Bank of Nova Scotia Aktie

Ladies and gentlemen, this conference is being recorded.

Good morning, and welcome to Scotiabank's Q2 '26 Earnings Call. My name is Meny Grauman, and I'm Head of Investor Relations here at the bank. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Shannon McGinnis, our Chief Risk Officer. Following our comments, we'll be glad to take your questions.

Also present to take questions are the following Scotiabank executives: Aris Bogdaneris from Canadian Banking; Jacqui 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 will 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.

Thank you, Meny, and good morning, everyone. Scotiabankers should be proud of this quarter as we continue to drive our business forward and deliver for shareholders even in the face of unexpected geopolitical developments. We remain focused on the needs of our clients as we work to deepen client relationships across our bank. Adjusted earnings came in at $2.7 billion or $2.02 per share. Pretax pre-provision earnings were up 16% year-over-year as we continue to drive revenue growth and manage our expenses effectively.

Our CET1 ratio was 13.3% even after repurchasing 6.4 million shares in the quarter. And today, we announced a quarterly dividend increase of $0.04 per share, reflecting confidence in our earnings growth. Over the past 12 months, we have returned $7.5 billion in capital to our shareholders through share buybacks and dividends. And looking ahead, we expect to keep this pace while maintaining strong capital ratios.

Our capital deployment priority continues to be organic growth, followed by share buybacks and strategic tuck-in acquisitions that fit a well-defined need. Return on equity for the quarter was 13.2% and remains on track to hit 14% plus in fiscal 2027, 1 year ahead of our Investor Day target. Our business mix is shifting, which is resulting in strong revenue growth and higher returns, and we expect those trends to continue into fiscal 2027.

In Canadian Banking, the momentum is building, and we are delivering better results quarter after quarter after quarter. Pretax pre-provision earnings were up 13% year-over-year, helped by the fourth consecutive quarter of margin expansion and continued strength in our fee income line as we maintain our focus on growing wealth management, credit card and insurance revenues.

At the same time, we are managing expenses effectively even as we continue to make substantial investments in frontline sales capacity and technology. As a result, Canadian Banking's productivity ratio was down 230 basis points year-over-year, contributing to positive operating leverage for the third consecutive quarter.

Industry-wide term deposit balances continued to contract during the quarter, but we've been able to consistently retain over 90% of retail GIC maturities despite intensifying deposit competition. These flows are either staying in Canadian Banking, where savings and deposits were up 3% year-over-year or are moving into retail mutual funds, where net sales were up significantly year-over-year.

A key pillar of our strategy is to grow high-quality, sticky deposits. And earlier this month, we announced the launch of the Scotia High Interest Savings Account, which is one of Canada's first relationship-based accounts that offers tiered regular interest rates based on a client's total relationship balance across eligible Scotiabank accounts. Average loan growth remains in the low single digits.

But by the end of the year, we expect to catch up to the broader market, thanks in large part to an acceleration in commercial loan growth. Commercial loans were up 2% sequentially this quarter, and we expect that pace to increase given our robust pipeline growth. Overall loan growth will also be supported by our small business portfolio, which continues to grow in high single digits.

Spot credit card growth is expected to reach mid-single digits by the end of the year, while our mortgage volume should keep pace with peers. In International Banking, pretax pre-provision earnings were up 12% year-over-year, helped by revenue growth of 7%. This, combined with strong expense discipline, delivered year-to-date positive operating leverage of 3.2%. Performance in Mexico was particularly strong this quarter with revenue up 8% year-over-year and earnings up 25% year-over-year.

Retail loans continued to grow across our footprint by 4% year-over-year with non-mortgages growing by a strong 7%, especially in Mexico and the Caribbean. Commercial loan growth was up 2% quarter-over-quarter and should continue to modestly improve in the second half of the year as we pursue growth thoughtfully and employ a cash management first strategy.

Our focus on deposits is also gaining traction, climbing 3% quarter-over-quarter and 5% year-over-year. Earlier this month, we were proud to sponsor Chile Day 2026, which brought together government and business leaders in New York and Toronto to strengthen Canada-Chile ties and advance investment in this important market. Scotiabank also hosted Mexico's official trade mission to Canada, convening senior government leaders, business executives and clients.

This event was a significant milestone and reinforced Scotiabank's role as a connector across the North American corridor. In Global Wealth Management, we are continuing to drive our underlying business forward. Net sales for the quarter were at $4.7 billion, 4x what we had in Q2 2025 and marking our seventh consecutive quarter of positive net flows. ROE came in at 17.9%, up 210 basis points year-over-year.

Canadian Wealth Management is continuing to benefit from deeper connectivity with Canadian Banking in the form of higher referral volume. Total closed referrals were at $9 billion year-to-date, largely stemming from our retail and small business segments to wealth. Closed referrals between Commercial Banking and Wealth were $2.8 billion or double what we reported in the first half of last year.

In our Global Asset Management business, we delivered year-to-date net sales of $3.1 billion and continue to rank third amongst our peers in long-term retail mutual fund sales, up from fifth in the same quarter last year, highlighting the opportunities we have to deepen penetration within our own network. And in our international wealth business, earnings were up 12% year-over-year and 22% in Mexico.

This quarter, we were also recognized with 8 Euromoney Private Banking Awards across our footprint, and Mexico's asset management unit was recognized by Morningstar with 6 funds ranked in the top 10 among all 4-star and 5-star funds. Finally, in Global Banking and Markets, revenues were up 9% year-over-year, driven by a 25% year-over-year increase in capital markets.

Our deal pipeline is strong, and Q3 has started off on a strong footing with a number of marquee transactions being announced over the past few weeks. Our mortgage capital markets business is accelerating, which is a good example of our U.S. growth strategy in action. GBM loans grew 1% quarter-over-quarter or up 3%, excluding our Asia portfolio, which is in runoff. Growth here should accelerate as the year goes on but will increasingly be driven by our capital market strategy.

We will continue to deploy balance sheet through our corporate revolver loan book, but with a focus on customers where we have a broader multiproduct relationship. We are focused on improving returns while also growing our loan book and investing in critical technology, including AI. This quarter, Scotiabank announced the launch of Scotia Intelligence and Scotia Navigator.

Scotia Intelligence unifies the capabilities, platforms and governance required to deliver AI securely and at scale for employees and clients globally. And Scotia Navigator puts AI directly into the hands of employees across the bank, including advanced assistance that automates routine tasks and redirect capacity towards more complex, higher-value tasks.

Our approach to AI is designed to take us from isolated AI use cases to AI that is embedded across our processes, decision-making and client interactions in a trusted, efficient and effective manner. Our approach is grounded in 4 key principles, but at the top of the list is security, which has taken on added importance given the cybersecurity risk posed by advanced AI models.

We are embedding security, governance and controls into the foundation of our AI infrastructure by design, enabling us to scale not just quickly but safely, fully aware of both the opportunities and risks of advanced AI. We are also leveraging AI to strengthen our security posture, including AI-driven scanning and monitoring to proactively identify and mitigate risks. Our second principle is flexibility.

The AI landscape is evolving rapidly, and we believe that no single model or vendor will dominate over an extended period of time. We have adopted a model-agnostic approach from Day 1, selecting models based on performance, security and cost. This approach gives us maximum flexibility with what is a rapidly evolving technology. Our third principle is data. AI is only as effective as the data it can understand.

We have deliberately invested in getting our data foundation right, clean, well governed and richly described so that AI can deliver meaningful outcomes at scale. This is enabled by our enterprise data platform, which ensures that our data is discoverable, trusted and ready for AI consumption across the enterprise. And our fourth and final principle is platform-first thinking. Rather than fragmented tools, we are building a unified enterprise AI platform.

This allows for faster deployment, consistent governance and repeatable scale across the bank. It also enables the deployment of AI agents and continuous monitoring and improvement of models in production, all with enterprise-grade security guardrails built in from the outset. In closing, as we've committed to, we are delivering growth across product lines that are strategically important to us and where we can drive client primacy.

In Canadian Banking, we delivered sequential commercial loan growth this quarter on top of already strong small business growth and our growing commercial pipeline gives us confidence that, that momentum will continue. Although total deposits are contracting because of industry-wide pressure on GICs, we are consistently growing our higher-quality savings and day-to-day deposits even as deposit dollars increasingly flow into retail mutual funds and our wealth business.

The connectivity between Canadian Banking and Global Wealth Management continues to strengthen, thanks to growing retail fund sales and 2-way referrals between the 2 units. In International Banking, retail and commercial loans grew 4% year-over-year with non-mortgage loan growth continuing to outpace mortgage growth on the retail side and growth improving on the commercial side as we build deeper client relationships.

Finally, in Global Banking and Markets, Capital Markets loans are growing even as total loan growth is being impacted by our decision to reduce our exposure in Asia. Overall, despite increased macro volatility, we continue to drive towards delivering on our medium-term financial objectives and building a stronger and more profitable bank for the long term. I will now turn it to Raj for a more detailed financial review.

Thank you, Scott, and good morning. My All Bank and other segment comments will be on an adjusted basis, which includes the usual amortization of acquisition-related intangibles. The business line results will be on a reported basis beginning this quarter. Moving to Slide 9 for a review of the second quarter results. The bank reported quarterly earnings of $2.7 billion and a diluted EPS of $2.02. My remarks that follow will refer to the last column of this slide that excludes the impact of divestitures.

The return on equity was 13.2%, up 270 basis points year-over-year, driven by strong revenue growth of 13%. Net interest income grew 10% year-over-year as net interest margin grew 24 basis points from higher business line margins and lower funding costs. The net interest margin expanded to 6 basis points quarter-over-quarter, benefiting from some seasonality in International Banking and increased levels of higher spread reverse repos.

Noninterest income was up 17% year-over-year, mainly from higher wealth management revenues, investment gains and income from associated corporations. Expenses grew 7% year-over-year, mainly due to higher performance-based and personnel costs and technology spend that also grew 9% to $1.4 billion to support strategic growth initiatives.

This resulted in a pretax pre-provision profit growth of 20% year-over-year. The bank generated positive operating year-to-date leverage of 4.9% and the productivity ratio improved by 290 basis points year-over-year to 52.5%. The bank's effective tax rate decreased to 23.3% quarter-over-quarter, primarily due to higher income in lower tax jurisdictions and higher inflationary adjustments.

Moving to Slide 10. The bank's CET1 capital ratio remained strong at 13.3%. We generated capital from strong earnings in the quarter and prudent management of RWA growth. We completed the 2025 share repurchase program and commenced repurchases under the 2026 program this quarter.

Under the 2 programs, we repurchased 6.4 million shares this quarter, representing 13 basis points of capital usage. The model parameter updates also consumed 13 basis points. Total risk-weighted assets were $474 billion, up $1.6 billion quarter-over-quarter, excluding FX, mainly relating to higher credit risk.

Turning now to the business line results beginning on Slide 11. Canadian Banking earnings were $935 million, up 53% year-over-year from strong pretax pre-provision earnings growth of 13% and lower performing provisions for credit losses. Loans grew 3% year-over-year from mortgage growth of 4%, while commercial and small business loans grew 1%.

Day-to-day and savings deposits grew 3% year-over-year, in line with our strategy. However, deposits declined 3% year-over-year, mostly in term. Turning to the P&L. Net interest income grew 7% year-over-year from loan growth and margin expansion. Net interest margin continued to expand, up 4 basis points sequentially.

Noninterest income was up 10% year-over-year from higher mutual fund distribution and credit card revenues. The PCL ratio was 50 basis points with impaired PCLs declining to 2 basis points quarter-over-quarter. Expenses were up 3% year-over-year from investments in technology, partly offset by the benefit of efficiency initiatives. Year-to-date operating leverage was 3.9%.

Turning now to Global Wealth Management on Slide 12. The earnings of $474 million were up 19% year-over-year as Canadian earnings were up 20% and international was up 12%, mainly in Mexico. Spot AUM and AUA grew 18% and 15% year-over-year from market appreciation and higher net sales. Revenues were up 14% year-over-year from higher mutual fund fees, net interest income and brokerage revenues. Expenses were up 12% year-over-year from higher volume-related expenses. Year-to-date operating leverage was 2.1%.

Turning to Slide 13. Global Banking and Markets earnings were $457 million, up 11% year-over-year. Revenue grew 9% year-over-year as capital markets revenues were up 25%, while business banking was down 7%. Net interest income was 5% year-over-year, primarily due to higher margins. Noninterest income was up 10% year-over-year due to higher trading-related revenues from equities, commodities and fixed income, partly offset by lower FX trading and underwriting and advisory fees. Expenses were up 10% year-over-year, mainly due to higher technology and personnel costs.

Moving to Slide 14. My comments on International Banking are on a constant dollar basis and exclude the impact of divested operations. The segment delivered earnings of $701 million, up 3% year-over-year. Revenue was up 7% year-over-year with net interest income up 5% and noninterest income up 14% from higher investment in associated corporations and insurance income.

Net interest margin of 476 basis points expanded by 22 basis points quarter-over-quarter from lower funding costs in Latin America and inflation benefits mainly in Chile. Deposits were up 5% year-over-year as personal deposits grew 3% and nonpersonal grew 7%. The loans were down 2% year-over-year as non-retail loans declined 8%, while retail grew 4%. The operating leverage was 3.2% year-to-date. The PCL ratio was 166 basis points, mainly from impaired.

The effective tax rate was 17.3%, mainly from higher inflation, refund of prior taxes in Peru and higher income from associated corporations. The GBM Business and International Banking generated earnings of $237 million, impacted by higher loan loss provisions.

Turning to Slide 15. The other segment's net income was $35 million compared to a loss of $41 million in the prior quarter, benefiting from higher mark-to-market gains. I'll now turn the call over to Shannon to discuss risk.

Thank you, Raj, and good morning, everyone. The macroeconomic environment remains uncertain, shaped by geopolitical developments and elevated energy costs that continue to affect trade flows and the GDP growth outlook. In Canada, near-term growth has moderated amid continued trade headwinds and inflation remains a key focus for policymakers. Against this backdrop, All Bank provisions were $1.2 billion or 66 basis points, up 5 basis points quarter-over-quarter.

Impaired provisions were $1.1 billion or 61 basis points, up 3 basis points quarter-over-quarter. This increase was driven mainly by a corporate account in International Banking, which represented about 7 basis points of the All Bank impaired PCLs. Performing provisions were 5 basis points, up 2 basis points quarter-over-quarter, driven mainly by the impact of forward-looking indicators in Canada. Our allowance for credit losses increased to $7.3 billion or 96 basis points, up 2 basis points quarter-over-quarter.

Turning to Slide 18. Gross impaired loans increased 4 basis points quarter-over-quarter to 99 basis points, driven mainly by the one corporate account in International Banking and higher formations in Canadian Commercial. Retail gross impaired loans declined across both Canada and International Banking as lower new formations reflected the impact of enhanced collections efforts.

In non-retail, new formations increased $368 million quarter-over-quarter, driven mainly by one account in International Banking and one account in Canadian Banking. Overall, the non-retail portfolio remains well positioned and underwritten to strong credit standards.

Turning to Slide 19. In Canadian Banking, provisions were $575 million or 50 basis points. In retail, total PCLs were $435 million, flat quarter-over-quarter as lower impaired provisions across most products were offset by higher performing PCLs. Performing PCLs were up $22 million quarter-over-quarter, driven primarily by unfavorable impact in our forward-looking indicators, partially offset by credit quality improvements.

In unsecured lending, we are seeing the benefit of targeted collection actions, including expanded capacity, enhanced client segmentation and increased self-service options through our online channels. These efforts contributed to a 20-basis points quarter-over-quarter improvement in 90-plus day delinquency for unsecured products. That said, we continue to closely monitor the portfolio given ongoing macroeconomic uncertainty affecting consumers, including elevated energy costs and inflationary pressure.

Moving to International Banking. International Banking provisions were $599 million or 166 basis points, up from $536 million in the prior quarter. In non-retail, the increase in PCLs was concentrated mainly in a single corporate account. This reflects primarily company-specific factors rather than broader macroeconomic or trade-related pressures.

We continue to actively manage the exposure with close monitoring and ongoing engagement and expect non-retail impaired PCLs to meaningfully moderate from Q2 levels. On the retail side, total PCLs were lower quarter-over-quarter, reflecting lower new formations in the Caribbean and Peru and lower performing provisions in the Chile consumer finance portfolio.

Retail impaired PCLs were $381 million, down $24 million quarter-over-quarter, driven by divestitures. In Global Banking and Markets, provisions were $38 million or 8 basis points lower quarter-over-quarter. The macroeconomic environment has evolved meaningfully since the start of the year.

Elevated energy costs, persistent trade uncertainty and higher unemployment continue to pressure both consumers and businesses across our footprint. Against this backdrop, we expect impaired PCLs to settle in the mid-50 basis points range for the remainder of 2026. While this is slightly elevated relative to our initial outlook, we still expect PCLs to moderate from first half levels, though more gradual than previously anticipated.

Looking at each of our portfolios. In Canadian Retail, Q2 performance benefited from collections efforts. However, prolonged inflationary pressures could further strain already vulnerable client segments. In Canadian Commercial, performance remains resilient and in line with expectations with continued attention on potential second-order impacts from trade developments and sustained elevated oil prices.

Across our key international markets, retail impaired performance is expected to remain elevated, in line with our earlier outlook. In Mexico, macroeconomic indicators continue to present a mixed outlook given trade uncertainty. In Chile and Peru, credit performance has been stable, supported by commodity fundamentals, although the potential impact of higher energy costs remains an area of focus.

In non-retail for International Banking, we continue to actively manage the portfolio through ongoing reviews and early warning monitoring. And while the macro uncertainty remains, we expect impaired PCLs to meaningfully moderate from Q2. In closing, we continue to build allowances, adding $159 million this quarter to bring total reserves to $7.3 billion or 96 basis points and now 24 basis points higher than Q1 2023.

Importantly, these allowances reflect a range of forward-looking macroeconomic scenarios, and we are comfortable that both the level of reserves and the quality of our portfolio position us well to navigate the environment. With that, I will turn it back to Meny for Q&A.

Thanks, Shannon. Operator, we're now ready for our first question.

[Operator Instructions] Your first question comes from Doug Young with Desjardins.

Maybe, Shannon, sticking with yourself. So just the guidance that you gave, so the impaired PCL guidance of mid-50 basis points for the remainder of fiscal '26. So that is -- I guess, your guidance for the full year now is higher than it was before. I just wanted to confirm that. And then the moderation in PCLs in the back half of this year, can you talk a bit about what gives you the confidence in the moderation?

Thanks for the question. So if I take a look at the macro when we gave guidance back in December, the macro environment has evolved meaningfully since that time. And so considering this, we do expect impaired PCLs to settle in the mid-50 basis points range for the remainder of '26, which I mentioned in my remarks. I think it is important, though, that we still expect a gradual trend down from first half levels, although more modest than we originally anticipated.

And in terms of what gives me confidence around that and what kind of going into that outlook, let me kind of walk you through a few portfolio components. In international retail, performance continues to be mixed by geography, and we do expect impaired PCLs to remain elevated, and that is consistent with our initial outlook. If I look at Canadian retail, Q2 performance benefited from the collections efforts that we've been speaking about over the past few quarters.

And we do expect impaired PCLs to potentially be impacted by prolonged inflationary pressures. So that could impact some of our vulnerable client segments. And then when I look at the non-retail portfolio, we do continue to monitor on a heightened basis, the sectors that are more exposed to trade dynamics and oil price volatility.

But as I look from this quarter forward, we do expect to see the non-retail impaired PCLs moderate from the Q2 levels. So when I take all of that into consideration, we do expect to trend down from the first half. But as you point out, it will be more gradual than we had originally anticipated, and that's really reflecting the changes in the macro since we gave our guidance back in December.

Okay. And then just maybe a follow-up on the performing loan side, a bit of a build this quarter. Can you maybe quantify or talk about or just put in perspective how confident you are in your performing loan allowances relative to your forward-looking indicators and your expectations for impaired? Just trying to get a sense. It's always difficult to kind of look at it across the group, but maybe there's some perspective you can give.

Yes. So maybe it would be helpful to take a step back and just kind of grounding how we factor scenarios into our performing allowance, we obviously take into consideration a range of scenarios, which includes the environment that we've been operating in and as we look forward and talk about some of the pressures that I spoke to in my remarks.

And so as we think about the performing build this quarter, which was 5 basis points, about $50 million of that was related to our forward-looking indicators, which we do think appropriately captures what we see as we look forward. And so when I look at the scenarios and what we leverage to generate the performing build, we're quite comfortable with our reserves. As you know, we're going to reassess this every quarter as the environment evolves but feeling good where it is right now.

Your next question comes from the line of Gabriel Dechaine with National Bank Financial.

Just a quick numbers one to start the other, other income. I heard mark-to-market gains in the explanation for the corporate segment. Can you tell me what was in that other, other income line item that was pretty high this quarter, please?

Sure, Gabe. It's Raj. Absolutely, you're right. There are 2 items that have gone into that line this quarter. One, I talked about the mark-to-market gains, which is on the private equity book that we have in treasury. That contributed somewhere between $35 million to $40 million.

There is another component, which is WBN that closed a deal in their books, and we had to do an equity pickup of the mark-to-market increases they have in their assets this quarter, and that was in the mid-40s. It was about $46 million that has gone into that line. That's why you're seeing that line elevated.

Okay. So $35 million to $40 million, that's pretax or...

Correct. Yes. Because the WBN that we pick it up after tax, there's no tax effect because of the way we account for investment in associated companies.

Okay. Great. Just to keep going with this credit discussion, the mid-50s H2. I guess the -- I'm trying to decipher where some of the changes are taking place. I can draw my own conclusions based on what I see in the environment, but it looks like Canadian retail because of inflation and the economy that's not rebounding as fast as expected, that's where you're expecting more upward pressure than you did previously.

In international retail, it doesn't sound like you're -- it's changed from what you anticipated at the start of the year, but these -- in Peru and Chile, especially the energy prices that are putting a lot of pressure, keep using that word on their economies, that's got to be a new twist to this saga.

And then I guess, it's too early to start thinking about 2027, not really, but technically, I guess. But none of this stuff seems to be -- and this isn't a Scotia-specific issue, but none of the stuff seems to be like is going to be all clear anytime soon. Are we thinking already that maybe 2027 will have this higher for longer impaired PCL ratio?

Yes. Okay, maybe I'll stick to the 2026 guidance and what's driving our outlook as we go into the latter half of the year. And I mentioned it a bit previously in my remarks. So in terms of what's changed from when we gave our guidance in December, it really is, as I think about the environment that we're operating in.

And so we do expect to see improvement in the latter half of the year, which is consistent with our guidance we provided. It's just the magnitude of that is maybe different than we had originally expected and again, reflecting the macro that we're in. And so we expect it to be more gradual than we did at the time. And to your point, Canadian retail is an area that I would point to.

Again, we're really encouraged by the Q2 performance. And that is a reflection of the collections efforts that have been underway for a period of time. We've seen that impact this quarter. But we are cognizant of the environment. And if you think about inflationary pressures and what that can mean to affordability, we have factored that into our outlook as we look out to the rest of the year.

And Gabe, it's Scott. I would just add a couple of things. One, I mean, there's definitely some stresses in the Canadian portfolio. There's no doubt. I mean I was really pleased that we saw improved impaired performance in that book. But as you look out to '27, I'm actually relatively optimistic about the outlook for Canada.

Despite the war and the kind of the tragic aspect of it, we're an oil exporting nation. You've got a new business-friendly government that is trying to get things done. And so as we look further out, I actually -- I think we're going to see some good things in the Canadian environment.

Yes, I get it. I agree, but there's a lag between when -- the bad stuff is still having an impact and when the good stuff kicks in. And -- I don't know it's a moving target, obviously. So I'll leave it there.

Your next question comes from the line of Mario Mendonca with TD Securities.

I think, Raj, you covered the corporate gains there. In the past, you've given us some outlook on what we'd expect from that segment going forward. Presumably, you'd expect that to return to maybe a modest loss next quarter. Is that right?

That's correct, Mario.

And then on international, the margin there in international remains well above the outlook you've offered in the past of 4.40% to 4.50%. Can you talk about what drove such a meaningful increase in the quarter and what your outlook is?

Absolutely, Mario. I think you're right. 4.76% is a high watermark for the international margin this quarter. As you know, IB NIM has got multiple countries, right? It's got all the Latin American countries, but it also has a big Caribbean operation. So a lot of the benefits or the increase in the NIM that we saw is lower funding costs in our Latin American franchises. We have seen rate cuts in Mexico.

We've seen it in Chile earlier, and we've seen it in Peru as well. So that's going to continue, and that's in line with what we expected even at the beginning of the year. What we did not expect, and it's a nice tailwind to have is there's been no U.S. rate cuts, so the Caribbean NIM has held up very well for us. And then there is the asset balance mix that is happening, no less mortgages and higher non-mortgages going over there.

If I look forward, this quarter, there was some nuance. There's some seasonality to some Q2 benefits that we get in International Banking NIM. I call it somewhere between 7 to 10 basis points, Mario. So I would say next quarter should be somewhere between 4.65% to 4.74% frankly, for the remainder of the year. And that is a nice tailwind to have to our 4.40% to 4.50% normal expectations we have for that NIM.

And that's primarily driven because we don't see rate cuts happening at any scale in the United States that should help with our Canadian -- sorry, the Caribbean deposit risk franchise. So it's a good tailwind. The 4.65% to 4.70% is likely the number I would look at for Q3 and for Q4 as well.

And maybe, Francisco, you can just highlight for Mario some of the business mix changes that are ongoing there because I think it was a great quarter for international to highlight some of the moving pieces.

Sure, Scott. Thank you. Mario, thanks for the question. We continue to be steady state on the strategy to try to change the balance sheet mix across all countries. This particular quarter, you begin to show on the year-on-year progression, for example, deposits moving quite strongly around the 6% mark. But when you begin to see also the loan growth in retail around 4.5%, non-mortgage predominantly growing at twice the pace of mortgage, increasing client profitability.

When you see GBM deposits year-on-year growing at 8%, that's all contributing to the sustainability that Raj was mentioning of the NIM expansion. So the overall underlying quality of our balance sheets in every market are improving sustainably on the back of the client strategy and the, I would say, very deliberate effort on quality deposits. So we have been optimizing expensive deposits out and replacing them by operational deposits sustainably across all business lines.

And Francisco, while you're there, do you have a sense for when the non-retail loan growth will emerge in your segment?

It's consistently growing. And remember, this year was a pivot to growth, right? And we wanted to ensure that the new value propositions resulting from the segmentation exercise generated high-quality vintages that allow us to get to primacy faster and sustainably. So we are in that journey.

What is very encouraging to see is that our primary market being Mexico is beginning to show that progression quite strongly in this quarter and has been the work over a year of the new team we have in place in driving that strategy. We're seeing similar progress in Peru and in Chile as well as in the Caribbean. So you should expect that by 2027, this will consolidate, but we are being very deliberate in the quality of the portfolio that we're building towards sustainability of performance.

Your next question comes from the line of Paul Holden with CIBC.

I want to ask you about the net interest margin outlook for Canada. Obviously, a positive result, I think, in Q2. A number of moving parts there, which is why I asked the question, right? Like the residential mortgage renewals, which should be a nice tailwind. I think we're hearing about increasing deposit competition, so maybe a little bit of a headwind there. Anyways, maybe you can give us an outlook and sort of wrap all of those components together would be helpful.

Sure. Paul, I'll start, but I want Aris to talk about his business as well and how the changes are impacting. I'll keep it short. I think the net interest margin expansion we saw this quarter will continue, maybe not to the same magnitude. But like in the beginning of the year, I had mentioned 2 basis points a quarter improvement driven by better deposits, the mix.

Better loan growth because even mortgages, I think, are more profitable than what we've had, and we've seen strong growth as well as commercial, like Scott alluded to in his opening remarks. So those are all going to contribute, I would say, for the remainder of the year for margin expansion in the Canadian bank. And maybe Aris, you can talk about the business mix shifts that you're seeing in the...

Sure. So I think in line with what you heard, the numbers this quarter really affirm the direction and the strategy we embarked on a few years back, and you see it in the numbers. And you have to go back, I think, to 2022 to see growth rates at this level across revenues, PTPP and the like. And I think the drivers, as I mentioned in the last call, there's really 4 drivers.

