John McCartney: Good morning, and welcome to Scotiabank's 2024 Second Quarter Results Presentation. My name is John McCartney, and I'm Head of Investor Relations here at Scotiabank. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Phil Thomas, our Chief Risk Officer. Following our comments, we will be glad to take your questions. Also present to take questions are the following Scotiabank's executives: Aris Bogdaneris from Canadian Banking; Jackie Allard from Global Wealth Management; Francisco Aristeguieta from International Banking and Travis MacHen from Global Banking and Markets. Before we start and on behalf of those speaking today, I'll refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to Scott.

Scott Thomson: Thank you, John and good morning, everyone. We are pleased to share our Q2 results, which reflect solid earnings from each of our four business lines. This is our second quarter since we shared our enterprise-wide strategy, and I'm encouraged by our continued progress against our plan. I want to take a few moments to recap a few key enterprise initiatives. First, disciplined capital allocation to higher-return client segments and geographies and as virtually all of our incremental capital deployed in fiscal 2024 has been to identify priority businesses. Second, deposit growth remains fundamental to our business prioritization and client selection decisions. Our focus on building primacy through deeper relationships has resulted in continued growth with P&C deposits up 7% year-to-date. Third, cost and process efficiencies, which both drive profitability and ensure frontline teams have the tools and capacity to deliver an excellent client experience. Well managed expenses and productivity gains are driving positive year-to-date operating leverage. And finally, a strong balance sheet, which will allow us to support clients through the cycle while maintaining optionality to invest in our businesses as evidenced by strong liquidity and our 13.2% CET1 capital ratio. In terms of results, the bank reported adjusted earnings of $2.1 billion or $1.58 per share in the quarter. We saw solid revenue growth from both net interest income and fee income, coupled with disciplined expense management. The benefits of our productivity initiatives were particularly notable in our Canadian and International Banking segments, where productivity ratios improved 100 basis points and well over 200 basis points, respectively, over last year. Higher credit provisions reflecting the uncertain macroeconomic environment and the impact of sustained higher interest rates on certain client segments impacted profitability. Overall, net loans were 3% lower year-over-year and in line with Q1. Balances have stabilized in the Canadian residential mortgage portfolio, while we have seen moderate growth in other personal and commercial portfolios. We continue to reposition our business banking portfolios with a view to optimize risk-weighted assets and profitability by client. And importantly, return on risk-weighted asset metrics are trending positively on a year-to-date basis. The all bank loan-to-deposit ratio continues to improve as a result of $26 billion of deposit growth over the past year, driven largely from focused efforts on our Canadian and international banking retail franchises. Deposit growth has now outpaced loan growth in Canadian and International Banking in each of the past five quarters. The bank's wholesale funding has been reduced by $34 billion year-over-year, resulting in a wholesale funding ratio below 20% down from approximately 23% in Q2 of 2023. Turning to the credit environment. The impact of higher rates is increasingly weighing on consumers and to a lesser extent, our commercial and small business clients. Although we believe the monetary tightening phase of the rate cycle in Canada is now complete, our prior expectation for multiple rate cuts in the back half of the calendar year feels less certain. The reality of a higher for longer rate scenario will naturally result in a continuation of elevated credit provision in our retail portfolios, keeping us at the higher end of our 2024 PCL outlook of 55 basis points. Our Commercial Banking and Global Banking and Markets portfolios remain stable from a credit quality perspective, although a continuation of the current rate outlook will weigh on economic activity and industry loan growth. In our key Latin American markets, we are now into the easing phase of the interest rate cycle. Central Bank policy rates in Chile at 6% and Peru at 5.75% are down significantly from peak levels last year as inflation has been successfully managed lower. Mexico Central Bank has started to ease policy rates as aggressive tightening over the past two years has effectively lowered inflation and managed near-term GDP growth expectations to more sustainable levels. The Mexican economy continues to demonstrate resilient growth in a tight employment market despite the impact of double-digit interest rates for the past 12 months. Our forecast do not anticipate recessionary conditions in any of our key operating geographies over the next few years. We are well positioned to execute on our new international banking strategy and what we expect to be a more normalized economic growth environment throughout the region going forward. A few highlights in terms of performance and strategic progress within each of our business lines. Our Canadian Banking business contributed approximately $1 billion of earnings in the period. Favorable business mix shift, asset repricing and deposit growth delivered solid margin expansion and resulting revenue growth in a period where overall loans were marginally lower year-over-year. With continued focus on process and efficiency, expense growth was moderate this quarter, resulting in a positive year-to-date operating leverage of 3.1%, Our focus on relationships and more deliberate new client selection is driving an increase in the percentage of clients that we consider to be primary. Our retail bank has added over 95,000 net new primary clients year-to-date and importantly, saw the lowest client attrition in three years as a result of more selective client acquisition and cross-sell initiatives. We are closely tracking client relationship depth and have seen meaningful progress with over 45% of all retail clients currently holding 3-plus products in the Canadian bank a 230 basis point increase from a year ago. Our Scene+ loyalty program continues to drive deeper client relationships with 32% of new clients holding more than three products after one month with the bank. These higher-value Scene+ clients now represent over half of the new-to-bank clients across day-to-day banking and credit cards up from 40% last year. At Tangerine, we continue to add new clients and see lower attrition rates with existing clients. Year-to-date, we're tracking well ahead of plan to add new clients in fiscal 2024. Importantly, primary client growth at Tangerine is up 15% year-to-date, with 35% of all clients now having three or more products with Tangerine. Tangerine continues to set the industry pace in terms of mobile penetration with 64% of new client sign-ups happening exclusively through the mobile channel, up 11% year-to-date versus last year. Our commercial banking business saw a continued moderation of loan growth, up 5% against double-digit deposit growth. Ongoing efforts on client selection and capital optimization contributed to a continued improvement in return on risk-weighted assets this quarter. We continue to believe there is material share gain and profitability growth potential in our domestic retail and commercial bank, which we expect to deliver at least half of the bank's earnings growth over the medium term. Global wealth earnings of $387 million reflects strong performance from our asset management franchise, our integrated multichannel advisory business and continued outsized growth from our international wealth unit. Favorable returns in most global equity benchmarks and strong relative performance from our 1832 fund lineup, resulted in solid AUM growth in the quarter and supports continued flows into long-term investment products as the year progresses. Assets under management in our international wealth business grew over 15% in the quarter through a combination of strong investment performance and over $1 billion of net sales in the period. Our Canadian wealth management advisory businesses, ScotiaMcLeod, MD Financial and our private investment counsel business are having great success delivering our fully integrated total wealth offerings to clients. We have increased the number of financial plans delivered this quarter by 27% year-to-date, and we continue to add product specialists to deliver comprehensive solutions to clients. Clients with the financial plan are better prepared for the future are a significant driver of Net Promoter Score and twice as likely to have a multiproduct relationship with the bank. We continue to see progress in strengthening the partnership between our wealth and Canadian retail channels with referrals up 15% year-over-year. In our Global Banking and Markets business, we reported resilient earnings of $428 million this quarter despite headwinds in the Canadian capital markets franchise that were largely offset by strong performance in our U.S. business. The business continues to reposition the portfolio with a view to achieving better balance in our loan-to-deposit growth as well as align with our strategic geographic priorities and client return objectives. Deposits were lower by 2% in the quarter, while overall loan volumes were down 6% due to lower new origination activity, paydowns and additional delivered actions to strategically reposition the portfolio. We were encouraged by GBM's performance in terms of growth in underwriting and advisory fee revenue in the quarter, an indication of more effective client selection and product coverage in our GBM business. We are also pleased to welcome Travis MacHen to our leadership team as our new Group Head of Global Banking and Markets. Travis brings a career of U.S.-focused corporate investment banking experience with best-in-class global banks. In our International Banking business, we delivered strong results this quarter with a net earnings contribution of $677 million resulting in a year-to-date return on equity of 15%, up from 13.3% in the period last year. Solid revenue growth was driven by continued margin expansion in most geographies, coupled with impressive expense discipline resulting in a significant improvement in the segment's productivity ratio to 51.1%. Our capital repositioning continued in the period as risk-weighted assets in the business were lower by $2 billion while deposits were up 3% sequentially and 6% on a year-over-year basis. Our GBM LatAm contribution moderated to $290 million in the quarter, down from an exceptional $372 million contribution in Q1. We are encouraged by the improved performance and profitability of the business as we look to drive even greater productivity through a more regional standardized operating model. In international retail, we have a significant client segmentation initiative underway to grow primary clients more selectively in the affluent, emerging affluent and top of mass segments. While we expect this franchise repositioning, including client selection to be an ongoing process, we saw good progress on priority net client growth in the quarter. We continue to believe we have sufficient scale and capital deployed in our international banking business to profitably grow our retail businesses and capitalize on wholesale opportunities when favorable market conditions and client activity allow, as evidenced by solid results again this quarter. In summary, the bank delivered solid financial performance in the quarter, while executing on key initiatives that will enhance profitability and set us up for a more balanced resilient growth over the long term. I would like to thank our team Scotiabankers globally who are delivering on our ambitious plan. As I continue to meet with our teams, it is clear our people understand the important role they play in driving the sustainable, profitable growth we've committed to delivering for our shareholders. With that, I will turn it over to Raj for a more detailed financial review of the quarter.

