Bank Of Nova Scotia · TSX:BNS
Bank Of Nova Scotia — Scotiabank — Q2 2018 Earnings Presentation
37 slides from Bank Of Nova Scotia's earnings presentation, May 29, 2018
Slide 1: Investor Presentation Second Quarter 2018
INVESTOR PRESENTATION SECOND QUARTER 2018 May 29, 2018
Slide 2: Caution Regarding Forward-Looking Statements
CAUTION REGARDING FORWARD-LOOKING STATEMENTS Our public communications often include oral or written forward-looking statements. Our use of new technologies in unprecedented ways to defraud the Bank or its customers; public communications often include oral or written forward-looking statements. inc
Slide 3: Scotiabank Overview
SCOTIABANK OVERVIEW Brian Porter President & Chief Executive Officer 3
Slide 4: Q2 2018 Overview
Q2 2018 OVERVIEW • Solid operating performance in Q2 o Net income of $2.2 billion o Diluted EPS of $1.70 per share o ROE of 14.9% o YTD operating leverage of 3.3%1 • Strong performance across Personal & Commercial banking businesses • Capital position remains strong o CET1 ratio of 12.0% 1 Excludes
Slide 5: Financial Review
FINANCIAL REVIEW Sean McGuckin Chief Financial Officer 5
Slide 6: Q2 2018 Financial Performance
Q2 2018 FINANCIAL PERFORMANCE Strong results with solid top line growth and expense management $MM, except EPS Q2/18 Y/Y Q/Q YEAR-OVER-YEAR HIGHLIGHTS Net Income $2,177 +6% (7%) Diluted EPS $1.70 +5% (9%) • Diluted EPS grew 5% Revenue $7,058 +7% - • Revenue up 7% o Net interest income up 6% from str
Slide 7: Strong Capital Position
STRONG CAPITAL POSITION CET1 ratio of 12.0% +28 bps -9 bps +4 bps 12.0% +50 bps 11.2% Q1/18 Impact of Moving Internal Capital RWA Growth Other Q2/18 to Basel II Floor Generation (ex. FX) Including FX • Strong CET1 ratio • Strong internal capital generation • Benefits from implementation of Basel II
Slide 8: Canadian Banking
CANADIAN BANKING Strong loan growth, margin expansion and improved credit performance FINANCIAL PERFORMANCE AND METRICS ($MM)1 YEAR-OVER-YEAR HIGHLIGHTS Q2/18 Y/Y Q/Q • Net income up 5% or 7%4 Revenue $3,231 +3% (2%) o Asset growth and margin expansion Expenses $1,641 +3% +2% o Lower provision for c
Slide 9: International Banking
INTERNATIONAL BANKING Strong quarter driven by continued earnings momentum in Pacific Alliance FINANCIAL PERFORMANCE & METRICS ($MM)1,2 YEAR-OVER-YEAR HIGHLIGHTS2 Q2/18 Y/Y Q/Q • Net Income up 15%6 Revenue $2,742 +7% (1%) o Strong asset and deposit growth in Pacific Alliance Expenses $1,438 +5% (2%)
Slide 10: Global Banking and Markets
GLOBAL BANKING AND MARKETS Good net interest income growth and improvement in credit quality FINANCIAL PERFORMANCE AND METRICS1 ($MM) YEAR-OVER-YEAR HIGHLIGHTS Q2/18 Y/Y Q/Q • Net Income down 14% Revenue $1,155 (4%) (3%) o Lower income from global equities (higher client Expenses $565 +13% (1%) driv
