Bank Of Nova Scotia · TSX:BNS
Bank Of Nova Scotia — The Bank of Nova Scotia — Q1 2023 Earnings Presentation
53 slides from Bank Of Nova Scotia's earnings presentation, Feb 28, 2023
Slide 1: Investor Presentation First Quarter 2023
Investor Presentation First Quarter 2023 February 28, 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 accounting standards, rules and interpretations on these estimates; global capital statements. Statements of this type are included in this document, and may be included
Slide 3: Opening Remarks
Opening Transparency and Partnership Remarks Disciplined Capital Allocation Optimize Funding Mix Scott Thomson President & CEO Improve Business Mix 3
Slide 4: Q1/23 Overview
Q1/23 Overview Raj Viswanathan Group Head & CFO 4
Slide 5: Q1 2023 Financial Performance
Q1 2023 Financial Performance $MM, except EPS Q1/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported • Adjusted EPS down 14% (reported down 36%) Net Income $1,772 (35%) (15%) o Reported earnings includes the impact of the Pre-Tax, Pre-Provision Profit1 $3,516 (8%) 14% Canada Recovery Dividend Diluted EPS
Slide 6: Strong Capital Position
Strong Capital Position Q/Q CHANGE IN CET1 RATIO (%)1 • Internal capital generation supported organic growth across all business lines 21 bps and contributed an additional 5 basis 11.5% 9 bps 11.5% points to the CET1 ratio (16 bps) (12 bps) (2 bps) • The revaluation of FVOCI securities mitigated muc
Slide 7: Canadian Banking
Canadian Banking $MM Q1/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported • Net income1 down 9% (adjusted -10%) Net Income1 $1,087 (9%) (7%) Pre-Tax, Pre-Provision Profit2 $1,715 8% (1%) o Pre-tax, pre-provision profit up 8% (adjusted +7%) o Higher PCLs reflect normalization of provisions Revenue $3,164
Slide 8: Global Wealth Management
Global Wealth Management $MM, except AUM/AUA Q1/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported Net Income1 $385 (7%) 6% • Net income down 7% (adjusted -6%) Pre-Tax, Pre-Provision Profit2 $521 (7%) 6% • Revenue down 7% Revenue $1,323 (7%) 3% o Lower fee income from a decline in trading Expenses $802 (
Slide 9: Global Banking and Markets
Global Banking and Markets $MM Q1/23 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Reported • Net income down 7% (up 7% Q/Q) Net Income1 $519 (7%) 7% o Higher expenses and PCLs, offset by higher Pre-Tax, Pre-Provision Profit2 $730 (1%) 11% revenue Revenue $1,503 7% 11% • Revenue up 7% Expenses $773 15% 11% o Ne
Slide 10: International Banking
International Banking Constant dollar basis1,5 YEAR-OVER-YEAR HIGHLIGHTS $MM Q1/23 Q1/22 Y/Y1 Q4/22 Q/Q1 • Net income2 up 18% Reported Net Income2 $654 $555 18% $655 - • Pre-tax, pre-provision profit up 11% Pre-Tax, Pre-Provision Profit3 $1,265 $1,141 11% $1,164 9% • Revenue up 8% Revenue $2,701 $2,
Slide 11: Other
Other 1, 2 REPORTED NET INCOME ($MM) HIGHLIGHTS (67) (10) (52) • Reported net income attributable to equity holders impacted by $579 million (603) attributable to the Canada Recovery (913) Dividend Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 1, 2, 3 ADJUSTED NET INCOME ($MM) HIGHLIGHTS (52) • Higher funding costs
Slide 12: Risk Review
Risk Strong secured retail and corporate portfolio Review Credit performance in line with Phil Thomas Chief Risk Officer expectations Credit trends remained resilient 12
