Investor Presentation - Scotiabank
Transcript of Investor Presentation - Scotiabank
Investor Presentation Fourth Quarter 2018
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. In addition, representatives of the Bank may include forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this document, the Management’s Discussion and Analysis in the Bank’s 2018 Annual Report under the headings “Outlook” and in other statements regarding the Bank’s objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results, and the outlook for the Bank’s businesses and for the Canadian, U.S. and global economies. Such statements are typically identified by words or phrases such as “believe,” “expect,” “foresee,” “forecast,” “anticipate,” “intend,” “estimate,” “plan,” “goal,” “project,” and similar expressions of future or conditional verbs, such as “will,” “may,” “should,” “would” and “could.”
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved.
We caution readers not to place undue reliance on these statements as a number of risk factors, many of which are beyond our control and effects of which can be difficult to predict, could cause our actual results to differ materially from the expectations, targets, estimates or intentions expressed in such forward-looking statements.
The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; changes in currency and interest rates; increased funding costs and market volatility due to market illiquidity and competition for funding; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; changes in laws and regulations or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; changes to our credit ratings; operational and infrastructure risks; reputational risks; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services; our ability to execute our strategic plans, including the successful completion of acquisitions and dispositions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; global capital markets activity; the Bank’s ability to attract, develop and retain key executives; the evolution of various types of fraud or other criminal behaviour to which the Bank is exposed; disruptions in or attacks
(including cyber-attacks) on the Bank’s information technology, internet, network access, or other voice or data communications systems or services; increased competition in the geographic and in business areas in which we operate, including through internet and mobile banking and non-traditional competitors; exposure related to significant litigation and regulatory matters; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; and the Bank’s anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank’s business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank’s financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank’s actual performance to differ materially from that contemplated by forward-looking statements. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results, for more information, please see the “Risk Management” section of the Bank’s 2018 Annual Report, as may be updated by quarterly reports.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2018 Annual Report under the headings “Outlook”, as updated by quarterly reports. The “Outlook” sections are based on the Bank’s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events.
Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s shareholders and analysts in understanding the Bank’s financial position, objectives and priorities, and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf.
Additional information relating to the Bank, including the Bank’s Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov.
TABLE OF CONTENTS
Scotiabank Overview 4
• Canada’s International Bank 5
• Well-Diversified and Profitable Business 6
• Medium-Term Financial Objectives 7
• Why Invest in Scotiabank? 8
• Increasing Scale, Improving Focus 9
• Track Record of Earnings and Dividend Growth 10
• Strong Capital Generation and Position 11
• Progress in Digital Banking 12
• Corporate Social Responsibility 13
Appendix 1: Business Line and Financial Overview 14
• 2018 Financial Performance 15
• Q4 2018 Financial Performance 16
• Canadian Banking 17
• International Banking 23
• Global Banking and Markets 26
• Credit Performance by Business Lines 28
• Wholesale Funding Composition 29
Appendix 2: Canadian Housing Market 30
Appendix 3: Key Market Profiles 36
Appendix 4: Energy Exposure 44
Additional Information 46
Contact Information 47
Scotiabank Overview
Canada’s International Bank Top 10 Bank in the Americas1,2
5 LEADING BANK IN THE AMERICAS
Full-Service
Canada • Mexico
Peru • Chile
Colombia • Caribbean
Uruguay
Wholesale Operations
USA • UK • Hong Kong
Singapore • Australia
Ireland • China • Brazil
South Korea • Malaysia
India • Japan
Earnings by Geography3,5,6
Scotiabank3 FY2018
Change
Y/Y
Revenue $28.8B +6%
Net Income $9.1B +10%
Return on Equity 14.9% +20bps
Operating Leverage 3.7% +390bps
Productivity Ratio 51.7% -190bps
Total Assets $998B +9%
Ranking by Market Share4
Canada 3
USMCA U.S.A. Top 10 Foreign Bank
Mexico 6
Peru 3 Chile 3
Colombia 5
Americas 7th largest bank by market capitalization1
8th largest bank by assets1
Europe
Asia
1 Source: Bloomberg 10/31/18; 2 By assets and market capitalization; 3 Figures adjusted for Acquisition-related costs, including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to current acquisitions and amortization of intangibles related to current and past acquisitions; 4 Market share in loans as of September 2018 for PACs, as of July 2018 in Canada; 5 For the twelve months ended October 31, 2018; 6 Excluding Corporate adjustments
Canada
U.S.A
PAC
Other
Americas Other
PAC
Americas (90%)
55%
7%
21%
7% 10%
2018 Bank of the Year
Latin America and the
Caribbean by LatinFinance
Canada
55%
U.S.
7%
Mexico
7%
Peru
8%
Chile
5%
Colombia
1%
Other Americas
7%
Other International
10%
6
Well-Diversified and Profitable Business
GREATER SCALE, GREATER FOCUS
Earnings by Business1,2,3 Earnings by Country1,2,3
1 For the twelve months ended October 31, 2018; 2 Figures adjusted for Acquisition-related costs, including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to
current acquisitions and amortization of intangibles related to current and past acquisitions; 3 Excluding Corporate adjustments
Diversified by business and by country, creating stability and lowering risk
Canadian
Banking
49%
EARNINGS MIX
$8.9B
23.0%
15.8% 16.0% 14.9%
Canadian Banking International Banking Global Banking andMarkets
All Bank
Canadian Banking
P&C
40%
International
Banking
31%
Global Banking and
Markets
20%
Canadian
Banking Wealth
9%
7
Medium-Term Financial Objectives1 2018 results met or exceeded medium-term objectives
METRICS OBJECTIVES FY2018 RESULTS2
(Y/Y Change)
ALL BANK
EPS Growth 7%+ +9%
ROE 14%+ 14.9%
Operating Leverage Positive 3.7%
Capital Strong Levels 11.1%
OTHER FINANCIAL OBJECTIVES
Dividend Payout Ratio 40%-50% 47.7%
CANADIAN BANKING
Net Income Growth 7%+ +8%
Productivity Ratio <49% (by 2020) 49.3%
INTERNATIONAL BANKING
Net Income Growth3 9%+ +16%
Productivity Ratio <51% (by 2020) 52.4%
13-5 year objectives. 2Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and the Day 1 PCL impact on acquired performing loans in Q3/18; 3On a constant dollar basis
Why Invest in Scotiabank?