It's the business mix shift that you've heard about, both on the deposit side and more and more now on lending as we increase the proportion of non-mortgage lending. The second is the RAM, the improvement in the risk-adjusted margins from the renewals and repricing of our mortgage book, which is now going to accelerate as the renewals start to increase.

And then, of course, you saw in the quarter the increase in fee income across cards, mutual funds and insurance. So all these put together are helping lift that revenue and PTPP line. In terms of the margin question you asked about, I think you'll see it primarily now coming on the asset side as the commercial loan book and business banking book and personal lending starts to increase, that will help the overall NIM. You saw the sequential growth in commercial lending on the quarter.

And again, that commercial lending growth is broad-based. It's across real estate, mid-market, and Ag. And that pipeline that has been built up since a year ago is starting to mature. And as it matures, it's going to actually lift the yield on our lending book as it grows. So we'll see continued increases in the NIM in the quarter, but again, more now weighted to the asset side as we go forward. So all in all, positive outlook from that standpoint.

Okay. That's good. And maybe, Aris, a follow-up question for you. Maybe you can drill down a little bit more into the NIR growth because it is quite strong year-over-year. And I think you touched on some of the drivers there, the credit card fees, et cetera, but maybe you can spend just a couple more minutes so we can understand fully, yes.

Sure. So the NIR growth for the quarter was close to 10%. I think there's 3 components. First is on the card book. Even though the balances have not grown, what you're seeing in the card book is a real shift in the quality of the card book,45% of new card acquisition now is in the premium card segment. That obviously has a huge impact on purchase volumes, transactions and balance growth.

And we're shifting the portfolio more to that premium -- that premium client group, and then you obviously see the fee increase from there is substantial. I think the other big part in the quarter, I think we had record mutual fund sales in the branches. I think fees were up 21% year-on-year. That's unprecedented.

And the third aspect, of course, is insurance as we build creditor and non-creditor insurance, that's also providing a lift on the NIR. So generally, the things that we talked about before in terms of trying to drive card, mutual fund and insurance growth is starting to really materialize. You see it in the quarter.

And again, the other part, and I'm going to pass to Jacqui, is just the sheer amount of referrals that we're doing now, where we're trying to get the right client in front of the right adviser and moving these clients over to wealth is also having a substantial impact on the business. So maybe Jacqui could give a few highlights on that piece.

Yes. I think what really stands out to me in the quarter, Aris, is that we saw really strong AUM growth driven by net new client flows. Like markets were actually pretty choppy during the quarter. They were up for the full quarter, a bit down in March. And in that kind of environment, we might typically see clients moving to the sideline. But what I found really encouraging is we saw positive client flows throughout the quarter despite that backdrop.

From our perspective, from a mix, what we're really focused on is retail growth and wealth advisory growth. And on the retail side, as Aris said, we had a really good quarter. We were #3 this quarter for the third quarter in a row compared to our bank peers in long-term mutual fund sales. That's up from #5 a year ago, #6 at Investor Day. And net flows in the first half of the year and Aris' business alone exceeded our full year flows for 2025.

So I think that is quite remarkable again, considering the market backdrop that I mentioned. Wealth Advisory as well had a really good quarter in both Canada and International. We saw over $3 billion in net new flows for the quarter. Fee-based assets are at an all-time high in those businesses. So overall, we're seeing great momentum both in terms of flows and mix. And I think that positions us really well to continue to deliver consistent higher quality earnings growth going forward.

Your next question comes from the line of Matthew Lee with Canaccord Genuity.

I'll keep it tight. You've spoken about strong commercial momentum and the expectation for that growth to continue accelerating. Could you maybe unpack what's driving that outlook, whether it's broader demand recovery, sector-specific opportunities or maybe just that increasing deeper client activity?

Thanks for the question. So as I mentioned earlier, the commercial growth we expect in the subsequent quarters to match the market growth rates you'll see, and it's on the back of work we started probably 1.5 years ago as we started to rebuild the sales force, particularly in mid-market, starting to add what we call boots on the ground to be able to compete more effectively in high-growth markets in BC, in Quebec.

And those RMs now are starting to generate business after a certain period of training. The pipeline has grown substantially, as I mentioned, on loan pipeline and the deposit pipeline. And all you're seeing now is these pipelines materializing. The paydowns we saw in real estate have stabilized now.

So that is also helping the overall balance growth. So taken all together in combination, we're very confident actually that it's just more business, more new client acquisition and more primacy that's driving this growth that we're going to see, and it's going to continue in the quarters to come.

Your next question comes from the line of Sohrab Movahedi with BMO Capital Markets.

Shannon, how many other similar large loans do you have in the non-retail international banking segment? Where does this kind of rank in the order of magnitude from a concentration risk in the portfolio, please?

Maybe I'll start by just giving a bit of context of this particular file and then maybe just talk about the overall non-retail portfolio and why we're comfortable. So in terms of this specific file, it was essentially driven by company-specific factors rather than broader macroeconomic or trade-related pressures. This is a long-standing client for us, investment-grade rating. It's in Brazil.

And so this is a domestically important file within that economy. And that's really what led to the downgrade. So I think that's just an important context because it's not really related to anything that we're seeing systemically in the book. But if I take a step back and I look at this impairment, I do see it as episodic, and I know we had a few in Q1 as well, but not reflecting deterioration in the underlying portfolio.

And there's a few things that I look at that give me comfort around that. First, when I look at our non-retail watch list, that remains below 2% out of our total outstandings. And so that's obviously an indicator of where we have stress in the book. The second thing that I look at is our risk management framework and how we're managing our portfolio. So we have disciplined credit reviews.

We have targeted deep dives on higher risk names and sectors. So as you can appreciate, we're very closely monitoring the portfolio. Importantly, we are talking to our clients each and every day. And so that's giving us real-time visibility into performance and what's happening on the ground. And then our book is overall like very well diversified across industry and geography and within our risk appetite.

So when I put that together, I'm not seeing systemic stress across the portfolio. And then maybe just one last comment just on the file in Brazil. Just to give you context, since we've been in Brazil, prior to this quarter, our impaired PCLs have been around $65 million, just to put in context in terms of how that portfolio, in particular, has performed over an extended period of time.

I mean I appreciate that. But one name, you said, I think, cost about 7 basis points of total bank impaired PCLs. I'm just trying to get a sense of how many other similar sized names you would have in Brazil.

Maybe I'll give a bit more details on the Brazil portfolio. And I think -- just when I think about exposures, and I'll go back to this was an investment-grade account. So when you think about where we typically have higher exposures, it would be in those more highly graded companies. On this particular file as well, I think it's also important just to comment that we were in a large kind of banking group on this particular exposure, and we're taking, I'd say, a reasonable hold.

So our exposure was less than 5% of the total amount outstanding. When I look at the Brazil portfolio, it is a very selective and deliberate corporate franchise for us. And when I look at what's in that portfolio, these are high-quality borrowers across strategic international corporates and leading players in the Brazilian economy. We have done a deep dive on the portfolio.

You can probably appreciate that, and it really has reinforced our confidence in the quality of the book and absence of similar stress within that particular portfolio. So again, we have exposures that are very much driven by the risk, and we're quite comfortable with where those sit. But Brazil as a book, we're quite comfortable with.

So a plus or minus 7 basis points to 10 basis points impaired kind of surprise is within your tolerance?

I think when you look at a corporate portfolio, you do from time to time, see what I would call a fallen angel. And I would put that in this category. And we do not expect to see those frequently. And I would say we haven't seen those frequently. And again, back to this particular portfolio in the last, I guess, more than 15 years, we've had one.

Your next question comes from the line of Ebrahim Poonawala with Bank of America.

I guess maybe, Scott, just wanted to double-click on like your optimism on the Canadian economy next year. From what we understand, the government actions probably kick in sometime late next year in terms of having a real impact and then you could have a multiyear investment cycle if all of that plays itself out. In the near term, you have a challenged consumer, CUSMA uncertainty.

Just round that out for us as we think about the macro-outlook for this group where -- and for Scotia, as you think about the next 6 to 12 months, where is the optimism coming from? Is it just the tone at the top has already led to businesses making investment hiring decisions? Like what are the markers that you're looking for that give you that optimism outside of the messaging.

Yes. Sure. Thanks, Ebrahim. So I guess a couple of things. One is we're an oil exporting nation. So right now, and you saw this in the budget, when you have oil at this type of prices, that is very beneficial for the overall Canadian economy. And that allows fiscal stimulus -- significant fiscal stimulus by the Canadian government to support some of the provinces that will be impacted either by CUSMA or affordability issues.

And you saw that in the most recent budget. You've actually seen that in the HST rebate that has gone about. And if you talk to people on the ground with this HST rebate, it's actually having an impact on real estate in Ontario in particular. So I guess that's one point. I think the second point is you have seen a significant change in tone from international investors to Canada.

And they would not underestimate an impact of something like a Shell acquisition of ARC, where over the last 15 years, and I've lived this, you've seen a lot of foreign money leave Canada. And now you have a lot of foreign money looking at Canada for a foreign direct investment. And I would say that also includes the pension funds in Canada. I think pension funds in Canada historically looked outside of the borders.

Now I think they're increasingly looking inside of the borders. And when you look at the agenda from the Prime Minister around whether it's the grand bargain out in Western Canada with pipelines and reduced emissions through carbon capture or airport privatization, which is increasingly talked about, I do think you're going to see uses of capital in the country. And then the third piece I would say is CUSMA.

I think it's become increasingly apparent to everybody that Canada, U.S. and Mexico need each other. And CUSMA is not something that's going to be ripped up. I mean the business community kind of has appreciated that now, which is a significant difference than a year ago and that it may continue to evolve and there may be tariffs on specific sectors, and there may be some industries that are impacted.

But ultimately, I think it's very clear that this regional trading block is increasingly important to the U.S. as opposed to unimportant. And so I think you'll continue to see business community get more certainty in that regard. So I'm not saying that there's no pressure, particularly in some provinces. You saw the unemployment rate pick up a little bit in Quebec.

But similarly, you've seen real strength in Alberta. And I do think if you look at our economists, who I think is the best economist on the street, he's highlighting an improved outlook in Canada next year, an improved unemployment rate. And as Shannon said, probably a little bit later than what we thought at the start of the year, but nevertheless, I think pretty positive from my perspective.

Got it. So your economists must feel pretty good about life after that praise on the call. Second question, Scott, in your prepared remarks, you said when you're addressing capital tuck-in acquisitions. So 2 questions. One, at these valuations, do you still want to lean into buybacks the way you have over the last 6 to 12 months? Or do you sort of become more opportunistic? And give us a sense so that the Street is not surprised what a tuck-in deal would look like?

Yes, sure. So on the -- I mean, the first use of capital is organic, and you're seeing our tech spend increase pretty significantly as we continue down this AI journey. So that's the first use of capital for us. The second would be share buybacks. You've seen what we've done over the last year. I would expect that to remain consistent going forward.

And I say that because of the valuation gap between us and our peers, which will narrow over time. And so we should take advantage of that while we're in this position. So we'll continue to do that. As we've highlighted before, I think pretty transparently, there's some capabilities in Travis' business that we need to address, particularly around mortgage capital markets. It would be nice to get some FDIC insurance.

And so if we could find something small to help that mortgage capital market business, which actually really has performed well over the last year, you're starting to see it through the numbers. If we could do something to get FDIC insurance, get some more sticky deposits that allowed us to fully capitalize on that opportunity, we would do something in that regard.

And similarly, in Jacqui's business, having a U.S. offshore booking point for our Mexican business is growing at 25% and the Canadian business is growing 25%, I think that would be helpful. When I say tuck-in, what's the size? I don't know, think $200 million, $300 million, $400 million. I mean we're not talking about billions of dollars here. We're talking about tuck-in. And frankly, I would like to do that sooner rather than later because I think the opportunity in those 2 businesses is so material.

That does conclude our question-and-answer session. I will now turn the conference back over to Raj Viswanathan for closing comments.

Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today, and we look forward to speaking to you again at our Q3 call in August. Have a wonderful day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Please welcome Mr. Aaron Regent, Chair of ScotiaBank's Board of Directors.

Thank you. And good morning, everyone. As he just said, my name is Aaron Regent, and I am the Chair of your Board of Directors. Ladies and gentlemen, good morning, and welcome. We'll begin by recognizing that we are on the traditional territory of the Mississaugas of the Credit First Nation, the Nishabag, the Chippewa, the Haudenosaunee and the Wedet Peoples. Across Canada, we acknowledge the traditional territories of the First Nations, Inuit, and Metis people who call these lands home.

As Chair, I am proud that Scotiabank continues to progress in its journey of reconciliation by building momentum through education and deepening trust in communities across Turtle Island. Through our truth and reconciliation action plan, the bank is committed to continue partnership with the indigenous peoples to remove systemic barriers to economic [indiscernible] participation [indiscernible] the past made it difficult for indigenous peoples to have access to banking services and in [indiscernible] the financial industry.

This year, we followed through on our action plan by operationalizing 11 of our 37 commitments, driving social and economic outcomes for indigenous peoples in Canada. As Scotiabank continues down this path of reconciliation, we stay committed to listening, learning and the consistent actions necessary to help drive prosperity for future generations of indigenous peoples.

Now it is my pleasure to welcome you to Scotiabank's 194th Annual and Special Meeting of Shareholders. As we have done in the past, we are proud to offer today's meeting in both of Canada's official languages for all participants. For those of you joining us in person, simultaneous interpretation headsets can be found just outside the entrance to this room. If you don't have a headset and would like one, please raise your hand and one of the ushers will bring one to you. English is Channel 1 and French is Channel 2.

For those of you joining us online through the webcast you may choose the language of the webcast interface in the right -- top right of the broadcast screen and the language of the streaming audio in the bottom left side of the broadcast stream. Sign language interpretation is also available, in the room today, and we are offering closed captioning on the webcast in both French and English. I will now ask that you please turn all personal communication devices to silent or vibrate.

I want to extend a warm welcome to everyone joining us today in Toronto and by webcast. Thank you for taking the time to be with us today. We continue to make every effort to host the meeting in a manner that promotes shareholder participation, by providing the options for shareholders to attend online or in person and vote their shares and submit questions regardless of their method of participation at the meeting. Now please allow me to introduce the members of Scotiabank's management team who will be presented today. Scott Thomson, our President and CEO, and Jaime Larry, Vice President, Bank Governance and Corporate Secretary.

In accordance with the bylaws of the bank, I as Chair of Board will act as Chair of this meeting, and Jaime Larry will act as Secretary. I appoint Tara Israelson and Colleen Nielsen of Computershare Trust Company of Canada and scrutineers. I received proof that notice has been duly given and that a quorum is present. As such, this meeting is duly constituted.

Please note that in advance of today's meeting, the bank has asked certain employees to move and second the motions for shareholders' consideration today. These individuals are shareholders or duly appointed proxy holders of the bank, and we do this to facilitate the introduction of motions. I'll now ask Jaime to speak to some of the procedure items for today's meeting.

Thank you, Aaron. For those shareholders and duly appointed proxy holders who have not voted in advance, Voting will be available throughout the meeting until the formal items of business are concluded. To facilitate the voting procedure on the items of business coming for today's meeting for those shareholders attending in person, there will be one ballot. A ballot will be provided to any registered shareholder who has either not completed a proxy form or would like to vote on a motion in person rather than by a previously delivered proxy. Any person appointed as proxy by a shareholder who has not indicated voting instructions on the proxy form may also request a ballot.

If you would like a ballot, please raise your hand now so that they may be handed to you by the scrutineers. Completed ballots will be collected by the scrutineers following the voting on the shareholder proposals. Also, please ensure that you print your name clearly on the ballot and sign it. Instructions on how to submit your votes online are available under the Home icon on the top left side of your screen, if you are watching the webcast, in the rules of conduct under the document icon at the top left side of your screen and also in the AGM user guide located on the bank's Annual Report and Annual General Meeting web page. If you are attending in person, please refer to the leaflet that was provided at the entrance to this room.

The items to be voted on are: the election of directors, the appointment of the auditor, the amendment to By-law No. 1 regarding directors' compensation, the administrative amendments to By-law No. 1, the advisory vote on executive compensation and the shareholder proposals. Each item of business that will be put before this meeting will be voted on by ordinary resolution requiring a majority of the votes cast for approval. The exception to this is the amendment to By-law No. 1 regarding reactor's compensation, which will be voted on by a special resolution requiring at least 2/3 of the votes cast for approval. We will provide the preliminary voting results during today's meeting, and the final voting results will be available after the meeting.

Thank you, Jaime. We will be conducting the meeting in accordance with our rules of conduct. I also note that questions may be raised by shareholders and duly appointed proxy holders through the various channels made available today. Shareholders and duly appointed proxy holders attending in person are invited to approach one of the standing microphones in the room, or if easier, please raise your hand and a microphone will be brought to you. I ask that you hold your comments and questions until the appropriate time in the meeting. Shareholders and duly appointed proxy holders are also able to ask questions through the webcast by selecting the messaging tab and either typing the question in the box at the top of the screen or type in your phone number in the box to indicate that you would like to ask your question over the phone. I've asked Jaime to read out questions submitted through the web chat.

The agenda for today's meeting can be found in the leaflet that was provided at the entrance of the room. As in previous years, we will have a general question period at the end of the meeting. If you have a question on the business of the meeting, shareholders and proxy holders submitting questions online are encouraged to submit their questions as soon as possible during the meeting so that we can do our best to address them at the appropriate time. For those attending online, and wishing to ask questions over the phone after you are prompted to provide your phone number, please ensure that you also note the subject matter of your question so that we can do our best to address it again at the appropriate time during the meeting.

To facilitate the timely conduct of our business and to ensure that all shareholders who wish to raise issues at the meeting have an opportunity to do so, I would ask that each speaker focus or question on the topic under discussion at the time. And also please be brief and concise limiting their comments to 3 minutes. We also request that anyone wishing to ask a question limit themselves to one question at a time until other shareholders have had an opportunity to ask a question. Questions should be of a general nature as this is a shareholders meeting. Client or personal questions can be directed to one of the contacts on the back of the proxy circular.

Bank representatives will also be available after the meeting to answer any additional client or personal questions from in-person attendees. As we will be receiving questions through multiple channels, we do appreciate your patience. If there are several questions on the same topic, we may group these together. We endeavor to answer all the questions during the meeting. However, any questions that cannot be answered and that have been properly put before the meeting, we will post answers on our website as soon as practical after the meeting.

For those attending online who are asking questions over the phone, if for some reason, we are not able to address your question during the meeting, please use the web chat to submit your question or reach out to the Corporate Secretary using the contact information on the back of the proxy circular. On behalf of your fellow shareholders, I thank you in advance for your cooperation.

Before we turn to items of business, I would like to thank you, our shareholders, for your continued commitment to Scotiabank. 2025 was an important year for the bank. Under the leadership of President and CEO, Scott Thomson, the bank has built a solid foundation for future growth, allocating capital to priority markets, prudently managing operating expenses and strengthening the capabilities that support long-term performance. At the same time, the bank continued its shift from volume to value, and is focused on proving products and services and diversified its business mix to advance Scotiabank's North Star of client primacy. Together, these actions have driven strong progress towards the bank's medium-term objectives, even as we've continued to navigate a challenging economic and geopolitical environment.

While Scott will speak more about the bank's progress in his prepared remarks, I would like to recognize the Board's role in support of the bank's strategic execution and the important work that was -- that has been done over the past year. The Board continued to engage with many of the bank's shareholders on matters such as governance, sustainability and leadership. These discussions remain an important part of our role, particularly as shareholder expectations evolve, and they help ensure we maintain strong governance and effective oversight of the bank's operations. We also established a new technology committee this year to oversee the bank's technology strategy, technology-based risk management and technology investment and innovation. As the pace of change continues to increase, oversight of cybersecurity and the ethical use of data and artificial intelligence are key areas of focus for this committee. We also remain highly engaged with the bank's management team and providing oversight and stewardship of the bank as it advances its priorities, and we look forward to continued progress in the year ahead.

It is truly my pleasure to serve the bank and you, our shareholders, as Chair of our highly qualified and engaged Board of Directors. And I look forward to continuing to meet and engage with all of you on various matters in the year ahead. On behalf of the entire Board, I would also like to acknowledge the Scotiabankers across our global footprint who worked tirelessly to deliver for the bank's clients, shareholders and the communities in which the bank operates. As a Board, we remain confident in the path that the bank is on today as it continues to execute its strategy and create long-term value for all its stakeholders.

Now before we turn to the first item of business, I would like to point out that discussions during today's meeting may contain forward-looking statements about the bank's outlook and objectives and our strategies to achieve them. The bank's actual results could differ materially from any expectations discussed. They also be references to non-GAAP measures. The details of our warning regarding forward-looking statements and non-GAAP measures are behind me and on the webcast screen. They can also be found in the bank's first quarter report to shareholders.

I would now like to invite Scotiabank's President and CEO, Scott Thomson, to address the meeting.

Good morning. It is a pleasure to welcome our shareholders here in Toronto this morning. Thank you for your continued confidence during such an important time for our bank and for the country. Over the past year, I've spent time across Canada and our broader footprint, meeting small business owners and corporate and commercial clients as they navigate this period and decide how best to steer their enterprises through it.

On a recent approach into Vancouver Airport, I looked down at the stacks of shipping containers lined up at the port and was struck by the power of simplicity. For much of the last century, trade faced a basic problem. Goods moved across oceans, but ports handled cargo differently. Ships would arrive and teams of dock workers would get to work breaking them down, pallet by pallet, crate by crate, barrel by barrel. Every ship was unpacked, sorted and reloaded by hand. It was labor-intensive and time-consuming. Global trade was not constrained because of a lack of demand but because of a lack of a common standard. Then a simple idea changed everything, the shipping container, one box that could move from sea to rail, to road, align global trade and something remarkable happened. Speed increased, costs fell and scale became possible.

That idea, that alignment matters as much as ambition, has guided how we have run the bank over the past 2 years. Just as the shipping container transformed trade by harmonizing how the system operated, our focus has been on simplifying, standardizing and sharpening how we deploy capital and serve clients. And the results are clear: stronger earnings improving returns and a balance sheet built for resilience. Across the bank, we've shifted from volume to value, moving from leading with our loan book to building deeper, more meaningful client relationships. We ended the year with an adjusted return on equity of 12.5%, up nearly 200 basis points year-over-year. We told the market we expect to reach our medium-term return on equity target of 14% plus in 2027, 1-year ahead of plan. And in the first quarter of this year, we've already reached 13%.

Our net income was up 10% in 2025, helped by strong revenue growth and good expense control. We have repurchased 20 million shares over the past year and we intend to continue repurchasing shares in the quarters ahead. Taken together, this has helped to drive a total shareholder return north of 35% in 2025. The introduction of the shipping container shows us that innovation on its own is often not enough, but rather what you do with it through processes, approaches or ideas that help a system scale. That's the lens we're applying across the bank from how we attract primary clients to how we modernize platforms. One of our core areas of focus continues to be growing primacy. And over the last 2 years, we've added more than 400,000 retail primary clients across Canada and our international footprint. These are clients for whom we meet their core banking needs who actively use our products and who are engaged digitally.

In Canada, many of these clients are coming to the bank through our innovative Mortgage+ program, which now represents more than 90% of new mortgage originations. Mortgage+ is a customizable banking proposition that gives clients access to preferred mortgage rates. We were also excited to welcome iconic Canadian brand Shell, to our Scene+ program this year, unlocking new ways for members to save and earn rewards on everyday essentials like fuel, groceries, entertainment, fuel and of course, banking. In our International footprint, we completed the transfer of our banking operations in Colombia, Costa Rica, and Panama to Latin American bank, Davivienda in exchange for an approximate 20% ownership stake in the combined entity. The transaction, which closes in December -- which closed in December reflects our commitment to optimize our International Banking business by focusing on those countries which we can grow and scale.

Our Global Banking and Markets business has been investing in new capabilities with our business in the United States now growing to 12% of the bank's total earnings in 2025. And in our Global Wealth Management business, we've seen a 14-point improvement in our Net Promoter Score since we launched our strategy in 2023. And this is one of our key metrics we use to measure client satisfaction. Within the bank, we focused on technology investments that are redefining how Scotiabank serves clients, how our teams work and how we create long-term value, allowing us to compete and win in a rapidly changing landscape. We have now launched our enterprise approach to data and AI, which we call Scotia Intelligence. Through Scotia Intelligence, we are building for where AI is going, not where it was. It unifies our most advanced tools and capabilities to turn information into actionable insights at scale, accelerate decision-making and drive a more agile, connected and high-performing organization.

As part of these efforts, we are putting the power of assistive AI tools into the hands of all our employees to help them make faster, more informed decisions so that we can deliver better outcomes for our clients now and into the future. All of our efforts have helped to build a strong foundation that is prepared and equipped to support our clients in whatever lies ahead and to continue delivering sustainable long-term returns for you, our shareholders.

Just as a shipping container reshaped the economic map, today's technological and geopolitical shifts are reshaping it again. The implications for Canada and our clients are profound, guiding where investment flows and how risk is managed. In the International Monetary Fund's most recent check-in on Canada's economic health, it's found the country to be economically resilient. In fact, Canada is faring better than might have been feared. But resilience on its own does not create prosperity.

The IMFs message is that productivity, investment and policy clarity now matter more than ever. Growth won't come from demand alone, but rather from restoring investor confidence that gets capital flowing and boost Canada's capacity to deliver on today's national priorities. This includes energy and resource infrastructure, defense, housing supply and innovation. In other words, the demand is here. The capital exists but misalignment between policy, infrastructure and investment still holds Canada back. Those same geopolitical ships have also sparked long overdue conversation about Canada's economic framework. Leaders have galvanized around a deliberate pro-growth agenda focused on trade diversification and long-term prosperity.

Last year at this meeting, I said that this is Canada's moment to point itself in the right direction, to be more deliberate about growth, investment and competitiveness. Since then, the federal government has referred more than 20 initiatives to the major projects office with countless other smaller scale projects receiving investment or support to help get them off the ground or accelerate their impact. Many businesses too have shown a renewed optimism about the path Canada is on, and it will take those same businesses stepping up and investing with confidence to unleash the country's potential. That confidence matters because Canada has set an ambitious goal to unlock up to $1 trillion in investment over the next 5 years. That investment is key to building infrastructure, expanding industrial capacity and strengthening long-term growth. If achieved, it would be transformational for the economy.

It would boost real GDP growth by 2%, driving a meaningful improvement in living standards in this country to the tune of approximately $1,200 per person per year in real income. It is also this type of ambition that is necessary admits an ongoing period of economic dislocation. Public capital can help set the direction, but it is private investment that will make this a reality.

Today, the world is converging on a shared view of Canada's opportunity. The recent conflict in the Middle East has served as a reminder that when resources become a geopolitical tool, secure supply trusted partners and long-term capacity matter more than ever. And that puts a premium on more Canada. Nowhere is this clearer than in energy. Just 4 countries, Venezuela, Saudi Arabia, Iran and Iraq, hold more than half of global oil reserves with conflict effected countries, including Russia and Libya rounding out the top 10, more than 60% of natural gas reserves sit in the Middle East and Russia. In other words, a large share of the world's supply sits in places where politics can change the reliability and the price overnight.

For households, this works its way into heating bills, gas prices and the cost of everyday goods. Before the Middle East conflict, a 1/5 of global oil and LNG moved through the Strait of Hormuz one of the world's most critical choke points. About 1/3 of global seaborne fertilizer passed through that same choke-point at a time when global food demand is only expected to rise. When fertilizer supply tightens or becomes more expensive, it flows straight through to farmers' costs and ultimately into grocery prices. This weaponization of resources also extends to the green energy transition. Half of all critical minerals essential to the energy transition are now intentionally restricted by export controls around the world, while nearly 75% of processing occurs in just one country.

Canada is uniquely positioned as a secure, reliable alternative to many of the world's suppliers. We stand apart in the global energy landscape, third globally in oil reserves fourth in production and fifth in natural gas. We are also in the top 3 globally on both current and planned carbon capture and storage capacity. Canada is the second largest producer of uranium and has some of the largest reserves of other key critical minerals such as nickel, cobalt and rare earth elements. Canada accounts for roughly 1/3 of the world's reserves and production of potash, one of the key ingredients in fertilizer. Crucially, these resources sit within a country characterized by strong governance, rule of law and political stability in contrast to many dominant global suppliers.