Slide 13: Strong Credit Quality
Strong Credit Quality GILs ($MM) AND GIL RATIO1 HIGHLIGHTS 81 bps 73 bps 67 bps 64 bps 60 bps 58 bps 62 bps 65 bps • Excluding the impact of foreign exchange, GILs increased $199 million Q/Q driven by new formations 5,116 33 5,104 18 in Retail Banking and Commercial 4,735 28 4,786 18 141 286 4,456 2
Slide 14: Strong Credit Quality
Strong Credit Quality PCLs ($MM) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 HIGHLIGHTS All-Bank Impaired 405 406 389 494 562 • Total PCLs increased $109 million Q/Q driven Performing (183) (187) 23 35 76 by less favourable macroeconomic outlook, Total 222 219 412 529 638 continued portfolio growth and higher ret
Slide 15: Prudent Allowances
Prudent Allowances TOTAL ACLs1 ($MM) AND ACL RATIO2 HIGHLIGHTS 109 bps 96 bps 86 bps 80 bps 75 bps 72 bps 71 bps 72 bps • Allowances increased to $5.7 billion 6,893 23 6,232 o Prudent performing allowance of 1,691 22 5,731 5,583 5,375 5,295 5,499 5,668 $4.0 billion to account for growth 23 20 28 31
Slide 16: Closing Remarks
Closing Commitment to strong CET1 ratio Remarks Profitable and sustainable growth Scott Thomson President & CEO Improve shareholder return 16
Slide 17: Appendix
1 2 Appendix 3 4 5 17
Slide 18: Net Income and Adjusted Diluted EPS
Net Income and Adjusted Diluted EPS Net Income ($MM) and Q1/22 Q4/22 Q1/23 EPS ($ per share) 1 Quarterly diluted common shares outstanding may be impacted by Net Income attributable to common shareholders $2,608 $1,949 $1,631 dilutive effect of put options sold by the bank in the following legal Dil
Slide 19: Adjusting Items
Adjusting Items1 Adjusting Items (Pre-Tax) ($MM) Q1/22 Q4/22 Q1/23 Acquisition-Related Costs 2 Amortization of Intangibles 25 24 21 Canadian Banking 6 6 2 International Banking 10 9 10 Global Wealth Management 9 9 9 Other Net Loss/(Gain) on Divestitures and Wind Down of Operations - 361 - Expansion
Slide 20: Risk Adjusted Margin and NIM
Risk Adjusted Margin1 and NIM2 RISK ADJUSTED MARGIN ALL-BANK NIM 3.31% 3.31% 3.22% 3.22% 3.18% (7 bps) 0 bps 2.22% 2.23% 2.20% 2.10% 2.05% 218 bps 2.12% 211 bps 2.05% 2.02% 1.94% 1.83% Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q4/22 Spreads Business Mix Q1/23 All-Bank Canadian Banking International Banking CANA
Slide 21: All-Bank NIM Calculation
All-Bank NIM1 Calculation All-Bank ($ millions) Q1/22 Q4/22 Q1/23 Average total assets2 1,238,616 1,332,897 1,380,008 Less: Non-earning assets 94,165 126,213 118,465 Average total earning assets2 1,144,451 1,206,684 1,261,543 Less: Trading Assets 162,885 117,807 119,974 Securities purchased under re
Slide 22: Interest Rate Sensitivity
Interest Rate Sensitivity NET INTEREST INCOME SENSITIVITY POLICY RATE CHANGE AND OUTLOOK • Impact of an immediate and sustained 100 Rate Change by BNS Forecast bps parallel shift on net interest income over a Fiscal Quarters (bps)2 Current Policy Rate 12-month period QTD Policy for Country Q1/22 Q2/
Slide 23: Economic Outlook in Core Markets
Economic Outlook in Core Markets REAL GDP (ANNUAL % CHANGE) Forecast1, 2 2010–20 Country 2021 2022E3 2023 2024 Average Full Full Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F Year Year Canada 1.6 5.0 3.6 2.2 1.3 0.5 0.4 1.1 0.7 1.4 2.0 2.3 1.6 U.S. 1.8 5.9 2.1 1.7 1.7 0.9 0.5 1.2 0.5 1.0 1.4 1.6 1.1 Mexico 1.7 4.