8
Canada’s international bank
and a top 10 bank in the
Americas
Diversified exposure to high
quality growth markets
Increasing scale and market
share in key markets
• Leading bank in the Pacific Alliance growth markets of Mexico, Peru, Chile and Colombia – a region of 230 million people with an under-banked market and a median age of 29
• Earnings momentum in personal & commercial, wealth, and wholesale businesses
• Gaining market share in key markets of Canada and the Pacific Alliance countries
• Top 3 bank in Canada, Chile and Peru
• Increasing scale in Wealth and Pacific Alliance with $7B of strategic acquisitions in 2018
• Unique footprint that provides sustainable and growing earnings and dividends
• Strong balance sheet, capital and liquidity ratios
• Attractive dividend yield and long-term shareholder returns
• Approximately 80% of earnings from core personal and commercial banking businesses
• Exited over 20 non-core countries and businesses since 2014
• Strong Canadian risk management culture – building stronger capabilities for AML, cyber and reputational risk
Improving quality of earnings
while reducing risk profile
• Leading levels of technology investment supports digital banking strategy. Increasing digital sales adoption with clear targets
• Well positioned in the Pacific Alliance to leverage technology, risk management and funding versus local and global competitors
• Named to Top 25 ”World’s Best Workplaces” (2018)
Enhancing competitive
advantage in technology
and talent
Canada Increases wealth management assets to $230B.
Adds 110,000 potential primary customers.
Chile Doubles market share. Creates 3rd largest bank.
Peru Creates #2 bank in credit cards.
Colombia Creates market leader in credit cards.
Dominican
Republic Doubles customer base. Creates 4th largest bank.
9
Increasing Scale, Improving Focus1 Gaining scale in key markets to drive earnings growth, improve earnings quality and reduce risk
INCREASING SCALE, IMPROVING FOCUS
Gaining Market Share (Total Loans)
Reducing Risk Profile Improving Earnings Quality
Increasing Scale with Strategic Acquisitions (2017-2019)
Increased wealth AUM by
37% to $282B in 2018.
Targeting earnings
contribution to All-Bank
earnings from
12% to 15%
Reduced
contribution of
trading to All-Bank
revenue from
7.5% to 4.9%
• Reduced wholesale funding (% of assets) from 29.6% to 23.4 %
• Reduced asset exposure in Asia by 21%
Canada
Mexico
Chile
Peru
Colombia
2013 2018
57 countries 38
countries
Between 2013 and 2018, exited
19 countries with either low
returns, small scale or higher
operational risk:
Turkey • Russia • Haiti • Egypt
Taiwan • UAE • plus 13 others
Exited 3 non-core businesses
2013
2018
0 2 4 6 8 10 12 14 16 18 20
1 5-year period 2013-2018
6.6%
10.4% 11.8% 11.1%
13.2% 12.0%
5 Year 10 Years 20 Years
$1.92
$3.28
08 09 10 11 12 13 14 15 16 17 18
Strong Track Record of Earnings and Dividend Growth
1 Reflects adoption of IFRS in Fiscal 2011 2 Excludes notable items for years prior to 2016. For 2016 onwards, results adjusted for acquisition-related costs including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to current acquisitions and amortization of intangibles related to current and past acquisitions. 3 As of October 31, 2018
Stable and predictable earnings with steady increases in dividends
10
Earnings per share (C$)1,2
$3.05
$7.11
08 09 10 11 12 13 14 15 16 17 18
Dividend per share (C$)
+9%
CAGR
+6%
CAGR
Total shareholder return3
Scotiabank Big 5 peers (ex. Scotiabank)
INCREASING SCALE, IMPROVING FOCUS
11
CET1 Ratio
Strong Capital Levels
11.5% 11.2% 12.0% 11.4% 11.1%
1.6% 1.5% 1.5%
1.4% 1.4%
1.8% 1.9% 1.8%
1.7% 1.8%
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
CET1 Tier 1 Tier 2
14.3% 14.9% 14.6% 15.3%
Strong Capital Generation and Position Capital levels are well above minimum regulatory requirements. Expect CET1 stay above 11%.
11.4% +33 bps +14 bps -65 bps -10 bps +1 bp
11.1% +10 bps
11.2%
Q3/18 Internal CapitalGeneration
RWA Impact(ex. FX)
Impact ofAcquisitions
Share issuance/ (buybacks)
(net)
OtherIncluding FX
Q4/18 Impact ofAnnouncedDispositions
Q4/18 Pro-Forma
14.5%
12
Progress in Digital Banking Progressing well against 2018 Investor Day digital targets
• Solid progress made in
all five key markets
across various product
suites including
deposits, personal
loans, insurance, etc.
• Digitally-active users
up over 30% in
Mexico, Colombia
and Peru. High single
digit growth in
Canada and Chile
• Mobile transactions
up over 30% in
Canadian Banking,
while in-branch
transactions
declined 6%
26 23
20
F2016 F2017 F2018
Digital Retail Sales Digital Adoption In-Branch Financial Transactions
Goal
>50%
11
15
22
F2016 F2017 F2018
26 29
33
F2016 F2017 F2018
Goal
>70%
+11% +7% -6%
Goal
<10%
13
Corporate Social Responsibility
MEMBERSHIPS &
ASSOCIATIONS
Business Line and
Financial Overview
Appendix 1:
15
2018 Financial Performance Strong adjusted earnings growth with positive operating leverage and productivity gains
YEAR-OVER-YEAR HIGHLIGHTS
• Adjusted Net Income up 10%3
• Revenue up 6%
o Net interest income up 8%
o Non-interest income up 4%
• Expense growth of 2%3
• Productivity ratio improved 190 bps3
• Full year operating leverage of +3.7%3
• Improved PCL ratio on impaired loans1, 2
1 2018 amounts are based on IFRS 9. Prior period amounts were based on IAS 39 2 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and the Day 1 PCL impact on acquired performing loans in Q3/18
ADJUSTED NET INCOME3 BY BUSINESS SEGMENT ($MM)
4,090 2,424 1,818
4,416 2,819
1,758
Canadian Banking International Banking Global Banking andMarkets
2017 2018
+8% Y/Y +16%
Y/Y -3% Y/Y
$MM, except EPS 2018 Y/Y
Reported
Net Income $8,724 +6%
Diluted EPS $6.82 +5%
Revenue $28,775 +6%
Expenses $15,058 +3%
Productivity Ratio 52.3% (160bps)
Core Banking Margin 2.46% -
PCL Ratio1, 2 48bps +3bps
PCL Ratio on Impaired Loans1, 2 43bps (2bps)
Adjusted3
Net Income $9,144 +10%
Diluted EPS $7.11 +9%
Expenses $14,871 +2%
Productivity Ratio 51.7% (190bps)
PCL Ratio1, 2 41bps (4bps)
16
Q4 2018 Financial Performance Strong revenue growth and higher NIM
$MM, except EPS Q4/18 Y/Y Q/Q
Reported
Net Income $2,271 +10% +17%
Diluted EPS $1.71 +4% +10%
Revenue $7,448 +9% +4%
Expenses $4,064 +11% +8%
Productivity Ratio 54.6% +80bps +210bps
Core Banking Margin 2.47% +3bps +1bp
PCL Ratio1, 2 39bps (3bps) (30bps)
PCL Ratio on Impaired Loans1, 2 42bps - +1bp
Adjusted3
Net Income $2,345 +13% +4%
Diluted EPS $1.77 +7% +1%
Expenses $3,962 +9% +6%
Productivity Ratio 53.2% (40bps) +140bps
PCL Ratio1, 2 39bps (3bps) (1bp)
YEAR-OVER-YEAR HIGHLIGHTS
• Adjusted Net Income up 13%3
• Revenue up 9%
o Net interest income up 10%
o Non-interest income up 8%
• Expenses up 9%3
• Productivity ratio improved 40 bps3
• Flat PCL ratio1, 2 on impaired loans
1 2018 amounts are based on IFRS 9. Prior period amounts were based on IAS 39 2 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and the Day 1 PCL impact on acquired performing loans in Q3/18
DIVIDENDS PER COMMON SHARE
0.79 0.79 0.82 0.82 0.85
0.03 0.03
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18Announced Dividend Increase
57%
25%
18%
60%
22%
16%
2%
• Improved productivity towards our 49% productivity ratio target (45% ex Wealth) by 2020 supported by higher revenue growth and mid-dingle digit expense growth.