This is especially important as artificial intelligence continues to permeate deeper into everyday business in life with access to affordable and reliable power quickly becoming a key factor in adoption. According to the International Energy Agency, data centers currently consume about 1.5% of total global electricity. That share is expected to double to 3% by 2030. Put differently, this represents half of the projected growth in domestic energy demand over that period, and it won't be a marginal shift. AI's energy use is expected to overtake that of all energy-intensive goods sectors combined, including chemicals, aluminum, steel and cement. In a world where all forms of energy and raw materials will play an increasingly important role. Canada has the resources. Add to that our human capital, our highly educated population, our deep financial sector expertise and a quality of life that ranks amongst the best in the world, and we also have the credibility to lead.

But investment only moves at scale when systems line up, when capital, policy and infrastructure pull, in the same direction. Amidst today's uncertainty the cost of misalignment is higher than it has ever been. That question of alignment matters just as much when we look beyond our borders. In the same way, the shipping container reduced friction by standardizing how trade moved, North America's advantage comes from shared frameworks that let trade and investment flow with confidence. Canada has what the world wants and needs and getting those goods to new markets has become a priority as the country works to diversify its trading relationships. Tangible commitments to do so may also reinforce the government's goal of attracting new investment and getting capital flowing into projects that enable overseas trade. Supporting this growth will mean making transformational investments in marine and air infrastructure and strengthening investments in rail, road and intermodal capacity. This is a generational opportunity that will be essential to securing Canada's economic future.

At the same time, it is important to deepen our relationship with our neighbor to the South. Geography matters. 70% of goods leaving the country shipped by road, rail or pipeline Canadian trade is deeply integrated with the United States. The U.S. has always been and will always be a central partner for Canada. And just as Canada needs the U.S. The U.S. needs Canada. It's no coincidence that some $900 billion in goods and services flow between Canada and the U.S. each year in roughly equal proportions. Energy, food and critical inputs move back and forth across the border every day. The United States relies heavily on Canadian energy and potash dependencies that underscore how interconnected our economies truly are, and nearly 8 million U.S. jobs are supported by trade with Canada. More broadly, the Canada, U.S. and Mexico relationship remains one of the most integrated in the world.

North America has been the second fastest-growing region over the last 30 years and represents roughly 30% of global GDP. Canada and Mexico are the United States' biggest trade partners, but they are also significant partners to each other. Mexico was the fifth largest purchaser of Canadian goods in 2024 and the third largest source of Canadian imports. Beyond the trade flows, the 3 countries human capital is highly complementary. Lower-cost, highly skilled labor in Mexico coupled with Canada's resource advantage, provides relatively cheaper inputs for American manufacturers, which in turn drive significant innovation and productivity growth.

These strong cross-border supply chains have kept jobs in Canada and the U.S. that would have otherwise departed. This is particularly the case in key sectors like automotive, which have benefited from stronger competitiveness while capital flows allow each country's firms to invest in the others, creating further jobs, fueling productivity and generating wealth, whether you're a tomato farmer in Leamington, a fleet owner in Lethbridge, or an auto parts distributor in Laval, trade uncertainty matters.

Roughly 3/4 of Canada's economy is now services based, but it is the goods-producing sectors about 1/4 of GDP that absorb most of the friction when trade rules are uncertain. Even relatively modest increases in trade friction can have meaningful economic effects, slowing investment disrupting supply chains and raising cost. This is especially true in sectors like manufacturing, machinery and transportation equipment on all sides of the border that depend most on cross-border flows. When you look at the resource, labor and manufacturing synergies to be found by working as one, it is not less of each other that we need. It's more, particularly in a more fragmented multipolar world, the relative strength that all 3 countries gained from CUSMA becomes all the more important. We believe that the renewal of CUSMA remains the most likely outcome. The economics of the deal are obvious, but the path to get there may not be linear.

The real risk is prolonged misalignment and missed opportunity. As the CUSMA review unfolds, the objective should be not only to move quickly to reduce uncertainty, reinforce clear rules and keep North America investable, it should be also to deepen even further to amplify trade and to grow our collective prosperity. Together with broader global trade diversification, Canada will be on a course to thrive. The faster we gain that trade alignment, the faster businesses can commit capital, build capacity and move forward with confidence. Scotiabank intends to be at the center of that alignment. We're built for this moment.

We are the fourth largest bank in Mexico and one of the top 10 in North America. We are the only bank that operates at scale in all 3 countries with deep expertise across sectors, including oil and gas, mining, infrastructure, real estate and many others. We are uniquely positioned to support our clients in each of these jurisdictions with an unparalleled ability to support those transacting across the continent. That's one of the reasons that we opened a best-in-class regional office in Dallas this year, a long-term investment in a region that is a hub for North American connectivity. It's why I brought our entire senior leadership team down to Mexico just 2 weeks ago to spend time with our clients and teams and to connect with a market that is so important to our bank. And it's why we're looking forward to hosting clients and officials from across Mexico and Canada as the government of Mexico launches its trade mission to Canada in the weeks ahead.

Just as a shipping container caused significant societal shifts as traditional rules were upended, technology has changed and new opportunities emerged, so too will the disruption that's reshaping today's global economy. To that end, the way we approach areas like social impact, sustainability and community investment are continuing to evolve. I'm very proud to share that we will disclose our energy supply ratio later this month, which will provide investors with clear insights into the relative balance between our financing of low carbon and conventional energy supply. We will be amongst the first banks globally to disclose both an ESR methodology and a calculated ratio. Importantly, we will also publish a supplementary ESR where natural gas and low carbon energy are recognized as essential to the transition. This is a recognition that all forms of energy, both conventional and alternative will be required to support the global emerging middle class and the unprecedented demand driven by technological advancements like AI.

Another area where we're committed to real impact is indigenous economic reconciliation. The relationship between indigenous participation, reconciliation and Canada's economic resurgence is clear. We are focusing on driving real opportunity for indigenous clients and communities and taking an enterprise-wide approach to expanding products and services that further contribute to the prosperity of the indigenous economy and our broader stakeholders. This includes through Cedar Leaf Capital, which is opening doors to new opportunities that support indigenous communities and accessing tailored financial advice, building capital and driving economic development. Our community investment efforts through a $500 million ScotiaRISE program will continue to evolve alongside our business strategy. To ensure that we are meeting the economic needs of tomorrow, the program will work to prepare our communities for innovation-driven infrastructure-intensive future. And through all of our efforts inclusion remains foundational. It is central to our culture framework, our Scotia bond.

And as we build the team that will continue to deliver our strategy, diversity of talent, experience and perspective remains a strategic advantage. Taken together, these efforts reflect a bank that is operating with clarity, confident about our role in the world today, and deliberate about the way we drive our impact forward. In the container revolution, the winners weren't the ports that have historically handled the most cargo, but rather the ones that aligned early around the new economic order and build for scale.

That's how we thought about our own journey here at Scotiabank, and it mirrors the path that Canada is on today. As a country and the continent only through alignment will be able to compete and lead globally. Alignment between capital and policy, between stability and growth between today's economy and tomorrow's. That's what turns potential into performance, within our bank and across Canada. That's how we'll thrive. And through it all, Scotiabank will be there, partnering with clients, delivering for shareholders and strengthening the communities we serve. Thank you.

Thank you, Scott. Those are great remarks. We will now proceed with the first item of business as set out in the notice of meeting. Copies of the annual report, which contains the bank's 2025 financial statements and auditors report were sent to shareholders in advance of this meeting. You can also obtain a copy of our 2025 annual report, at the entrance to this room or on the website at scotiabank.com.

We will now take any questions directly related to the financial statements. Raj Viswanathan, our Group Head and Chief Financial Officer, is here with us today. I'd ask again, please use one of the microphones located in the aisle, or again, raise your hand if you need a microphone brought to you. And please state your name and whether or not you are a shareholder or a proxy holder. Okay. I see no questions in the room. Jaime, have we received any questions online?

We have one question online. It is from a shareholder, Alan Best. He has a few questions. And his first one is deposits, are the foundation for growth in our business. I want to acknowledge the compelling promotional campaign the bank has undertaken to grow deposits in our Canadian Banking and Wealth Management groups. The message was clear and well reinforced in our branches. There were competing campaigns in the marketplace, and I'd be interested to hear management's assessment of our results and also to know where shareholders might look to see the hard numbers resulting from this effort?

Great. Mr. Best, thank you very much for your comments. You always have very good questions. As you know, the core to this strategy is primacy. Primacy with our retail clients or small business clients, our commercial clients and our corporate clients. And to get primacy, you need deposits, core deposits. And so that has been a huge focus for the firm since we launched the strategy. We've made good progress.

I think since first quarter 2023, we've added $67 billion in -- to the deposits of the bank. And if you look at 2025 year-over-year deposits in day-to-day, which are the key deposits we're after are up 5%, in line with market. So as a management team, we feel good about where we're heading. And I hope you find that we're being very transparent about that. So as you look at the financial results, as you look at the quarterly conference calls that I do, that's a big area of focus, and we can point you through our IR group to the right area to look, but we're pleased with the progress we're making. So thank you for the question.

My name is [ Astin Dobus ]. I am a shareholder for the past 50 years. So I [indiscernible] it was okay. I have one question. We have all kinds of problems with the United States. You didn't say anything about how can we solve that? They always want something different, increasing taxes and doing all these nonsense.

Well, first, thank you very much for being a shareholder for 50 years. That's very impressive. And thank you for the faith you put in the bank.

I've done well so far.

We're here to serve you. So thank you very much.

I think the U.S., Canada, Mexico relationship is a complicated one right now for reasons that we're seeing in the press. I think the key is to make sure that we don't lose sight of this power of the regional trading block of Canada, the U.S. and Mexico. And as I'd mentioned, it's growing quickly. It's 30% of the GDP. There's obvious issues that U.S. has with Canada and Canada has with the U.S. I think we have to stay away from listening to all the rhetoric on television and focus on the data and the stats. And the fact that, in my view, we want to grow and diversify trade with other countries. We should do that for sure, but we also should deepen and amplify the relationship with the U.S. And if we can do that, the economic pie gets better and we all benefit.

There were no further questions online.

Okay. We will now proceed with the election of directors. The Board's role is to oversee management of the bank, ensuring that strong corporate governance practices are in place. Sound and effective corporate governance is a critical part of the bank's culture and fundamental to our long-term success. Our directors are regional, national and international business and community leaders, with diverse thoughts, perspectives, backgrounds and experiences.

As a group, they have been selected based on their integrity, collective skills, and ability to contribute to the broad range of issues the Board considers when overseeing the bank's business and affairs. I would like to thank all of our directors for their commitment, hard work, leadership and counsel to me. I would also like to acknowledge the contributions of Don Callahan, who is not standing for reelection this year. His insights and collaborative spirit have been so valuable to the Board and to the bank. Don, thank you for your service, and we wish you the very best.

This year, we are delighted that Antonio Garza is standing for election at today's meeting for the first time. Tony is a senior adviser in the Mexico City office of White & Case LLP, and the former United States Ambassador to Mexico. He's acknowledged expert on U.S.-Mexico relations with a deep understanding of the business and political environments of both countries. Tony has extensive public policy and financial services experience as well as expertise in human capital management, executive compensation, risk management, and sustainability and governance matters. The Board of Directors has fixed the number of directors to be elected at 12 and I confirm that all nominees are eligible for election. We believe we have a board with the right combination of skills, experience and integrity to provide strategic counsel to management and oversee the bank's business and affairs. All of our directors are joining us today either in person or virtually. I will invite Jaime to read the names of the nominees standing for election, and I would ask each nominee who is attending in person to stand as their name is called.

Thank you, Aaron. The nominees for election as directors are: Nora Aufreiter, Guillermo Babatz, Dave Dowrich, Antonio Garza; Michael Medline, Lynn Patterson, Una Power, Aaron Regent, Sandra Stuart, Scott Thomson, Steven Van Wyk, Benita Warmbold.

All right. Thank you, Jaime. The Board looks forward to serving our shareholders this year. You will find information on each of our nominated directors on Pages 17 to 23 in both the English and French versions of the bank's management proxy circular. I now call on Michelle Stevens to make the motion for the nominations for directors.

Good morning, Mr. Chair. My name is Michelle Stevens, and my pronouns are she/her. Here at Scotiabank, I hold the position of Manager Board Services within the Corporate Secretaries Department. I am a shareholder. It is my pleasure this morning to nominate each of the director nominees as set out in the management proxy circular to be a Director of the bank until the close of the next Annual Meeting of Shareholders. Thank you, Mr. Chair.

Thank you, Michelle. Are there any questions or comments about the election of directors? And again, please use one of the microphones in the room or one to be brought to you. And similarly, you can ask a question through the online channel. And again, I ask that you state your name and whether or not you are a shareholder or a proxy holder.

Okay. I see no questions in the room. Jaime, any questions online?

We have no questions online.

Okay. I declare the nominations closed. The election of directors is the first item to be voted on. If you have not yet voted, please vote now by selecting either the option for or withhold for each individual director. And I'll pause for a moment so people can complete their voting.

[Voting]

Our next item of business is the appointment of the auditor. At the Annual Meeting held on April 8, 2025, shareholders reappointed the firm of KPMG LLP as a shareholder auditor of the bank for the 2025 fiscal period. You will find detailed disclosure on Pages 6 and 7 in both the English and French of the management proxy circular. The Board recommends that KPMG be appointed as the auditor of the bank until the close of the next annual meeting. Avi Verma, Jim Newton and Brent Alison representing KPMG are here in person today. It is a pleasure to welcome them to this meeting. And I would ask that Mr. Verma, Newton and Alison, would you please stand to be recognized. I will now call on David Washburn to make this motion.

Mr. Chairman, my name is David Washburn. I'm Vice President, Executive Compensation worldwide, and I'm a shareholder. I propose that KPMG LLP be appointed auditor of the bank until the conclusion of the next Annual General Meeting of Shareholders. Thank you, Mr. Chairman.

Jaime to second the motion?

I support -- I second the motion.

Okay. Thank you, David. Thank you, Jaime. I will invite shareholders and proxy holders with questions related to the point of the auditors to approach one of the microphones or if your question online, please use one of the online channels. I see no questions in the room, and Jaime, any questions online?

We have no questions online.

Okay. This item of business is the second item to be voted on. For those of you who have not yet voted, please vote now by selecting either the option for or withhold.

[Voting]

Our next item of business is the amendment to Section 3.13 of the bank's By-law No. 1 regarding directors' compensation. A description of the proposed amendment and the text of the resolution can be found on Page 8 of the management proxy circular in both -- particularly in both English and French. As noted earlier, to become effective, this resolution must be passed by not less than 2/3 of the votes cast in respect of this resolution. I now call on Andree Gage to make this motion.

Mr. Chair. My name is Andree Gage, and my pronouns are she/her. Here at Scotiabank. I'm the Senior Manager of Canadian Banking Communications within Global Corporate Affairs. I am a shareholder. I move that the special resolution to amend Section 3.13 of By-law No. 1 to delete the reference to $5 million and replace it with $7 million as set out in the management proxy circular for this annual and special meeting be confirmed. Thank you, Mr. Chair.

Great. Thank you. Jaime?

I second the motion.

Okay. Thank you, Andree, and thank you, Jaime. Shareholders or proxy holders with questions concerning this item to again approach one of the microphones or have one brought to you and similarly use one of the online channels. I see no questions in the room. Any questions online?

We have no questions online.

Okay. This item of business is the third item to be voted on. If you have not yet voted, please vote now by selecting the option for or against.

[Voting]

Our next item of business is to confirm administrative amendments to the bank's By-law No. 1. A description of the amendments and the text of the resolution can be found on Pages 8 and 9 of the management proxy circular in both English and French. I now call on Alex St.Germain to make this motion.

Hello, Mr. Chair. My name is Alex St.Germain and my pronouncer she and her. I'm Indigenous Community Relationships Manager here at Scotiabank. I'm also a shareholder. I move that the ordinary resolution for administrative amendments of By-law No. 1 as set out in the management proxy circular for this annual and special meeting, be confirmed. [indiscernible] to Mr. Chair.

Thank you. Jaime?

I second the motion.

All right. Thank you, Alex. Thank you, Jaime. I invite shareholders or proxy holders with questions concerning this item to approach one of the microphones or again, use the online channel. I see no questions in the room.

We have no questions online.

Okay. This item of business is the fourth item to be voted on. And again, if you have not yet voted, please vote now by selecting the option for or against.

[Voting]

The next item of business on the agenda is the advisory vote on the bank's approach to executive compensation, commonly known as Say on Pay. Our approach to executive compensation is described in detail in the compensation discussion and analysis section on Pages 69 to 115 in the English and Pages 71 to 119 in the French versions of the management proxy circular. Because our annual Say on Pay as an advisory vote, it is not binding upon the Board. However, the Board and the Human Capital Compensation Committee will take the outcome to the vote into account together with other suggestions that we receive from you when considering future executive compensation arrangements. A resolution on the approach to executive compensation is set out in the management proxy circular on Page 10 and under the heading Advisory Vote on our approach to executive compensation. I now call on Sara Mohammed to make the motion to approve the bank's executive compensation approach.

Mr. Chair. My name is Sara Mohammed, and my pronouns are she and her. It's a true pleasure to be the Senior Manager of Global Inclusion, working with the inclusion team to build Scotiabank's culture. I'm a shareholder. I move that the resolution set out in the management proxy circular under the heading Advisory Vote on our approach to executive compensation be passed. Thank you, Mr. Chair.

Thank you, Jaime?

I second the motion.

Okay. Thank you, Sara. Thank you, Jaime. I invite shareholders or proxy holders with questions regarding this item who approach the microphone. I see we have one question.

Mr. Chairman, my name is Willie Gagnon representing MEDAC. Like each year, we are voting against this approach for the same argument, that is, the compensation ratio is far higher than the 30x that we recommend for the ratio between the remuneration of the highest paid employees in the bank that should not go beyond 20x to 30x the median employee remuneration. And we would invite all shareholders to vote against this proposal. In fact, one bank is getting there this year. They did achieve a reasonable ratio. So it's possible. Thank you.

Okay. Thank you, Mr. Gagnon. I think as we set out in the circular, our approach to executive compensation is to make sure that we're fair and competitive and provide an incentive structure to properly motivate our team. And we think we have a plan in place that does that. And so thank you for your comments. And again, our whole approach to executive conversation is well described in the circular and the rationale behind it, but thank you for your comment. Okay. Jaime, is there any questions online?

We have no questions online.

Okay. This item of business is the fifth item you voted on. If you have not already voted, please vote now by selecting the option for or against.

[Voting]

The next item on the agenda is the shareholder proposals. This year, 8 shareholder proposals were submitted for a vote at today's meeting. Shareholders and proxy holders will be given an opportunity to ask questions related to the proposals after the proposals have been presented and moved. The 8 proposals were submitted by Mouvement d'education et de defense des actionnaires, or MEDAC, which you will find in the management proxy circular beginning on Page 119 in English and on Page 124 in French. The management proxy circular includes statements by MEDAC in support of its proposals as well as the bank's responses. Mr. Willie Gagnon of MEDAC has joined us in person today. Welcome. Mr. Gagnon you're welcome to address the meeting with any comments on your 8 proposals. And please don't forget to move each proposal.

Mr. Chairman, so again, Willie Gagnon for MEDAC. I'm a shareholder of the bank. And we are making our proposals this morning. I will start with a very small comment on Page 29 of the circular. There is an excellent table in which we see the evolution of governance within the bank. We're very happy with the publication of that table. If we had to write MEDAC next to each of the measures that you've adopted over the past 20 years, it would often show up in the circular. And we're very happy that we were able to participate in the evolution of the banks governance, and we're very happy with that small table. We would have been even happier to see our name in there, but we understand, how it was put together.

So we had submitted 9 proposals and 8 are being put to a vote. Today, we managed to agree on one of the proposals. The key proposal is the first, and I will spend a little more time on that than on others. Given that other proposals -- so 3 of the proposals have been made to you in the past. 5 are new. The other 3 are former proposals that are being made again. The key proposal, which is consistent with MEDAC's goal of promoting shareholder participation in the companies in which they've invested reads as follows. Strengthening shareholder participation in annual meetings. Last year, one company had no quorum. They didn't manage to get a quorum, and they were required to postpone their annual meeting by 2 days. And this led us to ask the question, why? Why does this kind of thing happen?

We've proposed a series of measures to the bank that could be implemented to try and promote shareholder participation in annual meetings. We would have been open to not submitting this proposal for the vote. If the fourth measure that we were asking, documenting participation in the publication of a table in which we could see whether or not shareholder participation in annual meeting has been increasing or decreasing over the last years, in a small table in which we could distinguish between the participation of institutional shareholders and the participation rate of individual shareholders because you can see in the table that we provided that there is a gap between both the institutional shareholder participation is keeping up. Whereas generally speaking, in Canada, the participation rate for individual shareholders is decreasing and we find that's a catastrophe and that corporations should devote specific efforts.

It would be easy for the bank to publish such a small table which would present information that is already available in documents published over the past few years on the rate of participation in annual meetings. Had the bank agreed to publish the small table, we would not be putting this motion to a vote today. We hope that the bank will eventually be open to publishing such a table, which would not be expensive to produce and independently of the results that we obtained today and the vote, we would be happy to see that. And we would invite all shareholders to support this proposal.

I will spend much less time on the other proposals, inclusion of young people in the banks governance bodies, Proposal #2, this is a measure that has already been taken by a number of crown corporations in Quebec. The bank is saying that it will not do this as long as the regulators don't require it. We think it would be a good thing to do it. Nonetheless, we've invited shareholders to support this proposal.

Proposal#3 that the bank adopt a more responsible compensation policy, aligned with the bank's overall performance. That goes without saying. In its reply, the bank seems to agree with us on principle, but not on modalities. So we would invite all shareholders to support this proposal.

Proposal#4. Strategic diversification of skills on the Board of Directors. We were asking what were the mechanisms that would allow in a time of crisis, such as the one we're experiencing now with the United States, worldwide crisis and war. If a mechanism could be triggered, that would review the compensation -- the -- sorry, the skills matrix for directors, we would invite shareholders to support this proposal.

Proposal 5, a recognition of the Board of Directors systemic role. We were asking the bank to create an advisory committee with journal experts to address the systemic role of the bank in the country's economy. This is a concern that the bank has -- we have heard about it today. and we heard about it last year in the CEOs addresses. And we would find it helpful if such a committee were created. So we did invite shareholders to support this proposal.

The other proposals -- so oversight of artificial intelligence, that is a proposal that we made last year, which obtained 12% of votes and public disclosure of nonconfidential information, country-by-country reporting, this is a proposal that had a obtained 8% last year and that we are making again this year, and advisory vote on environmental policies, that is a proposal that obtained 14% support last year. That is why we are making it again. So combating forced labor and child labor. This is a proposal that is not being put to a vote since we've been able to agree with the bank on the principal. The bank has stated that during 2025, no concern related to modern slavery and child labor has been identified. This is what we were asking for. So I'm sorry about the large nature of proposals that we've made.

If we we're able to agree on the past proposals that have obtained a high percentage of support, they would not be made again. So we hope that we can continue our dialogue with the bank in the future on these important topics even though, even though we don't necessarily get a majority of votes.

I would like to stress one important thing. It is stated in the bank's reply to say climate that we, we MEDAC, believe that this vote would replace discussions with shareholders. This is not the case. We are not saying that. We are saying that say on climate would be additive to all the efforts that the bank is already excellently deploying with shareholders. We don't want to substitute this for the dialogue that is existing. So we would hope that the state of discussions we have with the bank be reflected in your answers rather than the opposite of what we are submitting.

So thank you, Mr. Chairman. Thank you for all the time that you have allowed us. I'm happy to continue to attend this meeting in person. It's important, and we would obviously invite all shareholders to support our proposal. Thank you.

Mr. Gagnon, thank you for your proposals, and thank you for your comments. And one of the things that I'll continue to stress is we welcome ongoing engagement with our shareholders, whether it be at the annual meeting like this or throughout the course of the year. We have a very active dialogue, and we appreciate getting input at different perspectives. And we take it seriously, we bring it on board. And many of the things we agree with, we may agree with just how we go about addressing the issues, that you have raised. I think you would have seen in our response, a pretty comprehensive response by the bank 2-year proposals. And I would encourage all shareholders to review those. But thank you again for your comments.

On that, shareholders can find the bank's position on each of MEDAC's proposals on Pages 120 to 133 on the English and Page 125, 140 of the French versions of the management proxy circular. Are there any other questions on the proposals that have been made. I see none in the room. Online?

We have no questions online.

Okay. So if you have not yet voted, please vote now by selecting the option for or against or abstain for proposals 1 to 8.

[Voting]

Having now completed the formal items of business as set out in the notice. The voting is now closed. The scrutineers will now collect the ballots. Please raise your hand if you need the scrutineers to pick up your ballot. Thank you.

InvestNow submitted a proposal which was withdrawn after productive discussions. Ms. Gina Pappano of InvestNow would like to speak to this proposal. And Ms. Pappano thank you for being here, and please the mic is yours.

Thank you for the opportunity to speak about InvestNow's withdrawn shareholder proposal. We ask the bank to return to viewpoint neutrality in their business practices and to put fiduciary duty to their shareholders first. But after submission, it was argued that the language of our request was at odds with the requirements of the Bank Act, which stipulates that decisions must be made in the best interest of the bank itself and its shareholders. Point taken. So in these remarks, we are asking the bank to return to viewpoint neutrality in their business practices and to put fiduciary duty to the bank and its shareholders first.

Banks are essential institutions for participating in modern life. Without a bank account, it is difficult to play any part in our society. Banks therefore, must be truly inclusive institutions, and that means they should be held to a standard of strict viewpoint neutrality. Looking after the interest of their clients in a nonpartisan non-ideological way. So long as the bank's clients are abiding by the law, banks should be open to all potentially profitable businesses for the good of the bank, its shareholders and the health of the economy.

But over the past decade, maximizing financial returns to shareholders has increasingly taken a backseat to the pursuit of environmental, social and ideological goals. Along with other fiduciaries like public pension plans and university endowment funds, Canadian banks have placed ideological goals like decarbonization, Net Zero and energy transition above returns.

Since 2022, we have presented shareholder proposals to the big 5 Canadian banks, to counter these prosperity destroying campaigns, whose ultimate objective is to shut down Canada's oil and gas industry. Our goal has always been to prevent the bank from giving into political and ideological pressure and becoming complicit in schemes to undermine Canada's energy sector. Banks hold the government charter to conduct banking. That charter grants a privilege, but it also comes with the responsibility to stay focused on the purpose of banking. As customers and as shareholders of the banks, we need to hold the banks to account for any activity that strays from the business of banking. Thank you.

Gina, thank you very much for being here and for your very thoughtful remarks.

Shareholder Association for Research and Education, or SHARE submitted a proposal, which was withdrawn following the bank's -- following a productive discussion with the banks. Ms. Juana Lee, of SHARE would like to speak to the proposal. Ms. Lee, you may briefly address the meeting.

Good morning, shareholders. My name is Juana Lee. I'm the Associate Director of Corporate Engagement at the Shareholder Association for Research and Education, also known as SHARE. I am representing the Hamilton Community Foundation, a shareholder of Scotiabank, which has filed a shareholder proposal at Scotiabank, requesting that the bank conduct and disclose the results of a third-party ratio equity audit analyzing Scotiabank's employment and commercial practices to identify, address and prevent systemic discrimination risks.

Hamilton Community Foundation filed a similar proposal in 2025 and has engaged the bank on these matters since 2022. At Scotiabank's 2025 Annual Meeting of Shareholders, the proposal received over 38% of support from shareholders. Subsequent to the filing of this proposal, SHARE on behalf of Hamilton Community Foundation, engaged in meaningful and productive dialogue with Scotiabank, resulting in commitments from Scotiabank, to advance financial inclusion across its business for Black and other racially minoritized people and indigenous peoples and commitments to mitigate systemic discrimination risks, in line with the scope of a racial equity audit.

Broadly, Scotiabank has agreed to undertake a number of actions in exchange for the withdrawal of the shareholder proposal to be completed in fiscal year 2026 and 2027. The commitments include a series of internal assessments and public disclosures related to the race-based impacts of the bank's employment systems, procurement processes and lending and investment activities. The commitments touch upon topics such as financial inclusion, affordable housing and complaint handling. Scotiabank has also made a commitment to assess the merits of racial equity audit of business practices, an evaluation of the merit of such an audit will allow Scotiabank to assess peer bank practices, identify the effectiveness of its current policies, programs and practices and better understand the importance of a racial equity audit as a risk management tool for the business. Such an assessment will be important for investors to better understand and assess the due diligence conducted by Scotiabank to inform its decision around the conduction of a racial equity audit.

