Ladies and gentlemen, this conference is being recorded. Good morning, and welcome to Scotiabank's Q3 2026 results presentation.

My name is Manny Grauman, and I'm head of Investor Relations here at the bank. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Shannon McGinnis, our Chief Risk Officer.

Following our comments, we'll be glad to take your questions. Also present to take questions are the following Scotiabank executives: Aris Bogdaneris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Aristeguieta from International Banking, and Travis Machen from Global Banking and Markets.

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

Thank you, Manny, and good morning, everyone. Q3 was a record quarter for the bank, as we reported strong earnings across all business lines and exceeded all of our medium-term objectives.

We are particularly proud of the fact that we demonstrated our ability to hit our 14% plus return on equity target sooner than we had projected. This achievement was aided by strong markets, but is also the product of strategic repositioning and improved capital allocation that have led to sustainable improvements across the bank.

It continues to be driven by our Canadian Banking segment, whose return on equity improved 160 basis points sequentially and hit 19.4% this quarter. We expect to continue to improve the return on equity and close the gap with peers through a steady improvement in our business mix, fee income growth, and ongoing productivity gains.

We are delivering on our strategic priorities, and although you should expect to see some quarter-to-quarter variability, we don't see 14% return on equity as a ceiling for the bank. This quarter, the bank reported record earnings per share of $2.28, up 21% year-over-year.

We also delivered all-bank positive operating leverage for the 10th consecutive quarter, while our CET1 ratio ended the quarter at 13.1% after deploying 23 basis points to organic growth and repurchasing an additional 8.6 million shares in the quarter. Over the past 12 months, we have now returned $8.3 billion in capital to our shareholders through share buybacks and dividends.

Our capital deployment priorities continue to be organic growth, followed by share buybacks, and strategic tuck-in acquisitions that fill a well-defined need. The bank remains focused on deploying accumulated capital in support of Canada's economy, including helping fund areas of national importance such as natural resources, critical infrastructure, AI, and defense.

We expect to do all of this while maintaining strong capital ratios. While the trade relationship between Canada and the US is evolving, ever since tariffs were imposed last year, the Canadian economy has proved proven to be much more resilient than expected.

We will continue to monitor developments while supporting our clients and focusing on our strategic priorities. Our business mix continues to evolve across our footprint as loan growth improves in higher-returning portfolios and we gather higher-quality deposits.

In Canadian Banking, commercial loans grew 3% sequentially in Q3 after growing 2% in Q2. Looking ahead, we expect growth to continue to improve, supported by investments we are making in verticals where we've been historically underpenetrated, including the mid-market and small business lending, where loan growth was up 3% quarter-over-quarter and 10% year-over-year.

Credit card balances were up 3% quarter-over-quarter, and we continue to expect that to further improve by the end of the year, helped by growing purchase volumes, which are underscoring the improving quality of our book. The premium mix of new card acquisitions is now at 45% versus 35% last year.

On the deposit side, we've been able to retain over 90% of retail retail GIC maturities year-to-date. These flows are either staying in Canadian Banking, where personal day-to-day and savings deposits grew 1% year-over-year, or are moving into retail mutual funds, where net sales are $4 billion year-to-date, up nearly 2.5 times from last year.

Record revenue in Canadian Banking was helped by the fifth consecutive quarter of margin expansion and continued strong fee income growth as we maintain our focus on growing retail mutual fund, credit card, and insurance revenues. At the same time, credit trends are improving, thanks in part to better collection efforts, and we are managing expenses very effectively, even as we continue to make substantial investments in frontline sales capacity and technology.

We're also seeing improving business mix in our International Banking segment, where retail loans grew by approximately 5% year-over-year. This growth rate should continue to improve, even as growth in our non-retail loan book will remain restrained by design as we continue to optimize our allocation of capital to focus on primary relationships.

Our focus on deposits in the region is also working, with Q3 deposits up 1% quarter-over-quarter and 6% year-over-year. As a result, earnings remained above the $700 million mark for the third consecutive quarter, led by strong revenue growth of 7% year-over-year.

The strategy remains focused on deepening client penetration while further driving efficiencies. Pre-tax, pre-provision earnings in our international global banking and markets business were up 13% year-over-year, helped by our capital markets platform, where we're increasingly focused on delivering capital-light, higher-value solutions to our clients.

In Global Wealth Management, we are continuing to drive connectivity with the rest of the bank and investing in both our full-service advice and discount brokerage businesses. Net sales for the quarter came in at $3 billion, a record Q3, up 14% versus Q3 2025, and marking our eighth consecutive quarter of positive net flows.

Our net sales for the year-to-date are now higher than full year fiscal 2025. Total closed referrals between Canadian Banking and Canadian Wealth Management came in at $14 billion year-to-date, and more specifically, closed referrals between Commercial Banking and wealth were $4.5 billion, or 33% higher than what we reported for the same period last year.

In our Global Asset Management business, we ranked third among our bank-owned peers in long-term retail mutual fund sales, up from fifth in the same quarter last year and sixth at Investor Day. In our international wealth business, we are continuing to scale our total wealth solution across the region, including in the Caribbean and Mexico, where quarter-over-quarter earnings were up 14% and 15%, respectively.

Finally, in Global Banking and Markets, loans were up 7% quarter-over-quarter as growth returns after a period of optimization. Deposits were also up 9% sequentially, helped by positive momentum in Global Transaction Banking.