Raj Viswanathan: Thank you, Scott and good morning, everyone. All my comments that follow will be on an adjusted basis for the usual acquisition-related costs. Starting on Slide 6 for a review of the second quarter results. The bank reported quarterly earnings of $2.1 billion and diluted earnings per share of $1.58. Return on equity was 11.3%, and return on tangible common equity was 13.8%. Revenues were up 5% year-over-year, driven by 5% growth in net interest income and also by net interest margin expansion and 6% growth in noninterest income. All bank net interest margin expanded 5 basis points year-over-year. Margin was down 2 basis points quarter-over-quarter, driven mainly by a lower contribution from asset and liability management activities. Noninterest income was $3.7 billion, up 6% year-over-year, primarily from higher wealth management revenues, underwriting and advisory, commitment and credit fees, partly offset by lower acceptance fees. The provision for credit losses were $1 billion and the PCL ratio was 54 basis points, up 4 basis points quarter-over-quarter. Expenses grew a modest 3% year-over-year driven by higher technology-related costs. Personal costs from inflationary adjustments and higher performance-based compensation, partly offset by lower share-based compensation and the benefits of the efficiency initiatives. Quarter-over-quarter, expenses were down 1%, driven by seasonally higher share-based compensation in the last quarter. The productivity ratio was 56.2% this quarter and year-to-date operating leverage was a positive 1%. Moving to Slide 7, which shows the evolution of the common equity Tier 1 ratio and risk-weighted assets during the quarter. The bank's CET1 capital ratio was 13.2%, an increase of 30 basis points quarter-over-quarter and 90 basis points year-over-year, primarily benefiting from RWA optimization efforts. Total risk-weighted assets was $450.2 billion, marginally down from $451 billion in the prior quarter. Earnings contributed 14 basis points and the DRIP program contributed 10 basis points, offset partly by a reduction of 5 basis points from the revaluation of securities. Lower risk-weighted assets primarily reflecting the benefits of RWA optimization activities contributed 15 basis points. The Q1 capital floor add-on of $7.8 billion was eliminated by changes in book quality and LGD model updates that only impact the model risk-weighted asset numbers. The bank will continue to maintain strong balance sheet metrics as it executes on its strategic initiatives. Turning now to the business line results beginning on Slide 8. Canadian Banking reported earnings of $1 billion, a decrease of 4% year-over-year as higher revenues were more than offset by significantly higher PCLs. The business generated another quarter of positive operating leverage, resulting in year-to-date positive operating leverage of 3.1%. Average loans and acceptances were flat quarter-over-quarter and down about 1% from the prior year. The portfolio mix continues to evolve in line with our strategy as business loans grew 8% year-over-year, credit card balances grew 18% and personal loans grew 2%, while residential mortgage balances declined 5%. We continue to see deposit growth as year-over-year deposits grew 7% and the loan-to-deposit ratio improved to 122% from 132% last year. Net interest income increased 12% year-over-year, primarily from solid deposit growth and margin expansion. The net interest margin expanded 26 basis points year-over-year reflecting benefits of asset repricing, business mix changes and growth in deposits. Margin was stable quarter-over-quarter as asset margin expansion was offset by deposit margin compression. Noninterest income was down 11% year-over-year as the prior year included elevated private equity gains and income from our equity interest in Canadian Tire Financial Services that we divested in October 2023. The PCL ratio was 40 basis points, up 6 basis points quarter-over-quarter. Expenses increased 4% year-over-year primarily due to higher technology costs, personnel costs and expenses to support business growth. Quarter-over-quarter expenses grew 1%, primarily from higher pension and benefits and premises costs. Turning now to Global Wealth Management on Slide 9. Earnings of $387 million grew 8% year-over-year, driven by higher revenues in Canada by a mutual fund piece and International Wealth partly offset by higher volume-related expenses. Quarter-over-quarter earnings were up 3%, primarily due to higher brokerage and mutual fund revenues across Canada and international partly offset by higher expenses. Revenues of $1.4 billion were up $114 million or 9% year-over-year, driven by higher fee-based revenues, mutual fund fees from strong assets under management growth and higher net interest income from loan and deposit growth across our Canadian and international businesses. Expenses were up 9% year-over-year due to higher volume-related expenses, sales force expansion and higher costs to support business growth. Part assets under management increased 6% year-over-year to $349 billion as market appreciation was partly offset by net redemptions. AUA grew 7% over the same period to $669 billion from market appreciation and higher net sales. International Wealth Management generated earnings of $66 million, up 19% year-over-year, driven by higher mutual fund fees in Mexico and strong deposit growth in Peru. AUA and AUM grew 10% and 15%, respectively, year-over-year. Turning to Slide 10, Global Banking and Markets. Global Banking and Markets generated earnings of $428 million, up 7% year-over-year. Capital markets revenue was up 5% year-over-year, primarily from higher fixed income and global equities revenues, partly offset by lower FX and commodities revenues. Quarter-over-quarter capital markets revenue was down 5% as global equities revenue were down 11%, partly offset by growth in FICC. Business Banking revenues declined 8% year-over-year and 4% quarter-over-quarter, primarily due to lower corporate and investment banking revenues as the business continues to optimize capital deployment. Loans and acceptances were down 6% quarter-over-quarter to $115 billion, largely driven by borrowers accessing the debt markets to pay down loans and management's focus on ongoing balance sheet optimization. Net interest income decreased 14% year-over-year, primarily due to lower loan volumes, partly offset by lower trading-related funding costs. Noninterest income was up 2% year-over-year, mainly from higher underwriting and advisory fees, partly offset by lower trading-related revenue from the impact of the proposed denial of dividend received deduction on certain shareholdings in Canada. Expenses were up 4% year-over-year, due mainly to higher personnel costs and technology investments to support business growth. Quarter-over-quarter, expenses were down 3%, mainly due to seasonality of share-based competition, which was higher in the first quarter. The U.S. business generated strong earnings of $271 million up $97 million or 55% year-over-year with strong contributions from both Capital Markets and Corporate and Investment Banking while managing risk-weighted asset growth. GBM Latin America, which was reported as part of International Banking reported earnings of $290 million, up 5% compared to the prior year, mainly from Mexico. The business also earned through a 7% year-over-year reduction in average assets. Moving to Slide 11 for a review of International Banking. My comments that follow are on an adjusted and constant dollar basis. The segment delivered earnings of $677 million, down 2% year-over-year. Revenue was up 6% year-over-year as net interest income was up 14%, mainly in Chile and Mexico, partly offset by a decline in noninterest income driven by lower trading revenues. Net interest margin expanded 11 basis points quarter-over-quarter to 447 basis points driven by lower cost of funds from rate cuts and higher inflation benefits mainly in Chile. Year-over-year loans were down 2%, primarily in Brazil and Peru. Total business loans declined 7%, partly offset by 6% growth in residential mortgages. Deposits grew a strong 6% year-over-year, primarily in Mexico, Chile and Brazil. Total personal deposits grew 2% year-over-year and nonpersonal deposits grew 8%. The loan-to-deposit ratio improved to 124% from 138% in the prior year. The provision for credit losses was 138 basis points or $566 million down $2 million quarter-over-quarter. Expenses were up a modest 3% year-over-year driven by technology expenses and business and capital taxes despite a higher inflation environment. Year-to-date operating leverage was a positive 5.5%. Turning to Slide 12. The other segment reported an adjusted net loss attributable to equity holders of $421 million, an improvement of $53 million compared to the prior quarter, mainly due to higher noninterest revenues mostly from mark-to-market benefits from investments in certain derivatives and lower expenses. I'll now turn the call over to Phil to discuss risk.

