The Bank of Nova Scotia(BNS) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank reported adjusted earnings of $8.4 billion or $6.54 per share in fiscal 2023, with a return on equity of 11.7% [160] - The liquidity coverage ratio improved to 136%, up from 119%, and the net stable funding ratio increased from 111% to 116% [2] - The effective tax rate decreased to 14.7% from 17.6% year-over-year, influenced by higher tax-exempt income [9] Business Line Data and Key Metrics Changes - Canadian Banking earnings were $4 billion, down 16% year-over-year, primarily due to a $1.2 billion increase in provisions for credit losses, while revenues grew by 7% [6] - Global Banking and Markets reported earnings of $1.8 billion, down 7%, with revenues growing by 7% but expenses increasing by 15% [18] - International Banking earnings were $2.5 billion, down 4% on a constant dollar basis, with revenues up 7% but provisions for credit losses increasing by $638 million [29] Market Data and Key Metrics Changes - Economic growth in Mexico is forecasted at 3.5% for the year, significantly outpacing the sub-1% growth expected for Canada and the U.S. [3] - The Canadian loan-to-deposit ratio improved to 110% from 116% year-over-year, indicating stronger deposit growth [8] - Deposit growth outpaced loan growth, with deposits increasing by 10% year-over-year in Canadian Banking [24] Company Strategy and Development Direction - The company is focusing on balanced growth and improving profitability through strategic initiatives, including a strong emphasis on deposits [23] - The bank aims to generate positive operating leverage in 2024, with expectations of revenue growth exceeding expense growth [144] - The strategy includes a shift towards higher quality originations and a more secured business mix across its footprint [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in earnings growth for 2024, driven by strong net interest income growth and modest loan growth [30] - The bank anticipates a challenging environment for consumers and businesses in 2024, with Canadian GDP growth expected to remain muted [137] - Management highlighted the importance of monitoring unemployment rates and interest rate impacts on credit quality [117] Other Important Information - The bank has significantly increased allowances for credit losses throughout the year, totaling approximately $1.1 billion, mostly in performing allowances [166] - The Scene+ loyalty program has surpassed 14 million members, contributing to customer growth [4] - The bank was recognized for its commitment to sustainable finance and as one of the best workplaces in Canada [164] Q&A Session Summary Question: What is the outlook for earnings growth in 2024? - Management indicated that earnings growth is expected to be marginal in 2024, with net interest income growth supporting this outlook [122][123] Question: How will the bank manage its capital ratios in 2024? - The bank aims to maintain a capital ratio around 12.5% for 2024, with ongoing assessments based on regulatory changes [147] Question: What are the biggest risks for provisions for credit losses? - Management identified unemployment and interest rate uncertainty as significant risks impacting provisions for credit losses [100][101]