Following these commitments, Hamilton Community Foundation withdrew the proposal. As Scotiabank assesses the merit of a racial equity audit, shareholders continue to see that a racial equity audit will provide Scotiabank with a comprehensive mechanism to assess compliance with Canadian Human Rights and Indigenous Rights framework, identified gaps in financial products and service offerings for under-banked communities and evaluate deficiencies in the bank's systemic discrimination risk mitigation processes. The racial equity audit and Scotiabank's new commitments to strengthen its current practices to advance financial inclusion and commitment to mitigate systemic discrimination risks. Scotiabank will be better positioned to manage reputational, legal and operational risks, fulfill its own racial equity and indigenous reconciliation commitment, align its practices with its Scotia bond foundational commitments and build long-term value for our shareholders.

This is in line with peer banks. ABC, BMO, RBC and National Bank of Canada, who have agreed to conduct a racial equity assessment of employment and business practices. At present, we are in an environment that requires companies such as Scotiabank to continue advancing racial equity while managing for systemic disclamation risks to meet regulatory expectations and long-standing human rights and indigenous rights framework. As illustrated by the commitment made by Scotiabank, preventing discrimination remains a priority for businesses and strengthening of systems to address these risks continue to be warranted. Thank you for the productive exchange. We look forward to continued engagement with the bank on these matters.

Thank you, Ms. Lee, and we appreciate our ongoing engagement with you.

Okay. Ladies and gentlemen, the scrutineers have completed the preliminary tabulation of the votes cast in respect of each item of business before the meeting. I would now ask Jaime to speak to the preliminary report on voting results.

Thank you, Aaron. We wish to report that the vote return is over 53%. I'm pleased to inform you that each of the 12 nominees for Director named in the management proxy circular, has been elected and received over 96% of votes in favor.

The auditor was reappointed with over 92% voted in favor of KPMG LLP.

The special resolution to amend Section 3.13 of the bank's By-law No. 1 regarding directors' compensation was passed by more than 2/3 of the votes cast with over 98% voted in favor of the amendment.

The administrative amendments to By-law No. 1 were passed with over 98% voted in favor of the amendments.

The advisory vote on the approach to executive compensation was passed with over 95% voted in favor, and all of the shareholder proposals were defeated.

Proposal #1 received over 98% voted against. Proposal #2 received over 97% voted against. Proposal #3 received over 93% voted against. Proposal #4 received over 90% voted against. Proposal #5, received over 92% voted against. Proposal #6, received over 77% voted against. Proposal #7 received over 91% voted against, and Proposal #8 received over 82% voted against.

Okay. Thank you, Jaime. The final voting results will be available after the meeting. We will also ensure -- we will also issue a press release as required by the Toronto Stock Exchange and post results on the bank's website. This terminates the formal business of the meeting. We will now take questions from shareholders and proxy holders.

In keeping with our past practice, I'll ask our President and CEO to return to the podium and preside over this portion of the meeting. Jaime readout questions received online and we'll state the name of the shareholder or proxy holder who submitted them.

As noted earlier, this is a shareholders meeting, and as such, questions should be general in nature and related to the meeting. As I said earlier, if you have a client-related question, bank representatives will be available to speak with you after the meeting at the client care desk outside this room. To give all shareholders and duly appointed proxy holders the opportunity to participate and ask questions, please ask only one question at a time and re-queue if you have another question. Before asking your question, please give your name and state whether you are a shareholder or a proxy holder. Over to you, Scott.

Good morning. My name is Kiera Taylor. I'm with investors for Paris Compliance today representing [indiscernible] Foundation, a Scotiabank shareholder. So I'd like to provide an opportunity to Mr. Thomson to clarify his recent remarks, praising U.S. global military intervention, specifically regarding the context of South America. These statements included that the Trump doctrine is "a good thing for The Bank of Nova Scotia". This was surprising to many, given the history of intervention leaving permanent scars in many countries in Latin America. With a large presence that Scotiabank has in Latin America, this is surely something that probably Scotiabank already knows. These praises have also aged poorly given the U.S.'s recent intervention into Iran already causing hundreds of billions in cost to the global economy, also setting up a possible global recession, which will directly hit Scotiabank's bottom line. So would Mr. Thomson like to clarify your remarks?

Right. Thanks for the question. I guess two things. One is we don't have any operations in Venezuela, and we haven't for a long time, and we don't have any operations in Iran, and we've never had operations in Iran.

I think the point that I was making in respect to January was around what I said today is the regional trading block of Canada, U.S. and Mexico, I said today, but more broadly, Latin America is extremely important. And the second point I was making is as we see some of these countries like Chile, which was the country that had just gone through an election, move from left to center right, that should be positive for the economic growth of those regions and the Bank of Nova Scotia benefit from that. Those were the two points that I made. I think how it was reported in the press was a little bit differently than what I said if you're listening closely on January 8.

I'm Willie Gagnon and I still represent MEDAC. I'd like to underscore the exceptional quality and the fantastic nature of the CEO's speeches last year. I've never seen that in the past 20 years, the CEO of a bank who said so much about the economy. Its really refreshing. And I can see that it's the case again today. And that is the role of CEOs of large banks like you to say what they think.

Now I'd like to know what is the opinion of the CEO on the following question. We are a big producer of oil. We have a lot of oil resources. And this does not shelter us from the increased cost of gas in situations such as the ones we're experiencing today. So how is it that here in Canada, we have so much oil, and we are incapable of getting organized with that oil to protect our market and organized in order to make sure that citizens don't pay for other people's wars.

I understand that oil refinery or refining in North America is very structured and that Canada does not have the capacity to refine its own oil that they have to have refined in the U.S. to then purchase it refined. So do you have opinions on that? Do you believe that Canadians should be able to benefit from the fact that they produce so much oil and that, that would help them pay less at pump. What do you think of that regarding oil? But also regarding food because we can see the price of food exploding and everything that Canada is capable of producing, how is it that we are incapable of protecting ourselves from such fluctuation abroad.

I understand that our economy are integrated, but I think we should be able to benefit from the advantages we have. So it's an overarching question on the economy, but I believe the bank CEO opened the door to us asking questions about the economy at large.

Mr. Gagnon thank you for the question. A few comments. One is, obviously, what's going on in the Middle East is a tragedy right now in terms of wars, and it's not good to see any of that happening. And I do hope it gets resolved soon.

As you think about Canada's place in the global economic environment that we are an oil exporter and a resources exporter. And so when oil prices increase like they have, the actual GDP of the country does better. And as an example, I think our economics department, JF Peru has highlighted that for each $10 increase in WTI it's about a 0.5% impact to GDP. And so in a weird way, the war does help the economy, which is not something that we all -- I mean, we want the war to end, obviously.

The challenge, though, is it's complex is that all of the geographies don't -- the provinces don't benefit equally. And so you see obviously a lot of resource production out in Western Canada, you see not as much resource production in Ontario as an example. And so affordability does become an issue. And that's as a bank, we're trying to help our clients manage through what is a difficult period right now. And so as a country, I think we'll see a benefit from GDP, but different regions will benefit differently. And the same could be said for other resources as well.

It does highlight the opportunity for the country to not only continue the relationship with the U.S., but also diversified trade relationships. And I talked to that in my speech, that's really important. I think that's what the Prime Minister is trying to do right now. And so as you diversify those trade relationships, you can provide the resources that we have to the countries in need.

Interestingly, Mexico is also an oil exporting nation or a resource exporting nation. And so again, another country that through this crisis, we'll probably see a little bit of a pick-up to the economy, because of the oil price increase. Hopefully, that answers your question.

Yes. One last comment to the Chair of the Board. If I have a piece of advice for you, be careful with this CEO. He has interesting speeches on the economy, and I think that you might see him poached by politics. I see it almost never. So please try and keep them because politics will get interested in him even if he's not interested in politics.

So Mr. Gagnon. This is one area we 100% agree.

So Scott, we have a couple of questions online. One from Alan Best, who says that he understands that Tangerine earnings growth is expected to remain modest, and he would be interested to hear about the results of the TV campaign promoting some of the additional services available at Tangerine and whether management views Tangerine as a possible solution for branch closings in some rural communities?

Great. Thank you very much, Mr. Best, and we're fortunate to have Terri-lee Weeks here today in the room who is the CEO of Tangerine. I'm really excited about Tangerine. I think we have a great opportunity to have a different value proposition for our clients than we've historically had. We're in the front end of building out the team, making sure we have the right technology. And so I think you'll hear more in the weeks, months to come, and you're starting to see the TV campaign, which is actually having some pretty good success. It's off of a small base, but we're actually seeing assets come in, to the bank.

And so to your first question, which you provided earlier around deposits, this is actually increasing the deposits for the overall bank. As a possible solution for branch closings, they're not connected. We believe the branch network is extremely important for what we're trying to do around primacy. We have closed some branches, but it's not because we don't believe in the branch. We're trying to get the branch in the right place. And so there's been investment in branches, and there's also been a few closures, but Tangerine is a separate proposition from what we're doing at the Bank of Nova Scotia, and definitely not connected to any branch closures that may happen. And I think you're actually going to see a lot more investment into our branch network over time as we move forward in pursuit of the primacy agenda that you referenced earlier.

My name is [indiscernible]. I've been a long-term shareholder and also still proud to be ex-Scotiabanker. Congratulations, Scott, to your team, you and your team for achieving excellent results and consolidating the bank's position.

My question is two-pronged. What are your plans to strengthen our position in the U.S.A. which is 1/3 of the world market and also the fast-growing Asian market?

Esther, nice to see you. I remember your time here at Scotiabank and then also at the rating agencies. So good to see you here in the room.

So we have a great business run by Travis Machen, who's also in the room today in the U.S. And actually, it's growing at 10%, 12% from a revenue perspective. And it's mostly corporate and wholesale banking. We've added a lot of markets capabilities in the last year or 2, and that's actually been a significant contributor to the overall performance of the bank. So we'll hope that, that continues. You also probably know we have a 15% interest in KeyBanc, which is minority interest, it's a regional bank in the U.S. Our plan is continue to grow organically. Travis is continuing to add on capabilities. There may be some small, very small tuck-in type capabilities we want to add. But right now, we're focused on organic growth not inorganic growth. Sorry, you had a second question, too. Asia.

Asia, Asia, we're -- Well Asia has been a great growing area. We do have a footprint in Asia, in Singapore and Hong Kong. We're consolidating that footprint into Singapore. And we've actually continued to focus on Asia, but with clients that are dealing back into the North America corridor. And so as you think about the journey we were on, we were in 53 countries around the world. We're trying to really consolidate around this whole Canada U.S., Latin America footprint that we have, including Caribbean and that. And then servicing clients through Europe and Asia, which actually come back to that regional trading area. So that -- I wouldn't expect any significant acquisitions in Asia.

We have one more question online from Alan Best. He notes AI seems to be top of mind in every business. He submits this question in order to talk about it at this meeting. Can you tell us how the bank will use AI to grow revenue and earnings and whether you have any worries about possible ill effects?

Great. Thanks, Al or Mr. Best. I for one, this is top of mind for the Board. It's top of mind for the management team. We struck a technology committee as you know, last year. And from board engagement and the type of interaction we're having AI is top of mind.

We're also investing a lot as a company around AI, cloud, data. You're seeing our technology investment go up year-over-year. From an AI perspective, we've just announced Scotia Intelligence. We're being assisted AI tools to all of our employees to allow them to use that in the day-to-day work because we do see that there's productivity advantage. And then as a company, we are focusing on a few distinct areas that will allow us to create value for you, our shareholders, through AI. And as we think about that, think about effectiveness and efficiency, productivity improvements, client experience improvements and risk mitigation for the bank, and all through the cybersecurity and making sure we keep this bank safe is top of mind. And so making sure we do the right investments, we roll out AI to our employees in a way that keeps the bank and our clients safe. And that's the approach that we're taking.

Okay. I see no more questions in the room or online. Thank you, Scott. So my fellow shareholders, this now concludes the meeting. I want to thank the many Scotiabankers, translators and members of our production team who made today's meeting possible. There's a lot of effort that goes into today. I also want to thank you, our shareholders, for attending our annual meeting and for your continued support. And so with that, I'll declare this meeting terminated. If you have any interpretation or -- if you have any headphones, just leave them on your chair, and they'll be picked on. Thank you very much, everybody, and have a great day.

All right. Welcome back to back to back. Aris Bogdaneris, Group Head, Canadian Banking of Scotiabank. Welcome to the stage again.

Great to be here.

Let's start with the ROE, like everybody is obsessed with these days, rightfully so. But in Scotia's case, about half of the ROE expansion is expected to come from your business. Contrast that with some other banks where usually it's the ROE expansion in the U.S. or elsewhere, that's the driver. So what are the keys for that? And how do you expect to close the ROE gap with your peers?

Right. So great to be here. The ROE in the first quarter was 18.1% for the Canadian Bank. That's roughly 140 basis points up from a year ago. And I think it's correct to say the performance of the Canadian bank, of course, drives the overall ROE improvement at the enterprise level. And the way we see it in the Canadian bank, there's 4 key levers to improve that ROE from the current base that we're at.

First, clearly is improving the business mix or the product mix. This means both on the loan and the deposit side. What does it mean on the loan side, increasing our non-mortgage balances in the subsequent quarters. That's going to help the ROE. Also the mix shift in deposits more day-to-day in checking. The second driver is RAM, risk-adjusted margins. We see 3 drivers there. Interest rates now stabilizing and maybe even increasing, a big mortgage repricing next year in '27, that will be a big lever. And obviously, PCL slowly normalizing over subsequent quarters that will drive the RAM.

Third area is fee growth. We saw it in the first quarter, continued double-digit fee growth over subsequent quarters. And then finally, last but not least, will be productivity. And we saw signs of strong productivity in the last few quarters. This will continue. And between collectively, those four, we should continue to grow the ROE. If I was to think about what are the key drivers, probably mix shift and RAM improvement are roughly 70% of the overall puzzle to close the gap.

And mix shift -- sorry, can you...

Mix shift is simply more of the higher-value deposits, checking day-to-day and operating deposits in small business and commercial and more non-mortgage lending where the yields are higher. So that's the shift in the balance sheet.

So this dovetails on a couple of separate discussions, the RAM and the mix shift. I guess, when I think about mix shift and you're talking about deposits, more core deposits, less GICs, whatever, this is a shift of a shift. A few years back, you've been -- part of your strategy was to accelerate deposit growth as a big surge in term deposits. And today, you're, I guess, shifting in the other direction. So that's the -- there's a retention of the deposits that you gathered 4 or 5 years ago and shifting them into a different product. I mean shift a lot, but...

Yes. So yes. So essentially, what's happening is you're getting the shift out of term into day-to-day and savings, but more importantly, in wealth products. But overall, when you think of GICs maturing, 90% stays within the bank, okay? So that's an important point to make. So that's the shift we're seeing into wealth products and into day-to-day and...

And of that 90%, they're going into core, maybe a lesser extent staying into GICs...

Yes, exactly. And moving -- there's a big movement into wealth, but I think that's common across all the Canadian banks that we're seeing, which is now you're starting to see that shift out as rates now are floor starting to stabilize in the most recent period.

And the risk-adjusted margin, you mentioned mortgages. So I'm just thinking that's -- well, PCL next to nothing, God willing...

Yes, it's more the repricing.

Yes. So 2027 is the big year potentially, but....

Big window for renewals in '27. And we underwrote quite a few mortgages -- variable rate mortgages in '21, '22 that were really challenged on the margin side. Those will be up for renewal, and that will provide a tailwind to our RAM as they reprice.

Right. And there's big, I guess, the caveat there is competition, right? And because we've had this discussion with a couple of other presenters today, and they're all saying a similar thing, different timing, but it's -- hopefully, competition is not an issue.

Yes. Up to now, and we've had a big renewal window also this year and a bit last year. We're seeing a very high retention rate on our mortgage renewals, as I mentioned, also on our deposits. So we're really good now and getting better even on just keeping those high-quality clients into the bank.

Okay. And then before I get into more of these product type questions, I do want to go back to targets, and another target or guidance, whatever you want to call it, for this year was to get the consolidated double-digit earnings -- EPS growth in 2026, the Canadian Bank has to whatever, low teens, something like that, I suppose. You did it in -- the bank did it in Q1, largely because of capital markets, the Canadian Bank growth was 5%. So was this part of the plan and you expect it to grade it up? Or is there another interpretation there?

Right. So I think it's important context matters. And if you go back a year, in the first 3 quarters of 2025, the rate of earnings growth in the Canadian Bank was actually negative. And it was only in the fourth quarter of last fiscal year that we generated positive earnings growth that was 1%. So that's why the 5% growth that you mentioned in Q1 has to be seen in that context. And going from 1% to 5% sequentially and going from negative to 5% is a visible jump. More importantly, if you look even more deeply into the number, that 5%, if you strip out the onetime private equity gains we had a year ago, that earnings growth in Q1 is not 5%, it's actually on an underlying basis, 8%, closer to the double-digit target we set ourselves. So that's important to understand.

And then if I look at the building blocks of the growth, revenue overall was -- growth was, I think, flat or maybe a drag...

Yes.

But the fee income growth was 8%, something like that. So different stories margin versus fees. And that was encouraging because at the 2023 Investor Day, there was a lot of emphasis put on fee growth. We didn't see much of it for a while, and this is the first -- maybe the first, but a noticeable blip, a positive blip. What's behind that? What would make me believe it's going to continue?

Sure. Clearly, the first quarter, we saw a big jump in fee income, but it didn't just happen. I mean it's a deliberate outcome of investments made over the last 18 months across a number of fronts, and I'll give you a bit of color here. I think the first most important investment we've made is actually building up our investment specialists in the branch network. We added 240 since Investor Day. That's a 40% increase in the sheer number of advisers out in the network dealing with customers. That has driven in the first quarter, $1.2 billion in additional mutual fund sales net. That's double a year ago and actually places us third amongst our peers in long-term investment sales versus sixth a year ago. So going from sixth to third.

Second, we've invested heavily also in our card business, a new modern card system, helping us engineer the shift to premium clients in our card business. We've had new product introductions, working the whole value chain, and we're starting to see a lift again in card fees. Third area also is insurance where we're investing, and you'll start to see that slowly climb.

And then the fourth key area, I think, which should not be underestimated is our relationship with Wealth, which is very strong. In the first quarter, again, we referred $5.4 billion across our retail, small business and commercial clients to Wealth in which we get compensated. That's a 34% increase from a year ago. So again, sales power, cards, insurance, wealth combined collectively are going to continue to help us drive double-digit fee growth over the coming periods. I'm pretty confident of that.

Fees in general, how do you think about them longer term? And I'm not -- not a BNS Scotia specific question because we have VOS fee that's going to make it easier for fintechs to enter the marketplace and their, I guess, MO is to go after fee-rich environments. So what do you think about your fee structures in the longer term given that dynamic?

Where I see from my experience also in Europe, where we saw fees get attacked primarily initially by fintechs and some of the other players was on the daily banking fees that we saw, but less on the card fees, mutual funds, investment side of the pieces where we're actually growing our fee business. So yes, is there a threat again of fees being challenged by some of the new players who offer things for free. Yes, of course. But in the parts of our business where we are growing, I think we're pretty much protected to a large extent given the makeup of the fees that we're generating.

Okay. Going back to the building block thing, revenue, we had good fee growth, but expenses were flat year-over-year, and that also helped -- that helped your bottom line. What's a more normal expectation that doesn't seem like in an environment where you continually have to invest?

Right. Clearly, flat growth is not a sustainable nor a desirable outcome for the business, of course. We expect low single-digit expense growth on a sustainable basis. But let's not forget, in the fourth quarter, we took a charge where we really reduced substantially the number of head office staff and obviously improved spans and layers and reduced a lot of the clutter in the head office, to be honest. That showed up in Q1.

Part of the savings from that charge, we've redeployed into more salespeople, digital and technology, which over time, I would call this quality spend will help you drive more revenues and productivity down the road. So I'm pretty confident not only that we can sustain this cost discipline, operating leverage in the first quarter was the highest in 14 quarters. And we're confident we're going to drive positive operating leverage through the year as well. So all in all, good. But again, we have to continue to invest, but again, invest in productive ways.

Okay. Switching gears, pun intended for the -- I want to talk about auto lending. The Scotia is one of the biggest in the country, has been for years. But every now and then, we have a blip on the screen with someone in the industry having some higher losses, and we have a blip on the screen now or had one recently. What's your reaction to that? And the whole concept, are they play in a different sandbox, you're in the same park. What's -- why might the outcomes be different for Scotia? And what are you seeing in the book, I guess...

No, it's okay. Good question. So our auto business differentiates itself in several ways. And I think currently, PCLs are elevated across the industry and across our peer group. But I think what's different for Scotia's auto business is our business model is underpinned by our strong OEM relationships. We have the greatest depth of OEM relationships in Canada. That drives new vehicle sales of a higher quality, right, new prime, near-prime vehicle sales. That's different from some of our competitors.

I think the second differentiator is we stay with automotive assets. Some of our smaller competitors have gone into more recreational vehicles, ATVs, which we don't do, okay? We do automotive and particularly prime, and that brings us to the third point of differentiation. We have not chosen to go down the credit curve like some going to subprime. We stay at the prime, near prime level, and you start to see that play out when you start to look at the results around. So I think those are the 3 real differences in our auto business.

So that's them problem, not a you problem.

Yes.

What about the terms of the loans? I know every now and then, we discussed that over the past terms -- auto loan terms have gone 7, 8 years kind of thing?

Yes. What we see -- I haven't seen that being extended. Actually, the effective terms are even maybe a little less, but we haven't seen the terms being extended at least in our business.

All right. We talked about deposits earlier in -- well, risk-adjusted margin mix, you talked about deposits. And the competitive dynamic could always be a curveball there. Are you seeing that -- well, anecdotally, I hear on the commercial side, it's heating up. How big of a challenge is that going to be potentially?

Right. It is competitive, no doubt about it, especially when the pool of deposits is actually shrinking out there. So it is competitive. That said, we've managed to grow our deposit NIM again in the first quarter, and that's the third quarter in a row that we've managed. I think more importantly, we're actively managing our deposit business from a portfolio basis, trying to optimize margin and volume, but also more importantly, at the client level, where you have to make tactical short-term actions at a client level, depending on the primacy of the client, the sensitivity of the clients. So what we call is a lot of data to actually optimize the value at that level. So between the two, we're -- despite the competition, we're actually improving the margin, improving the mix, but it's a daily ground game, no joke. It's competitive out there.

So in -- I don't know if you can give an actual real-world example or illustration. What would Scotia do today versus what -- or not do today versus what it would have done a few years ago? Because you did touch upon the primacy and when we're defending the margin, you're willing to let market share go away. Is that basically it?

I think it's a very important question. And I think the fundamental shift has been less worried about headline deposit growth and more about the qualitative stickiness of the deposits we do gather. And I think that's been the shift. Our deposits overall are down 10% year-on-year. But more importantly, the most valuable deposits, checking day-to-day are up 5%, and you see that accretive to the ROE and accretive to NIM. But you've got to also manage both, but you have to have one foot in front of the other in terms of driving more value, more stickiness. That's the difference from the past, I would say.

And I guess, better partnership with the wealth business...

Of course, of course. And remember...

I'll just add a bit more to that. You mentioned the 90% stays with the bank. What's the split, I guess?

Yes. So a big chunk, again, $5.4 billion in funds and deposits were referred over to wealth. We have to earn through that in the Canadian Bank, right? And so the numbers you're seeing is post that. But the more important thing about the shift is the key fundament for us is getting the right client in front of the right adviser, right? And so that's why this partnership with wealth is so important because if you don't have the right adviser in front of the client, over time, that client won't be served and will leave the bank and you lose everything. So this idea of referrals is to ensure we keep the client in the bank and serve them and actually increase the share of their wallet. That's why these referrals as they're growing are so important to us as an enterprise.

Tangerine, is there anything interesting to update there? I know it kind of...

Quiet...

Comes and goes as far as the topic of discussion. I'm going with it today.

Yes. No, good for you. As you know, in my previous life, I was responsible for probably 11 Tangerines at ING. And we are doing a lot of things under the radar at the moment to rebuild what is, I think, an incredible asset for us, and not a small asset. There's over $50 billion, almost $50 billion in deposits there. But what we need to do is revamp this business for the modern day.

And what does that mean? We're investing and it will be unveiled in due course, a new technology, AI-enabled, new value propositions across wealth, small business and generally to get more growth out of it as a full bank, not as a deposit gathering vehicle for the Red Bank, but it's something that can stand alone and compete with the best digital banks in the world. But this is now in process. And in subsequent quarters, you'll hear more and more about how Tangerine now will come and relaunch "Tangerine 2.0, let's call it.

Okay. I don't want to end on a credit question. I'll ask it now because I ended on a downer a couple of times ago, I don't want to do that. But let's do the credit thing now. Your bank was talking about unsecured credit losses increasing over the last little while. And let's -- which product line, credit cards, the auto book seems to be -- they're not secured, but the auto book seems to be going well. But the credit card is not that big.

No...

At Scotia. So why they need to flag it?

Yes. I think we saw in the previous quarters, the unsecured book, I talked credit cards and you locked, unsecured lines of credit, PCLs growing. So since it started servicing, what have we done? We've done like I heard the previous speaker talk about, obviously, you start looking at the book more deeply and you start tightening the underwriting upstream, right? And we saw that in some of the higher-risk cohorts that we identified. No need to go into details.

But more importantly is on the collection side. I also heard it from the previous speaker that what we've also done is invest in collections in a different way. Of course, we've added collectors like everyone would expect in a high-stress environment, but more is digital outreach and self-serve mechanisms where clients, you can get much more contact with them earlier.

Because I think the game in unsecured is getting to them earlier. We've seen the impacts of both the underwriting tightening and the collections, I would say, focus where delinquencies, 30-plus, 90-plus entry rates going into delinquency, roll rates, vintages slowly starting to improve in unsecured. Okay? But it's a constant effort. And it's still stressed out there. So it just means you have to do things faster earlier than you otherwise would. And we're seeing the improvement of that. And again, over time, the RAM story will start to materialize as those PCLs gradually come down, particularly in the unsecured business.

So acting early, we're looking at the prospect of more insolvencies and higher rates. We're back on the table. Like is that spurring any at the moment...

Yes. I mean, again, I can't predict now with the latest geopolitics what will happen. I think the only thing that we can manage, and we say it often is what we can control, what do we control, we control actually strengthening and anticipating stress actually continuing and getting ahead of it, both on the underwriting side, but also on the collection side. But it's important to note, too, that in the past quarters, we've actually engineered quite a significant shift in the quality of our unsecured book. Premium clients or premium card products now constitute 40% of new card acquisition, 40%. Premium balances in our unsecured book have grown 10% year-on-year. So there is a qualitative improvement actually in the card balances that we have today. And every quarter, we expect this to continue until we get a much bigger proportion of premium clients in that base.

That's in credit cards or...

Yes.

So 40% are premium...

Of new acquisition is now coming in our premium card products.

Oh, product, not customer...

But obviously, a premium product is linked to a premium customer...

Yes, yes, okay.

Okay.

Wrap up on commercial banking then. And that's one that's been a bit of an evolution over the past couple of years. Can you maybe give us a time line and from where you started to where we are now and what your outlook is for growth there because there's been a deliberate strategy of maybe exiting some relationships. And are we done that? And from here on out, where do we go?

So commercial is a very important business for us, of course. We've actually now at the end of what I call the margin enhancement phase of commercial is coming to the end. Last year, pretax, pre-provision profit in commercial through this mechanism of, we call it value over volume, we call it margin enhancement, 25% up year-on-year last year, but now it's time to grow.

And what does that mean? Our pipeline is getting bigger. It's starting to mature. We have put a lot of effort in increasing sales capacity over the last 12 months in our mid-market subsegment. The paydowns we saw in commercial real estate have come almost to an end, the paydowns. Now it's starting to build. So through all this, more RMs, pipeline maturing. We've actually started to see growth in commercial on a spot basis month-on-month and quarter-on-quarter, we'll see it.

