Bank Of Nova Scotia · TSX:BNS
Bank Of Nova Scotia — The Bank of Nova Scotia — Q2 2023 Earnings Presentation
54 slides from Bank Of Nova Scotia's earnings presentation, May 24, 2023
Slide 1: Investor Presentation Second Quarter 2023
Investor Presentation Second Quarter 2023 May 24, 2023
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements From time to time, our public communications include oral or written forward-looking obtaining regulatory approvals; critical accounting estimates and the effect of changes to statements. Statements of this type are included in this document, and may be i
Slide 3: Opening Remarks
Opening Strong Capital and Liquidity Remarks Client Focused Growth Initiatives Scott Thomson Improving Business Mix President & CEO 3
Slide 4: Q2/23 Overview
Q2/23 Overview Raj Viswanathan Group Head & CFO 4
Slide 5: Q2 2023 Financial Performance
Q2 2023 Financial Performance $MM, except EPS Q2/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported Net Income $2,159 (21%) 22% • Diluted EPS down 22% Pre-Tax, Pre-Provision Profit1 $3,353 (11%) (5%) Diluted EPS $1.69 (22%) 24% • Adjusted pre-tax, pre-provision profit down 11% Revenue $7,929 - (1%) • Rev
Slide 6: Strong Capital Position
Strong Capital Position Q/Q CHANGE IN CET1 RATIO (%)1 9 bps 4 bps 12.3% • CET1 ratio of 12.3%, expected to grow 18 bps through fiscal 2023 56 bps (4 bps) • Strong internal capital generation across 11.5% business lines • Includes benefits of revised Basel III adoption and share issuances Q1 2023 Rev
Slide 7: Canadian Banking
Canadian Banking $MM Q2/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported Net Income1 $1,060 (10%) (2%) • Net income1 down 10% Pre-Tax, Pre-Provision Profit2 $1,677 6% (2%) o Pre-tax, pre-provision profit up 6% Revenue $3,134 8% (1%) o Higher PCLs as a result of retail formations Expenses $1,457 10% 1%
Slide 8: Global Wealth Management
Global Wealth Management $MM, except AUM/AUA Q2/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported Net Income1 $353 (13%) (8%) • Net income down 13% Pre-Tax, Pre-Provision Profit2 $482 (13%) (8%) o Impacted by challenging market conditions Revenue $1,300 (4%) (2%) o Canadian Wealth down 17%; Internationa
Slide 9: Global Banking and Markets
Global Banking and Markets $MM Q2/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported Net Income1 $401 (18%) (23%) • Net income down 18% Pre-Tax, Pre-Provision Profit2 $600 (1%) (18%) o Higher expenses and PCLs Revenue $1,352 7% (10%) • Revenue up 7% Expenses $752 15% (3%) o Net interest income up 7% driv
Slide 10: International Banking
International Banking Constant dollar basis1,5 YEAR-OVER-YEAR HIGHLIGHTS $MM Q2/23 Q2/22 Y/Y1 Q1/23 Q/Q1 Reported • Net income2 in line Net Income2 $642 $642 - $689 (7%) • Pre-tax, pre-provision profit up 6% Pre-Tax, Pre-Provision Profit3 $1,273 $1,200 6% $1,322 (4%) Revenue $2,752 $2,552 8% $2,809
Slide 11: Other