• Integration of our recent acquisitions in Wealth: MD Financial Management ($49B AUM) and Jarislowsky Fraser ($40B AUM)
• Leverage data analytics for prudent growth in higher margin credit card and small business banking
• Increase core deposits; increase primary customers towards our 1 million new primary customer goal
• Canadian Banking provides a full suite of financial advice and banking solutions, supported by an excellent customer experience, to Retail, Small Business, Commercial Banking, and Wealth Management customers
17
Canadian Banking Top 3 bank in personal & commercial banking, wealth and insurance in Canada
STRATEGIC OUTLOOK
REVENUE MIX1
Retail
Wealth
Commercial
Personal
Loan Business and
Government Loans
AVERAGE LOAN MIX1
$3.4B $340B
Residential
Mortgages
1 For the three months ended October 31, 2018; 2 As at October 31, 2018; 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related
to current and past acquisitions and the Day 1 PCL impact on acquired performing loans in Q3/18; 4 Attributable to equity holders of the Bank 5 3-5 year target.
Credit Cards
MEDIUM-TERM FINANCIAL OBJECTIVES
Target 2018 Actual2,3
Net Income Growth4 7%+ 8%
Productivity Ratio5 <49% 49.3%
CB ex Wealth <45% 46.0%
Wealth <65% 60.6%
New Primary Customers +1MM +160,000
18
Q4 2018 Canadian Banking Financial Performance Solid asset and deposit growth, margin expansion and positive operating leverage4
1,073 1,107 1,022 1,141 1,146
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
2.41% 2.41% 2.43% 2.46% 2.45%
ADJUSTED NET INCOME1,4 ($MM) AND NIM (%)
• Adjusted Net Income up 7%4
o Asset and deposit growth, margin expansion
• Revenue up 5%
o Net interest income up 6%
• Loan growth of 5%
o Business loans up 13%
o Residential mortgages up 3%; credit cards up 7%
• Deposit growth of 6%
o Personal up 5%; Non-Personal up 7%
• NIM up 4 bps
o Rising rate environment and improved business mix
• Expenses up 5%4
o Investments in technology and regulatory initiatives
o Full-year productivity ratio improvement of 90bps4
• Full-year operating leverage of +1.9%4
• PCL ratio2, 3 improved by 4 bps due to lower
retail PCLs
FINANCIAL PERFORMANCE AND METRICS ($MM)1
YEAR-OVER-YEAR HIGHLIGHTS
1 Attributable to equity holders of the Bank 2 2018 amounts are based on IFRS 9. Prior period amounts were based on IAS 39 3 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 4 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, and amortization of intangibles related to current and past acquisitions
Q4/18 Y/Y Q/Q
Reported
Revenue $3,443 +5% +2%
Expenses $1,747 +7% +5%
PCLs $198 (9%) +9%
Net Income $1,115 +4% (1%)
Productivity Ratio 50.7% +80bps +150bps
Net Interest Margin 2.45% +4bps (1bp)
PCL Ratio2, 3 0.23% (4bps) +2bps
PCL Ratio on Impaired Loans2, 3 0.22% (5bps) +1bp
Adjusted4
Expenses $1,705 +5% +4%
Net Income $1,146 +7% -
Productivity Ratio 49.5% (20bps) +70bps
19
Canadian Banking: Retail Exposures High quality retail loan portfolio: ~92% secured
1 LTV calculated based on the total outstanding balance secured by the property. Property values indexed using Teranet HPI data.