So now it's really about continuing to build through that pipeline growth and start to come in line with our peers from a market growth perspective. Something we don't talk nearly enough about, though, in Scotia is the small business segment, which also shows up in business banking. That is growing close to double digit as we've launched new value propositions in health care, professional services, accountants, where we're getting double-digit growth at good margin, and we expect this to continue also throughout the year and form a bigger part of what we call business banking lending. Again, part of the mix shift I talked about earlier. So all in all, feeling pretty good about commercial. And we'll see that more in the second half of the year, this growth in the commercial balances.

All right. Well, wrapped up another good discussion here, Aris. Enjoy the rest of your day and enjoy the hockey game tonight.

I will. Okay.

Ladies and gentlemen, this conference is being recorded.

Good morning, and welcome to Scotiabank's Q1 2026 Results Presentation. My name is Meny Grauman and I'm Head of Investor Relations. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Shannon McGinnis, our Chief Risk Officer. Following our comments, we'll be glad to take your questions.

Also present to take questions are the following Scotiabank executives: Aris Bogdaneris from Canadian Banking; Jacqui 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 will refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. All the remarks today will be on an adjusted basis.

With that, I will now turn the call over to Scott.

Thank you, Meny, and good morning, everyone. Building off a year of strong and consistent financial performance in 2025, we continued our momentum in Q1 as we executed on our strategic priorities despite what remains a challenging operating environment. This quarter, we delivered adjusted earnings of $2.7 billion or $2.05 per share. Earnings per share was up 16% year-over-year as strong revenue growth aided by constructive markets and good expense control offset the expected increase in our impaired PCL ratio that Shannon will discuss shortly.

Our CET1 ratio was 13.3% even after repurchasing 4.9 million shares in the first quarter under our current NCIB. Our current -- our capital deployment priorities remain investing in organic growth opportunities, followed by share buybacks. Return on equity was 13%, up 120 basis points year-over-year, demonstrating our ability to deliver improved profitability over time. Our return on equity is tracking ahead of our Investor Day expectations, which gives us greater confidence in achieving our 14% plus medium-term target 1 year ahead of plan.

Going forward, we expect to see return on equity expansion across each of our business units with the largest increase coming from Canadian Banking. Our key return on equity levers will be improved business mix in Canadian Banking, risk-adjusted margin expansion across Canadian and International Banking, the ongoing rollout of our global transaction banking capabilities and fee income growth and productivity enhancements across the enterprise.

While we continue to focus on efficiency improvements, we are also making important technology investments that will help us redefine how Scotiabank serves clients, how our teams work and how we create long-term value, allowing us to compete and win in a rapidly changing landscape. AI is an important and growing part of our total technology spending. The investments we are making in AI include both technology and talent. And recently, we have made several strategic hires from other leading global banks. We are scaling AI to boost efficiency across the bank, including through Ask AI, a tool which allows employees to get instant access to policy and product guidance. In Q1 alone, we processed over 450,000 queries across the client experience center, the branch network and the client services and solution help desk, which represents over 60% of the queries in 2025. And in Tangerine, we recently completed an AML AI pilot that was supported by an external partner, which demonstrated positive results with a 37% reduction in existing alert volumes.

We are now leveraging our internal AML AI subject matter expertise to design and implement a robust solution with improved precision and risk detection while minimizing false positives at a lower cost with faster time to market and no vendor dependency. We will continue to take a considered approach to our spending on AI to ensure that our investments are designed for long-term growth and sustainability.

Turning to our operating segments. Fiscal 2026 stands as a pivotal year for our Canadian Banking unit, where we expect earnings to grow by double digits. Consistent with our outlook, this segment had a strong start to the year, driven by further sequential margin expansion, strong fee and commission growth of 8% year-over-year and positive operating leverage of 2.8%. Return on equity came in at 18.1%, up 140 basis points versus the same quarter last year. This quarter, we saw demand deposits grow by 5% year-over-year, while our retail mutual fund net sales doubled versus the same quarter last year and retail referrals to wealth were $2.4 billion, up 19% year-over-year.

Term deposit balances declined given the low rate environment, but we've been able to keep over 90% of term maturities within the bank. These maturities are either moving to demand deposits, retail mutual funds or our wealth business through active referral from the Canadian Bank. Our Mortgage+ program continues to drive over 90% of all mortgage originations. Through this bundled offering, encompassing both lending products and deposits, we are winning new and deeper client relationships and unlocking significant value for our retail banking franchise. Last month, we were delighted to announce that Shell Canada has joined the Scene+ loyalty network as our new fuel partner. This will unlock new ways for members to save and earn rewards on everyday essentials like fuel, groceries, entertainment, banking and travel, creating more opportunities for Canadians to put rewards to work in places they shop every day.

In Global Wealth Management, we are delivering strong underlying performance. Net sales for the quarter came in at $1.8 billion, marking our sixth consecutive quarter of positive net flows and return on equity came in at 17.9%, up 180 basis points year-over-year and up 300 basis points since Investor Day.

In Canadian Wealth Management, we continue to see momentum in our private bank offering with strong year-over-year loan and deposit growth. We also continue to add advisors to our full-service ScotiaMcLeod brokerage unit, where we had another quarter of strong net sales.

In our Global Asset Management business, we continue to see positive net sales, including ongoing strength in our branch channel. This quarter, we ranked third amongst our peers in long-term retail mutual fund sales, up from sixth in the same quarter last year, highlighting the opportunities we have to deepen penetration within our own network.

And in our International Wealth business, earnings are up an impressive 18% year-over-year with 45% growth in Mexico, driven by higher mutual fund and brokerage fee revenue. Performance in our International Banking segment continues to be driven by solid execution, including strong expense management. Earnings were up 10% year-over-year and return on equity came in at 16%, in line with our medium-term target. We continue working towards building deeper and more profitable client relationships across the countries that we operate in.

In retail banking, non-mortgage growth continues to outpace mortgage growth. And in non-retail, we expect earnings growth to accelerate as the year goes on and the region's economies get stronger.

Finally, Global Banking and Markets delivered another strong quarter as we continue to benefit from constructive markets, but also from the productive investments we have made across the business, including our new U.S. transaction banking platform. This quarter, we also saw significant margin expansion, which is being driven by more disciplined pricing on both sides of the balance sheet. Our first quarter trading results were broad-based, but we saw particular strength in equities, including equity derivatives and another strong quarter from our peer-leading prime services business. Return on equity came in above 14% for the second quarter in a row. The U.S. continues to comprise about half of segment earnings, and we expect this share to increase over time as we continue to invest in our capabilities in that critical market. Our objective in the U.S. is to drive sustainable growth while reducing volatility and focusing on those businesses where we have the right to win.

Finally, we were pleased to confirm our partnership with the Defence, Security and Resilience Bank. This is yet another way that we are furthering our commitment to providing the capital, expertise and strategic advice to strengthen Canada's most critical sectors.

In closing, I am pleased that the earnings momentum that we built in fiscal 2025 has extended into the first quarter of 2026. Our results give me increased confidence in our ability to deliver on the full year outlook we provided you last quarter.

I will now turn it to Raj for a more detailed financial review.

Thank you, Scott, and good morning, everyone. My comments will be on an adjusted basis that excludes the loss on the sale of Colombia and Central America operations and the usual amortization of acquisition-related intangibles. Starting on Slide 8 for a review of the first quarter results. The bank reported quarterly earnings of $2.7 billion and diluted earnings per share of $2.05. Return on equity was 13%, up 120 basis points year-over-year or 110 basis points, excluding divestitures, driven by strong revenue growth.

My remarks that follow will address data in the last column of the slide that excludes the impact of divestitures. Revenue grew a strong 11% year-over-year. Net interest income grew 13% year-over-year as net interest margin grew 27 basis points from higher business line margins and lower funding costs. Noninterest income was up 10% year-over-year from higher wealth management and trading-related revenues and the positive impact of foreign currency translation. Expenses grew 7% year-over-year, mainly due to seasonally higher personnel costs, higher volume-driven compensation from higher revenue, and advertising and development costs to support business growth.

The technology-related spend that includes personnel costs, amortization, professional fees and direct technology costs of approximately $1.3 billion was up $38 million year-over-year. The pretax pre-provision profit grew a strong 16% year-over-year that was partly offset by PCLs of $1.1 billion. The bank generated positive operating leverage of 4.2% and the productivity ratio improved year-over-year by 200 basis points to 52%. The bank's effective tax rate increased to 25.7% from 23.8%, primarily due to lower income in lower tax jurisdictions and higher withholding taxes paid during this quarter.

Moving to Slide 9, capital. We generated capital from the Davivienda transaction of approximately 15 basis points. Internal capital generation was 7 basis points and gains from higher fair values of OCI securities contributed a further 4 basis points. Capital usage was mostly related to model and methodology updates of 16 basis points and a net 8 basis points related to share repurchases. The model and methodology changes include the impact of periodic update to our risk parameters and a clarification of capital methodology relating to certain exposures from the regulator.

The total risk-weighted asset was $474 billion, up approximately $2 billion quarter-over-quarter, excluding the benefit from foreign currency translation. The increase in Credit Risk risk-weighted assets from portfolio growth, migration and model and methodology updates was offset by RWA reduction from the closure of the Davivienda transaction. The bank remains committed to maintaining strong capital ratios.

Turning now to the business line results beginning on Slide 10. Canadian Banking reported earnings of $960 million, up 5% year-over-year. Pretax pre-provision earnings also grew 5%, reflecting good revenue growth and strong expense discipline. Loans grew 3% year-over-year with mortgages up 5%, while business and personal loans were each down a modest 1%. Deposits declined 2% year-over-year. Day-to-day savings deposits grew a strong 5% that was more than offset by a 10% decrease in personal term and a 2% decrease in nonpersonal deposits.

Turning to the P&L. Net interest income grew 3% year-over-year from loan growth and margin expansion. Net interest margin expanded 2 basis points quarter-over-quarter across retail and commercial banking from improving deposit mix, i.e., less term and more day-to-day and savings deposits. Noninterest income was up 2% year-over-year, impacted by lower private equity gains this quarter. Fee and commission income grew 8% from higher mutual fund fees, strong FX fees and higher credit card revenues. The PCL ratio was 49 basis points, mostly from impaired. The expenses were flat year-over-year, benefiting from efficiency initiatives that were reinvested in the business to support growth. The business generated strong positive operating leverage of 2.8% and the return on equity improved to 18.1%.

Turning now to Global Wealth Management on Slide 11. The earnings of $488 million were up 18% with strong double-digit growth in both Canadian and International Wealth Management. Spot AUM was up 10% year-over-year to $436 billion, and the AUA grew 8% over the same period to over $800 billion, driven by market appreciation and higher net sales. The revenues were up 14% from higher mutual fund fees, net interest income and brokerage revenues. The expenses were up 12% year-over-year, primarily from higher volume-related expenses that resulted in positive operating leverage of 1.9%. International Wealth Management generated earnings of $64 million, up 18% year-over-year, driven by growth in Mexico. The return on equity improved almost 200 basis points compared to last year to 17.9%.

Turning to Slide 12. Global Banking and Markets delivered strong earnings of $545 million, up 5% year-over-year. Revenue increased 11% as Capital Markets revenues were up 19%, while Business Banking grew a modest 2%. Net interest income was up 25% year-over-year, primarily due to higher margin and robust capital markets activities. The noninterest income was up 7% year-over-year due to higher trading-related revenues from fixed income and equities and higher underwriting and advisory fees. The expenses were up 14% year-over-year, mainly due to higher performance and share-based compensation and technology costs. The business generated a strong return on equity of 14.3% this quarter.

Moving to Slide 13 for a review of International Banking. My comments that follow are on a constant dollar basis and excluding the impact of divested operations. The segment delivered earnings of $717 million. That was up a strong 8% year-over-year and 11% quarter-over-quarter. Revenue was up 4% year-over-year with net interest income up 5% from lower funding costs, mainly in Mexico, while noninterest income was up 2%. The net interest margin remained stable at 454 basis points and expanded by 27 basis points year-over-year, mainly from lower funding costs due to decline in Central Bank rates.

Deposits were up 4% year-over-year, while loans were down 1% year-over-year as non-retail loans declined $5 billion or 6%, while retail loans grew $3 billion or 5%. The provision for credit losses was $497 million and the PCL ratio was 131 basis points. The business generated strong operating leverage as expenses were up a modest 2% year-over-year from disciplined expense management. The effective tax rate increased to 23.5% from 21.8% in the prior quarter due to lower inflationary adjustments in Chile. The GBM business in International Banking generated strong earnings of $354 million.

Turning to Slide 14. The Other segment reported an adjusted net loss of $41 million compared to $34 million in the prior quarter.

I'll now turn the call over to Shannon to discuss risk.

Thank you, Raj, and good morning, everyone. This quarter, impaired loan loss provisions remained elevated, in line with our expectations as we continue to operate in an environment of heightened macroeconomic uncertainty. Against this backdrop, all bank PCLs were approximately $1.2 billion. Performing PCLs were 3 basis points and impaired PCLs were 58 basis points, with 2 basis points of impaired PCLs related to the Central America and Colombia divestiture. Impaired PCLs increased quarter-over-quarter, driven primarily by elevated provisions in Canadian Banking Retail and GBM, offset by International Banking that was down $74 million, driven by the impact of divestitures. My remarks that follow will exclude the impact of divestitures. We increased allowances for credit losses by over $200 million quarter-over-quarter to approximately $7.2 billion. Performing allowances increased by $81 million, mainly due to credit migration and impaired allowances increased by $133 million, mainly in Canadian Retail and GBM. The bank's ACL ratio remained strong at 94 basis points, an increase of 2 basis points quarter-over-quarter.

Turning to Slide 17. Gross impaired loans increased approximately $425 million quarter-over-quarter, excluding the impact of FX. This was driven by an increase of $200 million primarily from 3 accounts in GBM. The remaining relates to formations across products in Canadian retail, mostly in mortgages, where we have strong collateral coverage and do not expect to incur material losses. The GIL ratio increased 6 basis points to 95 basis points.

Turning to Slide 18. All bank PCLs were approximately $1.2 billion this quarter. Excluding about $40 million recorded in the 1 month for the divested operations, PCLs were approximately $1.1 billion or 60 basis points. Impaired PCLs were 56 basis points, up 6 basis points quarter-over-quarter. Half of the increase was driven by 3 accounts in GBM with the balance driven by Canadian Retail.

Looking at each business. In Canadian Banking, PCLs were $576 million or 49 basis points, up $81 million quarter-over-quarter. In retail, PCLs were $436 million, up $82 million quarter-over-quarter. Performing PCLs were $12 million, driven by deteriorating credit quality in unsecured lines and credit cards, partially offset by improving FLIs. Impaired PCLs were $424 million, up $91 million quarter-over-quarter, driven by increased net write-offs in unsecured lending, reflecting current unemployment trends. In our Canadian commercial portfolio, PCLs were $140 million, in line with Q4.

Moving to International Banking. The PCL ratio was 131 basis points, down 1 basis point quarter-over-quarter. In International Retail, total PCLs were 218 basis points, down 3 basis points quarter-over-quarter, excluding FX. Performing retail PCLs were $38 million, driven by portfolio growth and continued credit quality deterioration, primarily in Chile consumer finance. Impaired PCLs were $375 million, down $11 million quarter-over-quarter, excluding FX, driven by continued weakness in Chile consumer finance, partially offset by improved performance in Peru and the Caribbean. In GBM, impaired PCLs were up $54 million this quarter relating to 3 accounts in the agriculture and wholesale and retail industries.

While uncertainty continues across our markets, overall credit performance has remained in line with our expectations. To put this quarter's results in context, GBM contributed 3 basis points to the all bank impaired PCLs from 3 files. The portfolio trends remain stable and concentrated in investment-grade exposures underwritten to strong standards.

Looking at each of our portfolios in Canadian Retail. While mortgage 90-plus day delinquency has increased quarter-over-quarter, this continues to be driven by the same trends we have been discussing, namely COVID era mortgages concentrated in Ontario and the GTA. However, impaired PCLs remain low despite elevated GILs, given the strong credit quality of the book and low average LTVs of approximately 55% in the uninsured portfolio.

In auto, we continue to work through the COVID originated portfolio, which was driven by elevated exposure to used vehicles in our prime segment. We continue to monitor the portfolio closely with a strong focus on collections effectiveness and remain comfortable with how the portfolio is evolving.

Turning to unsecured. We are seeing stress among single product, younger client cohorts. The portfolio continues to perform in line with expectations given how unemployment has trended for these segments. That said, despite some weakness, early-stage delinquency indicators in unsecured lending are showing signs of improvement as 30-plus day delinquency in both credit cards and UAC have shown sequential improvement. We also expect performance in unsecured will be further supported by ongoing collection initiatives with benefits expected towards the latter part of the year.

From a macro perspective, the unemployment rate has improved in recent months and is expected to continue to trend down in coming quarters, but will take some time to impact portfolio behavior. In International Banking, while impaired PCLs remain elevated, the outlook is stable across our key markets. In Mexico, ongoing trade negotiations continue to weigh on sentiment. Macroeconomic indicators present a mixed outlook with improved GDP estimates offset by softer employment data. Chile's outlook remains stable, supported by strong commodity prices. However, sustained elevated unemployment and cumulative inflation effects continue to drive softness in our consumer finance portfolio. Similarly, in Peru, the GDP outlook remains stable, supported by the rise in commodity prices. However, uncertainty is likely to persist until a new administration is placed.

Looking ahead, we expect the operating environment will continue to reflect ongoing challenges with impaired PCLs remaining elevated in the near term before gradually trending lower as the economic outlook improves as the year progresses. We remain comfortable with the adequacy of our allowances and the underlying quality of our portfolio.

With that, I will turn it back to Meny for Q&A.

Thanks, Shannon. Operator, we're ready for our first question.

[Operator Instructions] Your first question comes from the line of Ebrahim Poonawala with Bank of America.

I guess maybe just first, if we could spend some time on credit, looking at the impaired PCLs for the quarter, somewhat higher than we expected. Just maybe talk through when we think about the -- I think the guidance for impaired PCLs was high 40s to mid-50s. One, just as we think about the full year, does that still hold? Anything that's changed relative to sort of your view previously? And then maybe more fundamentally, are you seeing credit worsen or get better or be the same relative to whatever you expected a few months ago, both on the consumer and the commercial side?

Thanks for the question. I think it might be helpful if I anchor back to the outlook that we provided in Q4 and the assumptions that informed that guidance. At the time, we were operating in a highly uncertain macro environment, which is why we communicated that impaired PCLs would remain elevated in the near term, followed by gradual improvement, and that framing continues to hold today. In terms of outlook, I do think it is important to put this quarter's results in context. For non-retail, we had signaled results tend to be lumpy in the space. And this quarter, GBM contributed 3 basis points to our all bank impaired PCLs.

As I mentioned in my remarks, the impact was from 3 files. And overall, the portfolio trends remain stable, and we are not seeing any systemic or trade-related issues. As I look to Canadian Banking, what I would point to there is that early-stage delinquency indicators in unsecured are beginning to show some improvement despite what is still a challenging macro backdrop. I also mentioned collection initiatives. We are expecting to see those benefits in the latter part of the year. And then importantly, as we think about unemployment, it has improved, and we are expecting that to trend down in the coming quarters. But we know that this is going to take a little time to work through the portfolio.

And then as I turn to International Banking, overall performance this quarter is consistent with our expectations. And when you take into account developments across both our retail and nonretail portfolios, the impaired outlook across the region is expected to remain elevated but stable. That reflects some of the uncertainty in the market. So when I take all of those components together, so the gradual improvement that we're seeing in unsecured, supported by what we are expecting from a macro, that's really driving our support of our guidance.

So do you think these impaired PCLs could trend closer to 50 basis points or maybe even dip below 50 basis points as we think about the back half of the year, Shannon?

Yes. I think, Ebrahim, I just would go back to the guidance. Like we do expect it to be elevated in the first half and then coming down in the latter half. In terms of how far that comes down in the latter half, some of that is going to be impacted by what happens in the macro.

Got it. And I guess just one maybe for Scott or Raj, for you on Slide 5 on the ROE walk. I guess you all have made pretty significant progress over the last year or two in terms of improving the return profile. As we think about where could this go wrong? Like are you overearning in capital markets? Or could there be pressure on the net interest margin as we look out a year from now? Just maybe talk to us in terms of the downside risks to getting to this 14% plus and hopefully higher from there as we think about the next year or two?

Thanks, Ebrahim. It's Raj. So I'll try to address that question. Absolutely, the waterfall does have a lot of drivers as we have listed out on the right-hand side of it and risk-adjusted margin is a component of that. We are quite confident in that. The margin expansion that we saw this quarter across all the business lines and the bank as a whole, we expect it to continue throughout 2026 and beyond into 2027. The drivers for '26 and '27 will be different. '26 is going to be a lot about deposit margins. We're very focused on it, as you know, and you've seen the results this quarter. We think that will continue as we are thoughtful about how we source deposits and how we deploy them and how the business mix shift is going to happen, particularly in the Canadian banking space. So that's going to help with the margins.

I don't have -- Shannon talked about 2026, the PCLs and so on. '27, we think will be definitely better than what we are experiencing in '26 if the latter half plays out to our expectation. So both are contributors. The risk to the downside will always be macro, Ebrahim. It's a little hard to predict 7 quarters ahead with that level of certainty. But what we can tell you is going from 13% to 14% is not a big stretch for this company because we are ahead of 13% to date because of all the efforts we've made, certainly helped by markets, like you mentioned, GBM or wealth. We think GBM will be building a franchise, which is going to be sustainably profitable. Would it be 14% next quarter and beyond? It could dip down a little bit. That's fine with us, but it's less than 20% of the bank. We know wealth margins -- sorry, wealth return on equity will continue to improve, no doubt. IB is already at 16% plus, and they're working continuously to see how we can be efficient. And the Canadian bank, our target is to get closer to 24% by 2028. We're at 18% with 140 basis points improvement already.

We think that progress you will see quarter after quarter after quarter. And by the time we get to 2027, this should be in a good spot. So lots of confidence in saying we will get to 14% or beyond. What can derail other than macroeconomic, we don't see much at this time, and we're going to be very thoughtful about how we deploy capital, both from a credit perspective and how we'll continue to support it with the buyback program that you've seen us execute. Put all this together, greater confidence than what we might had a year back and certainly helped by the macro factors that has helped us along this way, and we think we are well prepared to deal with anything that comes across in the future.

Your next question comes from the line of John Aiken with Jefferies.

Thanks for the disclosures on the international ex, the divested operations. Francisco, was hoping to get a couple of comments from you. With the numbers that we saw in the first quarter, is this a good starting point for the international operations going forward? And what is your outlook, particularly for net interest margins and efficiency moving forward?

Well, thanks for the question. I apologize for my voice. I'm in the tail of a nasty cold. So I'll do my best to address the question. Number one, I think the quarter was a very strong quarter. It showed very strong resiliency across a complex footprint. When you look at the results on the revenue growth perspective and expense perspective show, number one, consistency of performance, alignment to our outlook and certainly, resiliency. Expenses are consistently performing better than expected. When you look at revenue growth in the key businesses, all performing better than expected in Q1, and particularly retail, which has been probably our most biggest effort in terms of getting back to where we believe that business should be performing. Q1 was a very strong quarter across the board.

When you look at loan growth at 5%, third consecutive quarter, of non-mortgage growing at actually twice the pace of mortgage where you see expenses almost flat versus the prior quarter in spite of the revenue growth. And overall, PCL improvement on the back of significant effort on collection effectiveness across all markets. And when you strip out Cencosud in Chile, which is, as you know, a noncore business, we are encouraged with the performance of our PCLs, particularly related to the new vintages that are coming through the new strategy fully segmented across all markets. So when I look at Q1, although traditionally our strongest quarter in the year, the underlying performance, number one, is sustainable. But when I look at the rest of the year and where we need to be by 2028, there's significant upside to be had in retail as we pursue top line growth at a faster pace as we pivot to growth.

In commercial, we're beginning to see growth for the first time in a number of quarters. That will pick up pace in the rest of the year. And GBM will continue to show performance very strong on the banking side as we saw in this quarter, but also on the capital markets side, where we have now deployed GBM in the Caribbean, whereas before we didn't have it. So I'm very optimistic about what's coming in the rest of the year, but we need to be mindful that we operate in emerging markets. Those emerging markets are not growing at full potential. Mexico, which is our core market. As you know, it accounts for 60% of our growth is going to be growing around 0.5% GDP this year. And the rest of the footprint is still going through an election cycle. So overall, the environment is one that continues to present the uncertainty, but we are very well positioned to capture our fair market share and continue to improve performance. I'm particularly proud of the ROE at 16%, which we committed to be there by 2028. Our ROA now at 2.25%. Again, all sustainable indicators on the back of the many decisions we've done over the last 9 quarters.

So overall, I would say the rest of the year is one where we continue to try to drive that pivot to growth and consolidated top line growth that will drive the consistent performance you saw in Q1.

Francisco, just as a follow-on, you mentioned Mexico, very strong performance, but driven by net margin expansion. How sustainable are the levels that you've been able to achieve at this stage?

Listen, we've done a significant amount of changes in the team in Mexico. I think we have now a very, very strong team that complements each other well, that understand the market extraordinarily well, very experienced leaders in each of the business segments. And that is resulting in shifts in strategy decisions, how we deploy the global strategy more effectively and how we capture our fair share. When you look at performance in Q1 on the back of all these changes, it's beginning to show the right trends across all business segments. And we believe that the rest of the year will be very much in line with that. When you look at the performance of our portfolio in new vintages, it's showing the right trends. Collections is showing a significant improvement over prior quarters. So I'm very confident that what we have in Mexico is a winning franchise with a winning team.

Your next question comes from the line of Sohrab Movahedi with BMO.

Okay. Raj, I just wanted to clarify, going back to an earlier question on that Slide 5, with this 14% plus in 2027. Can you just talk a little bit about what sort of capital ratios you expect to be running at? And I know part of the waterfall does include buybacks. I was a little bit surprised that I didn't see you try and file for a renewal of the NCIB. So if you could just talk a little bit about the pace of buyback activity as well.

Sure. Happy to do that, Sohrab. Yes, I did not mention capital ratio. Capital ratio in this waterfall that we have talked about is going to be well above 13%. That's the assumption we have made. So call it in line with this quarter, 13.3%. We're not looking for a huge benefit coming from net capital ratio being lower. On your buyback question, the 15 to 20 basis points that we talk about here primarily reflects the bulk of the buybacks that we have already done, which is about 15.7 million shares as of this quarter. We will renew the NCIB is our expectation, but the NCIB is not due till May, Sohrab, because it goes from May to May for us. And you should expect us to continue to be active in the buyback program, both in the remainder of '26 and perhaps into 2027 as well. But the benefits that you see here are largely relating to the buybacks that have already happened. So there should be some potential upside depending on how we execute under the new program as well.

Okay. That's very helpful. And if I could just kind of get clarification on the 3 basis points of contribution from those 3, I think, you said files in GBM. When would they have been originated? What sort of -- and would they have been in support of which business? Specifically, would it have been part of your global corporate kind of finance type -- financing solutions, private credit stuff? Or -- can you just -- can you give us a little bit more about which region, what business and why it won't repeat?

Yes. So maybe a few comments. And first, thanks for the question. So in terms of these files and their location within the portfolio, this is in our corporate banking portfolio and split between Canada and the U.S., so two-in-one, one in the other. And then to your question on originations, I'd have to confirm, but not new originations. These are files that we've had for several years. So I don't know if that helps clarify that question. But maybe, again, just to your point about how we don't think this will happen again. I do think it's important to reemphasize that this can be lumpy. When we look at non-retail provisions, they certainly can be lumpy. But when I take a step back and look at the portfolio, we continue to be anchored in investment grade. We're very comfortable with our underwriting standards. And so that is something that's very important as we look ahead and we look in terms of expectations. And then just back to your question again, just to confirm that this is not in the private credit space.

Your next question comes from the line of Doug Young with Desjardins Capital Markets.

Just a 2-part and they're probably related. But Shannon, when I look at International Banking, you did, I think it was a $53 million performing loan build. Just trying to understand what drove that? Was that migration? And then just tying that into Chile, when I look at the Chile results, it looked like PCLs were up materially. I think you did call out consumer finance was one of the drivers. Just hoping to get a little bit more color.