Other R E P O R T E D N E T I N C O M E 1, 2 ( $ M M ) HIGHLIGHTS • Reported net income attributable to equity (10) (52) holders increased $590 million from the prior quarter which included $579 from the Canadian Recovery Dividend (323) (603) (913) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 A D J U S T E D N E T
Slide 12: Risk Review
Risk Review Phil Thomas Chief Risk Officer 12
Slide 13: Strong Credit Quality
Strong Credit Quality GILS ($MM) AND GIL RATIO1 HIGHLIGHTS 73 bps • GILs increased $201 million Q/Q ($74 million excluding 67 bps 64 bps 65 bps 67 bps 60 bps 58 bps 62 bps the impact of foreign exchange) 5,104 18 5,305 23 • New formations in Retail Banking partially offset a by 4,735 4,786 18 120 de
Slide 14: Strong Credit Quality
Strong Credit Quality PCLs ($MM) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 HIGHLIGHTS All-Bank • Total PCLs (37 bps): Impaired 406 389 494 562 621 o Increased $71 million Q/Q driven by retail Performing (187) 23 35 76 88 formations primarily in International and less Total 219 412 529 638 709 favourable macroec
Slide 15: Prudent Allowance Build
Prudent Allowance Build TOTAL ACLS1 ($MM) AND ACL RATIO2 HIGHLIGHTS • Allowances increased to $5.9 billion 96 bps 86 bps 80 bps 75 bps 75 bps o Prudent performing allowance of 72 bps 71 bps 72 bps $4.2 billion to account for 6,232 uncertainty in economic outlook 22 5,731 5,931 5,583 5,499 5,668 33 1
Slide 16: Appendix
1 2 Appendix 3 4 5 16
Slide 17: Net Income and Adjusted Diluted EPS
Net Income and Adjusted Diluted EPS Net Income ($MM) and EPS ($ per share) Q2/22 Q1/23 Q2/23 Quarterly diluted common shares Reported View outstanding may be Net Income Attributable to Common Shareholders impacted by dilutive Net Income attributable to common shareholders 2,595 1,631 2,029 effect of
Slide 18: Adjusting Items
Adjusting Items1 Adjusting Items (Pre-Tax) ($MM) Q2/22 Q1/23 Q2/23 Acquisition-Related Costs 2 24 21 21 Amortization of Intangibles Canadian Banking 5 2 1 International Banking 10 10 11 Global Wealth Management 9 9 9 Other Canada Recovery Dividend - - - Total (Pre-Tax) 24 21 21 Q2/23 Adjusting Items
Slide 19: Risk Adjusted Margin and NIM
Risk Adjusted Margin1 and NIM2 RISK ADJUSTED MARGIN ALL-BANK NIM 3.31% 3.22% 3.31% 3.24% 3.18% 3 bps (1 bp) 2.23% 2.20% 2.10% 2.05% 2.08% 213 bps 211 bps 2.12% 2.02% 1.94% 1.83% 1.80% Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q1/23 Spreads Business Mix Q2/23 All-Bank Canadian Banking International Banking CANAD
Slide 20: Interest Rate Sensitivity
Interest Rate Sensitivity NET INTEREST INCOME SENSITIVITY POLICY RATE CHANGE AND OUTLOOK POLICY RATE CHANGE AND OUTLOOK • Impact of an immediate and sustained 100 bps parallel Rate Change by BNS Forecast shift on net interest income (NII) over a 12-month Policy Fiscal Quarters (bps)2 Current Policy
Slide 21: Economic Outlook in Core Markets
Economic Outlook in Core Markets REAL GDP (ANNUAL % CHANGE) Forecast1 2010–20 Country 2021 2022 2023 2024 Average Full Full Q1E Q2F Q3F Q4F Q1F Q2F Q3F Q4F Year Year Canada2 1.6 5.0 3.4 2.1 1.1 0.3 0.5 1.0 0.1 0.7 1.5 2.1 1.1 U.S. 1.8 5.9 2.1 1.6 1.9 1.0 0.3 1.2 0.1 0.2 0.8 1.5 0.6 Mexico 1.7 4.7 3.