DOMESTIC RETAIL LOAN
BOOK
79%
3% Credit Cards
5% Unsecured
13% Automotive
Real Estate
Secured Lending
$286.2B
• Residential mortgage portfolio is high quality
o 43% insured, and the remaining 57% uninsured has a LTV of 54%1
• Market leader in auto loans
o $37 billion auto loan portfolio with 7 OEM relationships (3 exclusive)
o Prime Auto and Leases (~91%)
o Lending terms have been declining with contractual terms averaging 77 months with effective terms averaging 54 months
• Growth opportunity in credit cards
o $7.3 billion credit card portfolio represents ~3% of domestic retail loan book and 1.3% of the Bank’s total loan book
o Organic growth strategy focused on payments and deepening customer relationships
o Upside potential from existing customers: ~80% of growth is from existing customers (penetration rate mid-30s versus peers in the low-40s)
o Strong risk management culture with specialized credit card teams, customer analytics and collections focus
$94.8
$29.4 $27.1 $14.1 $11.2 $8.8
$12.2
$9.2 $3.6
Ontario BC & Territories Alberta Quebec Atlantic Provinces Manitoba &Saskatchewan
20
Canadian Banking: Residential Mortgages High quality, diversified portfolio
1 LTV calculated based on the total outstanding balance secured by the property. Property values indexed using Teranet HPI data
2 New originations defined as newly originated uninsured residential mortgages and have equity lines of credit, which include mortgages for purchases refinances with a request for additional funds and transfer from other financial institutions
CANADIAN MORTGAGE PORTFOLIO: $213B (SPOT BALANCES AS AT Q4/18, $B)
% of
portfolio 50% 18% 14% 8% 5% 5%
$1.8 $0.2
$0.7
Freehold - $185B Condos - $28B $107.0
$38.6 $30.7
$15.9 $11.4 $9.5
43%
57% Uninsured
Total
Portfolio:
$213 billion
Insured
o Residential mortgage portfolio of $213 billion: 43% insured; LTV 54% on the uninsured book1
• Mortgage business model is “originate to hold”
• New originations2 had average LTV of 63% in Q4/18
• Majority is freehold properties; condominiums represent approximately 13% of the portfolio
o Three distinct distribution channels: All adjudicated under the same standards
• 1. Broker (~55%); 2. Branch (~25%); and 3. Mobile Salesforce (~20%)
4% 11% 12%
16%
57%
< 635 636 - 706 707 - 747 748 - 788 > 788
21
Canadian Banking: Residential Mortgages (continued) High quality portfolio, lower originations in Vancouver and Toronto
FICO is a registered trademark of Fair Isaac Corporation
Q4/17 Q3/18 Q4/18 Growth/Change
Y/Y
Canada
Total Originations ($B) 12.9 11.9 10.5 -19%
Uninsured LTV 64% 63% 63% -1%
GTA Total Originations ($B) 3.9 3.6 3.2 -18%
Uninsured LTV 63% 62% 62% -1%
GVA Total Originations ($B) 1.8 1.4 1.1 -39%
Uninsured LTV 61% 60% 59% -2%
Average FICO® Score
Canada 787
GTA 790
GVA 790 • <0.65% of uninsured portfolio has a
FICO® score of <620 and an LTV >65%
• Canadian uninsured mortgage portfolio
is $121 billion as at Q4/2018
FICO® DISTRIBUTION – CANADIAN UNINSURED PORTFOLIO
GTA
62%
ON
63%
QC
65%
Prairies 67%
GVA
59%
BC &
Territories
61%
Atlantic
Provinces
69%
NEW ORIGINATIONS: UNINSURED LTV* DISTRIBUTION
*Average LTV ratios for our uninsured residential mortgages originated during the quarter
22
Tangerine Canada’s #1 Digital Bank
• Simple, market-leading products that appeal to value-
conscious and tech-savvy Canadians
• Seamless digital client experience
• Highly competitive rates, simple products
• Velocity
• Enhanced self-service options, adding speed & agility
• Nimble, modern platform supporting rapid development cycles
• Low cost, scalable business model ~50% multiple-p roduct clients
Primary clients +23% Y/Y
50% New Clients via Referrals
STRATEGIC FOCUS:
Simplicity
Rapid Deployments:
Agile best practices enable
quick & efficient new product &
feature delivery.
Incubator:
Identify, explore, and pilot new
technologies and solutions to
meet evolving Client needs.
Scalable:
Nimble, low cost systems
provide a holistic client view.
Third-Party Recognition:
J.D. Power Customer Satisfaction
seven years in a row, Finovate “Best
in Class” for digital experiences.
Modern Platform Speed & Agility Client-Driven Innovation Unique ‘Orange’ Culture Award Winning Approach
Team Tangerine:
Our unique culture and
lean team are an essential
part of how we deliver.
Partnerships
• Accelerating momentum through the Toronto Raptors
• Deepening client relationships by introducing SCENE Loyalty
• Strong partnership with Scotiabank
• Industry-leading customer service (NPS)
• 97% digital transactions
• 96% digital on-boarding
• 91% digital sales
• International Banking operates primarily in Latin America, the Caribbean and Central America with a full range of personal and commercial financial services, as well as wealth products and solutions
23
International Banking Leading diversified personal and commercial franchise in high quality growth markets
STRATEGIC OUTLOOK
MEDIUM-TERM FINANCIAL OBJECTIVES
70% 24%
6%
REVENUE1
$3.1B
Asia
C&CA Latin
America
26% Mexico
23% Peru
26% Chile 18%
Colombia
5% Uruguay
2% Brazil Latin
America
51%
27%
16%
6% LOAN MIX1
$144B
Credit
Cards
Personal
Loans Residential
Mortgages
Business
Loans
• Integration of acquisitions in Chile and Colombia. Close announced acquisitions in Peru and Dominican Republic.
• Closing of dispositions of non-core operations in smaller Caribbean markets.
• Margins (NIM ~450 bps) and credit quality are expected to remain stable with the level in Q4/18.
• Maintain positive operating leverage
Target 2018 Actual2,3
Net Income Growth4 9%+ 16%
Productivity Ratio5 <51% 52.4%
Operating Leverage Positive +3.1%
1 For the 3 months ended October 31, 2018; 2 As at October 31, 2018; 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and
the Day 1 PCL impact on acquired performing loans in Q3/18; 4 Attributable to equity holders of the Bank. 5 3-5 year target.
24
Q4 2018 International Banking Financial Performance Strong performance in the Pacific Alliance supported by acquisitions
4.67% 4.66% 4.74% 4.70% 4.52%
Q4/18 Y/Y Q/Q Reported
Revenue $3,134 +22% +11%
Expenses $1,721 +23% +15%
PCLs $412 +32% (45%)
Net Income $712 +18% +36%
Productivity Ratio 54.9% +50bps +200bps
Net Interest Margin 4.52% (15bps) (18bps)
PCL Ratio 1.05% (9bps) (153bps)
PCL Ratio on Impaired Loans3, 4 1.20% +6bps (13bps)
Adjusted6
Expenses $1,661 +19% +14%
PCLs $412 +32% +14%
Net Income $746 +22% +6%
Productivity Ratio 53.0% (100bps) +130bps
PCL Ratio3, 4, 6 1.05% (9bps) (18bps)
613 675 683 715 746
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
YEAR-OVER-YEAR HIGHLIGHTS2
• Adjusted Net Income up 22%6
o Strong asset and deposit growth in Pacific Alliance
o Includes impact of acquisitions and alignment of
reporting period
• Revenues up 22%
o Pacific Alliance up 28%
• Loans up 29%
o Pacific Alliance loans up 42%
• NIM down 15 bps
o Mainly driven by the business mix impact of acquisitions
• Expenses up 19%6
o Business volume growth, inflation and higher technology
costs
o Full year productivity ratio improvement of 150bps6
• Full-year positive operating leverage of
3.1%6
• PCL ratio3, 4, 6 down 9 bps
1 Attributable to equity holders of the Bank 2 Y/Y and Q/Q growth rates (%) are on a constant dollars basis, while metrics and change in bps are on a reported basis 3 2018 amounts are based on IFRS 9. Prior period amounts were based on IAS 39 4 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures
ADJUSTED NET INCOME1,6
($MM) AND NIM5 (%)
FINANCIAL PERFORMANCE AND METRICS ($MM)1, 2
5 Net Interest Margin is on a reported basis 6 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and the Day 1 PCL impact on acquired performing loans in Q3/18
Key Highlights of Pacific Alliance countries (PACs)
Population1,2 • 230 million. 6.2x Canada’s population. Projected growth outpaces Canada and G7 countries; median age4 of 29
Government
Presidential Elections • No elections scheduled until 2021
Financial Stability • All sovereign credit ratings in IG category with central banks’ policy targeting inflation since 1999
Economy
GDP1 • 9th largest economy in the world
Exports5 • 64% of exports related to manufacturing
Trade Partners5 • US, China and Canada are the PACs’ largest trading partners, representing 72% of exports
Business Environment
HDI Score Rank6 • Rank “High” or “Very High” (United Nations, 2017)
Banking Penetration1 • Under-banked with average banking penetration at ~50% compared to over 90% in Canada and the U.S.