We ended the quarter with the highest quarterly net income on record in Global Banking and Markets, as both Global Capital Markets and Investment Banking delivered several marquee transactions for us. These include acting as joint lead and bookrunner on the two largest debt capital market deals ever done in Canada; our largest asset-backed securities deal since we established our structured credit platform; acting as a bookrunner on the largest IPO in Canada since 2021; and our first lead left leveraged finance deal.

All of this activity speaks to the increasing depth and breadth of our Global Banking and Markets franchise on both sides of the border and the investments we have made in capabilities. We are delivering strong and consistent results across the bank while still investing in the future, including in AI, where we continue to advance our enterprise-wide AI agenda with a focus on practical adoption, including training, scalable infrastructure, and responsible governance.

This quarter, we expanded Scotia Intelligence, our bank's centralized data and AI platform, to launch new capabilities to improve productivity and free up capacity for higher-value work. These new advanced features will help our teams collaborate in real time, turn complex information into clear outputs, and move from concept to execution faster.

With the recent launch of our Scotia Intelligence knowledge agents, employees now have access to AI-powered solutions that facilitate easy access to institutional information, enabling faster execution of routine processes, helping them to focus on higher-value innovation and client outcomes. Also this quarter, Scotiabank joined with Lightworks, Sun Life, and Telus to launch the AI Consortium, a collaborative Canadian model designed to help large regulated organizations build and govern the critical control systems required to deploy AI safely.

Looking ahead, we are confident that we will be able to finish the year strong and enter fiscal 2027 with momentum. Our Q3 results are proof that our strategy is working and that we are succeeding in building deeper, more profitable client relationships both in Canada and across our international footprint through a constant focus on improving business mix, boosting fee income, and driving efficiency gains across the organization.

I will now turn it to Raj for a more detailed financial review.

Thank you, Scott, and good morning, everyone. My all-bank and other segment comments will be on an adjusted basis, which includes the usual amortization of acquisition-related intangibles.

The business line results will be on a reported basis. Moving to slide eight for a review of the third quarter results.

The bank supported quarterly earnings of $3 billion and diluted earnings per share of $2.28. My remarks that follow will refer to the last column on this slide that excludes the impact of divestitures.

Return on equity was 14.2%, up 170 basis points year-over-year, driven by strong revenue growth of 16%. Net interest income grew 12% year-over-year as net interest margin grew 18 basis points from higher margins across all business segments.

NIM was unchanged quarter-over-quarter as higher margins in Canadian Banking and Global Banking and Markets were offset by lower margins in International Banking. Recall International Banking margins had some seasonal benefits last quarter.

Non-interest income was up 21% year-over-year, primarily on higher banking and wealth management revenues, underwriting and advisory fees, and other fees and commissions, and higher income from associated corporations. Expenses grew 14% year-over-year, mainly due to higher performance- and share-based compensation related to higher business volume and profitability, and higher technology spend to support strategic growth initiatives, which grew 16% to $1.5 billion this quarter.

This resulted in pre-tax, pre-provision profit growth of 18% year-over-year. The bank generated positive year-to-date operating leverage of 3.9%, and the productivity ratio improved by 90 basis points year-over-year to 52.5%.

The average loans increased 4% year-over-year, while deposits increased 5%. Moving to slide nine.

The bank's CET1 capital ratio remained strong at 13.1%. We generated capital from strong earnings in the quarter, offset by increased lending and underwriting activity.

We repurchased 8.6 million shares this quarter, representing 20 basis points of capital usage. The total risk-weighted assets was $493 billion, up $11 billion quarter-over-quarter, excluding FX, mainly relating to higher credit risk, including the recall of a synthetic risk transfer transaction.

In Q4, certain International Banking portfolios are migrating from the standardized approach to the AIRB approach that will reduce our capital ratios by approximately 15 basis points. We expect to absorb this impact and maintain our CET1 ratio around 13% next quarter.

Turning now to the business line results, beginning on slide 10. Canadian Banking earnings were $1.1 billion, up 12% year-over-year from strong pre-tax, pre-provision earnings growth of 11%, partially offset by higher provision for credit losses.

Loans grew 3% year-over-year, driven by 4% growth in mortgages and 3% growth in commercial and small business loans, while personal loans grew 1%. Day-to-day and savings deposits grew 1% year-over-year, in line with our strategy.

However, deposits declined 2% year-over-year, mostly in term. Turning to the P&L, net interest income grew 7% year-over-year from loan growth and margin expansion.

Net interest margin expanded for the fifth consecutive quarter, up 2 basis points sequentially, driven by an increase in both loan and deposit margins. Non-interest income was up 11% year-over-year from higher mutual fund distribution fees, credit card revenues, and insurance income.

The PCL ratio decreased 8 basis points sequentially to 42 basis points, driven by declines in both performing and impaired PCLs. The expenses were up 5% year-over-year from investments in technology to support strategic growth initiatives, partially offset by the benefit of efficiency initiatives.

The year-to-date operating leverage was 3.7%. Turning now to Global Wealth Management on slide 11.

The earnings of $515 million were up 23% year-over-year as Canadian earnings were up 27% and international was up 4%. Spot AUM and AUA grew 16% and 13% year-over-year, respectively, from market appreciation and higher net sales.