Slide 22: Digital Progress: All-Bank
Digital Progress: All-Bank • Canada: Progress across all key metrics as customer adoption of Digital continues. • Pacific Alliance: Continued digital progress with steady increase in digital and mobile customers across all countries. DIGITAL ADOPTION (%) +6% ACTIVE 8,073 8,733 8,357 8,889 7,524 DIGI
Slide 23: Digital Progress: Canada
Digital Progress: Canada DIGITAL ADOPTION (%) +7% ACTIVE 3,847 4,071 4,368 4,222 4,535 +160 bps 3,599 DIGITAL USERS (#’000) +26% 59% 61% 60% 62% 55% 50% 2019 2020 2021 2022 Q2/22 Q2/23 +1,180 bps +12% 2019 2020 2021 2022 Q2/22 Q2/23 ACTIVE 3,393 3,704 3,488 3,896 2,666 3,073 MOBILE USERS DIGITAL SAL
Slide 24: Digital Progress: Pacific Alliance
Digital Progress: Pacific Alliance +5% DIGITAL ADOPTION (%) 4,002 4,365 4,134 4,354 3,677 ACTIVE 2,717 +240 bps DIGITAL USERS (#’000) +60% 58% 55% 57% 53% 2019 2020 2021 2022 Q2/22 Q2/23 46% 35% +2,240 bps +10% 3,793 3,570 3,917 2019 2020 2021 2022 Q2/22 Q2/23 3,334 ACTIVE 2,830 MOBILE USERS 1,847 +
Slide 25: Revenue Growth
Revenue Growth CANADIAN BANKING1 INTERNATIONAL BANKING1 on Constant Dollar Basis2 +8% +8% 2,903 3,164 3,134 2,809 2,752 -12% 877 821 +13% 2,552 37 31 32 727 603 623 +14% 547 2,176 2,287 2,313 +6% 1,968 2,175 2,097 +7% Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Retail Banking Business Banking Latin America
Slide 26: Adjusted Non-Interest Expense
Adjusted Non-Interest Expense(1) HIGHLIGHTS ADJUSTED NON-INTEREST EXPENSE ($MM) Y/Y $MM Q2/23 Q1/23 Q2/22 Q/Q Y/Y • Salaries impacted by negative FX, inflationary adjustments and Salaries and Benefits 1,794 1,744 1,606 3% 12% higher staffing Performance & share-based • Technology costs up 13%. Unfav
Slide 27: Loan Growth by Business Line
Loan Growth by Business Line GLOBAL BANKING AND CANADIAN BANKING1 INTERNATIONAL BANKING1 MARKETS1 on Constant Dollar Basis2 +6% +9% +29% 446 447 177 177 420 84 86 162 73 6 7 8 72 73 98 97 69 89 132 132 9 9 8 102 283 281 20 20 272 19 46 51 51 Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Grow
Slide 28: High Quality Loan Growth
High Quality Loan Growth CANADIAN BANKING INTERNATIONAL BANKING GLOBAL BANKING AND COMMERCIAL1 C O M M E R C I A L & C O R P O R A T E 1,2 MARKETS1 +8% +18% +29% 98 97 132 132 84 86 93 95 81 89 123 78 18 20 +25% 73 111 17 102 16 56 58 57 +6% 16 52 52 +10% 55 50 54 49 47 113 112 +30% 105 95 86 33 +31
Slide 29: Deposit Growth
Deposit Growth REPORTED AVERAGE DEPOSITS BY SEGMENT Q2/23 REPORTED AVERAGE DEPOSIT MIX in billions CB IB GBM GWM Term - Notice - 666 679 Business Business 624 7% 21% Demand- 592 Personal 538 2% 328 337 308 295 261 Q2/23 Notice - Demand - $679 Bn Personal Business 119 126 22% 107 31% 104 111 156 170
Slide 30: Strong Balance Sheet Metrics
Strong Balance Sheet Metrics $Bn Q2/22 Q1/23 Q2/23 Capital Metrics CET1 Ratio1 11.6% 11.5% 12.3% Tier 1 Capital Ratio1 12.8% 13.2% 14.1% Total Capital Ratio1 15.0% 15.2% 16.2% TLAC Ratio3 30.1% 27.9% 28.3% Leverage Ratio2 4.2% 4.2% 4.2% TLAC Leverage Ratio3 9.8% 8.9% 8.4% CET1 Capital1 51.5 54.1 55.