Phil Thomas: Thank you, Raj. Good morning, everyone. Credit performance is playing out as expected. International Banking has benefited from a stabilizing macroeconomic environment and specific client segments in Canadian Banking are facing headwinds as rate relief is delayed. As a result, this quarter, all bank PCLs were 54 basis points towards the higher end of our range. This resulted in total PCLs of approximately $1 billion, up quarter-over-quarter by $45 million. performing PCLs were $32 million or 2 basis points. Impaired PCLs were $975 million or 52 basis points, up 33 basis points quarter-over-quarter largely driven by Canadian Banking and retail, partly offset by lower PCLs in Canadian Business Banking. We continue to maintain appropriate allowances on loans with an ACL coverage ratio of 88 basis points up 2 basis points quarter-over-quarter and up 10 basis points from Q3 2023. In Canadian Banking, PCLs were $428 million, translating to a PCL ratio of 40 basis points up 6 basis points quarter-over-quarter. Canadian retail PCLs were $365 million, of which $343 million were impaired PCLs. This represented a $65 million increase quarter-over-quarter. Canadian clients continue to be impacted by increased borrowing costs and higher expenses driven by inflation. PCLs were elevated due to deterioration in the Canadian automotive finance portfolio in the used segment and specific cohorts of variable rate mortgage customers. Specifically, variable rate mortgage customers originated in 2022 have shown signs of stress. These clients are largely from the Greater Toronto Area and Vancouver. This resulted in an increase of vulnerable customers from 2,700 in Q1 to 3,300 in Q2. Variable rate mortgage portfolio delinquency increased 2 basis points quarter-over-quarter to 28 basis points. Our fixed rate mortgage portfolio, representing 68% of balances had stable delinquency performance. We will continue to work through our mortgage and auto clients and have launched several proactive measures across our collections function, including pre-delinquency solutions and new loss mitigation tools. Turning to International Banking. International Banking PCLs were $566 million, down $8 million from the prior quarter. The Q2 PCL ratio was 138 basis points, up 3 basis points quarter-over-quarter. Our international business banking portfolio continues to perform well with PCLs down slightly from the prior quarter driven by strong performance across the region, slightly offset by continued market deterioration in Colombia. Retail PCLs were in line with the prior quarter at $485 million, PCLs in Colombia increased offset by stable performance in Mexico, Chile and Peru. Central banks across the region continue to cut policy rates, which should have a positive impact in these markets. Looking forward to the second half of the year, we expect on a full year basis to remain within our guidance of 45 to 55 basis points. However, we expect to remain at the higher end of the range in the next two quarters. In anticipation of a deteriorating environment in fiscal 2024, we increased ACLs from 78 basis points to 85 basis points in Q4 of fiscal 2023. Additionally, over the last four quarters, we have built approximately $585 million in performing allowances. Driving elevated provisions, Canadian credit performance will continue to gradually work through the cycle, and in international markets, we believe credit performance will remain stable throughout the rest of the fiscal year. Overall, we are comfortable with our allowances and continue to manage our portfolios proactively. With that, I will pass it back to John for Q&A.