Slide 11: Other Segment
OTHER SEGMENT1 Results reflect positive impact of FX and lower expenses NET INCOME2 ($MM) YEAR-OVER-YEAR HIGHLIGHTS • Positive impact of FX (including hedges) and lower expenses 56 • Partly offset by lower gains on -32 investment securities -55 -48 -86 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 1 Represents smal
Slide 12: Risk Review
RISK REVIEW Daniel Moore Chief Risk Officer 12
Slide 13: Risk Review
RISK REVIEW Credit fundamentals remain strong IAS 39 IFRS 9 PCLs ($MM) AND PCL RATIO ON IMPAIRED LOANS1, 2 YEAR-OVER-YEAR HIGHLIGHTS 49 bps 45 bps 43 bps • PCLs1, 2 on impaired loans of $595 million 42 bps 46 bps were up 5% Q/Q and 1% Y/Y o PCLs increased due to higher International commercial provi
Slide 14: Q2 2018 Canadian Residential Mortgages
Q2 2018 CANADIAN RESIDENTIAL MORTGAGES Credit fundamentals remain strong FICO® DISTRIBUTION – CANADIAN UNINSURED PORTFOLIO Average FICO® Score Canada 787 56% • <0.7% of uninsured portfolio has a GTA 789 FICO® score of <620 and an LTV >65% GVA 792 • Canadian uninsured mortgage portfolio 16% is $111.9
Slide 15: PCL Ratios
PCL RATIOS Stable all-bank PCL ratios on impaired loans IAS 39 IFRS 9 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 PCLs on PCLs on (As a % of Total Total PCLs on Impaired Loans Impaired Impaired Average Net Loans & Acceptance) PCLs PCLs Loans Loans Canadian Banking Retail 0.34 0.31 0.30 0.29 0.28 0.28 0.28 Commerc
Slide 16: Net Write-offs
NET WRITE-OFFS Stable net write-off ratio and economic performance Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 (As a % of Average Net Loans & Acceptance)1 Canadian Banking 0.34% 0.32% 0.29% 0.25% 0.26% International Banking 1.33% 1.43% 1.16% 1.38% 1.26% Global Banking and Markets 0.19% 0.18% 0.04% 0.05% 0.08% All
Slide 17: Appendix
APPENDIX 17
Slide 18: Diluted EPS Reconciliation
DILUTED EPS RECONCILIATION Q2/18 Reported Diluted EPS $1.70 Add: Amortization of Acquisition Related Intangible Assets, Excluding Software (after-tax) $0.01 Adjusted Diluted EPS $1.71 18
Slide 19: Core Banking Margin
CORE BANKING MARGIN YEAR-OVER-YEAR HIGHLIGHTS • Lower margins in International Banking 2.54% and higher volumes of low margin Treasury assets 2.46% 2.46% 2.47% 2.44% • Partly offset by higher margins in Canadian Banking given impact of recent rate increases by the Bank of Canada Q2/17 Q3/17 Q4/17 Q1
Slide 20: Canadian Banking – Revenue Growth and NIM
CANADIAN BANKING – REVENUE GROWTH AND NIM Good retail and commercial lending revenue growth REVENUE (TEB) ($MM) NIM (%) +5% +3% Y/Y Y/Y 2.38% 2.41% 2.41% 2.41% 2.43% 3,303 3,231 3,134 804 766 835 1.65% 1.68% 1.66% 1.63% 1.64% 579 558 528 1.05% 1.08% 0.97% 0.96% 0.99% 1,771 1,920 1,907 Q2/17 Q1/18 Q2
Slide 21: Canadian Banking – Volume Growth
