate continue reward. to if ourselves our channels, in and particularly broker There, three of as with you consistent in will, volumes, pleased view quite the channel. that participating can

but of growth of -- from mathematical quite to of growth that. sure. we for growth So just sequentially, example of a to for show to We're outlook sort I average growth growth you still QX our year-to-date or sequentially the were QX give mid-single-digit, QX given balances, no nominal reasonable. in X%, in GDP-plus of But think, looks X.X%. planning QX be there if year-over-year And in

X.X%. to X%, X%, at have going you're least So

with think quarters So to is year X right ago. we line fall what the X I indicated in somewhere and going

modestly. up with retention. high. strong. We're it's retention, I pleased as it describe trended of would It terms In

Meny Grauman

follow-up And the a the just broker on on comment channel.

wondering, do channel of rely you -- that to the forward, part remaining in than you're increase an emphasizing year? the or over you expect I'm saying on look more past. more were the just you're as broker You the seeing

James O'Sullivan

competitive us. dynamics think become as a Well, look, have And channel, shift. every channel that has relatively as I attractive left with channel, to others that

business, We XX has strong mortgage years led channel. very in Webster have of leadership experience that John who in by the

be important to an to it's So clear. I channel, want sure. But be

to Our channel in what branch that we're channel direct we I and describe as investing dollars an very is force important are as our would digital emerging speak. us as channel sales

all we're channels. like that channel, certainly, we're participate Canadians pleased mortgage We're But many channels in broker to to this committed So optionality it. are give look, to we finding multiple attracted these market in us. of and the the

Meny Grauman

Thank you.

James O'Sullivan

the on please? question Next line

Operator

Capital comes Our Movahedi Markets] [BMO ahead. Sohrab from go next question Please

Sohrab Movahedi

Thanks.

you us, James. mortgage for growth earnings lower quickie can how much James, total into a just remind translates bank? basis Just the for XXX points

James O'Sullivan

- $XX or tax. I pretax think it's million after

So it's a modest number.

Sohrab Movahedi

growth, to coming from geographies to you as Okay. provide pricing little which compares how And or in the the commercial the back a and bit can loan industries book? more color that's

James O'Sullivan

It's think quarter, we're in enjoying that Sohrab, clear I year. would and momentum Sure. strong a evidence of a we I strong say, see business.

estate mid-market, development. investments mid-market focused It's also equipment. you It's areas sectorally. But a honest, good we're agriculture I'd quite it is through in which say and successions. business and real about such if think And succession, think lender including rate, to I you I private on So think It's own seeing as great, growth and the remember I and Columbia British widespread. It's in business what's if Roynat, business needs. capital And driving as geographically if be growth about go the business. focus commercial growth in successful customers' we plant think equity. it, it the is MBOs -- working

XX% exact will deposits. book It focus priority. of So growth XX% in back has in I would to describe versus on continue in numbers book assets I front -- been and pricing. you terms year-over-year, a growth to don't be give have

a don't has think -- that might -- speak, in corporate surprised hear it's for competitive although you it into or pricing migrated space commercial. be instance won't see to fully as the I is pretty You we

to attractive still generate we're shareholders returns our think there. for I able

Sohrab Movahedi

Thank you.

James O'Sullivan

the Next line please? question on

Operator

Our next question from Mihelic Darko ahead. from comes go RBC Capital. Please

Your line open. is

Darko Mihelic

personal James deposits. area seeing is And income, but weaker excellent net growth for in well. better personal and My NIM not higher as one improvement question Royal James, as your rates growth and peers In peers. in base, have, growing of your you. also revenues your Thank fast particular, some of TD deposit a and bigger Hi. is growth NIM. is versus off where as is higher

be concerned NIM that rate and rising should peers that, get I have your have deposit I as think your going forward? into how If a XXXX, we better environment will should So we about growth, fall is weaker doing that's and in potentially back there at rate? further to growth? revenue growth peers deposits Or less come deposit the a having you're something have relative side that on even intentionally

James O'Sullivan

Sure.

let that So me address then.