John McCartney: Great. Thank you, Phil. Operator, please open the line for questions. Please limit your questions to one, so that all participants have the opportunity to ask a question, and re-queue if you have a call. Operator?

Operator: Thank you. [Operator Instructions] The first question is from Ebrahim Poonawala from Bank of America. Please go ahead. Your line is now open.

Ebrahim Poonawala: Hi. Good morning. I guess maybe question, Phil, starting with you just on credit quality. You mentioned impaired PCLs or PCLs at 55 basis points for the back half. Give us a sense of your visibility on credit around, do you see things peaking in the back half of the year, and whether one or two rate cuts from the BoC will make any significant impact, or how we should think about just credit quality as we look beyond the back half, and the potential that this could be a lot more worse come 2025, and within that, like, where do you see the drivers of the lost content within your loan book? Thank you.

Phil Thomas: Thanks, Abraham. So, I'll guide towards the higher end of the 45 to 55 basis points that we gave in Q4 last year on a full-year basis. I think the dynamic within our portfolio is you'll see, as I mentioned earlier, international banking starting to stabilize, and we've seen rate cuts over the last few quarters in international, and those are starting to really bear fruit for and provide relief for our consumers. I'm more thoughtful about what's going on in the Canadian market, and you are seeing this, the impact of higher for longer really starting to impact, particularly our variable rate mortgage customers and into our auto portfolio. We're seeing friction in those portfolios. There's some talk about rate decreases in June and July. I'm of the opinion that those rates, even with those decreases in June and July, it'll take a few quarters. Maybe one, two, three quarters for it to start to really support the Canadian consumer. Maybe a little bit of math to help you, some numbers to help just do it with the thought process. On the variable rate mortgage customer, particularly those within Toronto and Vancouver, with the average decrease of 25 basis points, or a 25 basis point decrease will lead to, about an average decrease in payment of about $100. And so, as you think about how quickly rate decreases happen, that will provide good relief for the average consumer, to start making payments on other products. And so, but I think it's going to take probably one to three quarters, depending on the consumer, for it to really bear fruit.

Ebrahim Poonawala: And just on that field, the 25 basis points, should we be looking at the overnight rate, obviously on the variable rate, but when you think about the rest of the book, overnight versus the five-year rate, like how do you think about the sensitivity between the two? Like should we be monitoring the yield curve needing to move lower as well as through the BoC rate cuts?

Raj Viswanathan: Ebrahim, I can start and maybe Phil can help. Yes, I think for the variable rate mortgage customer, like you said, the short end of the rate curve is going to have an immediate impact, because of our product and therefore a benefit in the ranges that Phil talked about. The others, they will benefit based on the longer term rate. I think most of our renewals we're seeing in the three-year cohort, fixed rates, so on. So, as the rate curve moves, definitely it's not going to go down 25 basis points at the long end of the curve. We know that, it might go down something, you know, five, 10 basis points and that will get reflected in some of the relief that these customers will get at the time of renewal. But I would say it's more meaningful at the short end of the curve for the variable rate mortgage customer.

Operator: Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead. Your line is now open.

Doug Young: Good morning. Just Phil, looking at Slide 15, you talk about the low - the decline in the PCL in international banking driven by lower retail formations, across all countries. And then, I flip to Slide 16 and you talk about higher GIL formations driven by higher new retail formations, mainly Chile, Mexico. Just trying to reconcile these two statements. I'm a little slow this morning, but just trying to kind of understand the movements there. And then, as a follow-up, just I just want to clarify, Phil, as well, you're talking about higher end of your 45 to 55 basis point PCL guidance. Is that higher end for Q3, Q4, or is it the higher end for the full year?

Phil Thomas: So, I'll start with your - question on Slide 16. And what you see, a lot of our increasing GILS this quarter in ID are related to Chile commercial real estate. And so, given the real estate higher for longer situation in that market, we have seen some prolonged stress on the commercial real estate portfolio there. It's not a big portfolio. It's about $3 billion. And really, the challenge has been for the real estate developers, the cost to complete. What we're seeing in Chile, though, the dynamic has been we've had about 475 basis point reduction in interest rates already. And so, we're starting to see the construction starting to come back online. And we're also reassured, because we have pre-sales in place for the majority of the lending that we've put in, that we have there. So, it's going to be higher for a little bit longer, but we're not expecting to lose any money there. So, that sort of explains the increase in GILS from that part. In terms of the forecast, we're expecting we'll be at the sort of 54, 45 range for the next two quarters. And so, I've been speaking more on the quarterly outlook. Sorry, 54 to 55 basis points for the next two quarters.

Doug Young: Thank you.

Operator: Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Your line is now open.

Paul Holden: Yes, thank you. I want to continue on the line of questioning of the higher for longer and potential impact on Canadian retail borrowers, specifically on the fixed rate mortgages. I'm wondering how you're viewing the difference or similarities and potential payment shock for the fixed rate mortgage borrowers versus what you're seeing with the VRM today?

