Bank of Nova Scotia To Acquire KeyCorp Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Good morning. I guess maybe, Scott, for you, I think the question that come up this morning is, the rationale for this transaction relative to maybe Scotia had excess capital, why not use that towards buying back your own stock, given where it's trading. So if you don't mind, just -- as a shareholder of Scotia, remind me what shareholders have gained for what seems like a relatively passive investment for now or for the foreseeable future? If you could please start there.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And I agree, I think the strategy is consistent when doing more in the US. I guess maybe, Scott, on the strategy front, like the only -- outside of Scotia at some point buying the entirety of the bank and not that you're proposing that today, I'm just trying to think about what combinations have worked in financials. The other thing that comes to mind is Morgan Stanley -- MUFGA, where you have a large holder, and that partnership worked out for both parties. As we think about the strategy and growth like -- if you don't mind, how quickly do you think or do you see yourself prepared to act like -- it feels like there's a lot to be done on commercial lending, capital markets between what Scotia already does, what Key already does in putting that together. But I would love to hear your thoughts, at least in terms of how you are thinking about the strategic alignment of the two companies.

Question: Ebrahim Poonawala - BofA Securities - Analyst : And if one last one, if I could, on the capital efficiency, you emphasized that, Raj, if I think about it purely very simplistically, should I think about we're getting CAD350 million earnings for USD2.8 billion capital that you're putting to work here?

Question: Matthew Lee - Canaccord Genuity Corp. - Analyst : Thanks for taking my question. Maybe just starting in terms of capital, it does feel like this transaction and the DRIP, maybe a signal to the Street that you're pretty comfortable with the position relative to Basel III endgame. Is that the right way to think about it? And maybe as a follow-on, does it preclude you or this transaction precludes you from doing a buyback program over the next couple of years?

Question: Matthew Lee - Canaccord Genuity Corp. - Analyst : Okay. And then maybe just in terms of approval, any regulatory hurdles to close this deal?

Question: Matthew Lee - Canaccord Genuity Corp. - Analyst : All right. That's helpful. I'll pass the line.

Question: Paul Holden - CIBC Capital Markets - Analyst : Yeah. A fairly straightforward question to start for Raj. That CAD300 million to CAD350 million of earnings, is that net of the cost of capital? And if it's not, how should we think about what you're giving up, I guess, would be effectively on investment income? Thank you.

Question: Paul Holden - CIBC Capital Markets - Analyst : Understand. Okay. That's helpful. And then second question, I guess, is more for Scott. I mean, look, you've already highlighted a number of reasons why you're attracted to KeyCorp. But I'm just curious in terms of the process you went through because it sounds like you approached KeyCorp, at least Scotia approached KeyCorp. Like I imagine it didn't start with a potential investment set of one. It started with a potential investment set looking at different regionals, but you really narrowed down on KeyCorp. So maybe walk us through a little bit through that process? And how you arrived at KeyCorp as being the best option for Scotia? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 1:00PM, BNS.TO - Bank of Nova Scotia To Acquire KeyCorp Call

Question: Paul Holden - CIBC Capital Markets - Analyst : And i guess, that leads to my last question, which is on US wealth strategy, which has been discussed in the past. Should we view this sort of as the solution in adding the US wealth capabilities? Or is there a potential to do something more?

Question: Paul Holden - CIBC Capital Markets - Analyst : Got it. That's it for me. Thanks for your time.

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Good morning. Thank you for taking my questions. Maybe to start off with, the timing is always curious. What was so interesting about August 12 to make this announcement?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay. And Scott, I think in response to the last question, you said, look, the tuck-in-type approach to wealth acquisitions in the US remain kind of part of the -- I guess, part of the playbook. But presumably, you -- your capital deployment, at least for now, is limited to getting this transaction done and I don't know, rebuilding the capital ratio to some level with some sort of a buffer to 12.5%. Is that the right way to think about it? Like I'm just trying to understand what's the likelihood of another transaction in the next 12 months.

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay. And just one last question for me. Just not to pick on this too, too much, but I guess it does kind of help get a state of management mindset. 3.5 -- or call it, $350 million plus in earnings, $3.9 billion, call it, plus or minus 10%, 11% return on that capital, maybe it goes a little bit higher; I mean, this doesn't look overly accretive to the target of 14%, 15%? Or am I thinking about it the wrong way?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay. So -- all right. So this -- so Raj, just to be crystal clear, this is indeed very much a financial transaction. I mean, it's hard -- I mean I think I listened to the Key call at 8:00 a.m. They position did very much as a financial transaction. And is that the right way to think about it from Scotiabank's perspective as well?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay. Thank you. Thank you for taking my questions.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : And my first question is on the Key call, we heard from them that Scott and you had been kind of reaching out to different banks for investment opportunities in the US shortly after he became CEO. I'm just wondering, what the rationale was for doing so early, I guess, in your tenure?

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. And then you mentioned optionality on the strategy, the North American corridor strategy. I think a lot of people are going to look at this, there's a five-year standstill, I believe, you can't buy more Key until five years from now or so. Does that optionality -- people are going to assume that you want to buy 100% of this thing, ultimately. But would you consider selling as well?

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. And then another basic, simple question. How do you -- your day-to-day involvement, I assume it's going to be limited. You'll have some Board seats. But how do you advance a partnership -- what am I going to see, I guess, in terms of success rate on -- oh, the North American strategy is working? Like are you going to have more auto loans between Cleveland, Midwest and Mexico, something of that nature? I'm just trying to figure out how it enhances that strategy from execution standpoint.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. And last one, just to sneak in there because you gave us your growth targets for the next few years at the Investor Day in December, no growth this year, 5 to 7, I believe, next year and then 7 to 8 beyond 2025. This deal doesn't change any of that? Or does it -- it's accretive? Does it enhance or will get updated at some point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 1:00PM, BNS.TO - Bank of Nova Scotia To Acquire KeyCorp Call

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. Thank you.