Slide 24: 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 (%) +8% 8,073 8,733 8,193 8,812 Active Digital 7,
Slide 25: Digital Progress: Canada
Digital Progress: Canada Digital Adoption (%) +7% 4,071 4,368 4,149 4,455 Active Digital 3,599 3,847 +200 bps Users (#’000) +24% 59% 61% 59% 61% 55% 50% 2019 2020 2021 2022 Q1/22 Q1/23 +1,100 bps +11% 2019 2020 2021 2022 Q1/22 Q1/23 3,393 3,704 3,415 3,800 Active Mobile 2,666 3,073 Users (#’000) +43
Slide 26: Digital Progress: Pacific Alliance
Digital Progress: Pacific Alliance Digital Adoption (%) +8% 4,002 4,365 4,044 4,357 Active Digital 3,677 +600 bps 2,717 Users (#’000) +60% 58% 58% 53% 52% 46% 2019 2020 2021 2022 Q1/22 Q1/23 35% +2,300 bps +12% 2019 2020 2021 2022 Q1/22 Q1/23 3,793 3,458 3,861 Active Mobile 3,334 2,830 Users (#’000)
Slide 27: Revenue Growth
Revenue Growth Canadian Banking1 International Banking1 (Constant Dollar Basis)2 +10% 3,134 3,164 +8% 2,874 838 877 +29% 2,562 2,701 31 -28% 679 2,491 43 30 551 597 +14% 525 2,195 2,296 2,287 +4% +8% 1,923 1,982 2,073 Q1/22 Q4/22 Q1/23 Q1/22 Q4/22 Q1/23 Retail Banking Business Banking Latin America
Slide 28: Loan Growth by Business Line
Loan Growth by Business Line Canadian Banking1 International Banking1 Global Banking and Markets (Constant Dollar Basis)2 +9% +33% +13% 442 446 408 166 171 81 84 +22% 68 151 7 7 +12% 7 72 72 +5% 69 92 95 +13% 84 132 8 8 123 7 +21% 99 265 282 283 +7% 19 19 19 +5% 42 46 48 +14% Q1/22 Q4/22 Q1/23 Q1/22
Slide 29: High Quality Loan Growth
High Quality Loan Growth Canadian Banking International Banking Global Banking and Markets1 Commercial1 Commercial & Corporate1,2 +22% +13% +33% 132 84 92 95 81 91 123 78 87 18 +17% 84 112 73 17 68 102 99 16 56 +7% 16 16 52 +4% 54 55 50 52 49 52 47 50 113 +37% 105 96 83 86 32 +72% 35 37 38 39 +22% 2
Slide 30: Deposit Growth
Deposit Growth Canadian Banking1 International Banking1,2 (Constant Dollar Basis)3 +10% +11% 299 320 328 116 119 107 116 116 +4% +14% 111 69 77 79 204 212 +13% 187 38 39 40 +4% Q1/22 Q4/22 Q1/23 Q1/22 Q4/22 Q1/23 Global Banking and Markets1,2 Global Wealth Management1 +12% -12% 39 37 34 165 179 185
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 January 31, Oc
Slide 32: Canadian Retail: Loans and Provisions
Canadian Retail: Loans and Provisions 1 MORTGAGES AUTO LOANS 99 78 39 37 41 39 50 78 4 45 63 0 0 1 35 31 1 1 0 0 0 0 0 0 0 1 0 01 (6) (4) (5) Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 LINES OF CREDIT3 CREDIT CARDS5 410 380 288 267 268 312 244 234
Slide 33: Canadian Residential Mortgages
Canadian Residential Mortgages 27% 37% Canadian Mortgage Portfolio Insured Variable Mortgage Variable Portfolio Mortgages Total Total Portfolio1,2: Portfolio1,2: Total Outstanding Balance ($Bn) $302 $111 $302Bn $302Bn Uninsured Outstanding Balance ($Bn) $221 $96 Average LTV3 52% 60% 73% 63% Uninsure
Slide 34: Canadian Residential Mortgages
Canadian Residential Mortgages Canadian Mortgage Portfolio1,2: $302Bn 84% Freehold 167.1 Freehold - $255Bn Condos - $47Bn (84%) (16%) 22.8 Total 60.2 Portfolio1,2: 144.3 16.8 32.6 $302Bn 20.3 11.7 10.3 43.4 3.8 2.9 0.3 0.7 28.8 17.4 11.4 9.6 Ontario BC & Territories Alberta Quebec Atlantic Manitoba