Foreign Direct Investment1 • FDI averaging 3.2% of GDP compared to 1.7% in Canada and the U.S.
25
Scotiabank in the Pacific Alliance Countries Well positioned for long-term growth in large, growing market
Mexico Peru Chile Colombia
PACs
(Total11/Average)
Scotiabank Market Share7 7.1% 18.2% 13.8% 6.2% 11.3%
Market Share Ranking7 6th 3rd 3rd 5th 4th
Strengths Mortgages and Auto Commercial, Personal
and Credit cards
Commercial, Credit cards
and Mortgages Retail and Credit Cards Well positioned
Average Assets8(C$B) $32.3 $24.0 $32.9 $12.3 $101.5
Revenue8(C$B) $2.2 $2.0 $1.7 $1.3 $7.2
Net Income after NCI8,9(C$B) $0.6 $0.7 $0.4 $0.1 $1.9
ROE8,9 26% 24% 11% 6% 17%
# of Employees8,10 13,204 11,032 9,386 9,658 43,280
1 Source: World Bank 2017 2 Population growth: World Bank DataBank 2017-2022 3 EM countries include: Argentina, Brazil, China, Greece, India, Indonesia, Poland, South Africa, Turkey, and Russia 4 Source: The World Factbook, CIA 2017
5 Source: United Nation Conference on Trade and Development (UNCTAD) 2017; Organization for Economic Co-operation and Development (OECD) 2016 6 Human Development Index. Source: United Nations Development Programme (UNDP) 2017. For more information,
please refer to: http://hdr.undp.org/sites/default/files/2018_human_development_statistical_update.pdf
7 Total loans market share as of September 2018 8 As of October 31, 2018 or for the fiscal year 2018 9 Earnings adjusted for acquisition –related costs including the Day 1 PCL on acquired performing loans, integration and amortization costs related to current acquisitions, and amortization of intangibles related to current and past acquisitions 10Employees are reported on a full-time equivalent basis 11May not add due to rounding
41%
30%
9%
5%
15%
REVENUE1,2
$1.3B
• Full-service wholesale bank in Canada, the United States and Latin America. Offers a range of products and services in select markets in Europe, Asia and Australia.
26
Global Banking and Markets Second-largest Canadian wholesale banking and capital markets business serving global clients
STRATEGIC OUTLOOK
Europe
Canada
US
Latin America
Asia
40%
30%
16%
7%
7%
AVG ASSETS1,2
$338B
Asia
Europe
US
Canada
Latin America
57%
21%
18%
4%
REVENUE1
$1.3B
Business Banking
FICC
Other
Global Equities
• Up-tiering lending relationships, expanding our Investment Banking capabilities in key markets, increasing our investment in the Pacific Alliance to become a leader in local and cross-border banking and capital markets
• Continued strong growth in deposits, improved corporate lending and investment banking results to absorb required regulatory and technology investments
1For the 3 months ended October 31, 2018; 2 Latin America revenue contribution and assets reported in International Banking’s results
27
Q4 2018 Global Banking and Markets Financial Performance Solid loan growth, strong credit quality and lower productivity ratio
391
454 447 441
416
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
FINANCIAL PERFORMANCE AND METRICS1 ($MM) YEAR-OVER-YEAR HIGHLIGHTS
• Reported Net Income up 6%
• Loans up 7%
o U.S. loans up 13%
• NIM down 16 bps
o Mainly driven by lower deposit and lending margins
• Expenses down 3%
• Productivity ratio improved 80 bps
• PCL ratio2, 3 improved by 13 bps
o Impaired loan provision reversals in Europe
1 Attributable to equity holders of the Bank 2 2018 amounts are based on IFRS 9. Prior period amounts were based on IAS 39 3 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures
NET INCOME1 AND ROE
Q4/18 Y/Y Q/Q
Revenue $1,073 (1%) (3%)
Expenses $553 (3%) +2%
PCLs ($20) N/A N/A
Net Income $416 +6% (6%)
Productivity Ratio 51.5% (80bps) +260bps
Net Interest Margin 1.72% (16bps) (10bps)
PCL Ratio2, 3 (0.09%) (13bps) (4bps)
PCL Ratio on Impaired Loans2, 3 (0.07%) (11bps) (1bp)
14.9% 16.2%
16.9% 15.6% 15.3%
28
Credit Performance by Business Lines Stable all-bank PCL ratios on impaired loans
IFRS 9 IAS 39
Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
(As a % of
Average Net Loans & Acceptances)
PCLs on
Impaired
Loans
PCLs on
Impaired
Loans
Total
PCLs
PCLs on
Impaired
Loans
Total
PCLs
PCLs on
Impaired
Loans
Total
PCLs
(adj.)
