Bank of Nova Scotia at National Bank Financial Services Conference Transcript

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

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Well, okay. That's a good way to set things up. Mortgage business, the growth has been phenomenal. Everybody knows that. One thing I'm curious about is how much of the growth that we've seen, which is way above average, has been from housing price inflation versus units? I suspect it's the latter. And we don't really get stats on that in Canada, like Australians are lucky that way, but... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2022 / 1:45PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : CBA access or something.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. So the next question I have is on more of the regulatory angle. OSFI is looking at the combining mortgage and HELOC products. First question, do you think the -- if there is a regulatory tightening of some sort, do you think it's going to be more on the capital requirement side or on the underwriting criteria side, because B20 might be reviewed again or both? What's your perspective?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : And okay, I guess that answers my next question. So if there were -- there was some tightening, and that would be on the secure...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Then the overall STEP program growth, you don't think would be negative?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I believe -- I think the point worth highlighting on the broker, and this is vague memory, but Scotia's approach is not just a pure distribute -- you actually handle the paperwork more and the renewals for broker origination.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Another aspect of the mortgage business, prepayment. So I suspect last year would have been a big year for prepayment. And this year, probably not just because of the direction of rates. Like how big of an impact was that on your revenues last year, say? Or was it not? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2022 / 1:45PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Right. Okay. Auto lending, that's a business where -- I mean, it hasn't dropped as much as cards, but it certainly hasn't recovered as fast as mortgages, obviously, supply chain issues that we know what's going on. Is there any reason to expect that business to start cranking up again?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : So what -- the used versus new, was that a big spread differential?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. And then the other part of the auto lending business is the dealer financing and that's probably pretty low compared to pre-COVID, I imagine. But from a -- it's lower spread business, correct? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2022 / 1:45PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Do you see -- maybe not autos because dealers are pretty good businesses, but maybe other businesses that just don't have enough inventory of whatever they're selling. Is there any financial stress developing where -- I mean there's a bike store near my house, anecdotal, they closed down because they just couldn't sell enough bikes. They didn't have enough despite the demand. Is there anything like that you're seeing in your commercial book more broadly?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. Commercial lending has been a double-digit growth business for -- loan growth that is, across the board, and Scotia has certainly participated in that. I'll just play devil's advocate and say, it's a one trick pony. CRE, the housing market is hot, so it's CRE that's driving it all. Is that accurate? Or what are some of the underappreciated drivers of commercial growth in Canada?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : You've mentioned Roynat a couple of times, now just a random question on it. I don't I haven't really spent much time thinking about it and it's embedded in your commercial business. Like what's the secret sauce there?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Expenses, the exciting topic to talk about. We're going into more initiative spending, obviously dialed back during the pandemic. What's the -- is there a way to quantify how much initiative spending contributes to your overall expected expense growth rate in your business? And then is this year, 2022, because there's probably some catch-up element to it, that proportion could be a bit higher.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Got it. And then just -- you alluded to your global operations role previously. Sometimes you look at Scotia -- not just sometimes, frequently. But if I look at the consolidated picture, expense growth can be very low for several quarters. I mean it looks like, oh, they're under-investing. But behind the scenes, there's Rob and Peter to PayPal, I suspect. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2022 / 1:45PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I have analogy for banking.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Got it. Well, maybe another venue. The margin outlook, I mean, this is one where prior to what happened in Eastern Europe, we're gearing up for a big rate hike cycle. Is there any reason -- or are you thinking of maybe a slower pace of rate increases from the Bank of Canada at this point?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Right. Just in time for mortgage season. The prior speaker had a comment on expectations for revolver rates in the cards business. I think at least it's not getting where it's going to plateau. Or is that what you're seeing as well?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : So the wealth cooperation, it's shifting deposits into mutual funds or something else? Is that...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. Branch question, and I think this question is maybe most relevant to Scotia, notwithstanding the relative size of the network. But what we saw from the international business last year was a substantive move to reduce the branch footprint across several countries. And the justification was digitization is ramping up, so we don't need these branches, this number of branches. And markets are different, of course, but why can't the same rationale be applied to the Canadian business where digitization is also ramping up and has been for years?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : All right. Well, good timing. I guess that -- one question from... Unidentified Participant I have a question on (inaudible) exactly what you're saying. Even it was 12 years ago, that the mass funds will be in this (inaudible). And that's why the wealth, the last 3 speakers have said, the wealth is higher and these are the boomers. Whats been general in next gen is everyone saying go to discount, go do yourself DIY and yet everyone of the next gen and so I think the banks are going to continue to do very well in wealth once these boomers are gone that we've cared for the last 12 years. What's going to happen? So how are you going to fill the gap?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I should -- yes. The question was about wealth is -- I'm paraphrasing, but the wealth business is going right now because it's catering to boomers and their needs. But as they transition to millennials and lower-touch, lower-cost service providing, how does that affect the financials of the business, I guess?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : We do have a break after so... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2022 / 1:45PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. With that, Dan, appreciate the Q&A. Always a good time to catch up. And...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Go to break.