Phil Thomas: Sure. Thanks for the question, Paul. We haven't - most of the renewals that are coming up on the fixed rate portfolio are those that were originated in 2017. So, we haven't been seeing a big volume of fixed rate renewals so far. Maybe it's interesting to note that 70% of the renewals that are coming through right now, are opting for a fixed three-year fixed term. What we are looking forward to, though, in terms of, you know, as we look in this year 2025 and 2026, obviously, there's some payment shock anticipated. But we're taking some comfort in terms of how our variable rate mortgage customers, are absorbing the shock. We have seen discretionary spend decrease. As an example, on our VRM portfolio, those customers' discretionary spend has decreased, by about 10% on retail expenditures year-over-year. And on fixed rate today, it's around five. So, we're already starting to see some consumers making choices in terms of how they're managing their savings. And I think I've given this number in prior calls, but we still see our variable rate mortgage customers holding on to about two payments, two payment buffer within their deposit accounts. And on the fixed rate, it's about three and a half to four. So, we're still comfortable with the credit quality we're seeing there. And just as a reminder, the average FICO score that we're seeing at renewal still remains strong at about 768, with 91% of the renewed balances being prime or above on the fixed rate portfolio. So, hopefully that's helpful.

Paul Holden: Yes. Thank you. And I'll leave it there. That's my one question. Thanks.

Operator: Thank you. The next question is from Matthew Lee from Canaccord Genuity. Please go ahead. Your line is now open.

Matthew Lee: Hi, good morning. Thanks for taking my question. One regarding balancing primacy and growth, Canadian loans declined by 1% year-over-year in the quarter. And I think part of that was a conscious effort to focus capital on areas you achieve primacy. So, we still be expecting to see accelerating loan growth in the back half of the year, maybe particularly on the mortgage front?

Aris Bogdaneris: Hi, Matthew. It's Aris here. Thanks for the question. Just to give a little context. So, on a spot basis in the quarter, we grew our mortgage book by around $2 billion. And we continue to grow our credit card book, our unsecured lending book. But where we see challenges is on the auto book, as Phil alluded to. Actually, the auto book, the retail business, is actually down 14% year-on-year in terms of origination. But we're slowly seeing now the pipeline for mortgages will continue to go up. We're trying to stay extremely focused on what you've heard Scott say often, this value versus volume. And just to give you a bit of background on that. So, 70% of our new mortgage originations are coming with three or more products. And actually, in April, that number was approaching 80% across all channels. That's one fact. The other fact is renewals. We're hitting a very high level of renewals now passing over 80% of renewals for the second quarter for our mortgages. These are the originations, or the business we like to book for obvious reasons. So, we're going to see continued mortgage growth in the second half of the year, obviously predicated on how rates go. But even if rates come down. We will continue to stay disciplined on getting multi-product mortgage customers at origination and again, focusing on renewal. The auto book will continue to be stressed. We're actually pulling back on used car on non-subvented and where we'll see some growth will be in the subvented new car business, as more new cars come on stream with our dealers. In terms of credit cards, we'll continue to grow double-digit the balances. But again, our credit card is not a monoline business. It's actually a cross-sell product, where 80% of our new originations in credit card, are coming from existing customers in C+. So, hopefully that gives you a bit of a background.

Matthew Lee: That's helpful. Thanks.

Operator: Thank you. The next question is from John Aiken from Jefferies. Please go ahead. Your line is now open.

John Aiken: Good morning. I wanted to dive into the appendix, actually slight 28 if I may. Declining balances in commercial and corporate lending international, not terribly surprising. But in context, we're actually seeing a shift away from investment grade to non-investment grade. First part of this is, is this just simple credit migration where some of the former investment grade has slipped into non-investment grade given what's going on in the region? And second part to the question, when do we think we can actually start to see the reversion of that and growth? Because presumably, you're looking to grow the investment grade part of the business, or do I have that strategy incorrect?

Raj Viswanathan: Yes, I can start, John. It's Raj. What you're seeing in investment and non-investment grade has got both qualities what you described. Yes, there is some level of migration that is happening, both in the GBM book as well as in the international commercial book. You actually see it in the capital, where we see non-retail migration for obvious reasons, right? High inflation, low growth in all these economies, high interest rates has got some impact. The numbers that you see is actually small, right? I mean, it's moving from 40% to 39% in investment grade and 60% to 61% in non-investment grade. There's no deliberate strategy over here. It's how we are going to deselect clients and those clients who we believe we are not getting the appropriate return. We're trying to pull back - from a capital perspective. And international banking, as you know, every three months, we have the ability to reprice if you want to keep the client, or reprice if you want to exit the client. So we have used that in the past. We continue to use it as we, you know, we have a finite amount of capital that international banking has and they're making the right choices to improve the returns. You can see some early reference to it. Scott made reference in his comments talking about ROE, how it's improved beyond 15%. Now, these are all contributors to the outcome, which is to have a more profitable business. But there's no significant shift that you should expect to see even going forward. It's just a small shift based on a couple of factors.

John Aiken: Thanks for the call, Raj. I'll re-queue.

Raj Viswanathan: Anytime, John.

Operator: Thank you. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Your line is now open.

Gabriel Dechaine: All right. Just a couple here. On international, a good NIM expansion this quarter, but with rate cuts that we've seen across the region, how do you expect that to evolve in the coming quarters? And then on the credit side, look, there's a lot of ways to slice and dice the evaluation of your provisions. But one thing I look at is the performing ACL ratio today versus pre-COVID, historical reasons, I guess. And it's pretty flat for Scotia. Your peers have more of a buffer above that pre-COVID level. Given what you've highlighted as far as, some of the challenges your customers are facing, and this is across the industry, of course, but your book in particular and the auto book, is it possible, plausible that we could see another bump up required to that performing ACL ratio just because of - everything that's going on? Thanks.

Raj Viswanathan: Gabe, it's Raj. I'll start on NIM, and Francisco might have a comment or two to follow me, and then Phil will take over on the performing ACL ratio. International banking, then, Gabe, you probably followed me quite a bit. A number of countries, multiple factors that move the NIM up and down, inflation is a factor and so on. This quarter, the benefit came primarily from reduction in cost of funds.

Gabriel Dechaine: Right.