PCLs on
Impaired
Loans
Total
PCLs
Canadian Banking
Retail 0.30 0.29 0.28 0.28 0.28 0.25 0.24 0.25 0.25
Commercial 0.07 0.11 0.08 0.09 0.09 (0.04) 0.06 0.06 0.15
Total 0.27 0.27 0.25 0.25 0.25 0.21 0.21 0.22 0.23
Total – Excluding Credit Mark
Benefits 0.28 N/A N/A N/A N/A N/A N/A N/A N/A
International Banking
Retail 2.00 2.28 2.39 2.26 2.16 2.36 2.254 2.38 2.21
Commercial 0.32 0.28 0.201 0.55 0.341 0.38 0.311, 4 0.07 (0.06)
Total 1.14 1.252 1.261, 2 1.382 1.221, 2 1.33 1.234 1.20 1.05
Total – Excluding Credit Mark
Benefits 1.34 N/A N/A N/A N/A N/A N/A N/A N/A
Global Banking and Markets 0.04 (0.01) (0.04) 0.02 (0.05) (0.06) (0.05) (0.07) (0.09)
All Bank 0.42 0.43 0.42 0.46 0.42 0.41 0.40 0.42 0.39
1 Excludes provision for credit losses on debt securities and deposit with banks
2 Not comparable to prior periods, which were net of acquisition benefits
3 On an reported basis; includes impact of Day 1 PCLs from acquisitions
4 On an adjusted basis; adjusted for Day 1 PCLs from acquisitions
29
Wholesale Funding Composition Wholesale funding diversity by instrument and maturity1,6,7
$233B
1 Excludes repo transactions and bankers acceptances, which are disclosed in the contractual maturities table in the MD&A of the Interim Consolidated Financial Statements. Amounts are based on remaining term to maturity. 2 Only includes commercial bank deposits raised by Group Treasury. 3 Excludes asset-backed commercial paper (ABCP) issued by certain ABCP conduits that are not consolidated for financial reporting purposes. 4 Represents residential mortgages funded through Canadian Federal Government agency sponsored programs. Funding accessed through such programs does not impact the funding capacity of the Bank in its own name. 5 Although subordinated debentures are a component of regulatory capital, they are included in this table in accordance with EDTF recommended disclosures. 6 As per Wholesale Funding Sources Table in MD&A. As of Q4/18 7 May not add to 100% due to rounding
31%
10% Mortgage
Securitization4
Bearer Deposit Notes, Commercial Paper &
Short-Term Certificate of Deposits
3%
Asset-Backed Commercial Paper3
36% Senior Notes
13% Covered Bonds
3% Subordinated Debt5
$18
$15 $14 $15
$8
$14
$1
$1 $1
$6
$4 $8
$4
$5
$2
< 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years>
MATURITY TABLE (EX-SUB DEBT)
(CANADIAN DOLLAR EQUIVALENT, $B)
Senior Debt ABS Covered Bonds
$25
$22
$24
$19
$13
$16 $3
0% Bail-inable Notes
2% Asset-Backed
Securities
2% Deposits from Banks2
Canadian Housing Market
Appendix 2:
31
Canadian Household Credit Growth Moderating Public policy changes are moderating growth in household credit
0
2
4
6
8
10
12
14
16
18
20
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
y/y % change
Sources: Scotiabank Economics, Bank of Canada.
m/m % change,
SA
-5
0
5
10
15
20
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
m/m % change, SA
Sources: Scotiabank Economics, Bank of Canada.
y/y % change
0
2
4
6
8
10
12
14
16
18
20
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
y/y % change
Sources: Scotiabank Economics, Bank of Canada.
m/m % change,
SA
• Total household credit growing 4.4% in nominal terms in 2018, vs 2008 peak of 12% y/y
• Consumer loans excluding mortgages (cards, HELOCs, unsecured lines, auto loans, etc.) are growing 4.4% in 2018 vs >6% in late-2017
• Mortgage credit growing 4.4% year-to-date vs 2008 peak of 13%
HOUSEHOLD CREDIT GROWTH CONSUMER LOAN GROWTH RESIDENTIAL MORTGAGE GROWTH
32
Housing Market Differences vs. U.S. Canada’s housing market features distinct practices and policies
Canada U.S.
Regulation and
Taxation
• Mortgage interest not tax deductible • Full recourse against borrowers in most provinces • Foreclosure on non-performing mortgages - no stay periods
Insurance
• Mandatory default insurance mortgages with LTV >80% o CMHC backed by Government of Canada (AAA). Private insurers
are 90% government backed o Insurance available for homes up to $1 million o Premium is payable upfront o Covers full amount for life of mortgage
• Homebuyers must qualify for mortgage insurance at an interest rate that is the greater of their contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate
• Re-financing cap of 80% LTV on non-insured mortgages
Amortization
• Maximum 25-year amortization on mortgages with LTV > 80% • Maximum 30-year amortization on conventional mortgages • Down payment of > 20% required for non-owner
occupied properties
• Tax-deductible mortgage interest creates incentive to borrow and delay repayment
• Lenders have limited recourse in most states
• 90-day to 1-year stay period to foreclose on non-performing mortgages
• No regulatory LTV limit • Private insurers are not
government backed
Product
• Conservative product offerings, fixed or variable rate options • Much less reliance upon securitization and wholesale funding • Asset-backed securities not subjected to US-style off-balance sheet
leverage via special purpose vehicles
• Can include exotic products (adjustable rate mortgages, interest only)
Underwriting • Terms usually 3 or 5 years, renewable at maturity • Extensive documentation and strong standards
• 30-year term most common • Wide range of documentation
and underwriting requirements
33
Housing Policy Developments in Canada Consistent policy initiatives to maintain a balanced and sustainable market
2018
• Ontario: Elimination of rent control on new rental units first occupied on or before November 1, 2018
• British Columbia: Extension of the Property Transfer Tax on non-resident buyers. Investment of more than $1.6 billion through FY2021 toward the goal of building 114,000 affordable housing units in the next 10 years
• Canada: OSFI imposes more stringent stress tests for uninsured mortgages, including a minimum qualifying rate at the greater of the five-year fixed posted rate or the contractual rate plus 200 bps, effective January 1, 2018
2017
• Ontario: 16 measures aimed to slow rate of house price appreciation
Key aspects include:
o 15% non-resident speculation tax
o Expanded rent control to all private rental units in Ontario
o Vacant home tax
o $125 million five-year program to encourage construction of new rental apartment buildings
2016
• Canada: Qualifying stress rate for all new mortgage insurance must be the greater of the contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate
• Low-ratio mortgage insurance eligibility requirements updated for lenders wishing to use portfolio insurance:
o Maximum amortization 25 years
o $1 million maximum purchase price
o Minimum credit score of 600
o Property must be owner occupied
• Elimination of primary residence tax exemption for foreign buyers
• Minimum down payment on insured mortgages on homes valued $0.5–$1 million increased from 5% to 10%
• British Columbia: 15% land transfer tax on non-resident purchases in Metro Vancouver introduced
34
Household Debt: Canada vs. U.S. Canadian households’ balance sheets compare favourably to US
101.3
98.2
102.7
75.1
50
60
70
80
90
100
110
120
130
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
% of GDP
* Adjusted for US concepts and definitions. Sources: Scotiabank Economics, BEA, Federal Reserve Board, Statistics Canada.
