Bank of Nova Scotia at RBC Capital Markets Canadian Bank CEO Conference Transcript

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

Question: Darko Mihelic - RBC Capital Markets - Analyst : And so -- I mean, I can imagine bringing this together wouldn't have been easy. And I guess the question is -- a couple actually come to mind first and foremost, when you say that there's a potential liquidity event, how could we see that developing? This doesn't seem like it's a very liquid position. So maybe you can like --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : And the approval process, if you can just walk?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. So with that out of the way, now, what's -- maybe you can talk a bit more about the big focus now. I mean, because we were all sort of expecting some sort of an event. Now that it's occurred, I think back to your Investor Day, and I think about, this is still sort of a transition year for IB. Does something change now?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Can you talk a bit about the big effort that Francisco and his team is undergoing with and talk a bit about the regionalization model because it -- in my discussions with investors and frankly, even myself, I think of that as a massive undertaking. And so, where are you in that process? And where do we go from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2025 / 6:20PM, BNS.TO - Bank of Nova Scotia at RBC Capital Markets Canadian Bank CEO Conference

Question: Darko Mihelic - RBC Capital Markets - Analyst : And so few couple -- just a couple of follow ups on then we can move on. But the first initial follow up is somebody in -- running the -- working in Chile will -- there'll be some local differences between Chile and Peru for sure. So how do you -- how does that work if the budgeting is centralized?

Question: Darko Mihelic - RBC Capital Markets - Analyst : And so where are you would say like fifth inning on this?

Question: Darko Mihelic - RBC Capital Markets - Analyst : And so one of the other sort of strong messages we got from the Investor Day was really a focus on this North American covert. And here we are with the threat of tariffs against both Mexico and Canada. So maybe you can talk a little bit about how you see that developing and what in the shorter term your preparation would be in the event?

Question: Darko Mihelic - RBC Capital Markets - Analyst : And so where are you in that journey on connecting the US business?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. And then just maybe to help us sort of better model because I do have to do this for a living sometimes, when I think of it being a down year, well, now that you've gotten rid of Colombia, there's a little bit of a drag there and -- but really, I think the issue was there's taxes and there's costs, which is the bigger impact?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay, great. So maybe just -- because I've been asking everybody, so I want to sort of touch base on anti-money laundering and I think of Scotia Bank and wow, you've got so many different jurisdictions including the Caribbean. And you were asked for the Federal Reserve, I mean, there was in 2015 to address deficiencies in compliance. So maybe just, were your efforts localized in the US. And again, getting back to Scotia's vast empire of -- did some of those -- did some of that AML work go global?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Is it different though by -- like, I just keep thinking to the complexities involved. You've got Mexico, you've got the USA, you've got -- do you manage it differently?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. Maybe we'll come back to Canada now in our chat. I've had the question from a few today and I wanted to talk a bit about the mortgage market and in particular, in your case, because you have a slightly different product that's out there. So we've moved away from concern, I think with the lower rates, but you would have a good view even your -- so I mean, just maybe, firstly, I mean, is this now turning from a concern for you to an opportunity and you know, and maybe you can touch on your mortgage strategy and how that product shapes your --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : So that's what I wanted to zero in on because if you've improved your retention rate, it's possible that a way to do that is to offer an exceptionally low right now, right? And that would harm the mortgage profitability. So can you talk to mortgage profitability --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. I did want to talk a little bit about something that was a bit unique to Scotia in the past, which was, you know, even like last year in Q1, you were affected by the output floor and now OBSI pushed it out, but BNS -- I guess you're in 2024 you're managing around the output floor, then there's the Key Corp. acquisition. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2025 / 6:20PM, BNS.TO - Bank of Nova Scotia at RBC Capital Markets Canadian Bank CEO Conference Maybe now that the floor is not really an immediate concern and Key Corp is expected -- now the second trance to a close. Do you plan at operating at a higher set one ratio going forward knowing that that floor could potentially come back and maybe can you just touch on capital optimization for 2025?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Right okay. So you'd -- I mean, I know you'd mentioned in the call you were thinking about buybacks, it was on your mind. And so essentially is -- we can think about this as something that really comes around once you're past 12.5%?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. Switching gears to credit and credit quality, I mean, you guys provided fairly decent mid 50s total PCL, but it was total PCL and so in the context of total PCLs, I often think about reserve releases or stage two. So maybe you can talk a little bit about, does that factor -- how do you think about that for your evolution of the PCL in 20--?

Question: Darko Mihelic - RBC Capital Markets - Analyst : But I guess this cycle has been a little bit different, right? There's been a gradual increase. We haven't seen much of a spike. But, you've got different geographies that we're working with here. So, is it still -- as we think about pcl's falling? Is it still potentially something that we should see a significant drop in PCLs? Or is this really going to be much more mild?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay, great. I'm going to take time now to go to the questions from the floor. Okay. So the first question, your NII is most sensitive to rate decreases versus peers. Rates are expected to further decrease in 2025. How do you expect your NIM to move through 2025?

Question: Darko Mihelic - RBC Capital Markets - Analyst : And maybe just a follow up on that. I mean, the thing that stands out with Scotia Bank is your corporate, right? That big loss that you have there. And so when I think about NII and the benefit, it all rolls through that segment. And so should we expect or can we expect that segment to be at net zero when we hit terminal rates or how should we think about that?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. The next question from the floor is how will you defend your mortgage market share as rates fall? Do you favor competitive pricing or multiproduct customer relationships building primacy? So I think I have an idea where you're going to go with this but --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : It's actually -- I mean, when I think of 13% monoline customer that doesn't sound --

Question: Darko Mihelic - RBC Capital Markets - Analyst : Yeah, in the mortgage. I mean, when I think of banks, I would have thought that that number would be higher. What indicators do you use to determine whether or not that monoline will at some point give you more business?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Now, you reference multi-product in that answer. But as I recall, there was a bit of an emphasis on deposits for your --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Yeah, absolutely. So the question is then how do you push more for the deposit? I mean renewal for a mortgage --?

Question: Darko Mihelic - RBC Capital Markets - Analyst : I want to dive into that more, but I don't have time. So maybe a discussion for another day is including the Scene.

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. So we're at the time now where I ask you for your key takeaways that you'd like to leave investors with for 2025.

Question: Darko Mihelic - RBC Capital Markets - Analyst : We'll end the session. Thank you very much.