Raj Viswanathan: And we have a significant cut in rates, particularly in Chile and Peru that we looked at. Peru's NIM is up 15 basis points. Chile is up 8 basis points. And even Colombia is up 41 basis points for the same reason. So that thing, I think, is largely done. We'll see some marginal benefits over there, but I think most of it is baked into the 447 basis points. There is about two, three basis points in the 447, which is inflation-related, which we know we will give up in Chile. So maybe look at it as 445. And then it'll bob around as international banking NIM always does, because of multiple factors. I - somewhere around that, maybe 450 is the top end, at least over the next two quarters, because we're not expecting meaningful rate cuts like we've seen in the last two or three quarters. So that would be my sense of how the NIM will behave looking forward.

Francisco Aristeguieta: I would agree, Raj. This is Francisco. I think the one, the lagger is Mexico. We expect Mexico to cooperate much later and much slower. So that will be the remaining benefit. But we don't believe that's going to happen in the second half of the year, but rather a 2025 event.

Gabriel Dechaine: Okay. Thanks for the clarity.

Phil Thomas: Gabe, Phil here. Hope you're well. So maybe just on the ACL question you asked, you know, if you recall, we did do a large performing build in Q4 last year, and we did it on both the business banking side and on the Canadian retail, just in anticipation of some of the headwinds we expected for fiscal 2024. If I were to go back to look at Q1, '20, we were at 82 basis points. We're at 88 basis points this quarter. So, I feel given where we are, given the level of build that we've done over the past four quarters, I'm comfortable with the level of allowances that we have. Will we increase performing allowances as we go forward? It's going to depend on how the macroeconomic scenario plays out, and we'll be guided by that.

Gabriel Dechaine: And that guidance range you gave, sorry, that was for impaired or total? The 45 to 55?

Phil Thomas: That's for total.

Gabriel Dechaine: Yes. Okay. All right. Thank you.

Phil Thomas: Thanks, Gabe.

Operator: Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is now open.

Mario Mendonca: Good morning. Probably for Raj, the capital ratio looks pretty healthy now, north of 13.2%. You may have discussed this somewhere in the presentation or in the material. I may not have seen it yet. Can you update us on what your intentions are with the DRIP? Most of your peers, I think all of your peers have dropped the DRIP. So I'm interested in your outlook there?

Raj Viswanathan: Yes, sure, Mario. Good morning. Capital ratio, yes, definitely healthy at 13.2% reflects a lot of the actions that we have taken, and we will continue to take as we pivot away from lower profitable segments and businesses to higher profitable segments. So, we're seeing good returns over there on the efforts that we've made. So the capital build has been really good, particularly over the last two quarters. And we're very pleased with the results from all the initiatives that we talk about, which we call as RWA optimization initiatives. We previously indicated that our intention, was to turn off the DRIP in the second half of the year. Our intention still remains the same. We're quite motivated to doing that, and that's what you should expect from us in the second half of the year to turn off the DRIP, but right now it is still on.

Mario Mendonca: Okay. And then, again, this is something I may have missed. I thought the cadence for dividend increases was every Q2, but again, I may have missed this. I don't see a dividend increase this quarter?

Raj Viswanathan: No, you haven't missed anything, Mario, as always. I think, yes, there is no dividend increase this quarter. It's part of what we're thinking is, we do want to grow dividends in line with our earnings growth, which we know is going to happen in 2025, rate situation and other stuff to contribute it. So we decided that it's better to take a pause at this time and we should start commencing our dividend increases in 2025, in line with what we do every year in the second quarter.

Mario Mendonca: Thank you.

Operator: Thank you. The next question is from Lemar Persaud from Cormark Securities. Please go ahead. Your line is now open.

Lemar Persaud: Yes, thanks. Maybe turning to Aris on a question on Canadian banking. This cessation of CDOR, is that going to weigh on non-interest income in Canadian banking? Because like I noticed the net fee and commission income dropped to $619 million this quarter, but it's been kind of stable in the north of $630 mid-$640 range throughout 2023. So I'm wondering if that's going to be a headwind - you're going to see play out for the next couple of quarters? Thanks.

Raj Viswanathan: Hi, Lemar, it's Raj. How about I start and then, Aris might have a couple of comments on this. Yes, absolutely. As we turn off the CDOR and the acceptance level starts going down, which should happen in an accelerated manner in Q3, yes, the non-interest revenue will go down, but it doesn't impact total revenue. It's kind of a geography that moves between non-interest revenue and NII. So, we don't have the stamping fees, but we pick it up through the NII line. And as you may know, some of these acceptances tend to be at lower margins. So as they come up for renewals, it'll be a tailwind to the margin of the Canadian bank and to the bank as a whole, not necessarily in Q3, but as they come up for renewal. So that's the change you should expect to see. But part of the non-interest revenue of the Canadian bank is also down, because we've lost the Canadian Tire Financial Services income, which as you know, is between $16 million to $18 million a quarter. But that shift will happen just between revenue for the acceptance as part of the business, but not necessarily impact the total revenue in any meaningful manner.

Aris Bogdaneris: And just to add, up to now, it's been one-third we've converted the BAs into loans, and that has obviously impacted the NIR. But again, as Raj said, the net interest income going up. By September, the remaining part of the BAs will be converted. These are not able to reprice like the earlier ones. So, we'll see a bit of pressure on the NIM, as that conversion takes place.

Lemar Persaud: Okay. So net-net, it just a - we should expect it to be kind of a shift from NIR into NII...?

Raj Viswanathan: Yes, that's right, Lemar. It shouldn't be meaningful. It's a $20 billion portfolio compared to the $440 billion we have in the business, but it'll have some impact as it transitions away. Yes.

Lemar Persaud: Understood. Thank you.

Operator: Thank you. The next question is from Mike Rizvanovic from KBW Research. Please go ahead. Your line is now open.

Mike Rizvanovic: Good morning. I have a question for Raj, and I wanted to ask about the corporate segment loss. And just in light of Scott's comments at the outset, it sounds like your - view on the number of rate cuts has certainly changed. And so, if you think about medium term, I'm trying to get a sense of the reasonable trajectory that we should expect on that loss. So I'm guessing it's not going to be $400 million plus. But if you think about, say, exiting 2025, so six quarters from now, does this go down to something like sub $300 million? And if that's the case, what do we need to see on maybe the shape of the yield curve to get you there?

