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, there you go. Got that one out of the way. So let's -- you joined the bank Scotiabank not too long ago -- so my first question would be kind of an obvious one. previous experience, you ran the ING's global or European branch Global (inaudible). Aris Bogdaneris Global retail -- retail bank.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Have you identified any, I guess, fixable issues. I'm saying fixable maybe not the right word but to get that loan-to-deposit ratio up? Aris Bogdaneris Yes. I think first and foremost, if you're going to be a digital bank, you have to know how to do consumer lending, cards and cash loans very efficiently on mobile. So that's one area. I wouldn't say nothing is a low-hanging fruit, everything is hard. The second one is to get a savings and investment proposition, but more in investment proposition. But the key is not the product. The product is the easy part is how do you deliver it on mobile. That's the challenge, how you do. And again, so not easy. But again, if the whole organization has to reorient themselves to thinking mobile first. Yes, but there's already relative scale there. You have 2 million customers.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : So the investment angle brings up an obvious question, and I go back, again, early stages, but Q1, you had a low single-digit expense growth in the Canadian bank. As you execute on some of these investment strategies, adding Bells and whistles to Tangerine, hiring commercial bankers, all sorts of things like that, does that expense growth pick up in any material way? Aris Bogdaneris Right. I think -- I mean, expenses, I think the -- or the operating leverage in the first quarter was, I think, the highest in I don't know how many quarters, I think it was 3.7%, but that's just a point in time. The one thing I would say is that costs are not all created equal. So you can have a 3% cost growth, 5% cost growth, what's in the cost. And so I think part of the challenge I have Obviously, to drive positive operating leverage, I think that's everyone's goal, but that's over a longer cycle. It's the quality of the cost. There's good cost, I would say, and bad costs. There's good costs. Good costs are investment that help you transform the bank. Bad costs, for lack of a better word, is how do you start to take cost out of your run, the run costs and start to shift them into change, change to do more digital teams to add, more advisers at the front, wealth advisers, particularly more investment in data, more invested in AI. So getting the mix is equally important for me than the absolute number of 3% cost growth, 4% cost growth. It's the quality of the cost, right? And that to me is super important. The other aspect on the cost side, of course, half of your cost in any bank, including in Canada is people, FTEs. So for me, the other transformation that has to take place in Scotia is how are those people in the Canadian bank allocated? How far are they from the front, from the customer facing? How far are they from where you really drive value. And when you do the FTE mapping, at least in my business, what I see is very different from what I'm used to. So there has to be a bit of that reallocation. And then over time, if you're investing in the right things that are driving revenues, customers primacy, you should get that operating leverage naturally falling because you're driving more revenues with that cost. The problem is the run cost is what you have to tackle. And that $500 million, which sounds like a big number, when you take it as a proportion of your running cost of your bank, it's not that much from what I'm used to. 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 26, 2024 / 3:05PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Well, that dovetails into a few different areas. One, boring margin question. But if you start seeing your mortgage balances grow again, does that translate to flat margin performance? Aris Bogdaneris It's an interesting question because mortgage margins, at least as I look at them now, there's 3 things happening and where it will end up probably will probably end up slightly higher, but let's see. So you have 1 is as we see more competition now as the spring season comes and the mortgage, you're going to see pressure on new originations. That's clear as everyone starts competing. What we're seeing in Scotia is that we're getting low margin of our book is falling off and the new stuff is higher margin and also you're getting a positive. And then what we anticipate in the second half is as rates slowly come down, there's a lag between we reprice our mortgages and the 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 26, 2024 / 3:05PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference cost of funds. So we'll get a benefit there. So what I expect is a slight improvement over time, but settling by year-end in a steady state, what we've seen in the past.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : You did the Freudian slip loan to the deposits actually was -- it's segues to my next question, actually. Is there -- have you hit your target because that's been a big trend at Scotia for the past year plus consolidated and in the Canadian bank. Are you comfortably positioned now? Or do you want to lower that even more? Aris Bogdaneris Well, it's interesting to ask that because I don't have a loan to deposit target. I have a primacy target, but more importantly, a deposit primary deposit target that I'm driving in the bank. And at the end of the day, between trying to be a primary bank, you cannot be a primary bank, if you

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Back to the credit topic, and this was a bit of a surprise. Auto delinquency rates popping up quite noticeably and Philip given your Chief Risk Officer. 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 26, 2024 / 3:05PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference Aris Bogdaneris He's sitting over there.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : All right. And then, well, I've got a couple more questions left, so we'll time it perfectly. I think Wealth the message I got from you earlier, you're working to sell more mutual funds to the branches. And I've heard that message a number of times over the years. What is the impediment and what are you doing differently, I guess, to increase that penetration rate. Aris Bogdaneris Right. So fair question, and I talked about at Investor Day, if you have a physical channel like branches like we have, and it's extensive. You have to maximize the throughput in that channel as much as possible. You're paying for that fixed cost. It's a fixed cost, so you have to get the most out of it. So what have we done in this regard for investment products. I think 3 things. Like you know, you have to change incentive. So in the branch in your scorecards, how do you evaluate your branch staff in your front line. You've got to pivot and make that incentive from lending or whatever it is. We've actually changed the scorecard for investment that's one. Two, you have to hire and train investment specialists. This has been a big focus of ours over the last 6 to 9 months, and that is different from the past. If you just look at the number of investors, specialists who can sit with the client and go through their situation and offer them the right product, investment product or savings or whatever, that makes a difference. And the third is technology, of course, we're working with the Silicon Valley-based company to what we call smart investor. It's a tool that we use that makes that interchange between clients and our advisers who are adding much more impactful. 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 26, 2024 / 3:05PM, BNS.TO - Bank of Nova Scotia at National Bank Financial Services Conference And what I can tell you, clearly, when we look year-on-year, and again, I look at the gross flows, not the valuation because the markets move. But when you look at the widgets, we call them widgets, how much we're getting, it's up 30% to 40% year-on-year, broadly speaking, across Canada. But again, because you're working on the inputs. And it's not just one moment. It's got to be sustained in terms of just trying to drive. Again, this is fee income. You talk about ROE and capital. I need my fair share in my branch and newer. We have a wonderful wealth business. It's one of the leading wealth businesses in Canada, but we just haven't been leveraging our branch channel, and this is what's going to change.