CANADIAN BANKING – VOLUME GROWTH Strong business and residential mortgage growth, and continue to grow retail deposits AVERAGE LOANS & ACCEPTANCES ($B)1 AVERAGE DEPOSITS ($B)1 +7% +3% Y/Y Y/Y 329 333 236 237 312 231 49 50 44 7 7 7 69 73 73 72 71 68 162 163 164 192 202 204 Q2/17 Q1/18 Q2/18 Q2/17 Q1/
Slide 22: International Banking – Revenue Growth
INTERNATIONAL BANKING – REVENUE GROWTH Strong revenue growth in Pacific Alliance BY TYPE (TEB) ($MM)1 BY REGION (TEB) ($MM)1 +7% +7% Y/Y2 Y/Y2 2,704 2,742 +21% 2,704 2,742 2,618 119 140 Y/Y 2,618 110 749 729 -1% 997 984 +10% 774 905 Y/Y Y/Y +5% +9% 1,836 1,873 1,713 1,707 1,758 Y/Y 1,734 Y/Y Q2/17 Q
Slide 23: International Banking – Volume Growth
INTERNATIONAL BANKING – VOLUME GROWTH Solid loan and deposits growth AVERAGE LOANS & ACCEPTANCES ($B)1 AVERAGE DEPOSITS ($B)1, 2 +11% +8% Y/Y3 Y/Y4 119 +15% 101 113 8 Y/Y 96 96 109 7 7 19 19 +10% 36 +6% 18 Y/Y 35 35 Y/Y 31 30 +9% 29 Y/Y +9% Y/Y 61 61 65 +12% 57 61 Y/Y 55 Q2/17 Q1/18 Q2/18 Q2/17 Q1/1
Slide 24: International Banking – Regional Loan Growth
INTERNATIONAL BANKING – REGIONAL LOAN GROWTH Strong loan growth in Latin America AVERAGE LOANS & ACCEPTANCES ($B)1 CONSTANT DOLLAR LOAN VOLUMES, Y/Y +11% Y/Y2 119 113 109 31 -1% 31 Y/Y Retail Commercial3 Total 32 Latin America 14% 17% 16% C&CA 1% (3%) (1%) +16% 88 Y/Y Total 10% 12% 11% 82 77 Q2/17 Q
Slide 25: Global Banking and Markets – Revenue and Volume Growth
GLOBAL BANKING AND MARKETS – REVENUE AND VOLUME GROWTH AVERAGE BUSINESS AND GOVERNMENT REVENUE (TEB) ($MM) LOANS & ACCEPTANCES ($B) -4% ― Y/Y Y/Y 1,203 1,190 1,155 533 612 542 80 80 80 657 613 591 Q2/17 Q1/18 Q2/18 Q2/17 Q1/18 Q2/18 Business banking Capital markets 25
Slide 26: Economic Outlook in Key Markets
ECONOMIC OUTLOOK IN KEY MARKETS Macro economic growth improving for Pacific Alliance countries Real GDP (Annual % Change) Country 2000-16 Avg. 2016 2017 2018F 2019F Mexico 2.2 2.9 2.0 2.3 2.8 Peru 5.1 3.9 2.5 3.3 3.7 Chile 4.0 1.2 1.5 3.6 3.9 Colombia 4.1 2.1 1.8 2.5 3.5 2000-16 Avg. 2016 2017 2018F
Slide 27: Provision for Credit Losses
PROVISION FOR CREDIT LOSSES IAS 39 IFRS 9 ($MM) Q2/17 Q3/17 Q4/17 Q1/18 Q1/18 Q2/18 Q2/18 PCLs on PCLs on Total Total PCLs on Impaired Loans Impaired Impaired PCLs PCLs Loans Loans Canadian Banking Canadian Retail 220 214 210 206 200 193 193 Canadian Commercial 16 10 8 14 10 11 12 Total Canadian Ban
Slide 28: Net Formations of Impaired Loans
NET FORMATIONS OF IMPAIRED LOANS1, 2 IAS 39 IFRS 9 1200 1000 800 600 ($MM) 400 200 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Net formations Average 1 Excludes loans acquired under the Federal Deposit Insurance Corporation (FDIC) guarantee related to the acquisition of R-G Premier Bank
Slide 29: Gross Impaired Loans