Raj Viswanathan: Yes, thanks, Mike, for your question. Yes, the other segment this quarter, just to clarify, it benefited, because of market adjustments. And I believe for the second half of the year, unless rate cuts happen different than what we're expecting, which is only, one rate cut we're expecting now in the second half of the year in Canada. We'll remain around the $450 to $475 million loss range, unless we benefit again from some late mark-to-market benefits like I saw this quarter. But to answer your question on trajectory, it will follow the trajectory of rate cuts, Mike, because the benefits of the rate cuts will show up in the other segment for us, because the business plan is compensated through the transfer pricing arrangements that, we have to remove the volatility in the business plan results. Each rate cut, this time we put out one additional disclosure in the appendix slide, where we said a 25 basis point cut at the short end of the curve gives us about $100 million NII benefit in a full year. So it gives you a little bit of perspective how many rate cuts and how that could play out for the other segment next year. The more meaningful one, Mike, is to look at our fixed rate mortgages that is coming up for renewal in 2025. You can make some assumptions saying, what could be the pickup in the yield that will show up in the other segment, because the spread will remain constant in the business. But it also has to be offset by some of the GICs which are coming up for renewal. Even this quarter in the Canadian Bank, we saw GIC renewals impacted there, NIM by about two basis points. So there is a dynamic between fixed rate borrowings that we have and fixed rate mortgages that will come up for renewal. That should help. If you have reasonable rate cuts, call it four rate cuts, right, through to 2025. I would see that the other segment will not start with a four. The quarterly loss should be meaningfully lower. But it's tough to provide an estimate. Like you said, it depends on how the various parts of the rate curve move right, from the short end all the way to five years. But it should be a meaningful benefit in 2025 through the other segment.

Mike Rizvanovic: Okay, that's super helpful. So it's rate cuts, Bank of Canada, and not necessarily the shape of the yield curve that would drive that?

Raj Viswanathan: Yes, I'm assuming that, the rate cuts obviously benefit the short end of the curve. Hopefully, there's not a parallel shift. I don't think any of us expect that, because the rate curve is inverted. So the long end of the curve should go down meaningfully lower than the 25 basis point rate that we might see at the short end of the curve. So, we might lose something at the three year and five year point. But the significant benefit will come from the short end.

Mike Rizvanovic: Okay. Perfect. Thanks for that. And then if I just squeeze one more in for Aris on Canadian banking, just wanted to ask about it sounds like you're getting a bit of traction on those more fulsome relationships, which is now your strategy. On the cost side, I'm just wondering, is that something that near term could result in a bit of expense inflation, I'm not sure how much incentives play a part in getting that customer, to become more of a fulsome customer for the bank. Any thoughts on near term expense?

Aris Bogdaneris: Let me just on the primary, just to give a bit of background before I get to your question. So on primary, what we're doing is, at the point of sale, we're much more deliberate in the types of customers we want to bring into the bank. So again, having multi product acquisition at the point of sale, I talked about mortgage, and but it's also in generally in our acquisition in our branch network. The mortgage plus, as you know, I discussed when we book mortgages, we're looking for the multi-product day-to-day banking, additional products along with the mortgage, and then again, the advisory getting more products. So as you can imagine, getting more products to our customers, they're more engaged with us, there could be additional, of course, interactions and costs with that. But again, in parallel, as you know, and you see that a bit on the cost side, is we're digitizing our business, we're looking to take costs out by digitizing end-to-end digitizing, onboarding digitizing, and that's where our investments are going. Despite the good management on the cost side, there's a lot of work going on behind the scenes on how we're going to digitize this business, in line with what I talked about at Investor Day. So yes, you'll get more engaged customers, they'll be interacting with you more, but you'll obviously drive more revenues and there the operating - leverage will continue to be strong. That's the whole thesis behind it.

Mike Rizvanovic: Thanks for the color.

Operator: Thank you. The next question is from my Nigel D'Souza from Veritas Investment Research. Please go ahead. Your line is now open.

Nigel D'Souza: Thank you. Good morning. I wanted to follow-up on the variable rate mortgages, but from a different perspective. When I think you mentioned those were 2022 vintages. So would you be able to set some light on the LTVs for those mortgages? And what I'm getting at here is, were those mortgages underwater or near 100% LTV? There wasn't a payment option to have an adjustable payment structure. And is there a correlation ultimately between the amount of equity and the LTVs of the ownership portfolio and the delinquencies and impairments you're seeing in that book?

Phil Thomas: Hi, Nigel. It's Phil. Our average LTV on that portfolio is in the 50s. So it is quite low. At origination, the average FICO for those products were 800. And so, it is a quite a strong credit quality portfolio. I think, as I pointed to in my prepared remarks earlier that the friction is really coming from Toronto, GTA and Vancouver, where you're seeing, where you had higher cost on the mortgage. And I think people are just in the process now of given the higher for longer rate, they're making tradeoffs in terms of their payments. And maybe they got a little bit over their skis at point of origination. But these are good customers that are just facing a little bit of tightness in terms of their cash flow. We've been really focused on the collections efforts, and we've been doing a lot of proactive outreach to these individuals. It's not - as if we have a bad customer here. This is just a customer who's sort of going through a life event, or having just some difficulties making some payments to pay. We've expanded our proactive outreach to these customers, and we've implemented a number of loss mitigation programs to help them through this structure period.

Nigel D'Souza: So, just to clarify, you're saying there's no correlation between LPD and delinquency rate it's mindful?

Phil Thomas: No, it's tough to hear you. But I think the answer to your question is no.

Nigel D'Souza: Okay. So, and then just a quick follow-up on the NII sensitivity. I noticed that, yes, there's a $100 million benefit for 25 basis points decrease, but I believe there's a decline in NII for 100 basis points decrease in rate. So, just wondering what's driving that dynamic in your hedging program, where there's a benefit for - 25 basis points decrease, but then there's a negative impact for 100?

Raj Viswanathan: Hi, Nigel, it's Raj. That's actually a simple answer. Because one of it is a parallel shift, right? Unless we believe that there's going to be a complete parallel shift up and down in an inverted rate environment, yes, the 100 basis points plus and minus, like we say, will happen. But that's not what we expect. I think what's more meaningful is the short end of the curve. That's the distinction between the two. But I'm happy to go into more detail with you one-on-one if you think you have more follow-up questions on that topic.