Yes, absolutely. So to your question on Chile, that is primarily in our Chile Cencosud business or Chile Consumer Finance, which I know we've chatted about on prior calls. And then when we look at the performing build, it is a mix of migration within the portfolio, which we would expect, including some growth as well.

Let me add something here. Just a reminder, Cencosud is noncore and it's a business that is not part of our future. It's the last piece of our footprint that we are working to get our way out of it, and we are optimistic in that process. But when you look at the bank ex Cencosud, we are very much in line with our historical performance and very much in line with competitors. The overall outlook in Chile is one that's improving on the back of the last election. So we are overall optimistic in Chile.

And then just maybe a follow-up, Shannon, what is the outlook for the Cencosud? Like I know it's not core, but it does still go through your results? Or should we expect further deterioration? And then Francisco, like I know this isn't core. Can you maybe give an update in terms of the plans of divesting or getting out of that partnership?

Yes. So I'll start. So in terms of our expectations for IB and as per my prepared remarks, we are expecting them to be elevated but stable. And that is really recognizing as you go throughout the portfolio when you look at the macro and you look at the mix, that is our expectations as we go forward. As it relates to Chile consumer finance and as Francisco mentioned, this is a higher margin contributor to our portfolio, but it's certainly impacted by the macroeconomic environment in Chile. And so again, when we look out at the balance of the year, we are expected to see that elevation continue throughout.

Yes, good point, Shannon. Thank you. Two things. Back in October of last year, there was a change in regulation in Chile that basically identifies any collecting calls. So this type of segment is more prone to avoid those calls, challenging collections. We have overcome that limitation, and we're back on track. But again, we got to see performance consolidate in the coming quarters. As it relates to commenting on what we're going to do with Cencosud, we don't do that. What we can do is revert to what we've done, and we've been extraordinarily disciplined in how we manage noncore assets, and we've demonstrated with what we've done with Credit Scotia, what we've done with Colombia, Panama and Costa Rica. This is no exception. So we're very focused on delivering on our commitments.

Your next question comes from the line of Gabriel Dechaine with National Bank Financial.

I just want to stick to the credit discussion here and then on the guidance, you did guide to high 40s, mid-50s this year, and you're saying it's going to be improving in the second half of the year. And you're saying it's elevated for a while and then you list a bunch of issues in the Canadian portfolio and then the international portfolio and then the -- some of the things that are going to move in the right direction. A lot of stuff to chew on there. So let's just simplify. When you look at your glide path or trajectory for impaired PCLs over the course of the year, is it higher now than what you were thinking a quarter ago? Because maybe some of this improvement stuff might be later in the year, but that's more of a calendar year thing than a fiscal year thing. So we might be talking about 2027 before these impaired losses start to decline.

Yes. So first, Gabe, thanks for the question. So maybe, again, to go back to the outlook that we gave at the end of last year, a few things. First, we are where we expected to be, and then we had indicated elevated PCLs -- impaired PCLs in the first half of the year. And to your point, there are a lot of moving pieces here. That's just, I think, the nature of our portfolio. But as we walk through those pieces, and again, if I kind of anchor back to maybe some of the key points in my remarks, when we look at Canadian Banking, we are seeing early signs of improvement in our unsecured portfolio. So that is certainly a factor as we look forward. I talked about elevated but stable in IB. That is a factor of our outlook for the balance of this year.

And then as I think about corporate and commercial, there can be lumpiness there. But again, we're quite comfortable with those portfolios and how they're performing. So if I look back to the information or what we were looking at when we gave our guidance, it still holds today. Now as I mentioned earlier, the macro is a factor in that guidance. And so we're still operating in a fairly uncertain environment. And so depending on how the macro plays out, in terms of the timing throughout the year, that could certainly have an impact, but we're still looking at the latter part of this year.

Okay. And just to be clear, unsecured in your [indiscernible] means includes autos, right?

No, it's credit cards and ULOC.

Okay. Mexico, I know in the past, in the IB segment, whenever there's a hurricane or whatever, we start thinking about resorts exposure. Given recent events and very recent events in Mexico, like how big is your resorts exposure and tourism industry more broadly, I suppose?

This one I'll make a couple of comments on Mexico and then Francisco, maybe you add in. I mean, obviously, what's happened over the last couple of days came as a little bit of a surprise. But if you take a step back and think what President, Sheinbaum is doing, she's addressing the three areas that the U.S. has been concerned about immigration, Chinese investments and rule of law. And so now she's on the third last pillar of that. We've seen a much more stable environment this morning than we did yesterday. And in terms of our employees and our clients, everyone is safe and branches are actually open today. And so we don't see a huge impact or any impact as it relates to go forward from a financial performance perspective.

Let me add. Thank you, Scott. And again, apologies for my voice. On our strategy in Mexico, we are not actively participating in resource financing of any kind. Our exposure is related to working capital associated to merchant acquiring services and very significantly consolidated hotel operators. On the working capital side, we exited that business a long time ago, and we're very selective when we choose to do anything of this sort. And normally, it will be limited to an expansion of an existing profitable facility rather than in the greenfield project. So we're not concerned at all in specific exposures in Mexico.

Now the impact of tourism on the overall GDP of the country is significant. And as we outlined, we did not expect this year for Mexico to have significant GDP growth. We're looking at 0.5 point. So it is not short-term good news, but I think it is a necessary set of actions that the government is implementing for the long-term benefit of the country. So want to go through some short-term volatility, but very much in line with what we want to see the country do in the long term, given our commitment to the country.

So no resort or resort operator exposure in Mexico?

No.

Your next question comes from the line of Paul Holden with CIBC.

I want to talk about the deposit margin priority you brought up. So I know you've highlighted a change in funding mix over time, reducing wholesale, increasing the proportion of low-cost retail. I guess the question I want to -- and also growing the GTB business. Just I guess I want to ask like based on public disclosure, what would you encourage us like if you had to pick 2 or 3 metrics other than the NIM to sort of follow to show the improvement you're making in funding that should result in better NIM? Like what would you encourage to track? And how do those results look in Q1?

Sure, Paul. I'll start. Thanks for the question. I think deposits is an area of focus, right? I mentioned it in the previous answer, and it's something that you've heard from us repeatedly, and you're seeing the outcomes. Like you said, NIM is an outcome of the efforts that the businesses are doing to improve the deposit profile. What do we track? We track checking accounts, savings accounts in the Canadian bank like we do in international banking. We have a slightly different definition. We call it core deposits, which is another euphemism to say these are primary customers for us who we believe will be the most profitable and deposits are a big component of that.

The second thing I would track is saying how we're growing our assets in line with our deposit growth. It's something we've been on for some time, and we are trying to improve and reduce our dependency on what we call wholesale funding. Now we have done better than what we thought at this time in our strategic plans. So that's helping because these deposits are very valuable to us apart from improving client primacy.

The third thing you would see is business mix shift that should start happening both in International Banking as well as in the Canadian Bank as it relates to the asset side of the balance sheet. How can we improve our margins? And we think about risk-adjusted margins specifically, are we deploying our capital and our funding and our liquidity with the right clients. So we focus a lot on that.

Another component always, whether it's GBM or the P&C businesses is pricing. Are we pricing for the risk that we are taking and how can we maximize the returns that we are deploying -- for the capital that we're deploying in these relationships. Lots of effort. If you spent a day with us in our office, you'll realize this is the conversations we have across the business line and across the risk functions as we talk about how can we continue to improve the risk profile of the company while continuing to improve the return profile as well. So easier to track many of these things. Now some of it will be better in one quarter compared to another quarter. That is just the nature of the business we are in. But I'd just point to the challenges that we had previously, which we're starting to improve on specifically in the Canadian Banking side, the level of savings and deposits growth attached to it at 5%. Term has been a bit of a drag, but the net of it, we're quite pleased with how disciplined we are on term deposits and how we are continuing to focus on what we believe are very valuable core deposits. That's what we track.

Raj, one of the things in the quarter, and it's not overly impactful for the enterprise, but it is impactful for GBM is just the margin that we [indiscernible] and maybe, Travis, just talk a little bit about how you're thinking about discipline as it relates to deposit pricing and then loan pricing as well and how that is contributing to margin expansion in your business?

Thanks, Scott and Raj. I mean, listen, if you step back and look at the GBM business, effectively, what we're doing is managing our asset betas and our deposit betas. And we've seen rates come down, and we've had more luck on managing our deposit betas where we've been able to drop the deposit costs faster than the drop in asset yields, even though it's mostly a floating book. It's just incredibly -- incredible relentless focus on the deposit cost name by name and then making sure that we're fighting for basis points on the loan yield side, too.

And then secondly, there's just a small component, but the SOFR moves at the end of the year is a nice impact to over Fed funds that you've seen. But overall, I think everything we do is, is really trying to focus on that total relationship, that loan and the deposit and trying to move away from loan only and try to get some deposit pricing concessions, if you will, as we look at that total relationship.

Second question related to, again, the ROE expansion team and the drivers there. One of the other key ones clearly is the efficiency ratio and again, something you've made good progress on to date. I guess the question people would ask on that one is given the tight expense control and given the evolving banking sector or evolving AI and technology investments more broadly, like how do we get comfort that you're making the right and appropriate level of investments for the future in the business at the same time as bringing down the total productivity ratio?

Yes, Paul, it's a great question. I mean one of the things that we've been really focused on is making sure we're running this business with discipline, which then allows us to take those savings and reinvest in areas of the business that are going to help us in the future. And so we look at technology as an example, where we've historically run a decentralized technology budget. Over the last 3 years, we've centralized that. We've been investing in getting our data to the cloud. We've been investing in getting our data to an optimized state so we can run AI at scale. We've been investing in getting the team in place with significant additions even in the last 2 months -- or sorry, 12 months where you've seen two prominent data and AI experts added to our field.

And we've been proving out cases like the one I referenced on the call. And so as you think about data and AI, this is definitely extremely important for the success of this bank going forward. And we're managing a cost base that has lots of opportunities to efficient -- to be more efficient to allow us then to invest in some of these areas that are extremely important. And I think about the Canadian bank, as an example, we went through this significant restructuring. We've given guidance that you're going to see positive operating leverage, but we are going to reinvest the savings to take care of our retail clients back to the deposit conversation that Raj had. And so this is a balance between making sure that the historic business is more efficient, which allows us to take the capital and the expense and invest to prepare us for the future. And so that's how we think about it as a management team.

Your next question comes from the line of Mario Mendonca with TD Securities.

Scott, a sort of broad question for you. I suppose if you want to sort of farm it off to the segments, it would make sense. But really, starting with you, looking at this bank over the last few years, you've been on this optimization, rationalization strategy for some time now. But we really haven't seen any growth emerge. Looking back, it's probably Q4 '23 since we saw any meaningful growth in loans, probably even going back a little further than that. So what's your overall impression on when Scotia can actually sort of start participating in growth again? And again, I'm not looking at anything special. I'm just saying something more in line with your peers in sort of mid-single-digit range. I'm pointing to loan growth now?

Yes. No, I've got it. So one, I do think we've been through a phase here where we've optimized and you look at the international bank is probably the perfect example of that, where we've taken out a significant amount of cost through the regional identification efforts, which have allowed us to get to the 16% ROE, and now we have this pivot to growth, which I think you'll see. But philosophically, I think loan growth is important, Mario, but it's important because it talks to additional clients and it talks to more market share. But if you think about what we've done here, we've actually grown 11% revenue without significant loan growth. And so this shift -- this philosophical shift that we're doing from volume to value is actually resulting in higher ROE, higher fee income, more capital-efficient business.

Now as the economies improve, we are going to see higher loan growth. And as I think about the Aris' business, there's the business mix opportunity of lower mortgage growth, higher growth in some of these other areas like commercial mid-market, small business, et cetera. But that will be a combination of loans and a more holistic relationship with the client that involves cash management, involves deposits, involves ancillary revenue. And so I would hate for you to walk away saying that kind of loan growth is the definition of success here. It's ROE expansion, it's fee income and loan growth will come about because of that because we'll be dealing with more primary clients. And of course, we're a bank. We've got a big balance sheet. We'll want to provide that service to our banks, but only when it's a profitable primary client relationship.

Okay. Maybe, Shannon, a quick question for you. On a couple of occasions, you referred to early signs of improvement in the unsecured portfolio. Can you be more specific? What signs are you seeing that would cause you to say that?

Thanks, Mario. Thanks for the question. So what we are seeing in both our credit card and our ULOC portfolio is improvement in the 30-plus day delinquency. And so that is sequential. We have seen a few months of that. So that's specifically what I'm pointing to there.

And do you know why that's -- what do you think that's causing that?

I think there's a few things. I mean we certainly have seen employment start to trend down. And again, that can be a bit of a lagging impact. I spoke also to collections effectiveness that is a focus for us here. And so that could also be having an impact as well.

Your next question comes from the line of Jill Shea with UBS.

I just wanted to touch on the GBM segment. Travis, you mentioned in a previous question around margin and pricing. But perhaps just drilling down on the margin. Obviously, it's been -- it was up substantially in the quarter. It's been on an upward path over the past year. Is there still more to do there in terms of the margin and funding costs? And then just tying that into durability of revenues in this segment. Obviously, we've had constructive markets, but with the margin up, can you just talk about the durability of the revenues in the segment?

And then just how to think about the net income outlook for the segment over the course of the year. I think you guys had talked about more a normalized number of $475 million to $500 million, but clearly, you outperformed that in the quarter. So just trying to think through the net income trajectory for the year and how that ties into the revenue line?

Perfect. Thanks, Jill. You gave a lot of questions in there. I'll try to unpack them. If I miss one, please let me know. But if you think about the margin, absolutely, we're quite proud of the 40 basis point plus expansion on the margin side. Again, we're not changing the risk profile of the book. You can see it in the data. Our investment grade is still predominantly investment grade. We're really attacking both sides of the balance sheet, both on the loans and the yields, as I mentioned before. We're having much more success on the deposit side, reducing our deposit costs, and you're seeing that coming through the yield.

And I would say, this is in partnership with Francisco. The stuff we're building out in GTB is quite powerful. We're building a sales force. We're building better analytics and data. We're better understanding of our profitability by client, by relationship, by product. We've also been remixing the quality of our deposits. So we've been able to grow deposits, but embedded in that is also remixing of higher quality deposits, more operating deposits, a better sales force, a better go-to-market strategy with GTB and the corporate bankers, better cross-jurisdictional approach when you think about multinational, tremendous opportunities from clients going north to south. We bank a lot of Fortune 1000 companies with operations around the globe. And we are really tied together. Francisco and I are working incredibly closely together, making sure that we're attacking every single name and every single opportunity, and it's a huge strategic push of both of our businesses. And you're seeing that play out in the numbers.

As far as margin expansion from here, I think there's still -- I think long term, there's tremendous opportunity. As we build out our operating and our payments capabilities, but there's a long sales cycle to that. There's a long ramp to that. Our clients are being informed. Our bankers are being trained. Our capabilities are improving every single day. We're investing in these capabilities jointly with Francisco and GTB and International Banking and our Canadian clientele. And I think you're going to see some output of that over the long term. But I don't think you're going to see the margin expand 40 basis points in the near term, again, until we build out these capabilities, but there is still room to grow on that.

As far as I think your next question was on the earnings run rate. Listen, we had a great quarter. It's one of our better quarters we've had in a very, very long time, if you look at the data. We feel quite confident about the -- it's a very constructive market. It's very constructive volatility. What I mean by that is when you're seeing SOFR and Fed funds and some of the volatility, we're doing quite well on that in the trading business. But when I say constructive volatility, it's also been leading to a very active DCM and ECM and investment banking business. When that volatility starts to break a little bit, those more finicky businesses that are more market dependent tend to slow down. And so we hope that the volatility remains constructive throughout the year. And we're watching it very, very closely, and we're quite happy with it. I think our guidance still remains the same. We always have a little bit more volatility going into the year where we can capitalize on it, but we'll look and expect some normalization of that and probably back towards our run rate.

And remember, in that run rate, our pretax pre-provision revenue is growing between 8% and 10%, depending on if you look on the quarterly or yearly basis. But then embedded that is significant investments into the new capabilities, new products, new services, new teams, cash management, better technology, better analytics and a better go-to-market strategy that we think will pay dividends over the long term. And we're quite disciplined in that approach, but we are trying to build more diversification so we can have that stable ROE over the long term. That's our goal.

Your next question comes from the line of Darko Mihelic with RBC Capital Markets.

I'll try and be really quick here. I just wanted -- as I stare at the credit quality statistics and some of the forward-looking indicators, including 90-day past delinquency and listening to your remarks about mortgages, it sparked a reminder of me to think about this. You mentioned that this is really like COVID era vintages. Can you remind me what it is about that vintage that's causing the issue here? And the real question is, are you in a state where perhaps you might be helping customers out with deferrals or any other sort of mechanism to prevent outright impairments?

Yes. So thanks, Darko, for the question. So in terms of that cohort or that era, I'd say recognizing what was happening at that time. So very high house prices, very low interest rates. And so when we look at that particular cohort, that is a group that we are seeing having some stress. And I would also say that, that is concentrated primarily in Ontario and the GTA, although I think it's also important to reinforce we have very low or very comfortable with the LTVs on that portfolio.

In terms of your question on supporting our clients, we are clearly supporting where we can, recognizing there are limitations to what we can do. We need to make sure that we are meeting the expectations in terms of when we can provide support. So again, that is happening through our collections activities. So we call out those two items. I don't know if that answers your question.

Is it material? How much is it saving you in terms of impairments? Like if we thought about the number of mortgages or customers that might have the loan deferrals or any other mechanism that will [indiscernible]?

No, it's not material, Darko. And again, that comes back to the very strict guidelines or requirements in terms of when you can provide those types of support to our clients. So I would not call it material.

And just one last quick question on that topic. Is it primarily a variable rate or fixed rate where you're seeing these issues?

We're actually seeing it in both, I would say.

Your next question comes from the line of Matthew Lee with Canaccord Genuity.

Sorry to go back to Francisco with your cold. But given the strength of the outline -- initiatives you've outlined, I'm a bit surprised to see such a small contribution from this segment on the waterfall on Slide 5. If you were to isolate international, take out wealth and GBM, but just international by itself, would that ROE contribution be close to 20 or 30 basis points? Or is Q1 really a high watermark just because of how much you've achieved?

Matt, how would I start? It's Raj, and then Francisco can add if there's something specific to IB. So we lumped in three segments there, as you noted. It's got GBM, it's got Wealth and it's got International Banking. And if I split the three, wealth, we are very confident. That's actually the biggest contributor, we think that will continue to grow from the 17.9%, but it's about 15% to 20% of the bank. So you put that in perspective, we think it will help us. GBM, we are actually being cautious. You just heard Travis talk about how we'd like to continue to improve the returns. Now 14.1% is a great ROE for that business. We know there might be some moderation depending on how markets behave. So that's a bit of an offset if you look at it.

International Banking being at 16% plus, they are well ahead of where we thought we'll be. Do we have greater confidence that this will be better than what we have factored into this number that we put on combining the three business lines? Absolutely. But International Banking, as you know, has got multiple countries. Francisco talked a little bit about the macro, particularly in Mexico. We want to be more confident about the Mexico GDP growth. And we think that, that could be a greater contributor. But I would say that at 16%, they're in a good spot. In a couple of years' time, they should improve, but I wouldn't put a lot of it in the numbers that we disclosed right now. So I'd probably leave it at that.

Okay. And then maybe if I just sneak one last one in here. KeyBanc, you've had it for a couple of years now. The investment has done fairly well. I'm sure you've been learning a lot. Can you maybe just update us as to what the plan is for that asset going forward? It didn't sound like a U.S. retail bank for your North American corridor strategy. So just any update on that is great.

Sure. Thanks, Matt. So as you know, we have 14.9%, so $400 million of NIAEH per year, 15% to 20% return on capital. And so we are pleased with it, Jacqui sits on the board. I think we've got a lot of learnings from that. As I said last quarter, there's no plans to increase our absolute dollar investment into Key. I think our priority is organic growth here or share repurchases. That being said, as they execute on their $1.2 billion share repurchase, which we're very supportive of, we'll probably tick up a little bit in terms of ownership just because we won't bend into it. So same plan as we talked about last quarter.

There are no further questions on the line. I would now like to turn the meeting over to Raj Viswanathan.

Thank you very much. Thanks all of you for participating in our call. And on behalf of the entire management team, I appreciate you all taking the time to talk to us. We look forward to speaking to you again at our Q2 call in May. Have a great day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

We'll get back into our fireside chats now. I think I'll just quickly read this intro remark. Before we begin, I've been asked to tell you that Scott Thomson's comments today may include forward-looking statements. Actual results could differ materially from forecasts, projections or conclusions in these statements. Listeners can find additional details in the public filings of Scotiabank. So I'm sitting here with Scott Thomson, CEO of Scotiabank. Thank you for coming today.

Thanks for having me, Darko.

So we've had broad-ranging discussions all day and a lot of it going to ROE. Maybe we'll touch on your ROE aspirations as well. But one of the things that separates your bank, I think, from the others is you came in as the CEO, you had a big Investor Day, you laid out a plan. And this year, you can pick this up from a lot of different places. But this year, you can really -- if you read the annual report, you'll pick up on what seems to be like a pivot to growth for 2026.

And I want to just start there and maybe just ask you, where do you expect the growth to come from? And as you pivot to growth, one of the things that I'm really interested in is one of the big differentiating factors is your international banking business. And what are your expectations for growth there as well for 2026? So unlike ROE, we're going to focus on growth for Scotiabank here with the first question.

Okay. We'll come back to ROE.

We will, for sure.

Well, listen, we entered 2026 with a lot of momentum on the back of 2025. And you go back to that Investor Day comment you made, which was 2 years ago, we laid out a plan, and we're exceeding that plan. So we talked about 5% to 7% growth in 2025. We had 10% earnings growth, positive operating leverage, a 13% CET1 ratio and bought back 11 million shares. And so entering 2026, we feel like we have a lot of momentum.

As you think about where that 2026 growth is going to come, which we've telegraphed double-digit earnings growth again in 2026. We see the International Bank with mid-single-digit PTPP growth, but modest NIAT growth. We'll come back to that. We see our GBM business, again, probably modest NIAT growth on the back of what was a record quarter for us. And interestingly, in the first couple of months of the year, that momentum has continued. But I want to be thoughtful about not overcommitting in our GBM business. So I think flattish or modest NIAT growth in 2026 as an objective is appropriate. High single-digit NIAT growth in wealth. We've got a lot of momentum in our wealth business, and we can come back to that. But Jacqui and the team have done exactly what we said we were going to do 2 years ago. in a very high ROE business.

And so high single-digit NIAT growth there. And then our Canadian bank is going to see double-digit growth in 2026. And we spent 2025 setting the foundations in place around our Canadian bank, we had some sequential improvement in the third and fourth quarter. As we look at double-digit earnings growth in Canada, it's going to be a combination of yield improvement, right, both asset yields and also from deposit mix, which we're making a lot of progress on, productivity improvements on the back of the restructuring charge that we took, we're going to drive positive operating leverage next year. And then fee income. And we've seen some good fee income growth, 8% year-over-year. That's going to continue into 2026. And so when you combine all of that, that leads to double-digit earnings growth. for the bank, and we'll continue to repurchase shares as well. And so I think that's -- it's a good constructive backdrop to 2026 and then thinking about 2027 and how we keep that momentum going into 2027.

So you mentioned -- you started off with the commentary. It's a good place to start. So you exceeded your targets in 2025. You had a lot of growth. What was it that surprised you in 2025?

Yes. I mean...

And the number, and then we'll talk about kind of how that's going to work out in '26.

I mean I think the 2 areas of the bank that have exceeded expectations relative to Investor Day would be our international bank. That international bank, lower capital deployed, improvement in ROE of 250 basis points and a setting of a foundation through capital and cost discipline that will allow us to pivot to growth going forward. And so we've the regionalization initiatives, which has reduced costs -- the implementation of a segmented retail strategy with a value proposition and leading with GTB, our Global Transaction Banking, which obviously helps us from a funding perspective will all allow us to continue to see high ROE growth in that business.

So that was one -- not a positive surprise because we said we were going to do it, but that was one kind of checkmark relative to the Investor Day. I think our Global Banking and Markets business, which we've been in the process of building up over the last few years, did really well in 2025. And so you think about the new product capabilities that we've added, CLOs, levered lending, securitization, DCM capabilities, investment banking capabilities, all led us to a 300 basis point improvement in ROE year-over-year with 14% lower capital deployed and 20% improvement in fee income.

Now I think we benefited definitely from a constructive market backdrop. But I do think the sustainable high capital velocity approach that Travis is putting into place there is going to continue to result in 14% type ROE with lower volatility as we look forward. I'm not willing to commit to higher earnings in 2026 because fourth quarter of 2025 was a record quarter. But I would say the first couple of months of the year have started out as well as the fourth quarter of last year. So that bodes well for 2026.

So let's step back then and just think about the IB segment because that's the one where -- if I think about -- I mean, it's fair to have modest growth expectations from GBM because a lot of things can happen, you say record fourth quarter. But you have higher expectations in wealth and in Canada versus IB. So maybe flesh out for us the growth expectations from IB in 2026. And should we see it accelerating into 2027? And what's -- maybe I'll leave it open-ended there. Maybe I'll just.

I mean, so when we need to make sure what we put out there as a marker, we do, right? We execute against. And last year, we exceeded expectations. I suspect this year, we're being a little bit conservative in terms of what we're telegraphing to the market, but we said mid-single-digit PTPP growth and then modest NIAT growth. And that modest NIAT growth comes because of impaired PCLs, which we're still dealing with a difficult macro environment in some of our areas like Mexico and in Chile in 1 or 2 segments.

But what I would say is we have got the foundations in place from a regionalization perspective, from a value prop perspective in the retail side and then from a GBM optimization of the client base, to actually grow when the GDP allows us to grow. And I don't want to get ahead of what the market will allow. And so when you have 1% growth in GDP in Mexico, that's not something that you're going to accelerate into. But I do think as you -- modest NII growth in '26, continuing with a higher growth into '27 on the back of 15% ROE, that's a pretty good value proposition for shareholders.

And maybe just before we leave the International Banking segment. We've had some recent events in Venezuela. I don't think you have direct exposure to Venezuela, but maybe you can give us a sense of what the feeling is on the ground with your operations. in LatAm and sort of what the client feedback has been? And what does it possibly mean for your business?

Yes. So we got out of Venezuela in 2014. So we don't have any exposure to Venezuela direct. What I would say though is I actually think this is potentially a medium-term, long-term positive for the region. And you think about the last 10 years, it's been a little bit of a lost decade in terms of growth in LatAm, partly because the political environment moved left and partly because the U.S. moved away from the region and China came into the region. I think with the Trump dock trend, the Monroe do trend of increasing emphasis in the Western Hemisphere. I think that's good for growth. And you look at the political environment, it's moving right already.

As you look at [ Kast ], the new President of Chile, you look at what's probably going to happen with Petro in Colombia. You look at a very business-friendly administration in Mexico. You look at a Peru political environment that probably moves center right. You're moving all of these governments from left to right or center right. And then you're seeing more U.S. influence, which plays very well to our Western Hemisphere strategy. And so I think there should be or could be some bumps along the way here, particularly as you think about Mexico in terms of navigating rule of law. But longer term, this is a good thing for the Western Hemisphere.

It's a good thing for the U.S. It's a good thing for the Bank of Nova Scotia. The one area that I do think we need to be thoughtful about as a Canadian bank is what does this mean for energy in Western Canada, that whole U.S. Gulf refinery complex was made for heavy oil. Heavy oil is Venezuelan and heavy oil is also Western Canadian Select. And so as the Venezuelan crude reenters the system over the next 5 to 10 years, having another pipeline here for Canada, I think, is really important.

And so hopefully, that provides more impetus to the build Canada program that the Prime Minister is trying to implement as well. So I think that's longer-term good news for the Bank of Nova Scotia.

And shorter term, just FX spreads, volatility in the marketplace, are we seeing any kind of.

We don't -- the market has taken it in stride, you haven't seen a big impact. There's a lot of confusion on the ground in Venezuela. I think the transition to a new government without boots on the ground from the U.S. is going to be really important. But from a credit perspective, there's not an issue for the Bank of Nova Scotia.

Okay. So maybe we can now shift gears and think about Canada because I think you're targeting double-digit growth in the segment. And it's a tough competitive environment from what I understand. So maybe you can just chat a little bit about the way you see it sort of progressing in a world where we have less immigration in Canada, fairly competitive marketplace, low growth, housing doesn't seem to be reviving anytime soon. How do you -- what do you see in 2026 that gives you so much confidence in a high growth rate for Canada?