strength earning look, some a X% of I margin there's But correlation between a say, relationship interest So by divided and and or given point of and income how opportunity. net there's clearly, were I just -- up average to would your and areas it's deposits Darko, average calculated. areas deposit and year-over-year, there's It's just assets. some

and X% So that deposits, were to If a deposits X%. up X%. commercial banking year-over-year, a strong though up we a non-personal we're led personal would by strong up that But X%. bit, balances be sure, ESA have checking were our deposits balances at where peel were were softer XX%. business, been back

out new feelings had deposit deposit in become core what of book, source be point do broker that X% I past of noticeable entrants an growth with has expensive years competitive call I'll about dynamics. So given want over our and sort deposit and mixed year-over-year. was we to the It to you. we've an have several decline honest book, various

And asset big primary And growth. banking as simply deposit billion. our is primary mightily to a available to on be going down point, prepared contributing just around driver look, market, to, Day X that businesses is that growth this But been overall, I on in bank. not that. think there's as I kind it's the Tangerine. initiative million and I speak focus $XX think we've that about And It new XX% would one support better to sources our to will banking, customers up gathering Investor continue. we pay of to the needs say -- of So year-over-year the that's to of of been funding to there's

let rising So focused I'm by to me very drive in on finish of and what's I saying going just mathematics directly margin the rate very business the environment. deposits understand because a

Darko Mihelic

quick may. if a And just I follow-up,

points basis TD, higher versus, it's year, margin So year; look Royal's when XX points XX. TD's than basis at XX. last I XX margin your say, was Today, today, it's last yours. was

the help balances closing that be on going deposits? gap your side will closing Or I in the gap? it else think is something close gap. used you And that that to to you speak about personal mind, is

James O'Sullivan

Yes.

So made progress I the in narrowing think good we gap.

never it, was close it. to was goal but narrow to Our

first progress asset to And narrowing the good side of I relevant driven we be to it, years, as by forward, pretty there is is going the going think 'XX 'XX, certainly, don't call over, going gap. well. balance sheet so I it's And made progress X in the and -- look, know, deposits. the And growing be

in credit was clearly when past our so one couple of about think successful the the progress drove And the over initiative that. cards of I of years, very drivers what

Darko Mihelic

Okay. much. Thanks very it. Appreciate

James O'Sullivan

Thanks.

please? line the on question Next

Operator

Our Steve Capital. next comes question from Theriault go Eight Please from ahead.

Steve Theriault

were Thanks higher credit the very PCLs quarter-on-quarter. A question for Stage X on significantly Daniel. Daniel, much.

remind QX were PCL here. into seasonality two outlook. wondering, can bit you into quarters Last little lower the little Just and with us QX. all-in [indiscernible] IFRS reflected year, so get QX seasonality. we're or Maybe that X, struggling PCL a bit than We're some a

a us what the give bit are of second can the of -- for maybe thinking a hand So you half year? you the for

Daniel Moore

for while think about Steve. Thanks, PCL a X And collectively new of dynamics we model. be as IFRS the Sure. understand we'll this I talking

indicated to That X the which that talked allowance $XX the an big issues. of set we the one account -- increase change driver the was release at, quarter-over-quarter, in came about by in from impacted we was was that aside that for that such that a we remarks QX the we looked increase was primarily million Stage As in our earlier, due hurricanes.

Stage that. release and to Q-over-Q, retail hurricane million. book primary the driven offset million before. IB, of $XX about due the credit $XX release million was the we of about loan quality by the That in and was the release, on mixture were spoke which drivers account is So was Again, in $XX X a net by one performing X that

that move outcome. set specifically then a of allowance this it's and [ph] from as of a this and bit outcome the and what swings in roundabouts was So realization up we noted for

Steve Theriault

about second half you when ahead. -- think the go And

Daniel Moore

Yes, sure.

of particular that's by going we've forward. So there, any the going that we so volatility looking the the wouldn't that think you're impact impact forward, anticipate for is We we at now think particular. the driven have headed, hurricanes in -- I got appropriate where position we're reserves

I discussions, probably focus Of much course, have But growth. about and discretion the less do our model things we with X indicated, having X, the like as X [indiscernible] be, on impact we going Steve, still book to on indicators forward. Stage will X, will impact LIBOR discussions the and in impaired and forward

James O'Sullivan

the on line question Next please?