Slide 35: International Retail: Loans and Provisions
International Retail: Loans and Provisions MEXICO CHILE CARIBBEAN AND CENTRAL AMERICA 428 Markets with 329 133 326 300 Greater 173 106 212 237 129 70 62 64 Weighting to 138 111 103 102 51 67 65 139 154 133 119 205 179 124 216 Secured 120 122 102 72 98 91 67 58 45 39 46 93 170 195 133 124 108 115 95
Slide 36: Retail 90+ Days Past Due Loans
Retail 90+ Days Past Due Loans1,2 CANADA3 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Mortgages 0.16% 0.13% 0.12% 0.12% 0.10% 0.09% 0.09% 0.11% Personal Loans 0.51% 0.41% 0.39% 0.44% 0.40% 0.42% 0.49% 0.56% Credit Cards 0.75% 0.57% 0.63% 0.69% 0.69% 0.65% 0.72% 0.70% Secured and 0.18% 0.15% 0.16
Slide 37: Trading Results
Trading Results TRADING REVENUE1 NO TRADING LOSS DAYS (Q1/23) AND ONE-DAY TOTAL VAR (Q1/23) 20 Average 1-Day Total VaR 40 Q1/23: $ 15.2 MM Millions 18 Q4/22: $ 14.2 MM 30 Q1/22: $ 12.3 MM 16 20 14 (# of days in quarter) 12 10 10 0 8 -10 6 4 -20 2 -30 0 <0 5 6 7 8 9 10 15 20 25 >25 Q1/23 Daily Tradin
Slide 38: International Banking: Pacific Alliance
International Banking: Pacific Alliance1 FINANCIAL PERFORMANCE AND METRICS ($MM) GEOGRAPHIC DISTRIBUTION8,9 Reported (Constant FX)2,3 Q1/23 Q4/22 Q1/22 Q/Q2 Y/Y2 12% 35% Colombia Mexico Revenue ($MM) $1,889 $1,813 $1,788 4% 6% Expenses ($MM) $873 $862 $823 1% 6% REVENUE PTPP4 ($MM) $1,016 $951 $965
Slide 39: International Banking: CCA
International Banking: CCA1 FINANCIAL PERFORMANCE AND METRICS ($MM) GEOGRAPHIC DISTRIBUTION8,9 Reported Q1/23 Q4/22 Q1/22 Q/Q2 Y/Y2 (Constant FX)2,3 19% 66% English Revenue ($MM) $597 $551 $525 8% 14% Central America Caribbean Expenses ($MM) $346 $339 $340 2% 2% REVENUE PTPP4 ($MM) $252 $212 $185 18
Slide 40: Non-GAAP Reconciliations
1 2 Non-GAAP Reconciliations 3 4 5 40
Slide 41: Impact of Foreign Currency Translation
Reconciliation for non-GAAP Financial Measures Impact of Foreign Currency Translation Average Exchange Rate Q1/23 Q/Q Y/Y US Dollar/Canadian Dollar 0.742 (1.3%) (6.0%) Mexican Peso/Canadian Dollar 14.342 (4.8%) (12.5%) Peruvian Sol/Canadian Dollar 2.853 (3.0%) (9.2%) Colombian Peso/Canadian Dollar 3
Slide 42: All Bank: Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures All Bank: Risk Adjusted Margin All-Bank ($ millions) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Average total assets1 1,238,616 1,264,193 1,295,165 1,332,897 1,380,008 Less: Non-earning assets 94,165 102,901 111,324 126,213 118,465 Average total earning assets1 1,14
Slide 43: Canadian Banking: Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures Canadian Banking: Risk Adjusted Margin Canadian Banking ($ millions) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Average total assets1 411,748 423,218 437,269 445,670 450,040 Less: Non-earning assets 4,129 4,035 4,089 4,112 4,035 Average total earning assets1 407,619
Slide 44: International Banking: Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures International Banking: Risk Adjusted Margin International Banking ($ millions) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Average total assets1 196,100 203,875 209,076 217,061 228,374 Less: Non-earning assets 16,039 17,371 18,448 19,358 19,103 Average total earning