We think about the 3 pillars of our strategy. So one is primacy. Two is the business mix; and three is operational excellence or productivity. From a primacy perspective, we're making a lot of progress, right? We've added 275,000 primary clients since Investor Day. We've rolled out the Mortgage+ offering, which has gotten a lot of traction. 95% of our originations now are Mortgage+. We're starting to see business mix changes in some of the areas like small business, where we're growing at twice the market rate.

We've improved our deposit positioning significantly since Investor Day, over $55 billion of new deposits. Our day-to-day deposits and our savings accounts have increased by 7% and 6%, respectively, year-over-year. If you just look at the [ Red Bank ], it's around 11%. And we've made massive progress in driving wealth through our branches. So when you think of Investor Day, we were sixth out of sixth in terms of retail mutual fund sales. At this time last year, we were fifth Halfway through last year, we were fourth. At the end of last year, we were third.

And in October, we were second across the industry. And so this business mix, which is the real opportunity here for us in terms of increasing ROE is going to start to transition into higher ROE across the Canadian bank. I was really pleased with the third quarter results. I was pleased with the fourth quarter results. I think we have a lot of momentum on the back of the restructuring charge that we took in the fourth quarter to both invest in this business to achieve the primacy objectives and drive positive operating leverage.

And so when you think about the ROE objectives for the bank, we increased year-over-year significantly. By fourth quarter, we were at 12.5% -- we're probably a year in advance of our target that we set at Investor Day. We're going to be over 13% by this time next year. And I would say more than 50% of that is going to come from the Canadian bank. And it's not going to come from leverage. It's going to come from business mix and return on assets. That's where the improvement is going to come from. And so we're starting off strong in Canada with a new team. We've got opportunities for improvement for sure in cards where we're lagging relative to the competition.

We're fifth, and we've invested in a new technology and a new team to help move us forward there. We're going to harvest a lot of the competitive advantage of seeing to drive that cards position. And we've got a lot of opportunity in commercial mid-market as well, where we're relatively underpenetrated. We've been really good at real estate and agriculture, less so in commercial. We spent the last year making sure we have a real handle on our primary clients. despite not increasing loan growth in commercial, we actually increased PTPP by 20% last year on the back of GTB, pricing discipline, et cetera. But we do have an opportunity in mid-market to accelerate loan growth into that area as well.

And so there's a lot to unpack there. You rattled off a lot of trying to write it all down. So thank you for that. It's really always helpful to the mosaic. I picked up on a couple of things there. I just wanted to sort of go back and revisit. One of the things you mentioned was the strong deposits in the Red Bank. I'm assuming that excludes the Orange Bank, Tangerine. So maybe can you talk about that a little bit? I mean you had a lot of success in the Red Bank. What about the orange.

And listen, what we're trying to do with Tangerine, we're repositioning that to be more of a challenger bank in the overall landscape. And so you've seen a partnership that we've struck with Engine by Starling Bank of the U.K. And so we'll have more to say over the next year. But there has been historically -- I mean, it was a very good deposit gatherer, but we're being thoughtful about what we pay for deposits and making sure we're not getting deposits on price, getting them more on value.

And so there was a little bit of a runoff in deposits in Tangerine as we set that business up for success going forward. But in the Red Bank, our day-to-day and savings accounts, and a lot of this was on the back of Mortgage+, by the way, were up 11% and 10%, respectively. I think the market was up 7% or 8%. And so it is competitive for sure. But the grind, the kind of the quarter in, quarter in grind of making sure we have the organization focused on deposits in addition to assets, we've got the right incentives in place.

We've got the wealth business working in conjunction with the retail business is allowing us to capture market share. And that will continue. And as you continue on that deposit mix perspective, it helps on the yield perspective. And so you get a higher yield because of the better deposit mix and you get a higher yield because of the better asset yield as well. And so that contributes to NIM expansion in 2026 relative to 2025.

And then you gave us a lot of little data points there on the sales of funds all the way up to the second as you exited the year. What's driving that momentum?

It's coordination between the Canadian Bank and the Wealth division. And I think historically, I've talked about this a lot of here is a very siloed organization. What Aris, our Head of Canadian Banking and Jacqui have done so effectively is just bring these 2 organizations together. And so at our Investor Day, we said one of the biggest opportunities in wealth was retail mutual fund sales. We said it was a $400 million NIAT opportunity if we could close the gap from us to best-in-class. And to see that progression, our referrals are up 18% year-over-year between those 2 organizations. And so that starts to drive a better retail mutual fund performance. And second was the last month. So we've got to continue that progression, but it's a big move from sixth to second.

Okay. And then maybe we'll just go back to the GBM total. And there, too, what we're hearing consistently all morning long is a couple of things. One, constructive markets for 2026; two, strength in the U.S.; and three, strengthen deposits. And I know deposit gathering is important to you in your U.S. cash management platform. Can you talk about that a little bit? And is it -- do you see it as the same sort of construct for you?

Yes. So we'll start with global transaction banking and then we'll come to strength in the U.S. I mean I think global transaction banking is one of the biggest opportunities for us across the bank. We have a good proposition in Canada, and we capture our fair share in Canada. We didn't have a proposition in Mexico 2 years ago. We now have a proposition, and we're migrating all of our clients to ScotiaConnect 2.0, and we're building out our proposition in the U.S. And we've actually -- we spent $250 million on it last year.

We're going to spend another $250 million on it this year. We've got 5, pilot clients helping us do this in the U.S. right now. By the end of the year, we'll have 50 to 100 clients. And this is a significant opportunity and strength in the U.S. franchise because then you get the sticky deposits that allow you to grow the asset side of the business. So big opportunity for us. We're going to continue to invest behind it. And I think it's actually one of the drivers of our Canadian commercial success this year. A lot of people have been asking, how do you grow PTPP by 20% when your loans actually aren't growing in commercial.

A big part of that is the focus on global transaction banking in Canada. So that is definitely a high priority for us going forward. In terms of your view on the U.S., we're on a journey in our Global Banking and Markets franchise to move from beyond the balance sheet to fee-based revenue. And CLO securitization, leverage lending, DCM capabilities, all of these we've invested -- mortgage capital markets, all of these we've invested in, in the last 2 or 3 years. And the result is the best result we've ever had.

Now yes, it benefited from constructive markets, but I think it's also benefited a lot from the fee increase that we've seen. So capital deployed down 14%, but fee income up 25% and ROE up 300 basis points. And so continuing that consistent low volatility diversified approach is going to be the objective. And we can do that at a 14%, 15% ROE, I think we'll be very successful. Now there's more work to do. We have to continue to add talent, particularly on the IB side, the investment banking side.

We've got great verticals like mining and oil and gas that have really helped us this year in terms of our advisory income. We've got to continue to expand that in the U.S. And if we can focus on adding talent in very defined verticals, we'll continue to see investment banking and advisory income increase as well.

And just to go back to the GTB and the increased investments in the offering into the U.S. Is that going to be ready for the end of '25?

By the end of the year, we'll have probably 50 to 100 clients on it, but the full capabilities will be 2027.

Okay. Okay. Great. And so what is the end goal? I mean like the U.S. is growing well. You've made some investments there, 50% of earnings. Where does it go? Do you think that, that's reasonable to expect it to be bigger than Canada?

I don't have a target for percentage of the business. What I would say is we've got a U.S. capability set that is resonating with clients and high capital velocity and growing at a decent clip. We are fully deployed in Canada, and I think we've had a lot of success in Canada as well. But there's -- it's a bigger market in the U.S. And so from a GBM perspective, you'll continue to see probably growth there. It's a little bit higher than in the Canadian business.

From a wealth perspective, I really like what we're doing in Canada. I really like what we're doing in LatAm. We've got to find a way to connect for our Canadian clients, the U.S. proposition and for our LatAm clients, the U.S. proposition. So there's work to do there as well. But it's an organic strategy. It's an organic build-out. And frankly, it's not a technology build-out beyond GTB. It's a people build-out. And we'll be thoughtful about how we add expense. I'm not judging Travis and Jacqui on operating leverage. I think there is investment that you're going to have to make to get the returns.

I'm managing them on ROE, whereas in our [ P&C ] banks, I think businesses, I think we have a big expense opportunity as well. And so driving positive operating leverage through those pieces of the business is really important.

Okay. So you touched on ROE. Let's go back to ROE and talk about it. What's driving it from here? I mean you did 14% in GBM. The overall target is 14%, I guess. And you mentioned it wasn't really leveraged. So...

It wasn't leverage. Yes.

Yes. So let's talk about that. Like we've had -- we've seen one bank with an ROA target that's out there. So a, are you interested in upping your ROE target because your ROA is improving, your return on assets is improving? And then b, where do you see this ultimately going? What can we do without pushing the common equity Tier 1 ratio down? Is it possible to see 15%, 16% sort of ROEs? And I think a lot of people are saying 27% is the year where you're going to see a real lift. So over to you on.

So as you think about the strategy that we're deploying, it's a value versus volume strategy, and we're trying to grow the deposit base through GTB and primary clients and align that with the asset base. And I think we're making a lot of progress. We talked about the deposits, we talked about GTB, but our wholesale funding has reduced like 500 basis points from like 23% to 18.5% over the last 2.5 years. And so you can continue to assume that we're going to be thoughtful about growing deposits and assets at the same time.

Loan-to-deposit ratio has come down from 115% to 104%. The real opportunity for us is business mix. And that real opportunity for business mix is in the Canadian business, where we've historically been really strong in mortgages and autos and underpenetrated in the other areas. And so when you think about small business, why we're spending so much time on small businesses, comes with deposits, but it's also a higher return proposition. And we're fifth in small business. The last year, we actually grew at 2x the market rate, but it's off of a small base.

So we've got opportunity there. In cards, that's a great fee return proposition. Commercial mid-market, a great return proposition. deposits in day-to-day and savings, a great return proposition. So the ROE benefits we are going to get are not because of leverage, it's going to be because of business mix and ROA. In terms of the target, I mean, I don't want to come out with a target. But if you think about ROA in our Canadian business right now, it's [ 0.74 ]. I think by 2028, we should have that at 1 right? If we have that at [ 1 ], that's 50% to 60% of the contribution of getting to 14% plus.

And then in terms of your question on 14% plus, we're at 12.5% and we're in 2025 versus 2028. By the end of next year, we're going to be over 13%, right? And so I do think we're tracking a year ahead of what we said 2 years ago in terms of ROE. But as I've been pretty consistent on, let's do what we say we're going to do. We're 8 quarters into this strategy. We've met expectations or exceeded expectations. And so we'll continue to do that, and you'll see ROE improvements along the way.

So I guess that leads to the next question, which is -- and actually sort of 2 questions embedded in the next part, so maybe we can talk about this in -- we'll do a piecemeal -- every bank says that they prefer organic deployment of capital to buybacks or even inorganic. How do you determine the right balance? And what kind of RWA growth are you contemplating? And should we be thinking about Scotia being in a position to really create a lot of capital in '26 and into '27 or really deploying and pushing out the RWA growth?

Yes. So I -- again, we're moving the philosophy from volume to value, and we're really focused on fee income to drive a higher capital return. That all being said, we have done and gone through a period of optimization, and we are ready for continued deployment of organic capital. And I use commercial mid-market as an example. Are you going to see a big increase in commercial mid-market capital deployment in the first half of the year?

Probably not. We're building up the sales force. We're building up the technology to make sure we can do that. But are you going to see more RWA into that business as an example? For sure. I think the -- across the company, we have so many organic opportunities for growth. We have all these assets that we haven't fully optimized. And so whether it's GTB, whether it's data, whether it's cloud, we have an opportunity here to deploy capital in a very cost-effective, high-return perspective.

Our technology spend is going to go from $5.3 billion to $5.8 billion this year. We're going to do that and continue to drive positive operating leverage. And I think we can do all of that from an investment perspective and continue to buy back shares at a reasonable clip. We bought back 11 million shares in 2025, if there's a valuation disparity between us and the other banks. So we should be continuing to buy back shares. And I think we can do those 2 things and keep [indiscernible] at 13%. And if we get capital relief to push [indiscernible] down further, then so long as the other banks do that, I think I'd be prepared to do that as well.

And so what about inorganic deployment? We know you purchased Key. And the question I've been getting from some people is Key, there's a lot of things going on at Key now and potentially they're acquiring or -- so how do you view your position? And what do you do if you can buy more? Or what if Key decides to make an acquisition? What is your initial stance on that?

Yes. So I mean we're pretty happy with the Key investment. It's the $350 million of NIAT that's coming into us at a 15% to 20% return on capital. And the stock is up 25% from where we bought it. So in general, I think we're happy. We're also very supportive of what that team is doing in terms of prioritizing share repurchases as opposed to acquisitions.

And as I think about our objectives in the U.S., what we need to do is organically continue to build out some product gaps in Travis' organization and help Jacqui get that U.S. offshore booking point. And that's the priorities as opposed to anything larger scale. And so first, organic deployment of capital; two, share buybacks; and three, if we can close some of these product gaps with small tuck-in type acquisitions for Jacqui and Travis, that would be something we should think about.

Okay. I think we're going to take a look at these questions that are coming in or hopefully, they have. I have to switch this.

Working for you now.

Yes. Okay. So there's a lot here. So maybe we'll just go in order. Scotia took restructuring charges, but full benefits won't accelerate -- won't accrete to earnings due to product frontline investments. Can you elaborate on the investments?

Yes. One of the things that we talk a lot to Aris, who runs our Canadian bank around about is continuing the strategy but self-funding the strategy. And the restructuring charge, which was -- that was a multi-month, I think multi-quarter effort to make sure that we did this the right way was significant. I mean 3,000 people ended up leaving the building. And it was an area that I think we had the opportunity to rationalize given the focus going forward. So it was a lot of back office.

It was a lot of -- in areas that are not going to grow at outsized rates. And it creates the capacity then to reinvest in the frontline sales force and technology. And so what we've talked about is, yes, make those reinvestments, and that's the technology budget increase that we talked about, but also run the Canadian bank at positive operating leverage. And that's what you're going to see from us in 2026.

Okay. I think I've got time to ask one more of these questions. The fiscal '26 impaired PCL ratio guidance is mostly similar to '25. What is needed for more significant credit normalization or a drop in credit losses?

Yes. So I think we ended the year around 49 or 50 basis points of impaired. And what we've guided to for next year is high 40s mid-50s. So essentially consistent in the first half of the year with where we ended last year and then hopefully getting better through the third and fourth quarters. There are some pockets of weakness in IB that we've talked about, a little bit in our monoline credit card operation in Chile and then also in Mexico that is going to impact that or offset that [ PTPP ] growth.

But in Canada, I'm feeling actually pretty good. I'm feeling pretty good about the impaired outlook. And I do think that will contribute also. I didn't mention this, but that will also contribute to the double-digit earnings growth in 2026. And so if [indiscernible] doesn't get signed, does that change your view? Maybe, but probably not. I mean we took an 18 basis point performing build in the second quarter with a view that [indiscernible] wouldn't get signed and tariffs would be a problem. And as you think about ACLs overall for this bank since I've become the CEO, we've added $2 billion of ACL, of which $1.3 billion has been performing. We've added 35% to our overall ACL since I've been the CEO. So I'm feeling really good about the kind of the resiliency of the balance sheet and where we stand going into 2026.

And those issues in Chile and Mexico, you think we've just grind through it.

Just going to grind through.

They go down in '27 kind of.

Yes. No, I think they do. I mean I think we're peaking and coming down, and this goes back to your Venezuela question. I mean, Latin America is moving to the right, right? And when you move to the right or center right, you get more growth. And so when you look at Chile or Colombia, Peru, Mexico, they're all much more business-friendly macro environments. And so I do think that's going to be beneficial for us as we think about the next 3 or 4 years as well.

Okay, Scott, we're at the time where I hand the floor over for some final remarks and key messages. So what would you like to leave with?

I mean, listen, I've said consistently when I've been up here over the last 3 years is do what you say you're going to do and be the bank and no surprises. And I hope now after 8 quarters of doing what we say we're going to do and exceeding expectations, we're starting to build the credibility that when we say we're going to do something, we are going to do it.

And when we look at next year, we see double-digit growth. We see double-digit growth on the back of very strong Canadian banking performance, continued performance in the wealth -- and then GBM and IB, we're actually, I think, being relatively conservative in terms of the outlook because those were market-driven constructive backdrops that we had in 2025.

So you combine that with a commitment to continue to repurchase shares when there's a valuation disparity. And I think that creates a good backdrop for the bank as we go into 2026. Frankly, I'm starting to focus a lot on 2027. And that's what you would expect me to do. But how do we keep the momentum from 2026 into 2027 and allow us to continue this kind of track record of ROE enhancements and EPS growth. And if we can do that, then I think the share price will take care of itself.

Excellent. So thank you very much for joining us.

Great. Thanks a lot.

Good morning, and welcome to Scotiabank's Q4 results presentation. My name is Meny Grauman, and I'm Head of Investor Relations. 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'll be glad to take your questions.

Also present to take questions are the following Scotiabank executives: Aris Bogdaneris from Canadian Banking; Jacqui 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 will refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. All the remarks today will be on an adjusted basis.

With that, I will now turn the call over to Scott.

Thank you, Meny, and good morning, everyone. Our Q4 results cap off a year of strong and consistent financial performance, and we've entered into fiscal 2026 from a position of strength. 2025 was a year of execution. We did what we said we were going to do despite the emergence of unexpected trade-related economic challenges. We accomplished this by focusing on what we can control and delivering our strategic plan. Overall, EPS grew by 10% for the full year. We also ended Q4 with an ROE of 12.5%, up 190 basis points year-over-year and an efficiency ratio of 54.3%, an improvement of 180 basis points versus the prior period.

These results demonstrate clear and measurable progress against our medium-term financial targets. Recapping our strategic objectives, our focus on client primacy is yielding results as we drive strong cooperation across the bank. Closed referrals between Canadian retail, commercial and wealth were $15 billion for the year, up 18% over last year. And our emphasis on deposit gathering is also paying off as we increased our mix of P&C deposits for the second year in a row.

We've added 400,000 primary clients since we launched our new strategy, and I am confident we will continue to accelerate client acquisition as we enhance our client experience and build out our data and personalization capabilities. We also remain disciplined in our approach to reallocating capital to key growth areas and continue to strengthen our balance sheet and maintain a strong capital position. We reduced our wholesale funding ratio by 60 basis points this past year, while our loan-to-deposit ratio closed the year at 104%. On capital, we ended the year with a CET1 ratio of 13.2% after repurchasing 10.8 million shares in fiscal 2025.

Turning to our Q4 results. We delivered earnings of $2.6 billion or $1.93 per share, up 23% year-over-year. Our quarterly results exclude a restructuring charge with the majority related to actions taken to simplify our Canadian operations. While these types of decisions are always difficult, they are nevertheless necessary as we work to boost the value of the Canadian bank. The actions simplify and streamline our organizational setup, which will free up capacity to further invest in technology and revenue-generating sales staff to propel future revenue growth.

We do not anticipate additional charges, but we remain focused on running our bank as efficiently as possible, including taking full advantage of emerging technologies. Our technology spend in 2026 will be concentrated in the following key areas: further building out our global transaction banking platform, enhancing our technology platforms, including AI investments, balancing security and client experience with a continued focus on fraud and transaction monitoring and adding new product capabilities to drive client primacy.

Moving to our operating segments. Fiscal 2025 stands as a pivotal year for our Canadian Banking unit as we laid the groundwork to drive stronger earnings growth in the years ahead. We did this by improving client primacy through growth in core deposits and increased in-branch sales of mutual funds, improving our channel mix with a focus on increasing our sales capacity and improving efficiency. Performance in Canada has improved sequentially over the past 2 quarters, setting this business up for strong earnings growth in 2026.

Our Mortgage+ program remains a key contributor to the growth we are seeing in multiproduct banking relationships with over 90% of all mortgage originations, including a product bundle, helping drive both deposits and cards growth. We are capturing an increasing share of money in motion, especially in the retail bank, where day-to-day and savings deposits rose by 6% year-over-year and closed referrals between retail banking and wealth management came in at $8.1 billion or up 20% from fiscal 2024.

In commercial banking, full year pretax pre-provision earnings were up 21%, even as average loan balances declined by 1%, evidence that our focus on value over volume is delivering tangible results. Our commercial bank is an important and growing source of referrals with our Global Wealth Management unit with closed referrals up 35% this year and a growing source of revenue for our Global Banking and Markets unit, especially in the FX business. Global Wealth Management continued its positive momentum with record earnings across Global Asset Management, Canadian Wealth Management, Private Banking and ScotiaMcLeod. Rising markets are helping drive assets under management higher, and we are also seeing strong underlying performance as full year net sales improved by $11.5 billion versus fiscal 2024.

In Canadian Wealth Management, we are seeing strong momentum in our differentiated private bank offering, including double-digit loan and deposit growth. At the same time, we onboarded 5,000 households to our recently launched Signature Bank offering and our full-service ScotiaMcleod brokerage unit saw double-digit growth in fee-based assets, helped by net sales of approximately $6 billion in fiscal 2025.

In our Global Asset Management business, retail net sales improved by almost $7 billion in fiscal 2025, led by our own branch channel. And this past year, we launched 4 new private asset funds, delivering compelling private asset solutions tailored for our wealth and institutional investors. We continue to see strong growth within the liquid alternatives asset class and remain a market leader in this space. And in our International Wealth business, earnings are up 14% for the year with 20% growth in Mexico.

We also delivered continued progress in our International Banking segment with results in fiscal 2025 coming in ahead of what we committed to at our Investor Day. This happened in what is still a challenging economic environment as we demonstrated the benefits of our geographic diversification and executed to our plan. Performance in our International Banking segment continues to be driven by solid execution, including strong expense management and improved profitability metrics as we shift our business mix to deeper and more profitable client relationships. We recently launched our singular retail brand and value proposition across Mexico, Peru and Chile, which highlights the work we are doing around both regionalization and client segmentation.

For the year, expenses were flat and ROE came in at almost 15%, up 110 basis points versus the prior year. We look to maximize shareholder value across all the markets we operate in. The Davivienda transaction that closed yesterday is a prime example of that. This deal creates additional scale in Colombia and is immediately accretive with further upside from the benefits of scale and diversification as well as from future collaboration.

Finally, Global Banking and Markets delivered another strong quarter as we continue to benefit from constructive markets, but also from our organic investments in new capabilities, particularly in the U.S. Our prime services business, where we believe we have a competitive advantage relative to our Canadian bank peers is a growing contributor to GBM's earnings, and we will continue to build on our relationships with top-tier U.S. managers. Fiscal 2025 was the best year for underwriting and advisory fees in our history, rising 35%. Looking ahead, we have a strong pipeline to execute in 2026 and the federal government's Grow Canada initiative with a focus on energy and mining is well suited to our core capabilities.

The U.S. contributed 50% of GBM earnings in fiscal 2025, and we will continue to invest in our U.S. capabilities in fiscal 2026 to increase this contribution over time. Part of that investment is going to the build-out of our U.S. cash management business. After a successful pilot, we officially launched this fall. Across all business lines, we increased the number of enterprise-wide cash management clients by 15,000 in fiscal 2025, exceeding our own internal targets. Success here will help us grow primary client relationships, further reduce our reliance on wholesale funding and drive fee income. Our focus on accelerating the velocity of our balance sheet and growing fee income is delivering results. For the year as a whole, GBM loan balances were down 13%, but earnings in this division were up 30% and ROE increased by 320 basis points.

Looking ahead to our strategic priorities for fiscal 2026. We will continue to improve our business mix as we further deepen our client relationships. In Canada, mortgage growth is outpacing growth in commercial loans and cards. But nevertheless, we are making progress in deepening client relationships, thanks to our success in growing core deposits and investments. Looking ahead, we aim to accelerate card growth by further tapping into our Scene+ loyalty program and building on the momentum of our Mortgage+ proposition. And in commercial, the pipeline is growing as we target markets and regions that we've historically been less focused on, which should gradually improve loan growth in 2026. We will continue to build on the strength of our business lines. In Canadian Banking and International Banking, this means building a more efficient, digitally forward bank that seamlessly integrates our branch network with mobile customer service capabilities, meeting our clients where it is most convenient for them.

In Global Wealth Management, we will continue to build on our strong sales momentum as well as grow the number of relationship managers in both our Private Bank and ScotiaMcLeod. And in Global Banking and Markets, we will focus on accelerating our balance sheet velocity as we further optimize our use of capital. In the U.S., this includes pursuing a thoughtful organic growth strategy by expanding our product offering while avoiding areas where we do not have scale to compete. Finally, we are focused on further improving connectivity across the North American corridor. We are pursuing deeper connectivity as we continue to build out our global transaction banking business and optimize the value of our international footprint.

In closing, we feel good about our earnings momentum heading into 2026 and the ability to continue to execute on our strategic priorities and deliver our medium-term financial objectives, including achieving an ROE of 14% plus. Improved revenue growth, coupled with positive operating leverage should help us deliver double-digit annual EPS growth in fiscal 2026 despite what remains an uncertain operating environment.

Canada's renewed focus on natural resource development will drive higher GDP growth and improved national prosperity over the medium term. The recent memorandum of understanding on energy between the Canadian federal government and the province of Alberta is a very significant development in our view and proof that Canada truly is on a new economic trajectory. This renewed focus also plays into our bank's strengths as a trusted provider of capital and advice to key sectors such as mining, energy and critical infrastructure.

We are well positioned to contribute to the ambitious plans of the major projects office by helping our clients drive forward large-scale infrastructure projects. This includes pipelines that will enable Canadian oil and gas producers to access global markets, strengthen export opportunities and support Canada's energy competitiveness. And we will continue to advocate for those measures that will unlock greater economic prosperity within our markets. Our results this year have truly been an enterprise-wide team effort, and I would like to thank our entire Scotiabank team for their many contributions in 2025. Two years into our strategic journey, we head into 2026 with momentum and excitement about all that we will accomplish in the year ahead.

I will now turn it to Raj for a more detailed financial review.

Thank you, Scott, and good morning, everyone. This quarter's net income was impacted by $299 million of adjusting items after tax and noncontrolling interest or $0.28 of earnings per share and approximately 7 basis points on the common equity Tier 1 ratio. The adjusting items include a $268 million after-tax charge to simplify the Canadian banking organization, rightsize Global Banking and Markets operations in Asia and regionalized activities in International Banking, in line with the bank's strategy. Legal provisions of $54 million, a $43 million credit related to the Colombia and Central America transaction and our usual amortization of acquisition-related intangibles. All my comments that follow will be on an adjusted basis and on a constant dollar basis for the International Bank.

Starting on Slide 7 for a review of the fiscal 2025 results. The bank ended the year with adjusted diluted earnings per share of $7.09, up 10% compared to the prior year and a return on equity of 11.8%, up 50 basis points and a return on tangible common equity of 14.3% that was up 60 basis points. Revenue was up 12% year-over-year, while expenses grew 9%, resulting in positive operating leverage of 3% for the year. The provision for credit losses were $4.7 billion, driven mainly by higher performing PCLs. Canadian Banking earnings were $3.4 billion, down 9%, impacted by higher PCLs of approximately $600 million and lower margins due to rate cuts. Revenue grew 3%, driven by solid asset and deposit growth, while expenses were up 5%.

Global Wealth Management earnings of $1.7 billion were up 17% year-over-year, benefiting from strong AUM growth of 16%. Revenues were up 15%, driven by higher fee revenue and net interest income across the Canadian and international businesses. Global Banking and Markets reported earnings of $1.9 billion, up 30%, driven by higher trading-related revenues, fees and commissions, underwriting and advisory revenues and higher net interest income. International Banking earnings were $2.7 billion, up 1% year-over-year. Revenues were up 2%, while expenses were up 1% year-over-year, resulting in positive operating leverage. The Other segment reported a loss of $347 million compared to a loss of $815 million in 2024, benefiting from significantly lower funding costs. As disclosed on Slide 25, excluding the foregone income from the sale of Colombia, Central America and CrediScotia in Peru, 2025 adjusted earnings were $9.3 billion, up 9% year-over-year.