Operator

comes Our go Mendonca Securities] Please from [TD Mario next question ahead.

line is Your open.

Mario Mendonca

you're could in just, take the arrive is, the is understanding the this account I'm you leverage fairly look why an conclusion giving And do high on numbers unusually you the at depending 'XX. broad first, that QX message if the asking how was quarter, what operating on question weak, at could trading of us the equity expenses. way you get reason I into If

do different though it how you message. good clearly, send another -- leverage look being as at quarter you view even operating So would a view this

you're on focusing So much the what year? expenses quarter, is too rather the message us sending on the remainder than broad of the for

Sean McGuckin

Mario. It's Sean. right, I'd say you're

can quarter-to-quarter be can trap you a fall Looking into.

first the XX.X%, For hitting the goal in of the ratio next year. excludes postretirement our on the of large half our credit which of is was benefit way productivity our that by XX% and end of QX, year, well

well very against that goal. So we're tracking

or hearing think we're the I expect year. that towards next of by that our meet and them this XX% target of far off to better march and is to continue productivity by again, to is expenses year next goal on the perhaps ratio the come end opposed year, as to that you've end And this elevated quarter, what would year progresses. to from that as been level were we higher so

Mario Mendonca

can that the Yes. you get you us outlook That's because with revise go going exactly mean Does some in where awfully would I XXXX? right, you'd close was that -- you're XXXX. give to for

Sean McGuckin

We will continue to grow.

You make think, productivity digital, Digital improve another we said XX to continue recall basis percentage to ratio would our we year. beyond the months beyond that per expect points continue Day, as which -- is at XXX ago, even investments in now we may to have I X XXXX, Investor Banking 'XX by,

just So to Mario. our when goal stop get XX%, we to isn't

better continue for ROE a returns productive and shareholders. drive will bank, our drive better to more which will We a

Mario Mendonca

is that in -- and you'd Dieter, not in rely for. the the ones political or Mexico -- Okay. out play polls, this how through a to that too but did who learned over near the this haven't Brian maybe way because on And look then considering don't favorable, your much before maybe And I've gone polls for in What time finally, on is and rooting look? on the the longer-term election? things you've been then term hope, when past, elections outlook you're

Brian Porter

going it to I'm something might to Mario, off. let that, have finish I with Nacho start and

Ignacio Deschamps

as Mario, these of continued has take different Mexico past economy strengthening in the well, significantly. the been the parties political important, country, the has have in we you government. The the years, years, improve. Scotiabank this XX institutional XX process. bank in I highlight And central to seen country And for very in independent has especially say. would grown role

-- which in were of of bright see the continue year reverse the expectation is importantly, government. there our Brian? enough doing Mexico future reforms, in to candidates So will a that, don't And important very reforms this very we see economic first very some We be the candidate, term. important they the for to were growth. any these Congress votes got of regardless structural in significant for medium

Brian Porter

it's come medical of we're into these we the long diversified We're get it's way, it's volatility sophisticated running has manufacturing Mexican is economy. This devices, just electronics, afterwards. autos, It's things just think prudent, levels that in Yes. being here. liquidity manufacturing economy the across is Nacho said. as But a a very think not you board. Mexico, and running I because which cautious Mario, always higher

is doesn't they'll win like that to which win, look it AMLO looks they will, it going like certainly think if I Congress. So

So growing energy interesting of programs some see student he more could But the with reforms. focused on economy support community, importance in has there. made that overturning the a that And business there, to of sector. of situation things think has We strong the of any a has a he's leader bit in been some He got not AMLO social the politics. I engagement you've a hung statements mind. in the terms structural of about

how Mexican there's we read important Obviously, that's an the So in election election. Colombia.

the with Sunday. frontrunner. election Brazil, other saw later results is we're the the obviously is interest. candidate that on this summer And big and in center-right in LatAm The You watching

Mario Mendonca

you. Thank

James O'Sullivan

on question the line please? Next

Operator

Thank you.

ahead. Desjardins next question Our Young Doug from comes Please of go Capital Markets.