Revenues were up 18% year-over-year from higher mutual fund fees, net interest income, and brokerage revenues. The expenses were up 16% year-over-year from higher volume-related expenses, sales force expansion to support business growth, and technology costs.

Year-to-date operating leverage was 2.2%. Turning to slide 12.

Global Banking and Markets earnings were $647 million, up 37% year-over-year. Revenue grew 32% year-over-year as Capital Markets revenues were up 33% and Business Banking was up 30%.

Net interest income was up 34% year-over-year, primarily due to higher margins and higher client-driven capital markets activities. Non-interest income was up 31% year-over-year due to higher underwriting and advisory fees, and client-driven trading revenue from equities and foreign exchange.

Expenses were up 26% year-over-year, mainly due to higher performance-based personnel costs on stronger results and higher volume-related costs, including technology to support business growth. These results were supported by strong loan growth of 5% year-over-year.

Canadian loans grew 7% quarter-over-quarter and 9% year-over-year. Deposits also grew 12%, helped by the investments we have made in Global Transaction Banking.

Moving to slide 13. My comments on International Banking are on a constant dollar basis and exclude the impact of divested operations.

The segment delivered earnings of $725 million, up 6% year-over-year. Revenue increased 7% year-over-year, with net interest income up 3%, while non-interest income increased 18% from higher income from the Davivienda investment, card revenues, and insurance income.

Net interest margin of 469 basis points was up 18 basis points, but declined 7 basis points from seasonally higher net interest margin in the prior quarter. Deposits were up 6% year-over-year as personal deposits grew 4% and non-personal grew 7%.

The loans were down 1% year-over-year as non-retail loans declined 7%, while retail loans grew 5%. Operating leverage was 1.9% year-to-date.

The PCL ratio declined 28 basis points sequentially to 138 basis points, mainly driven by lower impaired PCLs. The GBM business in International Banking generated earnings of $321 million, driven by strong Capital Markets revenue growth.

The effective tax rate increased sequentially to 21.3% due to favorable adjustments in the prior quarter and changes in earnings mix across jurisdictions. Looking ahead, Chile announced a reduction in the tax rate by 4% over the next 3 years to 23%.

Although this will result in lower taxes in future years, once enacted, it will also require a one-time deferred tax asset write-down in Q4. Turning to slide 14.

The other segment net loss was $42 million, compared to $35 million of income in the prior quarter, due to elevated investment gains in the last quarter. I'll now turn the call over to Shannon to discuss risk.

Thank you, Raj, and good morning, everyone. Our credit performance improved this quarter, with PCLs beginning to decline in line with our outlook for the second half of the year.

Against this backdrop, all-bank provisions were $1.1 billion or 56 basis points, down 10 basis points quarter-over-quarter. Impaired provisions were $1 billion or 52 basis points, down 9 basis points quarter-over-quarter, driven mainly by lower International Banking provisions related to the single corporate account we discussed last quarter and better performance in Canadian retail.

Performing provisions were 4 basis points, down 1 basis point quarter-over-quarter, reflecting lower provisions in Canadian and International Banking, largely offset by higher provisions in Global Banking and Markets. Our allowance for credit losses increased to $7.6 billion or 97 basis points, up 1 basis point quarter-over-quarter.

Turning to slide 17. Gross impaired loans increased 1 basis point quarter-over-quarter to 100 basis points, with modest increases across business lines.

Overall, GIL formations declined quarter-over-quarter, primarily reflecting elevated corporate formations in International Banking and Canadian commercial in the prior quarter. Turning to slide 18.

In Canadian Banking, provisions were $498 million or 42 basis points, down 8 basis points quarter-over-quarter. In commercial, total PCLs were down $11 million quarter-over-quarter to $129 million.

In retail, total PCLs were $369 million or 39 basis points, down $66 million quarter-over-quarter. Performing PCLs were $24 million, down $10 million quarter-over-quarter, reflecting more favorable forward-looking indicators, primarily from lower interest rates and positive credit migration in auto and cards.

Impaired provisions in retail were $345 million, down $56 million, driven by lower net write-offs in unsecured lines of credit and lower impairments in auto, reflecting improved delinquency trends from continued collection efforts. While we are encouraged by the improving trends in impaired provisions and 90-day delinquency across most retail products, we continue to monitor some pockets of weakness, including elevated mortgage delinquencies.

That being said, mortgage clients remain resilient and our overall retail portfolio quality remains strong, with an average FICO score of 798. Moving to International Banking.

International Banking provisions were $522 million or 138 basis points, down 28 basis points quarter-over-quarter. In commercial, PCLs declined quarter-over-quarter, driven mainly by lower impaired provisions from an elevated Q2 relating to the one account in Brazil.

We continue to work through this account and this quarter, we took an incremental provision of $57 million and reclassified $14 million related to a derivative exposure from CVA to PCL, with no change in the underlying exposure. International Banking retail provisions were also lower quarter-over-quarter, reflecting improved performance in Mexico and improved delinquency performance in Chile across most products.

This was partially offset by higher mortgage impairment in Chile and the Caribbean. In Global Banking and Markets, provisions were $53 million or 18 basis points, up 4 basis points quarter-over-quarter, driven by higher performing provisions from forward-looking indicators and impaired provisions mainly driven by new formations in Canada.