Slide 31: Macroeconomic Scenarios
Macroeconomic Scenarios SELECT MACROECONOMIC VARIABLES USED TO ESTIMATE EXPECTED CREDIT LOSSES Alternative Scenario - Alternative Scenario – Alternative Scenario – Base Case Scenario Optimistic Pessimistic Very Pessimistic As at As at As at As at As at As at As at As at Next 12 months April 30, Janu
Slide 32: Macroeconomic Scenarios
3 4 5 6 7 8 9 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2 2022Q1 2022 Q1 2022Q2 2022 Q2 in $Trillions 2022Q3 2022 Q3 2022Q4 2022 Q4 2023Q1 2023 Q1 2023Q2 2023 Q2 2023Q3 2023 Q3 2023Q4 2023 Q4 2024Q1 2024 Q1 2024Q2 2024 Q2 2024Q3 2024 Q3 2024Q4 2024 Q4 2025Q1 2025 Q1 2025Q2 2025 Q2 2025Q3 2025 Q3 2025Q4 2025 Q4 CA
Slide 33: Commercial Real Estate
Commercial Real Estate Portfolio comprised of Commercial Real Estate, and Construction loans which include project management and trade contractors LOANS OUTSTANDING HIGHLIGHTS Q2/22 Q1/23 Q2/23 Total Portfolio: $67.1Bn • Growth in Real Estate and Construction loans has been primarily from under-sup
Slide 34: Canadian Retail: Loans and Provisions
Canadian Retail: Loans and Provisions 1 MORTGAGES AUTO LOANS 89 78 39 37 41 39 50 4 63 65 35 45 0 0 1 1 31 0 0 0 0 0 0 0 1 0 01 1 (6) (4) (5) Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 LINES OF CREDIT3 CREDIT CARDS5 380 357 288 267 268 312 244 234
Slide 35: Canadian Residential Mortgages
Canadian Residential Mortgages CANADIAN MORTGAGE PORTFOLIO ($BN) 27% 36% Insured Variable Mortgage Variable Portfolio Mortgages Total Total Total Outstanding Balance $300 $109 Portfolio1,2: Portfolio1,2: $300 $300 Uninsured Outstanding Balance $220 $94 Average LTV3 53% 61% 73% 64% Uninsured Fixed CA
Slide 36: Canadian Residential Mortgages
Canadian Residential Mortgages C A N A D I A N M O R T G A G E P O R T F O L I O 1,2 in $ billions Freehold Condos 84% ($253Bn) Freehold 166.2 22.7 Total 59.6 143.5 Portfolio1,2: 16.7 32.2 20.2 11.6 10.2 $300Bn 42.9 3.7 2.9 0.3 0.7 28.5 17.3 11.3 9.5 Ontario BC & Territories Alberta Quebec Atlantic
Slide 37: International Retail: Loans and Provisions
International Retail: Loans and Provisions CARIBBEAN AND MEXICO CHILE CENTRAL AMERICA MARKETS 329 WITH GREATER WEIGHTING 173 158 133 300 TO 138 111 129 103 104 106 212 237 102 62 64 67 65 139 109 179 51 124 154 133 119 SECURED 120 122 102 98 91 93 96 3 195 72 78 170 133 124 115 58 45 39 46 108 95 62
Slide 38: Retail 90+ Days Past Due Loans
Retail 90+ Days Past Due Loans1,2 CANADA3 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Mortgages 0.13% 0.12% 0.12% 0.10% 0.09% 0.09% 0.11% 0.12% Personal Loans 0.41% 0.39% 0.44% 0.40% 0.42% 0.49% 0.56% 0.58% Credit Cards 0.57% 0.63% 0.69% 0.69% 0.65% 0.72% 0.70% 0.71% Secured and 0.15% 0.16% 0.17
Slide 39: Trading Results
Trading Results TRADING REVENUE TWO TRADING LOSS DAYS (Q2/23) AND ONE-DAY TOTAL VAR (Q2/23) Average 1-Day Total VaR Q2/23: $ 17.4 MM Q1/23: $ 15.1 MM 60 Q2/22: $ 11.9 MM 14 50 12 40 (# OF DAYS IN QUARTER) 10 30 20 8 10 Millions 6 0 -10 4 -20 2 -30 0 -40 <0 5 6 7 8 9 10 15 20 25 >25 Q2/23 DAILY TRADI
Slide 40: International Banking: Pacific Alliance
International Banking: Pacific Alliance1 GEOGRAPHIC FINANCIAL PERFORMANCE AND METRICS ($MM) D I S T R I B U T I O N 7,8 Reported (Constant FX)2,3 Q2/23 Q1/23 Q2/22 Q/Q2 Y/Y2 12% 35% Revenue $1,918 $2,000 $1,873 (4%) 2% Colombia Mexico Expenses $915 $918 $833 0% 10% REVENUE PTPP4 $1,003 $1,082 $1,040
Slide 41: International Banking: CCA
International Banking: CCA1 GEOGRAPHIC FINANCIAL PERFORMANCE AND METRICS ($MM) D I S T R I B U T I O N 7,8 Reported (Constant FX)2,3 Q2/23 Q1/23 Q2/22 Q/Q2 Y/Y2 20% 65% Revenue $623 $603 $547 3% 14% Central America English Caribbean Expenses $344 $350 $328 (2%) 5% REVENUE PTPP4 $279 $253 $219 10% 28
Slide 42: Non-GAAP Reconciliations
1 2 Non-GAAP Reconciliations 3 4 5 42
Slide 43: Impact of Foreign Currency Translation
Reconciliation for non-GAAP Financial Measures Impact of Foreign Currency Translation Average Exchange Rate Q2/23 Q/Q Y/Y US Dollar/Canadian Dollar 0.738 (0.5%) (6.5%) Mexican Peso/Canadian Dollar 13.549 (5.5%) (15.7%) Peruvian Sol/Canadian Dollar 2.799 (1.9%) (5.5%) Colombian Peso/Canadian Dollar 3
