Bank of Nova Scotia Q4 2024 Earnings Call Transcript

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

Question: Ebrahim Poonawala - Bank of America - Analyst : I guess maybe, Scott, going back to the summary you provided in terms of the strategic sort of execution around the turnaround. I guess just big picture, if you look at top down, give us your comfort level as we think about the 5% to 7% earnings growth this year, what pushes you towards the higher end or maybe even above the higher end of that target given the macro backdrop that you are assuming in your forecast? And as we think about the ROE improvement, 11.3% for full year, do we exit 2025 with something that's north of 13%? Thank you.

Question: Gabriel Dechaine - National Bank Financial Inc. - Analyst : Just want to ask about that international business a bit, both the -- I guess, the P&C component and then the GBM component. So loan balances have been declining both in the mortgages and the commercial side of things. And then GBM, up year over year, but the steady decline in GBM revenues and -- or earnings anyway over the course of the year from unusual peak in Q1. I'm just wondering, is this something that your outlook for international overall didn't sound too bullish and lower earnings next year. I'm wondering if that's become more pessimistic or more cautious in the wake of what happened in the US election. Is there a reduced CapEx expectation or investment in some of these countries and factoring in the impact of dollarization and all that stuff. Just wondering if you can give an updated perspective.

Question: Gabriel Dechaine - National Bank Financial Inc. - Analyst : And then aside from your cost, your productivity gains and stuff like that, what else can you -- how else can you adapt?

Question: Matthew Lee - Canaccord Genuity Group Inc. - Analyst : Maybe a clarification on the RWA growth this quarter. I think you guys mentioned book quality changes. It seems like exposure you're seeing is expanding pretty much every quarter, but sort of jump this one. So I know part of it is recalibration, but is there any change in the risk of the book to call out? And how should we think about RWA growth impacting capital for '25.

Question: Matthew Lee - Canaccord Genuity Group Inc. - Analyst : Okay, that's fair. Then can we potentially see a reversal of that increased exposure or that growth if macro environment gets better?

Question: Paul Holden - CIBC - Analyst : I have a question for Phil. On the Canadian residential mortgage books saw a bit of an uptick in impairments this quarter. I know you commented that as something you expected. But just wondering if you can kind of provide any more details on what drove it? It was just simply interest rate pressures? And then with renewals on fixed mortgages coming up in '25, why that's not going to be more problematic, if that's the case and or if there's a certain cohort of mortgages this quarter that saw more pressure than the overall book.

Question: Paul Holden - CIBC - Analyst : Can I sneak in one really quick one for Scott. You said hopeful Key closes Q1. Is that calendar or fiscal?

Question: John Aiken - Jefferies - Analyst : In the MD&A, you talked about some pressure from Brazil negatively impacting top and bottom line in international. A little surprised that this got called out because I did not think that the Brazilian operations were that meaningful to have an overall impact on international. Can you describe what happened in the quarter and try to give us some sort of quantification in terms of what the scale of the operations are in Brazil?

Question: Mario Mendonca - TD Cowen - Analyst : First for Phil. Phil, when you offer the mid-50s guidance on total PCLs, could you give us any insight into what that implies on the performing side? Like what I'm getting at here is -- are we at the stage now where the allowances have been sufficiently built up that we can actually see the releases come through the way IFRS 9 was sort of intended?

Question: Mario Mendonca - TD Cowen - Analyst : And then on capital, and this might maybe Raj or Scott. Can you talk about what dividend growth expectations would be like in 2025 will that resume? And also, is there room for Scotia to start to return capital to shareholders in other ways, like buybacks, for example, just sort of in line with that outlook you have for our ROE improvement over time. I know you're not talking about this year necessarily, but --

Question: Lemar Persaud - Cormark Securities - Analyst : Maybe for Scott or Raj, can you guys help me square up why despite a higher tax rate challenges in primary client growth and perhaps a tougher economic backdrop in international, why the 5% to 7% EPS growth for 2025. Like is it all down to lowering interest rates versus when you provided the guidance at Investor Day last year. Just talk about some of levers in driving that 5% to 7%.

Question: Lemar Persaud - Cormark Securities - Analyst : If I could squeeze in just a really quick one here. Just Scott, for you. When you mentioned the double-digit EPS growth for 2026, does that include KeyCorp or is that ex-KeyCorp?

Question: Jill Shea - UBS - Analyst : Raj, just on the Other segment, we did see the NII number improved this quarter. Just curious if you could give us some more color in terms of both the NII trajectory into 2025 with rate cuts as well as the bottom line results in other segments, just given I presume that tax rate hit is going to run through the Other segment. Any color there would be appreciated.

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : I just wanted to clarify something with Phil. Phil, for '25, I think that, let's call it, mid-50s PCL-- like do you expect '25 PCLs to be higher than '24 PCLs?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : I mean I don't want to put too fine a point on it, Phil. But in your sub pack, you have 2024 total bank PCLs 53 basis points. That seems to me to be mid-50s and you finished the second half with 55, 54. So when you say first half of next year might be a little bit elevated, it could be higher than how the second half of this year has gone. Is that what you're implying to us?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : But I mean you've got one of the smallest relative credit card book. So what's causing this degradation in the first half of next year?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : And maybe a quick one for Raj. I know I hear the 14% ROE. Do you have the equivalent number from a return on asset perspective that you're targeting?