In closing, while the delinquency trends are encouraging, we continue to monitor monitor the sustainability of the improvements, given continued geopolitical developments, elevated energy costs contributing to increased inflation, and persistent trade uncertainty. Our allowances incorporate a range of forward-looking macroeconomic scenarios.

This, together with the high quality and demonstrated resilience of the portfolio, supports our comfort with current allowance levels and our position in the current environment. With that, I will turn it back to Manny for Q&A.

Thanks, Shannon. Operator, we're now ready for our first question.

Hey, good morning. I guess maybe if you could if I could start with the Canadian business segment.

Lot It feels like you're making a ton of progress there in terms of just improving the business mix, growing that. I was looking at like the year-to-date ROE in that business is about 18% give and change.

If I go back, I think, Raj, when you presented at the Investor Day, you talked about a big sort of the ROE bridge. That 18% going into, I think, 22%, 23% kind of sort of ballpark.

Just talk to us, when we think about the ROE in that business today at 18% and that journey towards maybe low to even mid-20s, one, is that the right way to think about that business? If so, what else needs to happen over the next year or two for us to get for get to that point from where we are today?

Thank you.

Hi, Aris here. Let me let me take that question.

I think what what is happening in in business banking, we have two obviously, we have the commercial segment and the smaller business banking segment. On the commercial segment, what has been in flight for probably the last 18 months is the increase and build-up of our mid-market segment.

As we were quite heavy in the real estate side, and over time now, we're expanding into the mid-market. Year-to-date, we've added nearly 700 mid-market clients, which is up almost 85% year-on-year.

Obviously, this mid-market client is deposit-rich, higher-margin lending, and that pipeline is building in market as we also leverage the capabilities of GTB, or Transaction Banking, in that segment. We're also, as on the mid-market In addition, we are also driving a lot of process improvement end-to-end in the Commercial Bank.

Of course, gathering these operating deposits we're up probably around 3% to 4% in operating deposits across the segment. All contributing, of course, to higher ROE over time.

That's one aspect. Then we shouldn't forget business banking, the smaller the smaller part of our our Commercial segment, where you see loans growing double-digit consistently quarter-on-quarter, deposits growing.

More importantly, we've focused on specialized segments. That's healthcare, professionals, accountants.

Here, we're gaining share and obviously the margins are rich. You see the ROE there almost at 25%.

When you take these two businesses together, we're confident as we continue and especially as our transaction banking capabilities improve that we can hit the 20% plus ROE over time. All on a good track.

Good morning. Francisco, was hoping that we could dive into the outlook for International.

We're we're seeing on a sequential basis loan growth, revenues pick up. Do we do we think that we're at an inflection point or a pivot in terms of the the loan growth moving forward?

Then secondarily, even though with the revenue growth, we are still seeing expenses remaining reasonably high, any sense in terms of when that might move into positive operating leverage territory? Thank you.

Thank you very much for the question, and good morning to all. This is a an important quarter in the sense that it marks the effectiveness of the pivot-to-growth effort we've been leading for the last four quarters.

We're now seeing the business growing at 6% year-on-year. When you look at the underlying business lines, all growing substantially higher revenues than what we saw in 2025.

That positions us to the target in 2027 and beyond of growth within the 6% to 8% level on the revenue front. We don't see a reason for expenses to move beyond where we've been, which is around the 4% level.

That continues to be materially below inflation. We have been able to capture the power of synergies and scale through the regionalization effort that we implemented in the first two years of the transformation.

We see that trajectory stable over time, and we see our ability to drive very important solutions across all markets at scale. When you combine those two, you should see PTPB, like you see in this quarter, growing sequentially year-on-year at 8% or above.

We are very encouraged with the quality of the new vintages that we're onboarding and the effectiveness and penetration on our GTB business across corporate and commercial. The combination of those two should allow us to see a more stable credit performance going forward that should allow us to deliver double-digit earnings in '27 and beyond.

That's the path we're in, and that path is demonstrated by the ROEs that today are sitting north of 16% and we see that path going forward. We are very excited by the delivery across all markets and business lines that we've seen so far, and we don't see a change going forward other than consolidating this revenue growth performance that we've seen throughout 2026.

Thanks, Francisco. I'll requeue.

Hey. Just sticking with the International.

On the you mentioned some conversion of portfolios from standardized to AIRB, and that's going to reduce your Core Tier 1 by 15 basis points. Just wondering, why that is.

Typically, it goes the other way. Is this a kind of a one-and-done, or is there more of that type of transition taking place?

Hey, Gabe. It's Raj.

It is it is one-and-done. I think there were certain portfolios we should have converted a few years back.

We've been on a journey because our data quality had to continue to improve. This is a quarter, which is the upcoming quarter, we're going to convert those to AIRB.

Some of it comes down to conservatism that is expected in Basel because, the data quality in the in the countries are not as great, not our portfolio. You'd expect it to add a level of conservatism to the modeled outputs, and that's why it results in a 15 basis point increase in our capital requirements.

Obviously, there'll be some near-term impact to the ROE in the International Banking business because the denominator is going to increase next quarter, but it's pretty much done. Afterwards, we should see our portfolio is growing in line with our new risk appetite, the way Francisco is laying out his business for growth, and we should start seeing our returns improving, the ROE should continue to improve, but it's done with Q4.

Okay. Actually, yeah, I'll stick with International.

Ask about the Global Banking and Markets earnings that are booked in the segment. We're up over, 40% of total segment earnings from that source so far this year.