Canada*
US with unincorporatedbusiness debt
Original US
Original Canada
163.6
169.1
133.8
60
80
100
120
140
160
180
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Adjusted Canadian*
Official Canadian
Official US
* Adjusted for US concepts and definitions. Sources: Scotiabank Economics, BEA, Federal Reserve Board, Statistics Canada.
household credit liabilities as % of disposable income
16.7
18.0
10
15
20
25
30
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
US
Canada
household debt
as % of assets
Sources: Scotiabank Economics, Federal
Reserve Board, Statistics Canada.
• Canadian debt-to-income ratio is now 5.5% below the U.S. peak in 2008
o In the last 7 years, increases in Canadian debt-to-income ratio have slowed vs. 2002–10
o Calculated on the same terms, Canada’s debt-to-income is currently 164% vs. 134% in the U.S.
• Canadian debt-to-assets ratio remains below U.S.
o U.S. households have incentive to pursue higher asset leverage in light of mortgage interest deductibility
o Debt is a stock concept, to be financed over one’s lifetime. Income is a flow concept measuring one single year’s earnings. Debt should be compared to lifetime or permanent income, or assets
• Ratio of total household debt-to-GDP remains lower in Canada than U.S.
o Calculated on a comparable basis, the ratio of household credit market debt is 98.2% in Canada vs.101.3% in the U.S.
Household Credit Market Debt to Disposable Income
Total Household Liabilities As % of Total Assets
Household Credit Market Debt to GDP
35
Canadian Housing Fundamentals Remain Sound Solid indicators on several dimensions
INTERNATIONAL IMMIGRATION
RESIDENTIAL UNIT SALES TO NEW LISTINGS RATIO
140
190
240
290
90 95 00 05 10 15
NU
MB
ER
OF
IM
MIG
RA
NT
S
TO
CA
NA
DA
, 0
00
S
0.0
0.2
0.4
0.6
0.8
1.0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
2018
Target = 310K
RA
TIO
Buyers’ Market
Balanced Market
Sources: Scotiabank Economics, Statistics Canada.
Sources: Scotiabank Economics, CREA MLS. Data through September 2018.
Sellers’ Market
TOTAL DEBT-SERVICE RATIO
RESIDENTIAL MORTGAGES ARREARS
% O
F D
ISP
OS
AB
LE
IN
CO
ME
%
OF
MO
RT
GA
GE
S I
N A
RR
EA
RS
3
MO
NT
HS
OR
MO
RE
10
11
12
13
14
15
16
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
1990–2017
average
Sources: Scotiabank Economics, Statistics Canada. Data through 2018Q2.
Sources: Scotiabank Economics, CBA, MBA. Data through 2018Q3 (US) and June 2018
(Canada).
0
1
2
3
4
5
6
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
U.S.
Canada
Key Market Profiles
Appendix 3:
37
Economic Outlook in Key Markets Growth expected to accelerate across the Pacific Alliance
2018 AND 2019 REAL GDP GROWTH FORECAST (%)
Source: Scotiabank Economics. Forecasts as of October 15, 2018.
Real GDP (Annual % Change)
Country 2000–17 Avg. 2018F 2019F 2020F
Mexico 2.2 1.8 2.1 2.4
Peru 5.0 3.7 4.0 4.1
Chile 3.9 3.9 3.2 3.2
Colombia 3.9 2.5 3.5 3.6
PACs Avg. 3.8 3.0 3.2 3.3
2000–17 Avg. 2018F 2019F 2020F
Canada 2.2 2.1 2.2 1.8
U.S. 2.0 2.9 2.4 1.7
38
Focused on the Pacific Alliance Attractive growth opportunity for Scotiabank
• Pacific Alliance
o Portfolio of high quality growth markets for Scotiabank
o 223 million people with median age of 29
o Largest trading partner is the United States (64% of exports)
o Largest sector is manufacturing (64% of exports)
o Trade bloc with free trade agreements to liberalize commerce and improve integration
o Supports trade flows with Asia in order to compete with Brazil and Argentina which participate in Mercosur
o Accounts for 36% of Latin America’s GDP, comparable to Brazil
o Canada has bilateral free-trade agreements with all four Pacific Alliance countries and it has initiated an application for Associate Membership in the Alliance
• Pacific Alliance is an Attractive Long-Term Opportunity
o Region is the 6th largest goods exporter in the world
o Trade bloc with governments supporting growth/significant infrastructure spending
o Solid GDP growth rates relative to peers
o Considerable room to increase banking penetration (avg. domestic credit/GDP of 66%)
o Fast-growing middle-class with increasing financial demands
o Favourable demographics for banking needs
o Relatively stable legal, tax, and regulatory infrastructure in place
o Central bankers have earned credibility and banking system is well-capitalized
39
Mexican Economy Diverse economy with a strong balance sheet
Top 5 Trading Partners
MEXICAN GDP BY INDUSTRY
(Q2 2018)
6.5%
5.8% 16.0%
6.3%
7.0% 3.9%
1.9%
16.0%
17.4%
15.9%
Finance, Insurance, & Real Estate
Health & Education
Wholesale & Retail Trade
Manufacturing
Mining and Oil & Gas Extraction
Construction
Public
Administration
Professional, Scientific,
& Technical Services
Transportation & Warehousing
Other
3.2% Natural
Resources
• The Mexican economy reflects a solid mix of commodities, goods production, and services
• Trade remains dominated by the US, but Mexico’s diversification agenda is underpinned by 13 free-trade agreements with 47 countries that account for 40% of global GDP
• Despite NAFTA-related uncertainty, investment has rebounded in 2018 and trade has returned to making a positive contribution to economy-wide growth
United
States
59%
Others
21% Germany 3%
Japan 3%
Canada
4%
China
10% -3
-2
-1
0
1
2
3
4
5
16 17 18
OtherNet ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Mexican GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
40
Chilean Economy Advanced economy with wide-ranging trade links
CHILEAN GDP BY INDUSTRY
(JUN 2018) 1.9%
9.6% 15.1%
6.2%
4.6% 19.1%
8.4%
8.9% 10.3%
12.4%
Finance, Insurance, & Real Estate
Wholesale & Retail Trade
Manufacturing
Mining and Oil &
Gas Extraction
Construction
Public Administration
Housing &
Personal Services
Transportation & Warehousing
Restaurants & Hotels
Other
3.5% Natural Resources
Top 5 Trading Partners
United
States
16%
Others
40%
Brazil
7% Japan
6%
South Korea
4%
China
27%
-6
-4
-2
0
2
4
6
8
16 17 18
Net ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Chilean GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