GROSS IMPAIRED LOANS1, 2 IAS 39 IFRS 9 6 1.15% 5 1.10% 4 1.05% 3 1.00% ($B) 0.95% 2 1 0.90% 0 0.85% Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 GILs (LHS) GILs as % of loans & BAs (RHS) 1 Prior to Q1/18, excludes loans acquired under the Federal Deposit Insurance Corporation (FDIC) guarant
Slide 30: Canadian Retail: Loans and Provision
CANADIAN RETAIL: LOANS AND PROVISION $209.9 (Spot Balances as at Q2/18, $B) Total Portfolio: $288 billion1; 93% secured2 $33.3 $37.5 $7.0 Mortgages Lines of Credit Personal Loans4 Credit Cards % secured 100% 62% 99% 3% PCL3 Q2/18 Q1/18 Q2/18 Q1/18 Q2/18 Q1/18 Q2/18 Q1/18 PCLs on Impaired Loans $ mil
Slide 31: International Retail: Loans and Provision
INTERNATIONAL RETAIL: LOANS AND PROVISION Total Portfolio1: (Spot Balances as $18.1 $59 billion; 67% secured at Q2/18, $B1) $1.8 $14.1 $4.5 $2.1 $11.4 $0.6 $3.8 Mortgages ($32.8B) $3.2 $8.1 Personal loans ($17.5B) $1.5 $6.4 Credit cards ($7.8B) $11.8 $1.8 $3.8 $7.6 $8.2 $2.2 $2.8 $2.4 C&CA Mexico Ch
Slide 32: Canadian Residential Mortgage Portfolio
CANADIAN RESIDENTIAL MORTGAGE PORTFOLIO $104.4 47%Insured $11.6 $92.8 Total Portfolio: $37.6 $210 billion $8.6 $30.9 $3.6 $15.9 $29.0 $27.3 $1.7 $11.6 $0.2 $9.5 $0.7 $14.2 $11.4 $8.8 53% Uninsured Ontario BC & Territories Alberta Quebec Atlantic Provinces Manitoba & Saskatchewan Freehold - $184B Con
Slide 33: Retail 90+ Days Past Due Loans
RETAIL 90+ DAYS PAST DUE LOANS Favourable credit quality across all markets and products Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Mortgages 0.23% 0.22% 0.21% 0.20% 0.19% Personal Loans 0.70% 0.61% 0.60% 0.63% 0.57% Credit Cards 1.30% 1.05% 1.13% 1.18% 1.08% Secured and Unsecured Lines of Credit 0.37% 0.30% 0.2
Slide 34: Q2 2018 Trading Results
Q2 2018 TRADING RESULTS Zero trading loss day(s) in Q2/18 14 12 10 (# of days in quarter) 8 6 4 2 0 1 3 4 5 6 7 8 9 10 13 15 20 30 Q2/18 Daily Trading Revenues ($MM) 34
Slide 35: Q2 2018 Trading Results and One-Day Total VaR
Q2 2018 TRADING RESULTS AND ONE-DAY TOTAL VAR Average 1-Day Total VaR 40 Q2/18: $14.7 MM Millions Q1/18: $13.2 MM Q2/17: $11.1 MM 30 20 10 0 -10 -20 -30 1-day total VaR Actual Daily Revenue 35
Slide 36: FX Movements Versus Canadian Dollar
FX MOVEMENTS VERSUS CANADIAN DOLLAR Canadian (Appreciation) / Depreciation Currency Q2/18 Q1/18 Q2/17 Q/Q Y/Y SPOT U.S. Dollar 0.779 0.813 0.733 4.2% (6.3%) Mexican Peso 14.56 15.13 13.79 3.8% (5.6%) Peruvian Sol 2.534 2.615 2.376 3.1% (6.6%) Colombian Peso 2,188 2,301 2,155 4.9% (1.5%) Chilean Peso
Slide 37: Investor Relations Contact Information
INVESTOR RELATIONS CONTACT INFORMATION Adam Borgatti, Vice President 416-866-5042 adam.borgatti@scotiabank.com Lemar Persaud, Director Judy Lai, Director 416-866-6124 416-775-0485 lemar.persaud@scotiabank.com judy.lai@scotiabank.com 37