Like how intertwined is that business with your, your personal Commercial Bank, if you will, across the region? What would the ROE look like if that business is not there?

I suspect quite a bit lower.

Thanks for the question. It's it's a very important one because this is a decision we made, I would say probably a year and a half ago, a little more, as we continue to try to drive higher earnings and create value for investors, managing capital very smartly.

We decided to build market-leading capital markets capabilities supporting the international footprint. We've been able to put together an extraordinary team, very aligned, by the way, with the global strategy that Travis is also leading in the same space.

What we're doing is really capturing the piece of the wallet we never pursued. We're seeing fantastic response from our clients.

We're now covering the sovereign space, which before we never covered. Given our very substantial presence in many of these markets, we're covering sovereigns with structured solutions and liability management, and we're participating in domestic capital markets in a way that before we couldn't.

What you saw in this quarter and sequentially year-on-year, you're seeing growth on the revenue front of 40% without necessarily absorbing material capital. This is also very accretive to primacy within the GBM space because we're now having strategic conversations with clients in a nature that we couldn't have before.

When you see this contribution together with our very strong corporate relationships, now capturing the full space of the wallet, including transaction banking and a deeper relationship on the transactional basis with clients, this is really capturing the full wallet on the GBM space. We see that as a very powerful development in our business strategy and to carry forward definitely going beyond 2026.

Very strong showing this quarter and we're very excited about the potential of this business going forward.

The ROE?

The ROE from this business, absolutely.

[laughter] We don't break that out, Gabe, obviously, the ROE between the separate business lines.

Good morning. Just want to talk a little about capital markets.

You highlighted in the call just, a really strong quarter, particularly in the IB side with a lot of large deals. Maybe can you talk about like maybe near-term expectations next quarter, is there, going to be a little bit of a giveback in that, but also maybe the long-term growth rate with all the investments you've made in the business?

Sure. Hey, Gabe.

Thanks for the question. I would be remiss if I didn't say that we were thinking about you and your farm over the next couple of weeks.

Appreciate

appreciate it. If you think about where we are right now, I think for this quarter, if you look, it was obviously a broad-based, record quarter for for GBM.

If you look through the numbers, whether that was in capital markets or investment banking, whether it's loans, deposits, you've seen a lot of activity throughout the quarter. If you step back and look at it, very intentional.

Over the last two, three years, we've been on a journey. We've been de-emphasizing some businesses or regions, and we've been doubling down on building new products and services and focus in our core footprint, both Canada, the US, and and rest of the world.

We're we're on the journey of trying to build a very durable franchise that's very broad-based. We feel like we're building a business that is perfect for this environment where we can offer excellent products and services and advice to our clients as they're trying to navigate the complex environment.

Our outlook and our pipelines remain quite strong. We're and I think we're proving quarter-over-quarter that when the markets are constructive that we can capitalize on that and we can service our clients with excellent products and and advice.

Great. Thank you.

Hi, good morning. I guess this is for Shannon.

Shannon, I think you expected or you talked about impaired PCL rate to be mid-50 basis points in in the second half. It was 52 this quarter and that included a decent drag from that Brazil loan this quarter again.

I think it's safe to say things are seem to be progressing better than expected. Just wanted to kind of get your sense as to, what's driving that.

Are you sticking with that guidance for Q4? Maybe if you can kind of layer on, obviously, some new tariff announcements here, how does that impact your your outlook and your views, on credit over the near term?

Thanks for the question. Maybe I'll go back to what informed our outlook at the time as there were a few items I called out that we were monitoring quite closely.

The first was the macroeconomic environment and and just the uncertainty within it. In Canadian retail, we were seeing entry rates and early-stage delinquency were improving, but we were certainly monitoring whether they would be sustained at those levels.

We had several collection initiatives that were still coming online. Then lastly, for non-retail, we always talk about the risk of episodic episodic activity, given the environment we're operating in.

If I think about what's occurred since then, I think there's a three few things I would highlight. One, in Canadian Banking retail, the early-stage and 90+ day delinquency has improved across products, except for mortgages.

Our collections initiatives are delivering strong benefits. We also saw build formations decline in Canadian Commercial.

The performance continues to develop largely as expected as our collections initiatives are yielding quite strong results. When I go back to our original outlook, our performance is in line with what we've said at the time, which was that impaired PCLs were going to trend down in the latter half of the year, which is certainly what we are seeing.

Then if I think about tariffs, I think there's a maybe I think about it in a few ways. Clearly, the evolving trade outlook, we look at the impact to our clients and our portfolio, and then how we are managing that risk.

In terms of outlook, I think this is a good example of the uncertainty that we are currently managing. The scope and duration of tariffs continues to evolve and the ultimate impact is going to depend on degree of retaliation, government support, and how consumers and our businesses respond.

In terms of our exposure, we've been monitoring industries more vulnerable to tariffs since last year. If I look at the latest measures that were announced just to give you some context, that represents less than 1% of our total bank loans.

In terms of how we're managing these risks, our scenarios and allowances already reflect a range of outcomes. We'll continue to to reassess new developments as they occur.

Maybe if I just take a step back, if you go back to Q2 of last year, we did build 18 basis points in performing PCL. At that time, our downside scenarios modeled Canadian tariff rates of 12.5% and up to 25% with full retaliation.

