The Bank of Nova Scotia Q2 FY2024 earnings call

• Disciplined capital allocation to higher-return client segments and geographies, with incremental capital in fiscal 2024 deployed to priority businesses.
• Deposit growth remains fundamental, with P&C deposits in Canada up 7% year-to-date.
• Cost and process efficiencies driving positive year-to-date operating leverage.
• Canadian Banking: $1 billion earnings, moderate expense growth, over 95,000 net new primary clients year-to-date, lowest client attrition in three years, 45% of retail clients holding 3+ products.
• Global Wealth Management: $387 million earnings, assets under management up, driven by higher fee-based revenues and mutual fund fees.
• International Banking: $677 million net earnings, revenue growth, expense discipline, productivity ratio improved to 51.1%, well-positioned for new international banking strategy.

Canadian Banking contributed approximately $1 billion of earnings. Global Wealth Management reported earnings of $387 million. Global Banking and Markets generated earnings of $428 million. International Banking delivered a net earnings contribution of $677 million. Canadian Banking saw favorable business mix shift, asset repricing, and deposit growth driving margin expansion. Global Wealth's earnings were driven by higher revenues in Canada's mutual fund piece and International Wealth. Global Banking and Markets had resilient earnings despite capital markets headwinds. International Banking saw solid revenue growth with net interest income up and expense discipline improving productivity ratio.

• Full-year PCL outlook is 45 to 55 basis points, expecting to be at the higher end in the next two quarters.
• Intention to turn off the DRIP in the second half of 2024.
• Plan to start dividend increases in 2025 in line with earnings growth.

• Canadian variable rate mortgage customers in GTA and Vancouver facing stress, auto portfolio friction.
• International Banking Chile commercial real estate prolonged stress, with challenges in real estate developers' cost to complete.

Q: Ebrahim Poonawala asked about credit quality visibility and rate cuts impact on Canadian consumers A: Phil Thomas discussed credit quality visibility, stating they expect to be at the higher end of the 45-55 basis point range for the next two quarters and explained how rate cuts would impact Canadian consumers over time Q: Doug Young inquired about PCL reconciliation on Slide 16 and PCL outlook A: Phil Thomas explained that GILS increase in Chile was related to commercial real estate stress but reassured no significant losses expected, and stated they expect to be in the 54-55 basis point range for the next two quarters Q: Paul Holden asked about payment shock for fixed rate mortgage borrowers vs variable rate mortgage customers today A: Phil Thomas said most fixed rate mortgage renewals are from 2017, 70% of current renewals opt for 3-year fixed term, and compared client discretionary spend and payment buffers between fixed and variable rate customers Q: Matthew Lee questioned Canadian loan growth and mortgage pipeline A: Aris Bogdaneris discussed Canadian loan growth, mentioned growing mortgage book by around $2 billion, focus on multi-product clients, and auto book moderation Q: John Aiken inquired about international lending migration from investment grade to non-investment grade A: Raj Viswanathan explained it was due to migration and client deselection for capital optimization, with no significant deliberate shift expected Q: Gabriel Dechaine asked about international NIM outlook and performing ACL ratio A: Raj Viswanathan discussed international NIM outlook with marginal benefits expected, and Phil Thomas talked about performing ACL ratio and comfort with current allowances Q: Mario Mendonca asked about DRIP intention and dividend pause A: Raj Viswanathan stated intention to turn off DRIP in second half of 2024 and explained dividend pause to align with 2025 earnings growth Q: Lemar Persaud asked about CDOR impact on Canadian non-interest income A: Raj Viswanathan and Aris Bogdaneris explained CDOR impact as a shift between non-interest revenue and net interest income, with no meaningful impact on total revenue in the long run Q: Mike Rizvanovic inquired about other segment loss and rate cuts impact A: Raj Viswanathan discussed other segment loss and how rate cuts would benefit the segment through NII and GIC renewals Q: Nigel D'Souza questioned variable rate mortgage LTV and delinquency correlation A: Phil Thomas said average LTV was in the 50s, credit quality was strong, and discussed proactive client outreach for variable rate mortgage customers Q: Darko Mihelic asked about capital floor add-on and model updates A: Raj Viswanathan explained capital floor add-on elimination due to client de-selection and model changes, and discussed future floor trends Q: Sohrab Movahedi asked about Brazil operations and PCL outlook A: Francisco Aristeguieta discussed Brazil operations focusing on returns and connected strategy, with no anticipated PCL issues in Brazil