Doug Young

morning. Good

know energy around bit international this I with a Colombia the side, were has in essentially quarter, year-over-year. and the sticking flat earnings little the past side. Just struggled

maybe -- quarter, that some improvement. get you to think see to indicated I wondering just I'm So last and you start

there mention the driver So And I expense, Sean, more benefit came a And on into Colombia in the hoping growth a bit to from an just little growth in to earnings glimpse the -- we from key color look that was get, when just tax get that. wanted on of through? a maybe Just contribution. some at Mexico, was just a Nacho, PCL, of going a within what's it MD&A. was then there perspective. from obviously that general

Ignacio Deschamps

are to is much we loan expected with much. is X.X%, digit. a driven definitely stronger. Colombia. and And is by Underlying X.X% say is pleased and Colombia. which relative have positive improvement we grow economic this growth also our growth, outlook. very would NIAT reflected better very revenue XX%, the XXX to leverage single growing you growing GDP Thank Well, I is operating of this year in XX%, This high in is

grown we years, expect has at we in that Mexico of Mexico past Mexico, continue a thing will So to market relative basis XXX the to the quarter. If Mexico is had X improve future look points in Colombia organically add share. only fantastic And to quarters. to

part the Mexico. And understand it's economy of you for think very the of So is think -- U.S. to North it's with of pleased positive evolution that's growing Mexico, important and When quite we're that economy. to American also very Mexico. strongly, the

Sean McGuckin

tax... regarding And

Doug Young

Nacho And sorry, ahead I'm go --

Sean McGuckin

No.

Nacho. with finish You

Doug Young

-- it was through. flowing year-over-year in some I say wasn't like just I when really terms sounds Colombia, look just But growth -- just themes No, going were to of Nacho, strong. at the earnings from it the underlying of

in noise-wise there. wondering there's anything So I'm if

Sean McGuckin

looking you're But is XX% versus what sure XX% not I'm up at. year-over-year answer. I'll Doug, Colombia quarter. up and last -- not I'm

it's... So

Doug Young

-- Yes. we But offline. on I tax take at just your it geographic again, side, on just MD&A I'm can take -- looking and the can Sean. Mexico,

Sean McGuckin

benefit quarter. tax there's this Yes. a Mexico tax, small

tax rate quarter not was was compared only significant. see division, You'll to about so last it in that X% the that off

Doug Young

material. Not that

you. thank Okay,

James O'Sullivan

Next question line on the please?

Operator

ahead. comes Our Barclays. question go next John of Please Aiken from

John Aiken

of XX% Good Sean, on your the generated does that assuming morning. roughly in capital bit impact ratio? on guidance just said the CETX of forma clarification you a the QX, internally pro I'm When include ratio. little -- on

Sean McGuckin

Yes.

in So XX.X%, could say around and XX.X%, it modest -- thereabouts. so be when XX%, we

around XX%. So guiding to we're just

that to organic internally This capital the Colombia, quarter, equity, points at the less issued these around you that basis points, of when about we basis they generated the generated look we've And and Fraser amount we acquisitions XX of RWA. so Jarislowsky announced, will most capital because about not Chile, we Peru, much mark. XXX be XX% in the with the

John Aiken

aggressive the with assume we the you're buy necessarily buyback not dust of -- settle actually that can terribly these great. That's the to see renewal acquisitions? And on going we be the until

Sean McGuckin

we're around then we to to XX%, in accreting us a more and more suggesting that If that It's are buyback. capital at do what our go opportunity bit capital accretion. gives that linked ultimately than

look for reduce You've shares of we heard XX opportunities, the back next issued effect. the we to or so, mention to issued months buy us past Fraser we in will the dilution over those in Jarislowsky transaction. there, Because the some equity

as heard in tool toolkit the past, deploy again, - it opportunities we in it's So we'll see to and you've us arise. our talk it's capital as a deploy

John Aiken

for Great. Sean. that Thanks

Sean McGuckin

All right.

again Thank a we question. and second QX. talking great day. quarter, the all to to think our - Have I in in last for forward listening that's you on look you

The Bank of Nova Scotia (BNS) 29 May 182018 Q2 Earnings call transcript