Our base case today assumes that tariffs are implemented and that trade negotiations continue. If I put all of that together, we're monitoring the situation.

We're very comfortable with where we are, and we'll continue to reassess the situation as it evolves.

Maybe just Doug, if I can add on a couple of things on the tariff situation. I think it's important just to take a step back.

The fundamentals in Canada are pretty good. If you look at the job growth numbers, if you look at the fiscal capacity on the back of oil prices, and if you look at some of the activity that's starting because of the Prime Minister's agenda, you actually have a backdrop that's pretty good.

As you think about the tariffs that were just put in place, it's 5% of exports. It's a small impact on GDP, 0.2%, 0.3%.

You're going to see at 11:00 today support programs rolled out by the government on some of the sectors which will be impacted. There will be select sectors that that will be impacted.

As I put all that together, I think this is obviously creates uncertainty, but with the current tariffs, it's manageable. I think if I could add one point, I think we should use this as a country use this moment to accelerate further the Prime Minister's agenda: removing interprovincial trade barriers, reducing the timing of approvals, getting big things done, and continuing to diversify trade while also continuing the great trade relationship we have with the US.

If we look at the US, the US, as you saw from Travis's business, is doing quite well. You put that all together, of course, there's uncertainty, but it does feel like a manageable force to get through as a country and as a North American corridor as well.

Appreciate that. Then just a second question.

ROE at 14%, or adjusted ROE, top of house, 14%. I think that's your target and you were targeting that for next year, a little earlier than expected.

I guess my question is like is there any structural reason why this bank can't be a 15% plus ROE bank? Like what what takes you from where you are to to that 15%

plus? Listen, I think we're we're very pleased and and I want to thank all Scotiabankers for the effort that they've put in place to get to our targets prior to that where we thought we were going to, and that's the 14.2% this quarter.

There is more opportunities for sure. If you think about the Canadian Bank, which maybe Aris will expand on later in the call or or after this, we see a significant opportunity to continue that that progression.

That is up 160 basis points year-over-year. It's on the back of the business mix strategy we've put in place and we're just getting started.

We are just getting started in Canada. Over the last couple of quarters, you've seen these green shoots, and this quarter, you're starting to see, more than green shoots.

That is going to be the biggest driver of the ROE improvement of this bank over the next journey. Maybe, Aris, just talk a little bit about Canada.

Thanks, Scott. As as Scott talked about early in the call, there's four components to our what I call ROE expansion strategy, and we laid it out during Investor Day.

You see in this quarter and the last progress translating into the P&L. On the business mix, we've talked about it many times, non-mortgage lending now is accelerating and actually passed mortgage growth in the quarter for the first time in two years.

We see that in the card book, the business banking book, HELOC, and commercial, and that should continue. You see also the second component of the business mix is on the deposit side: more day-to-day, more savings, that will continue.

The other big component of our capital-heavier businesses in auto and mortgage is the improvement in RAM. We're seeing that also as we we renew the mortgages, you're going to see the RAM lifting.

We saw that in the quarter as well, a big increase in RAM. Then fees, we've talked about the big components of fees: cards, insurance, and mutual funds all grew over 20% increase in revenues this quarter.

That's significant. The near overall was double-digit despite the impact of NSF fee regulation changes, which impacted, but we still came in double-digit.

Then finally, we shouldn't forget productivity. We've had five consecutive quarters of positive operating leverage expansion.

Where's that coming from? We haven't grown direct costs in 12 months.

Year-on-year, the direct cost base of the Canadian Bank has been flat. That said, we've added over 500 salespeople and continued to invest in digital, AI, and technology enablement.

This quarter, actually, digital sales passed 44% of total sales. That's almost double what we had during Investor Day.

We're making huge progress on on that. Of course, we we can't ignore the power of the network and what we're doing on the sales side in mutual funds.

I think it's important also to to pass to Jackie to give a bit of color on the progress we're making just in the sales power in the network.

Sure. When I think about retail fund flows, Aris, we've made significant progress on both an absolute and a relative basis.

It's not anomaly. We are we ranked, number three for the quarter.

We're also ranked number three on a year-to-date basis with over $4 billion in retail fund sales. Rankings are nice, but it's I think we take our confidence really from the underlying operating improvements.

It's the drivers are right in line with the strategy that we laid out: stronger execution on our partnership with Canadian Banking, multi-year investments that we're making in advisors, investment specialists, financial planners, technology, as well as better coverage in our wholesale channel. I think the last thing I'd say, Aris, is we still have so much opportunity.

I think we've we've dramatically improved our penetration of the retail client base since Investor Day. We're currently sitting at around 11.6%.

We think 15% penetration is absolutely achievable in this business.

Appreciate the

Thank you. Good morning.

A question on GP GBM. Very strong sequential loan growth, 7%.

Obviously, that's by design. Maybe talk a little bit about that in terms of what a reasonable run rate is.

Obviously, 7% is not a probably not a run rate. What do you think a reasonable run rate is?

Just confirmation, it seems like that's coming with the deposits. Deposit growth was even stronger.

Maybe talk about how the two are tied together in terms of, again, by design, if that's the strategy, and the fee income that should also come with those those wholesale loans. Thank you.

Yeah. Paul, Travis.

Thanks for the question. I think you're right.