Slide 44: All Bank: Net Interest Margin and Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures All Bank: Net Interest Margin and Risk Adjusted Margin All-Bank ($ millions) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Average total assets1 1,264,193 1,295,165 1,332,897 1,380,008 1,390,459 Less: Non-earning assets 102,901 111,324 126,213 118,465 111,261 Average t
Slide 45: Canadian Banking: Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures Canadian Banking: Risk Adjusted Margin Canadian Banking ($ millions) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Average total assets1 423,218 437,269 445,670 450,040 450,634 Less: Non-earning assets 4,035 4,089 4,112 4,035 3,957 Average total earning assets1 419,183
Slide 46: International Banking: Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures International Banking: Risk Adjusted Margin International Banking ($ millions) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 Average total assets1 203,875 209,076 217,061 228,374 238,705 Less: Non-earning assets 17,371 18,448 19,358 19,103 20,050 Average total earning
Slide 47: Pacific Alliance: NIM and Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures Pacific Alliance: NIM and Risk Adjusted Margin Pacific Alliance ($ millions) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 1 Average total assets 154,649 157,441 161,526 170,840 183,531 Less: Non-earning assets 17,638 18,427 18,640 18,071 21,552 1 Average total earning
Slide 48: Caribbean and Central America: NIM and Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures Caribbean and Central America: NIM and Risk Adjusted Margin Caribbean and Central America ($ millions) Q2/22 Q3/22 Q4/22 Q1/23 Q2/23 1 Average total assets 32,409 33,219 34,522 35,124 35,372 Less: Non-earning assets 2,718 2,656 2,611 2,662 2,547 Average
Slide 49: Pre-Tax, Pre-Provision Profit
Reconciliation for non-GAAP Financial Measures Pre-Tax, Pre-Provision Profit 1 ($ millions) Reported Basis Adjusted Basis Business Line Pre-tax, pre-provision profit Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Revenue 7,942 7,980 7,929 7,942 7,980 7,929 All-Bank Expenses 4,159 4,464 4,576 4,135 4,443 4,555
Slide 50: Pre-Tax, Pre-Provision Profit (Constant FX)
Reconciliation for non-GAAP Financial Measures Pre-Tax, Pre-Provision Profit (Constant FX) ($ millions) Reported Basis Adjusted Basis1 Business Line Pre-tax, pre-provision profit Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 International Banking Revenue 2,552 2,809 2,752 2,552 2,809 2,752 (Constant FX) Expen
Slide 51: Return on Equity
Reconciliation for non-GAAP Financial Measures Return on Equity ($ millions) Reported Basis ($ millions) Reported Basis Return on Equity FY21 FY22 Q2/23 Return on Equity FY21 FY22 Q2/23 Mexico Chile Net Income Attributable to Common Shareholders 586 745 206 Net Income Attributable to Common Sharehol
Slide 52: Pacific Alliance and CCA: Return on Equity, PCLs
Reconciliation for non-GAAP Financial Measures Pacific Alliance and CCA: Return on Equity, PCLs Reported Basis Constant Dollar Basis1 PCLs ($ millions) Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Pacific Alliance 230 350 398 241 367 398 Caribbean and Central America 39 35 25 43 37 25 ($ millions) Reported B
Slide 53: Revenue, Loans, Deposits
Reconciliation for non-GAAP Financial Measures Revenue, Loans, Deposits 1 Reported Basis Constant Dollar Basis Revenue ($ millions) Q2/22 Q1/23 Q2/23 Q2/22 Q1/23 Q2/23 Latin America 1,866 2,073 2,097 1,968 2,175 2,097 C&CA 503 597 623 547 603 623 Asia 37 31 32 37 31 32 Average Loans ($ billions) Q2/
Slide 54: Investor Relations Contacts
John McCartney, Senior Vice-President 416-863-7579 john.mccartney@scotiabank.com Investor Sophia Saeed, Vice-President Relations 416-933-8869 Contacts sophia.saeed@scotiabank.com Rebecca Hoang, Director 416-933-0129 rebecca.hoang@scotiabank.com 54
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