Scott Thomson: And Raj, it's also important to note is the sensitivity disclosure we've had, $100 million for 25 basis points, doesn't include the asset repricing? It does not. And so, the tailwind here for the bank in the scenario where rates come down is pretty significant.

Nigel D'Souza: Okay. That's helpful. That's it from me. Thank you.

Raj Viswanathan: Thanks, Nigel.

Operator: Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead. Your line is now open.

Darko Mihelic: Hi. Thank you for taking my question. I know we're running out of time here. I'm just wondering, Raj, if you can spend a little bit more time to elaborate on the capital floor add-on, and specifically, you suggested that it was eliminated, because of changes in book quality and model updates. And I think I heard you say that there was more work to be [Technical Difficulty] when the floor kicks back in again. And what it is precisely that you're doing with respect to model updates? Thank you.

Raj Viswanathan: Yes. Sure, Darko. I missed part of your question. You got cut off. But I think I got what you're looking for. The impact at the end of Q1 of the floor was $7.8 billion, approximately 23 basis points, if you recall. As I also mentioned previously, the floor impact inherently will move due to a number of factors. Movement in ARB capital relative to the standardized equal and movement in ACL versus GL. So a lot of things impact the floor, unfortunately, which makes it very difficult to follow from quarter-to-quarter perspective. I'll call out two of the things, one of which you touched on, which impacted the elimination of the floor this quarter. One is client de-selection. The way we have worked about client de-selection, when we think about profitability, we have tried to calculate it or recalculate it based on 72.5% floor. Because that's ultimately where we're going to land up, and see if the client will continue to remain profitable. So the focus of the business across all three business lines is to look at those clients who will not be profitable under the standardized 72.5% risk-weighted asset capital requirements. So they've been deselecting those clients, which has the greatest impact and therefore benefits the floor when we look at it from period-to-period. The more important thing that impacted this quarter is model changes of $4.5 billion that impact ARB, RWA only and does not impact the standardized calculation. It's split two ways. One I would call out is just parameter changes. Constantly we look at our probability of defaults for our customers, based on market influence as our own performance and so on. So that resulted and there was some migration too in the non-retail book like I pointed out on a different question which increased the ARB, RWA which is obviously insensitive under the standardized calculation. The other component is an LGD methodology change we actually put through. So that impacted at $4.5 billion. The PD changes or the parameter changes, which we call book quality impacted a little over $4.5 billion. It just added up to $7.8 billion, which was our floor. Every quarter, Darko unfortunately, you're going to see this move around. The floor should not get engaged in Q3, Q4 for sure, because it has directionally it's supposed to go the other way based on the actions we're taking. But again, Q1, '25 is going to be a 2.5% floor. We'll see how we trend up towards that and we'll update you on what could be the impact in Q1, '25 as well as in Q1, '26. Our capital plans looking forward through to 2026 comfortably cover all these impacts as we think about what, are the minimum ratios we'd like to run and how we can support the business growth. So, we feel pretty good about where we are today and the impact of the actions we have taken on our capital ratios.

Darko Mihelic: Thank you, Raj. I appreciate that. And one last quick one in here. Would it be reasonable for next quarter to get some sort of an estimate on the possible impact of the minimum tax?

Raj Viswanathan: Yes, sure. I think I can give you the answer now. It's obviously due in 2025. Impact is not expected to be material like, some of the jurisdictions where it's not at 15%, which is what the OECD wants. There will be some pickup in that tax bill. But we really don't have too many jurisdictions, which are outside of the 15% Darko. But I'm happy to provide more details, but it won't be material at all. That I can tell you.

Darko Mihelic: Okay. Thank you very much.

Operator: Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead. Your line is now open.

Sohrab Movahedi: Okay. Thank you very much for squeezing me in. I think most of the questions were asked and answered. Just one clarification. I think, Raj, you mentioned Brazil at least once in your remarks. I think you talked about it in the context of good deposit growth. Is Brazil a battleground for you? Is this an area that you're likely to deploy capital in, please?

Francisco Aristeguieta: Francisco, thank you for the question. We have built a sound franchise in Brazil focusing on the right clients. We have a great team on the ground. But that responded to a strategy of asset growth, which is not the strategy we're focused on now. The focus with Brazil is to ensure that one, returns increase, primacy drives the clients we serve, and it's an integral part of a connected franchise. We don't expect capital to be deployed in Brazil going forward. We do expect returns to continue to improve, and we have every confidence in the quality of the team that, we have on the ground to get that result. And we're seeing it already. Seeing tremendous progress there. But ultimately, Brazil is about how can, that franchise continue to contribute to a connected strategy that serves multinational clients, not about incremental capital at all.

Sohrab Movahedi: So we won't have, Francisco, a quarter where you say PCLs are higher, because of impairments in Brazil, for example?

Francisco Aristeguieta: No, not at all. If you look at the exposure we have in Brazil, as I said, it has been very well managed. All primary strong clients in terms of quality, global names primarily that do business in Brazil, and that we serve elsewhere. So no, we do not anticipate at all a PCL issue in Brazil.

Sohrab Movahedi: And so this would be in support of GBM LatAm operations?

Francisco Aristeguieta: Yes, primarily GBM driven and markets business. And again, you're going to continue to see us, not only in Brazil, by the way, but certainly in Europe and Asia, is this drive of multinational banking really at the heart of who we serve, and how we serve them. This will be in connection to increased share of wallet, across all of our footprint with these names. So we will not be focused on, for example, Brazilian names that operate only in Brazil. We will be focused on names that operate across our footprint that, also have a presence in Brazil. And we will be aiming to deploy capital, to close those global relationships, not necessarily only in Brazil.

Sohrab Movahedi: I appreciate you taking my questions. Thank you.

Francisco Aristeguieta: Sure.

Operator: Thank you. There are no further questions registered at this time. I would like to turn back the meeting over to Raj.

Raj Viswanathan: Thank you very much. On behalf of the entire management team, I want to thank everyone for participating in our call today. And we look forward to speaking again at our Q3 call in August. This concludes our second quarter results call. Have a great day.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.