I think a couple of quarter ago quarters ago, I mentioned that we might be on a flexion point where we thought loans would bottom out. If you look at the investments we're making in our franchise, we're investing across sectors, we're deepening the sectors where we're already strong, we're well positioned for the current environment.

I think our loan book is reflecting that. In addition, we've been building out new products and services, as as I've mentioned before, whether it's mortgage capital markets, or CREF, or other other subsectors.

I think you're starting to see those businesses taking off. I think loan growth is really just a reflection of the economic output and the focus that we have on our clients.

It's not a KPI that we're trying to drive. We're not out there just trying to grow loans to grow loans.

We're looking at covering our clients, providing great products and services, and using our capital or liquidity as efficiently as possible, and we're highly focused on the velocity of our capital. If you look at some of the data, you will see that our our return per risk unit are up significantly.

You can see that our fees per loan unit are up significantly. We're picking the right clients, we're banking those clients, we're providing all the products and services to those, and I think loan growth will be an outcome of that strategy.

On the deposit side, you're absolutely right. That is that is very, very intentional.

We are super, super focused on deposits. Anything, everything we do is really trying to capture those core operating deposits.

In connection with Francisco on the GTB build-out, we're investing heavily there and we are looking to continue growing that that business. I think one of the things you'll notice that our net interest margin was up 30-something basis points year-over-year.

We've been able to grow deposits, grow loans, and expand our margin. That's that's that hyper-focus on quality, customer segmentation, and cross-selling.

Yep. Then one really quick sort of micro question for me, if you don't mind.

Just in terms of the the SRT, can you remind us what drove the decision to bring that back on balance sheet and did that play a role in that 7% sequential growth in GBM?

Hey, Paul, it's Raj. No, that doesn't contribute to the 7% because the loan was always on our book.

The SRT is only a capital structure. It's an SRT we put in place about 3 years back when we had floor constraints.

It's an expensive SRT. As we look at it today, we don't, obviously, don't have capital constraints, we just recalled that SRT, and that increases our risk-weighted assets.

This is the benefit or some part of the benefit we got in 2023 when we put it on, but it doesn't impact loan growth.

Got it. Thank you.

Good morning. I want to go back to capital markets for a moment.

I think we're all impressed and and also a little surprised at how strong capital markets-related revenue is. What I'm thinking trying to think through is what are the conditions that cause this to slow or even reverse?

I'd take you back to last week when there was a fair bit of uncertainty around US Treasuries, there was some intervention there. Is that the sort of condition that dries up liquidity and hurts capital markets, or are the overall macro drivers like the hyperscalers and AI, like the capital formation related to that, and also your expansion and capabilities, are those macro drivers sort of would they overwhelm something like what happened in US Treasuries last week?

Mario. What you saw in the in the US Treasuries, that was mainly that was mainly focused on the long end of the bond.

As that doesn't affect capital markets quite as much. I would say more the 10-year and inside would would affect capital markets.

What what you're really thinking about and the reaction function I think you're looking for is you want volatility in the capital market side, but you want constructive volatility. Too much volatility, if the VIX pops to 50, plus, like you're going to see your ECM and DCM businesses compressed.

When you have constructive volatility, and which is what we have right now on a global scale, is you have clients trying to navigate really complex environment right now. They're trying to understand their FX risk, they're trying to understand capital formation, they're trying to understand the right capital structure for their businesses for the new world.

This is where we're super well positioned to help advise our clients. We are building world-class expertise, we're investing in our people and our products, and we can we can provide those, whether it's debt capital markets, equity capital markets, hedging, investment banking, corporate banking, deposits, and global banking capabilities.

This is all very, very intentional. It's part of our strategy.

When you're looking for reaction functions, the 30-year a little less so, probably 10-year and in, I would say VIX, and some of the, the the volatility in exchange rates. For the last year or two or since Liberation Day, these have all been highly constructive.

You're also seeing a reinvestment in Canada. Canada is really looking to to grow.

You look at our loan growth, we're actually up 9% in Canada year-over-year versus 5% on average loans. We are investing in our local markets and and our local clients, and and we are well positioned for that cross-border activity.

Notwithstanding this Sorry, notwithstanding this pretty strong growth we've seen in the last couple of years, and again, I'm not so much asking you for guidance for next year, but we shouldn't be surprised if this environment allows for Canadian banks to grow their capital markets revenue still further. You you're you wouldn't guide us to something like a contraction in revenue from this point forward.

Capital markets businesses are always hard to predict, right? Because you need a lot of the things I just talked about.

If you can tell me exactly where the S&P or the Toronto Stock Exchange is going to be or rates are going to be or FX is going to be next year, I could probably reverse engineer into the answer you're looking for. I think what we're trying to do is is we're trying to build products and services that we can help our clients in any environment.

It's a it's a little difficult to tell you exactly with, the the magnitude, or order of of what revenue or net income would be next year. We are investing in our future.

We're investing in new products and capabilities. I think what you can take away from this quarter, while it was a record and an exceptional quarter, it was very broad-based across every single product, region, service, sub- subgroup, you name it.

We saw broad-base base widening of our business.

Okay. A question for you, Scott.

I'll take you back a couple of years when you and I had a conversation about sort of long-term aspirations for Scotiabank and you described it to me as wanting to wanting to see a Scotia in the North American corridor, and that included Canada, US, and Mexico. I think that was the way you described it.