Slide 45: Pacific Alliance: NIM and Risk Adjusted Margin
Reconciliation for non-GAAP Financial Measures Pacific Alliance: NIM and Risk Adjusted Margin Pacific Alliance ($ millions) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Average total assets1 147,550 154,649 157,441 161,526 170,840 Less: Non-earning assets 14,998 17,638 18,427 18,640 18,071 Average total earning as
Slide 46: 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) Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Average total assets1 32,177 32,409 33,219 34,522 35,124 Less: Non-earning assets 2,720 2,718 2,656 2,611 2,662 Average
Slide 47: Pre-Tax, Pre-Provision Profit
Reconciliation for non-GAAP Financial Measures Pre-Tax, Pre-Provision Profit ($ millions) Reported Basis Adjusted Basis1 Pre-tax, pre-provision profit Q1/22 Q4/22 Q1/23 Q1/22 Q4/22 Q1/23 All-Bank Revenue 8,049 7,626 7,980 8,049 7,987 7,980 Expenses 4,223 4,529 4,464 4,198 4,287 4,443 Pre-tax, pre-pr
Slide 48: Pre-Tax, Pre-Provision Profit (Constant Currency)
Reconciliation for non-GAAP Financial Measures Pre-Tax, Pre-Provision Profit (Constant Currency) ($ millions) Reported Basis Adjusted Basis1 Pre-tax, pre-provision profit Q1/22 Q4/22 Q1/23 Q1/22 Q4/22 Q1/23 International Banking (Constant FX) Revenue 2,491 2,562 2,701 2,491 2,562 2,701 Expenses 1,35
Slide 49: Pre-Tax, Pre-Provision Profit: Reported and Adjusted
Reconciliation for non-GAAP Financial Measures Pre-Tax, Pre-Provision Profit: Reported and Adjusted ($ millions) Reported Basis Adjusted Basis1 Pre-tax, pre-provision profit Q1/22 Q4/22 Q1/23 Q1/22 Q4/22 Q1/23 Global Wealth Management Revenue 1,422 1,289 1,323 1,422 1,289 1,323 Expenses 862 798 802
Slide 50: Mexico, Chile, Peru, Colombia: Return on Equity
Reconciliation for non-GAAP Financial Measures Mexico, Chile, Peru, Colombia: Return on Equity ($ millions) Reported Basis ($ millions) Reported Basis Return on Equity FY21 FY22 Q1/23 Return on Equity FY21 FY22 Q1/23 Mexico Chile Net Income Attributable to 586 745 220 Net Income Attributable to 605
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 Q1/23 Return on Equity FY21 FY22 Q1/23 English Caribbean Dominican Republic Net Income Attributable to 204 298 123 Net Income Attributable to 50 57 19 Co
Slide 52: Pacific Alliance and Central America: Return on Equity
Reconciliation for non-GAAP Financial Measures Pacific Alliance and Central America: Return on Equity ($ millions) Reported Basis Q1/22 Q4/22 Q1/23 Pacific Alliance Net Income Attributable to 461 527 522 Common Shareholders Total average common equity 12,522 13,880 13,934 Return on Equity 14.6% 15.1
Slide 53: Investor Relations Contact Information
Investor John McCartney, Senior Vice-President Relations 416-863-7579 john.mccartney@scotiabank.com Contact Sophia Saeed, Vice-President Information 416-933-8869 sophia.saeed@scotiabank.com Rebecca Hoang, Director 416-933-0129 rebecca.hoang@scotiabank.com 53
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