• Chile’s mix of economic activities reflects its status as an advanced market economy
• Chile’s diversified trading relationships are supported by 21 free-trade agreements with 59 countries that account for 70% of global GDP
• Investment has been a strong contributor to growth in Chile over the past year, which should underpin future productivity gains
41
Peruvian Economy Resilient economic fundamentals
PERUVIAN GDP BY
INDUSTRY (Q2 2018)
9.4%
14% 29.9%
19.7%
5.5%
Finance, Insurance, & Real Estate
Transportation, Information & Commerce
Construction
Mining & Energy Other
13.7% Manufacturing
7.7% Natural
Resources
Top 5 Trading Partners
United
States
18%
Others
44%
Brazil
5% Spain
4%
South Korea
3%
China
26%
-6
-4
-2
0
2
4
6
8
16 17 18
Net ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Peruvian GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
• Peru’s important resource sectors are increasingly balanced by stronger service-sector activity and solid economic fundamentals
• Peru has 16 free-trade agreements with 49 countries that account for 66% of global GDP
• Investment is making a consistently strong contribution to GDP growth, which should make the recent upturn in growth rates more sustainable
42
Colombian Economy Gaining momentum
COLOMBIAN GDP BY
INDUSTRY (Q2 2018)
6.5%
17.4% 14.1%
6.6%
15.2%
7.5% 2.9%
6.8% 12.2%
8.2%
Finance, Insurance, & Real Estate
Wholesale, Retail Trade, Accommodation & Food
Services
Manufacturing
Construction
Mining and Oil & Gas Extraction
Public Administration
Professional,
Scientific,
& Technical
Services
Information & Communication
Natural Resources
Other
2.6% Arts &
Entertainment
Top 5 Trading Partners
Germany
3%
United
States
29% Others
44%
Brazil
4%
Mexico
6%
China
14%
-3
-2
-1
0
1
2
3
4
5
16 17 18
OtherNet ExportsInvestmentGovernmentConsumptionReal GDP
Contributions to Colombian GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
• Services account for a rising share of Colombian GDP compared with traditional strengths in extractive industries
• Colombia continues to build on its 10 free-trade agreements with 42 countries that account for 38% of global GDP
• Rising consumption, supported by public spending, reflects an expanding middle class as growth gains momentum and converges toward the economy’s underlying potential
43
Other Regions Strong contribution from leading C&CA franchise and portfolio investments in Asia
• Caribbean & Central America
o Operations in 16 countries contributing ~$0.7B in earnings in 2018
o Well-established, diversified franchise that serves retail, commercial and corporate customers
o Actively managing footprint to ensure scale in larger growth markets and reduce risk profile:
o Announced acquisition in Dominican Republic in August 2018 which doubles customer base and creates 4th largest bank.
o Announce sale of operations in 9 smaller countries in Caribbean in November 2018
o Recognized by Euromoney for the “Best Commercial Banking” capabilities in the Caribbean and Bahamas (2017)
o Recognized by Global Finance Magazine as:
o “Best Bank Award 2017” in the Bahamas, Barbados, Costa Rica, Turks & Caicos and U.S. Virgin Islands;
o “World’s Best Consumer Digital Bank 2017” in 24 countries across Latin America and the Caribbean; and
o “Best in Mobile Banking” in the Caribbean region
• Asia
o Strategic portfolio investments in Asia
o Thailand: 49% interest in Thanachart Bank (2007)
o $3.0 billion carrying value as of October 31, 2018
o $590 million of net income for twelve months ended October 31, 2018
o China: 19.9% interest in Bank of Xi’an (2009)
o $772 million carrying value as of October 31, 2018
o $456 million of net income for twelve months ended October 31, 2018
Energy Exposure
Appendix 4:
45
Energy Exposure1
High quality energy portfolio
• Energy portfolio represents 2.6% of loans outstanding
• 64% is rated Investment Grade (IG). 88% of WCS exposure is IG
• Watch-list reduced to less than 1% of total exposures from 14% since Q4/16
• RWA has decreased 37% since Q4/16
1 As of October 31, 2018 2 May not add due to rounding
1
6.2
0.2
1.1
3
0.7 2.5
Energy
Exposure by
Geography2
$14.8B (%IG)
Mexico (42%)
Canada (74%)
Latin
America
(48%) U.S. (33%)
Asia (93%)
Europe (67%)
C&CA
(30%)
Loans and
Acceptances
Outstanding ($B)
% of Total
Energy
Exposure
% of Total Loans
and Acceptances
Outstanding
% Investment
Grade
Total Exploration and Production 6.6 45% 1.1% 64%
Canadian Exploration and Production 3.4 23% 0.6% 83%
WCS Exposure 1.2 8% 0.2% 88%
Midstream 4.9 33% 0.9% 55%
Services 1.3 9% 0.2% 25%
Downstream 1.9 13% 0.3% 86%
Total Energy Exposure2 14.8 100% 2.6% 64%
46
Additional Information
• Toronto Stock Exchange (TSX: BNS)
• New York Stock Exchange (NYSE: BNS)
Moody's
Investors
Services
Standard &
Poor's Fitch Ratings
Dominion Bond
Rating Service
Ltd.
Legacy Senior Debt1 Aa2 A+ AA- AA
Senior Debt2 A2 A- AA- AA (low)
Subordinated Debt (NVCC) Baa1 BBB+ - A (low)
Short Term Deposits/Commercial Paper P-1 A-1 F1+ R-1 (high)
Covered Bond Program Aaa Not Rated AAA AAA
Outlook Stable Stable Stable Stable
Scotiabank Credit Ratings
• CUSIP: 064149107
• ISIN: CA0641491075
• FIGI: BBG000BXSXH3
• NAICS: 522110
Scotiabank Listings: Scotiabank Common Share Issue Information:
For further information, please contact: www.scotiabank.com/investorrelations
1 Includes: (a) Senior debt issued prior to September 23, 2018; and (b) Senior debt issued on or after September 23, 2018 which is excluded from the bank recapitalization "bail-in" regime 2 Subject to conversion under the bank recapitalization "bail-in" regime
47
Contact Information
Investor Relations
Philip Smith
Senior Vice President 416-863-2866
Lemar Persaud
Director 416-866-6124
Michael Lomas
Managing Director
Treasury Sales and Market Development
416-866-5734
For further information, please contact: www.scotiabank.com/investorrelations
Judy Lai
Director 416-775-0485
Steven Hung
Vice President 416-933-8774
Tiffany Sun
Manager 416-866-2870