There is an important opportunity here for Canada's banks in looking at US regionals, given the disparity in valuation. I think where I'm going with this question is, can Scotia grow in the US through acquisition while still in this lock-up with Key, which I know ends sometime, I think it's December 2029.

Can you grow in the US through acquisitions while still maintaining this interest in Key, or do you see those as they need to be separate? You need to be either in Key or out of Key before you can make an acquisition in the US.

Those are a couple different questions in there. First, the Key investment was an investment.

We've talked about that, ad nauseam, and it's been a great investment. When you look at their their share price and their performance and and how they've executed, it's been a it's a great investment for the firm, but it is just that.

As we think about growing in the US, the first port of call is Travis's business. We've said we've said this continually, and you're starting to see that, investment that we've been making starting to pay off.

Across Travis talked about Canada, which we're super proud of, but the US also is very broad-based. Lots of capabilities being added.

Frankly, in Mexico, you heard Francisco talk about the capital markets investments and that Mexican business doing really well also. I do think we've got a lot of organic room to continue to grow in across the corridor in each of those three countries.

You saw last quarter we bought Maplemark. That was intentional.

It was small. It was a small Commercial Bank based in Texas that actually really helps Travis build out, again, further some of his capabilities and allows us to attract more deposits to actually fund those capabilities.

I think it's that type of organic with some tuck-ins, potentially, to build out on the capabilities that we're focused on. That's the priority right now.

It sounds like your interest in the US is in capital markets, not in commercial banking. Is that true?

I think right now where where we've got the biggest opportunity is in Travis's businesses and Jackie's business. As we think about Jackie's business, it's doing so well, the Canadian focus and also the international focus.

It's growing at kind of 15%, 20% for the last three or four years and we see lots of opportunity there. We could benefit from some US capabilities that connect that whole footprint.

Some of that may be through Maplemark, some of that may be through small acquisitions that we look at in other ways. That would be the priority before we start to get into things like commercial or retail.

In fact, retail is not appealing at all, let's before you get into commercial.

Got it. Thank you for that.

Hi, good morning. Thanks for taking my question.

Maybe back to Francisco. LatAm retail growth continues to be strong.

I think you particularly called out non-mortgage. I assume some of that's coming from credit cards.

Can you just talk about how you think about balancing growth, credit, and primacy as you expand that credit card portfolio in LatAm?

Thank you, Matt. Absolutely.

This has been a very deliberate journey, right? If you go back to Investor Day, what we tried to do is, number one, segment our client base.

That took us about a year, in really understanding who our client was, what the needs were, and how do we segment across the footprint and not country by country. Remember, the the the key goal here is scale in everything we do in retail.

We completed that segmentation, and on the back of that, we created value propositions that were very specific to primacy. What we concluded in that journey is that mortgage monoline does not deliver primacy.

The problem with non-primacy and monoline is that you don't capture the deposits and you have high attrition. The the the journey needed to shift our focus towards primacy.

The definition for us is really the combination of the full suite of products, where you need transactionality, and transactionality is delivered by credit cards, is delivered by personal loans, is delivered by payroll, is delivered by insurance and investment advice. That's what we're looking for.

When you see the growth of non-mortgage, and what we refer to non-mortgage, is really the combination of all those products. What we're seeing today is that we're seeing deposit growth to an extent that we've never seen before in retail.

Although the average deposit growth is 5%, core deposits are up 7%. That is a huge contributor to our returns in the long term.

The other component to think about here is that when you talk about cards, for example, is a de minimis share across all countries, right? Probably the only exception being Chile, where we have a little bit more, but beyond Chile, we're not necessarily playing to our size and scale in any market.

It's not a credit card strategy per se. It is a primacy strategy that recognizes that cards and personal loans are an important component to be prioritized by our clients as they transact with the bank.

Without having a transactional relationship, they will not bring their payroll to you. It is really a combined effort, and that's why we're so deliberately focused on non-mortgage.

That's helpful. I'll pass the line.

Thanks. Thanks for putting me in.

Just I guess the comment about the Canada agenda, I guess, OSFI is giving you another 50 basis points of excess capital. I'm wondering if if if part of that capital is going to be used to support that Canada agenda, defense, infrastructure, AI, or is that excess capital just going to be used to continue to to buy back shares?

Thanks, Steve. It's Scott.

I'll start, and Raj, if you want to add, feel free. The first call for our capital is organic growth.

I think we have, as you see, some great organic growth opportunities, and you saw that in the quarter with deployment of capital to organic growth. As I look at the Canada agenda, I do think there are a lot of opportunities.

You think about infrastructure, pipelines, you think about defense, we've actually really organized ourselves significantly differently over the last 6 months to capitalize on the defense opportunity. Now as you think about an emerging or evolving relationship with the US, I think there's going to be some opportunities to really lean into our small business clients and our our commercial clients to help them through, an uncertain period.

I do see the opportunity for more capital to be deployed frankly across all of our business. It's not going to be an issue of capital availability because we've managed this bank to a point where we now have the capital.

That's good news. Now, if there is excess capital, well, the first place that that will go will be share repurchases.

That's because there's a valuation gap and we still think there's great opportunity. You saw a little bit of that in in last quarter.

You'll see continue to see us, renew and do more as we go forward. It's that combination of organic growth and share repurchases that I think right now provide the best equation for our shareholders.

Thank you.

Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today.

We look forward to speaking to you again at our Q4 call in December. Have a great day.