Bank of Nova Scotia Q1 2025 Earnings Call Transcript

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

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I guess maybe just a question on credit outlook. I think if we can break this down in an ex-tariff world, I think, Phil, you mentioned expect PCLs to go down in the second half of '25, and then you referenced higher-for-longer rates. Would you characterize rates today as no longer being higher for longer in terms of the ability of the consumer customer base to service their debt? So one, if the rate backdrop now low enough where that's not a big risk factor, and ex tariffs, should we -- are you seeing any signs of a cyclical rebound? Maybe if you go back three, four weeks ago before the headline said. Would appreciate any color on those two. Thanks.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Got it. And one quick follow-up, maybe, Scott, for you. Stocks at very discounted valuations. Why not initiate buybacks given where capital levels are? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 12:15PM, BNS.TO - Q1 2025 Bank of Nova Scotia Earnings Call

Question: John Aiken - Jefferies - Analyst : Wanted to focus in on the strong performance that we saw in Global Banking and Market this quarter. The productivity ratio showed some market improvement, both quarter over quarter and year over year. And I know a lot of that is related to the strong growth that we saw in revenues, but I was a little surprised that it came in this low. What -- how should I be interpreting this? Are we expecting, I guess, lower expenses or a better productivity ratio through 2025? Or is this an indication that we're expecting revenues to significantly decline to a more normalized level from what we saw in the first quarter?

Question: John Aiken - Jefferies - Analyst : And then not to downplay the advisory impact this quarter, but I mean, obviously, exceptionally strong growth on trading. Can you give us a sense in terms of what you're seeing for pipeline on advisory given the fact that there's a lot of, I guess, excitement or exuberance in terms of what the outlook may be?

Question: Matthew Lee - Canaccord Genuity LLC - Analyst : Maybe just one on international and the Davivienda transaction. Was taking back equity a strategic decision on your end or maybe more in a way to negotiate more favorable terms on the deal? I guess if you look at divesting more assets, so [would you say] more deals like this one or maybe a greater focus on receiving cash in the transaction?

Question: Doug Young - Desjardins Securities Inc. - Analyst : Questions for Phil, and sorry, Phil, I'm going to go tariff. But you haven't changed your PCL rate guidance for fiscal '25. You were at the higher end this quarter, but you're expecting to be lower in the back half as you kind of talked that you built a little bit of cushion in for tariffs. Now you've done a lot of stress testing. Can you give us a sense if tariffs are put in as proposed? Like what -- where does your guidance go, or what are the kind of ranges we should be thinking about in terms of your total PCL rate?

Question: Doug Young - Desjardins Securities Inc. - Analyst : Okay. I would ask what meaningful means. But I'm going to guess you're not going to tell me.

Question: Gabriel Dechaine - National Bank Financial - Analyst : A quick one on international. If I strip out the GBM impact, your earnings were down still high single digits. And I'm wondering, you had guided to softer performance for that business this year. Just wondering if that's better, worse, in line than what your expectations were? And then on capital -- actually, I'll wait for the answer and I'll ask you the capital one.

Question: Gabriel Dechaine - National Bank Financial - Analyst : Okay. Now as far as the balance sheet management, this optimization process, whatever you call it, has been ongoing for two years or so. And I appreciate it's not a process that ever ends, but been a bit more distinct activity in the past couple of years. Your corporate loan book is down roughly $30 billion from its peak. You did $11 billion of credit risk transfer this quarter. I don't know what the cumulative amount is. Just wondering if we're done with that outsized stuff, given that ASPs put the increases to the Basel III output floor, shelved them, anyway. Is that the -- are we going to be more business as usual going forward?

Question: Mario Mendonca - TD Securities, Inc. - Analyst : Going to tariffs again for a moment. Was there any trend in loan growth throughout the quarter that you could highlight? And what I'm getting at here is, as the threat of tariffs unfolded throughout the quarter, did it have a negative effect on commercial loan growth, corporate loan growth, even retail loan growth throughout the quarter?

Question: Mario Mendonca - TD Securities, Inc. - Analyst : Okay. A quick question then on impaired. Like with all due respect to the accountants who dreamed the IFRS 9, I'm not really not -- it's hard to build up my interest in performing loan reserves. What really matters to me is what is the timing? And what sort of effect do you expect on your impaireds, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 12:15PM, BNS.TO - Q1 2025 Bank of Nova Scotia Earnings Call if, in fact, we do see meaningful tariffs? Like do the impaireds build up abruptly? Or is it lags 2026? How should we think about the impaireds with a little emphasis on the performing here?

Question: Paul Holden - CIBC World Markets Inc. - Analyst : Wanted to tie together two predominant themes here: tariffs and capital allocation. A lot of contingency planning, I'm sure on the part of Scotia as with many companies. What are you thinking in terms of -- if tariffs under the scenario where there are significant tariffs and may be more permanent, does that change at all, Scott, sort of your thinking around capital allocation, like those accelerate the need or desire to do more in the US, for example?

Question: Darko Mihelic - RBC Capital Markets - Analyst : I see things a little bit differently with respect to Stage 2. I see Stage 2 provisioning as somewhat of a reflection of conservatism. And given all of the uncertainty, I was surprised that you didn't build more in. But I guess your answer to Mario was that, look, you think that the problems come in 2026 and maybe it's outside of the 12-month window, but yet I still think there could have been an overlay, right? So Phil, can you speak to me about -- when I look at your base case and your alternative pessimistic cases, they don't change much. So you could have at least perhaps put a bigger weighting on a scenario and sort of get ahead of it and build a reserve. But is it really the timing that's preventing you from doing that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 12:15PM, BNS.TO - Q1 2025 Bank of Nova Scotia Earnings Call

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. And so is it fair to say though, then that unless something significantly changes, we should be expecting something really in Q2?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Phil, just maybe to take Darko's question just a little bit differently. If the quarter was ending today, would those 5%, 10%, 15% type assumptions be any different?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Understood. So I mean, it doesn't really matter that the quarter ended January 31. You have no better information you're seeing today versus January 31? Is that --?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : I appreciate that. And Scott, I just wanted to kind of go back to the December 2023 Investor Day. You obviously laid out a plan, including a five-year set of kind of milestones and what have you. I mean, you've got a little bit over a year under your belt since then. What -- which one of the assumptions would you say are being tested the most in you being able to deliver on that 2028, for example, road plan?