The Bank of Nova Scotia(BNS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank reported adjusted earnings of $2.2 billion or $1.63 per share for Q3 2024, reflecting quarter-over-quarter EPS growth and solid top-line revenue growth driven by higher net interest income and noninterest revenue [6][22] - Return on equity was 11.3%, and return on tangible common equity was 13.7% [22] - Revenues increased by 5% year-over-year, with net interest income growing by 6% and noninterest income by 4% [22][23] - The provision for credit losses was approximately $1.1 billion, with a PCL ratio of 55 basis points, up 1 basis point quarter-over-quarter [23][35] Business Line Data and Key Metrics Changes - Canadian Banking reported earnings of $1.1 billion, up 6% year-over-year, with a 1% increase in average loans and acceptances quarter-over-quarter [25][26] - Global Wealth Management earnings were $415 million, up 11% year-over-year, driven by higher brokerage revenues and net interest income [28] - Global Banking and Markets generated earnings of $418 million, down 4% year-over-year, impacted by lower fixed income revenues [29] - International Banking delivered earnings of $674 million, up 6% year-over-year, with net interest income increasing by 7% [31] Market Data and Key Metrics Changes - Customer deposits in International Banking grew 4% year-over-year, while loans were managed 2% lower, resulting in a loan-to-deposit ratio decrease to 126% [14][31] - In Canadian Banking, year-over-year deposits grew 8%, including a 5% increase in personal deposits [26] - The bank's CET1 ratio was 13.3%, an increase of 10 basis points quarter-over-quarter and 60 basis points year-over-year [24] Company Strategy and Development Direction - The bank is focused on developing primary client relationships, with P&C deposit growth across Canadian and international retail businesses up 7% year-over-year [3][4] - The investment in KeyCorp represents a strategic move to reallocate capital from developing to developed markets, enhancing growth opportunities in the U.S. [17][19] - The bank aims to enhance productivity and efficiency through cost discipline and process improvements, with a focus on maintaining a strong balance sheet [5][20] Management's Comments on Operating Environment and Future Outlook - The management expects modest economic improvement in Canada due to monetary easing, with policy rates likely trending lower into mid-next year [15][16] - The bank anticipates benefits from rate cuts to materialize in Q4 2024 and accelerate through 2025 [40][41] - Management remains confident in the resilience of the Canadian consumer and the stability of credit quality across portfolios [36][68] Other Important Information - The bank's productivity ratio improved by 210 basis points in international banking and 130 basis points in Canadian banking year-to-date [6] - The bank's wholesale funding requirement has been reduced by $33 billion over the past year, leading to a 250 basis point reduction in the wholesale funding ratio [7] Q&A Session Summary Question: Net interest margin outlook with expected rate cuts - Management indicated that every 25 basis points of rate cuts could benefit net interest income by approximately $100 million annually, with full benefits expected to materialize in fiscal 2025 [39][40] Question: Update on deposit franchise improvement - The bank has added over $28 billion in deposits in the last year, with day-to-day banking balances growing, indicating successful execution of deposit strategies [43][47] Question: International segment margin and loan loss ratio outlook - Management expressed optimism about the stability of the international banking portfolio, with expectations for continued performance in line with current levels [52][53] Question: Balance sheet growth expectations for international banking in 2025 - The bank anticipates a flattish balance sheet in 2025 due to a focus on client de-selection and targeted penetration efforts [56][57] Question: Potential for performing allowance releases - Management acknowledged the possibility of performing allowance releases if macroeconomic conditions improve, given the resilience observed in the Canadian consumer [58][59]