Now a few comments on the outlook for 2026. Our outlook commentary normalizes fiscal 2025 to exclude the contribution of the now divested operations. The bank expects to generate strong earnings growth in 2026, underpinned by growth in both net interest income and noninterest revenue. The earnings are also expected to benefit from lower provision from credit losses, mainly performing, partially offset by a higher tax rate that is expected to be around 25%. Net interest income is expected to grow from both loan and deposit growth and benefit from margin expansion. Noninterest revenue is expected to grow across all business segments. Expenses are expected to grow from increased technology spend to strengthen and strategically grow the bank. The bank is expected to generate positive operating leverage in 2026.

From a business line perspective, Canadian Banking is expected to generate double-digit earnings growth, driven by good revenue growth and moderating loan losses. The business will continue to maintain strong expense discipline with a focus on generating positive full year operating leverage. International Banking earnings are expected to be modestly higher, adjusting for the impact of divestitures. Good growth in pretax pre-provision earnings is expected to be offset by slightly elevated loan loss provisions and a higher tax rate. Global Wealth Management is expected to generate strong earnings growth in 2026. Global Banking and Markets earnings are expected to grow modestly after a very strong fiscal 2025.

Moving to Slide 8 for a review of the fourth quarter results. The bank reported quarterly earnings of $2.6 billion, which is up 21% and diluted earnings per share of $1.93, an increase of $0.36 compared to last year. Return on equity was 12.5%, up 190 basis points year-over-year, driven by strong pretax pre-provision growth of 19%. Net interest income grew 13% year-over-year from higher net interest margin and loan growth. The all-bank NIM expanded significantly, up 25 basis points year-over-year, mainly from lower funding costs. Quarter-over-quarter NIM expanded 4 basis points from business line margin expansion.

Noninterest income was $4.2 billion, up 16% year-over-year from higher wealth management and underwriting and advisory fees and the contribution from the KeyCorp investment. Expenses grew 11% year-over-year and 4% quarter-over-quarter, driven by higher personnel costs, including performance-based compensation and technology costs. The PCLs were approximately $1.1 billion, mostly impaired and the PCL ratio was 58 basis points. The bank's effective tax rate increased to 23.6% from 21.8% last year due primarily to lower income in lower tax jurisdictions and the implementation of the global minimum tax.

Moving to Slide 9, which shows the evolution of the CET1 ratio and risk-weighted assets during the quarter. The bank's CET1 capital ratio was 13.2%, down approximately 10 basis points quarter-over-quarter. Internal capital generation was 9 basis points, while gains from higher fair values, FVOCI securities contributed 5 basis points. This was offset by the allocation of capital to share repurchases of approximately 12 basis points and 7 basis points from the impact of adjusting items. Risk-weighted assets grew $6 billion, excluding the impact of FX to $474 billion from book size and book quality changes of $4 billion, the impact of model updates and higher operational risk, partly offset by lower market risk. The bank remains committed to maintaining strong capital and liquidity ratios in 2026.

Turning now to the business line results beginning on Slide 10. Canadian Banking reported earnings of $942 million, up 1% year-over-year as pretax pre-provision profit growth of 3% was mostly offset by a substantial increase in loan loss provisions. The average loans were up 2% year-over-year as mortgages grew 4% and credit cards 1%, partially offset by lower personal and commercial loans. Although deposits were down 1% year-over-year, retail savings deposits grew 7% and the retail day-to-day balances grew 6%. This was offset by an 8% reduction in retail term deposits and a 2% decline in nonpersonal deposits that improved the deposit mix in line with our strategic objectives.

Net interest income grew 1% year-over-year due primarily to loan growth, while year-over-year net interest margin was down 2 basis points due to business mix changes. Quarter-over-quarter net interest margin expanded 1 basis point from higher asset and deposit margins, partly offset by the impact of changes in business mix. Noninterest income was up 8% compared to the prior year due to elevated private equity gains, higher mutual fund distribution fees and insurance income. The PCL ratio was 43 basis points. Expenses grew a modest 2% year-over-year and 1% quarter-over-quarter from higher investments in technology that support our strategic initiatives. The fiscal 2025 operating leverage was negative 1.6%.

Turning now to Global Wealth Management on Slide 11. Earnings of $453 million were up 17%. Canadian earnings grew 16% year-over-year to $390 million, driven by higher brokerage revenues, net interest income from private banking and strong mutual fund fee growth driven by assets under management growth of 15%. International Wealth generated earnings of $63 million, up 30% year-over-year, driven by higher net interest income and higher mutual fund fees as AUM grew 25%. The full year operating leverage was positive 1.6%. The spot AUM increased 16% year-over-year to $430 billion and AUA grew 13% year-over-year to almost $800 billion, driven by market appreciation and higher net sales.

Turning to Slide 12. Global Banking and Markets delivered earnings of $519 million, up 50% year-over-year. Revenue increased 24% year-over-year as capital markets revenues were up 43%, driven by strong growth across both FICC and global equities. Quarter-over-quarter revenues were up 3%, driven by higher business banking revenues. Year-over-year, net interest income was up 29% from higher lending margins and deposit volumes. Quarter-over-quarter net interest income was up 4% from higher deposit margins and volume growth.

Loan balances declined 8% year-over-year and were in line with last quarter. However, deposits were up 4% quarter-over-quarter and year-over-year. The noninterest income was up 23% year-over-year, driven by higher fee and commission revenues and underwriting and advisory fees. Expenses were up 11% year-over-year, mainly due to higher personnel costs, including performance-based compensation and higher technology costs. Operating leverage was a strong 7.7% in fiscal 2025.

Moving to Slide 13 for a review of International Banking. The segment delivered earnings of $638 million, up 3% year-over-year, but down 7% quarter-over-quarter. Revenue was up 3% year-over-year as noninterest income grew 7% from higher capital markets revenues, while net interest income increased 2% year-over-year from margin expansion of 12 basis points, mainly from lower funding costs. Deposits were up 4% year-over-year with personal deposits growing at 1% and nonpersonal up 5%. Loans were down 2% year-over-year as business loans declined 7%, while retail loans grew 4%.

The provision for credit losses was 144 basis points, up 5 basis points quarter-over-quarter. Expenses were up a modest 2% compared to the prior year and prior quarter from continued disciplined expense management, resulting in full year operating leverage of positive 1.6%. The effective tax rate increased to 22.9% from 20.7% in the prior year due to global minimum tax implementation and earnings mix changes. The GBM business in International Banking generated earnings of $295 million, up 19% year-over-year or up 13% on a constant FX basis, driven by good performance in Brazil and Mexico.

Turning to Slide 14. The Other segment reported an adjusted net loss of $34 million, an improvement of $22 million compared to the prior quarter. With that, I'll now turn the call over to Phil to discuss risk.

Thank you, Raj, and good morning, everyone. This quarter, we continued to operate in what remains a highly uncertain macroeconomic environment. Shifting tariff policy and an unclear path forward and trade negotiations are muting economic activity even as some indicators are showing signs of resilience. Looking at this quarter's results, all bank PCLs were approximately $1.1 billion or 58 basis points, up $72 million or 3 basis points quarter-over-quarter. Impaired PCLs were approximately $1 billion or 54 basis points, up 3 basis points quarter-over-quarter and in line with the outlook we provided in Q3. The increase in impaired was mainly driven by our retail portfolios across both Canadian and International Banking.

Now turning to the business lines. In Canadian Banking, PCLs were $494 million or 43 basis points, up 3 basis points quarter-over-quarter. In retail, PCLs were $354 million or -- up $34 million quarter-over-quarter. Performing retail PCLs were $21 million, primarily driven by negative migration that was partially offset by improvements in prime auto and releases as performing mortgage allowances migrated to impaired. Impaired retail PCLs were 36 basis points, up 2 basis points quarter-over-quarter, driven primarily by unsecured lines and Canadian mortgages. Although clients are showing some signs of stress, partially due to elevated unemployment, these remain isolated and not systemic. Overall, 94% of our Canadian retail exposure is secured with an average FICO score above 790.

90-day plus mortgage delinquency ticked up 4 basis points quarter-over-quarter. Increased delinquency was seen across both fixed rate and variable rate clients, driven primarily from weakness in Ontario and more specifically in the GTA. On unsecured, we continue to see some weakness with delinquency driven mainly by non-primary and younger clients. In our Canadian commercial portfolio, PCLs totaled $140 million, up $4 million from Q3. Notably, new formations slowed quarter-over-quarter.

Moving to International Banking. The PCL ratio was 144 basis points, up 5 basis points quarter-over-quarter, driven primarily by impaired PCLs. In international retail, total PCLs were 239 basis points, up $21 million quarter-over-quarter, excluding FX. Performing retail PCLs were $32 million, driven by portfolio growth and continued credit quality deterioration, primarily in Chile Consumer Finance. Impaired PCLs were $468 million, up $17 million, excluding FX driven by Chile Consumer Finance and increased net write-offs in Mexico. On a full year basis, our all-bank PCL ratio was 62 basis points, of which 54 was impaired. The significant performing build in Q2 contributed to an increase of performing allowances by $630 million in fiscal 2025. That helped increase the total ACL ratio by 10 basis points year-over-year to 98 basis points.

Looking ahead to fiscal 2026, we expect the full year impaired ratio to be in the high 40s to mid-50s basis point range. The outlook reflects the expectation that we will continue to operate in an environment of elevated global macroeconomic uncertainty in fiscal 2026. In Canada, the absence of a trade deal with the U.S. and elevated unemployment continue to weigh on sentiment. However, we are cautiously optimistic that the federal budget will contribute to greater economic growth and improved consumer and business sentiment that will benefit the performance in the latter half of the year.

In International Banking, the outlook across the region remains mixed, characterized generally by subdued economic activity and evolving political dynamics in Peru and Chile.

Looking across our markets. In Mexico, trade negotiations continue to weigh on overall sentiment, but GDP forecasts are being revised upwards, suggesting some resilience amid ongoing uncertainty. Chile's forecast remains stable, supported by strong commodity prices. However, unemployment remains elevated. And as a result, we are seeing continued softness in our consumer finance portfolio. Peru's GDP outlook remains stable. However, the benefit of the pension fund withdrawals and client liquidity is tapering and political uncertainty will linger until we get past next year's presidential and parliamentary elections.

It is important to note that we are seeing the early signs of our primacy strategy in International Banking, driving improved credit outcomes across the region. While these benefits are observable in the behavior of our newer vintages since 2023, overall credit performance is still being impacted by older vintages. In closing, the credit picture remains stable, but trade uncertainty continues to be a factor across our markets. We remain comfortable with the adequacy of our allowances and the overall quality of our portfolio.

With that, I will pass it back to Meny for Q&A.

Operator, can we have our first question, please?

[Operator Instructions] And your first question comes from the line of Ebrahim Poonawala with Bank of America.

I guess maybe, Raj, I think you mentioned double-digit EPS growth in the Canadian Banking segment. If you don't mind unpacking that for us in terms of how much of that is like PCL normalization relative to the impaired guidance you just put out? And then what should we expect in terms of the PTPP growth? Is it loan growth that's going to be driving it? Is it margin expansion? If you could just dig into that a little.

Yes. Sure, Ebrahim. I think the growth will come from what I would call mid-single-digit PTPP growth. And there's going to be a combination, just from loan growth, Ebrahim. To be very clear, you've seen the deposit growth that we've been showing quarter after quarter in the Canadian Bank, and more importantly, the right deposit growth. So that's contributing to margin expansion, which even this quarter was 1 basis point up quarter-over-quarter. So it's going to come from margin expansion driven both by the repricing of the loans. There's a lot of fixed rate mortgages that are coming up for repricing in 2026.

Improvement in our deposit margin as we continue to build out through primacy some of our very valuable deposits and take down some of the term deposits, which naturally also move towards the Wealth segment as we know. So it's a combination of that. And of course, expense management is going to be more disciplined, including the benefits of some of the restructuring charge that they're expected to get. Not all of the restructuring charge benefits are likely to fall to the bottom line because we are going to invest in our product capabilities and our frontline people so that we can continue to grow the business. So that's kind of the composition of the PTPP growth.

You're absolutely right. PCL is expected to normalize, is probably the way I would call it. Like this quarter was 43 basis points. We think that will be somewhere in the high 30s next quarter. I mean you just heard next year. You just heard Phil talk a little bit about his outlook, slightly elevated impaired perhaps in the first couple of quarters and then normalize down is our expectation at this time. So PCL will be a meaningful contributor to the bottom line growth. I think -- Aris might have a couple of more comments.

Ebrahim, Aris here. I just wanted to add one thing to what Raj said. I think it's important also on the fee line. We're going to see very good fee growth, almost double-digit next year across insurance, mutual fund fees as we grow and also card fees. And so this is something we've been investing in and working on very hard, and we'll start to see that impact in F '26, which will also help us drive positive operating leverage.

Got it. And I guess maybe one, Scott, for you. You made significant progress over the last 2 years. As we think about the ROE journey from here, 2 questions. One, structurally, like a lot of your peers are targeting a 15%, 16% ROE. Structurally, are there any reasons why Scotia cannot attain a 16% ROE, number one?

And second, in terms of capital deployment, talk to us in terms of priorities, could M&A, you've talked about U.S. being obviously the second most important market. Is there any tactical M&A that you would look to do over the course of the next year?

Right. So as we said when we rolled out the Investor Day 2 years ago, we said 14% plus, and we thought 14% was a conservative estimate. And we are tracking ahead of that plan to date, seeing good ROE expansion in our international bank, good ROE expansion in our GBM bank, continued growth in Wealth, which we know is ROE accretive. And next year, you're going to see significant earnings growth in our Canadian bank and significant ROE expansion in our Canadian bank.

And so as we sit here next year at this time, I'm confident you're going to see another step in that ROE journey, which is going to get us a lot closer to that 14%, probably a year earlier than we thought. And so is 14% plus conservative? I continue to believe it's conservative. But part of this journey is continuing to deliver day in and day out for our shareholders on a consistent basis and do what we say we're going to do. And we're 8 quarters now into doing that. So we're going to continue on that journey.

In terms of your question on capital allocation, the focus is on organic. We've got so many opportunities with organic deployment. You saw what GBM is doing in terms of new product capabilities and opportunity there. You see this new economic trajectory in Canada, where I do think there's going to be a demand for capital. We have a pivot to growth. In IB, which will start to come in the back half of this year. And then our Canadian commercial business as well, I think in the back half of this year, we will start to attract some capital in segments that we haven't historically been in. So that would be priority one. Priority 2, given the relative valuation and given our confidence in our plan, we will continue to be repurchasing shares. And you've seen us do that in the last year. You'll continue to see us do that in 2026.

And then lastly, if there's some product capabilities or some capabilities that we can fill via tuck-ins in the U.S., I'm thinking Wealth here, as we've talked about that, relatively small tuck-ins that help Jacqui broker business or help Travis close a couple of gaps, and we'll think about that, but that would be sort of on the priority list. And there's nothing in the hopper right now for us to be thinking about in that regard.

Your next question comes from the line of John Aiken with Jefferies.

Phil, I get the messaging on the outlook for credit next year. But just when we take a look at the domestic retail formations as well as the 90-day plus impact on the quarter, is this -- I guess as a messaging, is this more seasonality than underlying weakness that we're seeing that might be a continued trend?

John, thanks for the question. As I said in my prepared remarks, mostly what we're seeing on the GILs in Canada related to mortgages and particularly mortgages in the GTA. And so we're -- if I look broadly across the Canadian retail portfolio, I'm quite confident that what we're seeing is not systemic. We're seeing -- still seeing strong FICOs around 790 in the portfolio.

And even if I look at where we have 90-plus on the LTV -- or sorry, 90-plus delinquencies, the LTVs are still in the low 60s, so showing that these mortgages are fairly well collateralized. So I'm comfortable overall with the trends in the Canadian portfolio. There are some weaknesses, as I've mentioned in my prepared remarks. But I'm confident that as we look forward into 2026, we'll start to see GILs normalize in the latter half of the year, similar to PCLs.

And then just as a follow-on, you did mention that the commercial performance in the quarter domestically was very strong. Again, can I take this as a potential positive indicator that we may actually see a bit of a rebound in that segment?

Yes. I was very happy to see that commercial GILs and PCLs normalized this quarter. I think that's a lot due to the resilience and the lending quality standards that we have in the Canadian bank and frankly, the good management that I'm seeing both from the business and from the risk team. As you know, these portfolios can be a bit lumpy, and you may have 1 or 2 files that jump up every now and again, but I'm confident in the outlook for next year and particularly in the Canadian bank that will probably be sort of flat to where we are today in the commercial space.

Your next question comes from the line of Gabriel Dechaine with National Bank.

I was wondering, Scott, Raj, if you can just walk me through or maybe confirm some of my high-level conclusions here on your double-digit EPS growth outlook for next year. So on a segment basis, double digits in Canada, probably the same for Wealth, mid-singles for Capital Markets and International from the sounds of it. Corporate, I mean at least the back half will be flat probably, but who knows. So overall, high single digits plus the buybacks to get you into the double digits. Is that how you're thinking about it?

Yes, Gabe, it's Raj. I think you got it mostly right. I'll just make one correction on Wealth. I think it might be high single digit. That's probably the one I would say. And for IB and GBM, I'd call it modest growth is the term we use, and that I would equate to like a low single-digit growth rather than mid. Now obviously, right, markets play a role because we do have a GBM business in IBM and GBM is always subject to markets.

And of course, the other segment, like you point out, the whole year loss is $347 million. The most recent quarter is $30-odd million. So that's got to give us back roughly about $200 million. And of course, repurchase, right? But we don't need to have repurchases to get to double digit. I think it's a contributor. I think the businesses themselves will get to double digit.

Just a finer point on Capital Markets, the implication there is that your earnings in that business are going to be above the run rate? Which the guidance run rate is $425 million to $450 million of earnings per quarter, and that may be stale at this point? Is that...

Yes. I mean you heard Scott talk a lot about the investments we have done both in product capabilities and people, particularly in the U.S. I think this quarter, $519 million, I'd probably say $475 million to $500 million is probably the business contributing and some part of it is markets for sure that's helping. Markets remain constructive. This business is ready to capitalize on it.

Okay. Great. And then we talk a lot about buybacks these days for obvious reasons. But what happens, Scott, if you own 15% of KeyCorp, and they decide to participate in the M&A consolidation trend in U.S. regional banking. Would you -- I mean the details, of course, if you like the deal or not, let's say you do like it. Do you want to be diluted? Or do you want to maintain your position? What's your thought process?

Yes. I mean I think we're really happy with the KeyCorp stake. Jacqui is sitting on the Board now. I think we're getting a lot of good insights into the kind of the overall environment. It's contributing now from a dividend perspective on a very attractive basis given it's in the significant investments bucket. There's not a plan here to increase beyond our current 15%. And I think we'll just have to see what KeyCorp does from a strategic perspective and then deal with it at that time. But I think we're pretty comfortable with the stake we have, and I'll leave it at that.

Your next question comes from the line of Doug Young with Desjardins Capital Markets.

Just something on capital, Raj, organic capital generation of CET1 generation 9 basis points. Is this around what we should expect for Scotia net of dividends? And can you maybe talk a bit about the puts and takes that maybe take you higher over the next few years, if that's something that you think?

And then, Scott, can you remind us what the minimum CET1 ratio target is for the bank and what you're comfortable going down to?

Sure, Doug. I think fee income will always contribute to higher capital generation, and we're starting to see improvements in the fee income, as we talked about earlier. So that should help. 9 basis points, I would say, is at the lower end, frankly, Doug. I think this should progressively improve each quarter. I think 10 to 15 basis points by the time we get to the end of 2026. For the quarterly contribution after dividends is likely the run rate we're looking for. Obviously, if businesses like Wealth and GBM, if they perform well, they just contribute directly to capital generation. So we'll see how the year goes in '26.

But fee income is a big component. And as far as the capital levels go, I think we'll be around 13%. We'll be north of 13% first couple of quarters. We'll see how the loan growth evolves. And the X factor, Phil talked a little bit about from a PCL perspective, as you know, capital also gets impacted when we see migration. Like even this quarter, you see this $2 billion of RWA on migration, which equates to roughly 5 to 6 basis points of capital.

So we'll see how that evolves. That could be the only drag I can think of, which potentially is very hard to estimate, but could be small. But capital ratio is 13% plus. Funding all the organic requirements as we see in the profit plan, I think, is a good position to be in to capitalize on other opportunities that may come along.

The only thing I'll add is tying it into Ebrahim's question around ROE. I mean the strategic journey we're on is business mix, right? And that's around increasing fee income, increasing capital velocity. It's really encouraging to see what Aris' plans are next year in terms of insurance, cards, et cetera, driving fees. You see outsized growth from our Wealth business. You see outsized growth from a fee perspective from Travis' business. So I think this 9 basis points is kind of the floor. And from here, we will grow, which will contribute to the ROE contribution of the overall bank.

Okay. And then just second, just back to the guidance, Phil, the PCL, I just want to confirm this, a little slow this morning. But PCL guidance that you gave, I assume that's for total. And if that's the case, can you break it out between impaired and performing or any sense or -- and then on the International Banking, modest earnings growth, I assume that's off the base, excluding Colombia for fiscal '25. Just wanted to confirm those 2 items.

Yes, I'll start on PCL. The guidance I gave is on impaired PCL.

And as far as your IB assumptions, you're right. I think we have disclosed on Slide 25 and 26, the foregone income relating to the divested operations as it relates to lines because the bottom line is not big, but there's a lot of changes that happens on revenue, expenses, PCL. So you have all the numbers by quarter and the growth rate of modest growth is after excluding the foregone income in 2025.

Your next question comes from the line of Matthew Lee with Canaccord Genuity.

Maybe a bigger picture question. You've highlighted in the past the importance of U.S. presence or an expanding U.S. presence for the North American corridor strategy. But now you've sort of mentioned that M&A is not a priority for this year. Does that imply that you can run the corridor strategy with a larger U.S. footprint? Maybe through partnerships or maybe through Key? Or is the U.S. acquisition still on the wish list, but down the road?

Yes. So let me start, and then Travis, maybe talk to you about what you're building in GBM. But as we've always said, the corridor strategy is primarily focused on Wealth and our GBM business. And we do need to, as I talked about, potential capability enhancement, we do have to have a U.S. offshore booking point for our Latin American wealth clients and our Canadian wealth clients. So that's something that we'll continue to look for.

But in terms of what Travis is building, it's been an organic build over time, and you're starting to see the results from that. And so maybe Travis give a sense of what you're trying to add from a product capability.

Yes, absolutely. Everything we're doing is very intentional. We're trying to build an Americas connected bank, really starts on the GTB side, on the cash management and then follows through, through our corporate investment banking business and our markets business and trying to help our clients navigate both North and South America.

And so some of the capabilities that we're building and that Francisco is leading on the GTB side are going to be very, very important to providing that client connectivity and that durable franchise is the word we use a lot. And so we're quite excited. We think we can do organically. We have a lot of talent that wants to join the bank. And we've been building organically and been very successful at it.

And Francisco, GTB, I mean we had our pilots this quarter for the first time. And this is essentially connecting Canada, U.S., Mexico. Maybe just give the group an overview of where we are in GTB.

Absolutely. Thank you, Scott. I think the important element to understand is what makes us different and how can we gain wallet share in the journey. And geographically, North America is the core. The tool is connectivity, like Travis just said. And I think the tool of connecting clients through cash management is essential. So we're very focused on it.

Super excited that in October, we rolled out for the very first time, our basic cash management capabilities. We have a very clear rollout schedule throughout '26 to continuously enhance that proposition on a connected basis. So we now have a global transaction banking organization for the very first time, and we have a consolidated sales effort that allows us to manage centrally our pipeline and onboarding and roll out of new capabilities, allowing us to prioritize investment and keep track with that investment.

So it is really about how effectively do we cover global clients. And I think Travis has done an amazing job in bringing leaders that understand how you connect global clients and using the right tools in terms of bringing a differentiated value proposition. And as we see in the core countries in which we operate, other global banks leaving that footprint, we now stand in a very important position to capture share as we connect the countries on behalf of our clients.

That's helpful. So what I'm hearing is that you don't necessarily need a traditional P&C or commercial bank to kind of do your strategy?

I think right now, we have so many organic opportunities in front of us but that's going to be the focus area.

Your next question comes from the line of Paul Holden with CIBC.

First question is for Francisco. So just going back to the 2026 growth guidance of low single digits or modest growth. I think that's probably a little bit lower than what was originally in the plan, which would have been, I think, high single digits for this year. So maybe talk about some of the factors that are contributing to it. I'm assuming it's macro, but maybe we can understand better just the intended pivot to balance sheet growth. I know that was an important part of the plan for '26 and if that's still part of the plan.

Thank you. I think what's important to understand is where are we today. And where we are today is in a position of strength. We have now completed the full regionalization of all the business lines and support functions, and that is allowing us to centrally drive the right investment and the right returns at scale. I can't stress enough the importance of the [ WA ] in the transaction. It is allowing us to simplify our operating model and operate at scale in all the countries in which we operate in today. And that is a massive advantage for us going forward. I think the element to understand is that as we pivot to growth, what you're going to see is that GBM, for example, that has been in a very deliberate effort to deselect low-returning loans and clients. We have completed that exercise in 2025.

So you're going to see loan growth in GBM on the double-digit side of things for the first time in the last couple of years. We're now returning -- ROR was north of 2% in GBM for the first time in a long time. And this is all in alignment with Travis' organization in a highly connected deliberate effort to drive multi-country clients penetration and GTV. And that's going to perform strongly in 2026. We just onboarded a new leader, for example, for capital markets, and that's bringing new capabilities that we didn't have, again, accretive to capturing wallet share with clients that we didn't participate in most of those activities before.

When you look at commercial banking, we now have regionalized the commercial bank and changed the strategy to a cash-first strategy, meaning if we don't have cash management, we will not give you a loan, as simple as that. And that's a massive change in our strategy because it's going to drive higher returns, better penetration across the wallet of those clients and drive consistent performance going forward. And on retail, as Scott mentioned in his opening remarks, we're tremendously excited because for the first time, we now have rolled out multi-country a common value proposition for our most important clients, being affluent and emerging affluent under the singular common brand. And that's a major, major step in delivering the strategy that we set out to achieve in 2023.

So when you put all that together, you're going to have mid-single-digit PTPP growth in 2026, trying to offset, still increasing PCLs, like Phil mentioned, and higher taxes. So 2026 is a strong year from the performance point of view, but we have some offsets to do. And this is also in the midst of a geographic GDP growth, which is still very modest. I mean you're seeing Mexico barely breaking the one -- the positive growth GDP for 2026. And still Chile, Peru and Colombia not benefiting from political change resulting from elections that we will see in '26. So it's a strong year within very much the strategy and time line that we set out to achieve in 2023.

Got it. Okay. That's helpful. And then a question for Travis. I guess it's almost kind of along similar vein because we've talked about a number of drivers, I think, for your business, Travis. Maybe you could highlight sort of -- I don't know if it's top 3 or whatever the right number is, what would you say are the top drivers that are going to contribute to that revenue and earnings growth in 2026? In other words, what should we be tracking for success in '26?

Sure. Listen, excellent question. I'm pretty proud. If you look at what we did in 2025 and some of the drivers, which I think will continue, we clearly had significant net interest margin expansion, and it's just absolute relentless focus on our balance sheet, thinking about our capital velocity, understanding how we price our deposits, driving more core operating deposits and looking at our loans. We haven't changed the risk profile of our lending book, but I think we've been highly selective on our loan portfolio. You've seen our loans were actually down and our ROE is up significantly, and we've still been able to maintain the fee growth and the net interest margin expansion despite the loans coming down. So I think that just highlights a little bit about the discipline that we're having on our balance sheet.

And I think from a strategic standpoint, there's a lot of low-hanging fruit. I mean when we just think about the -- exactly what Francisco said, the global connectivity of this franchise is incredibly powerful, unlike any bank I've ever seen. The ability to connect clients from Canada to the U.S. to Latin America, there's no other bank that can replicate what we're trying to do. And we see tremendous opportunities. We see relatively low penetration rates of some of our clients, and we see a lot of cross-border activity. So I think as we continue to build that connectivity and continue to build the capabilities on the products and on the services and on the advisory side, I think you'll see our fee income and our noninterest income continue to grow.

On the market side, I think we remain incredibly disciplined. We clearly have some beta and alpha in this quarter. You've seen highly constructive markets. You're seeing spreads at all-time tight. You're seeing the capital markets incredibly constructive. You're seeing a lot of our clients access the capital markets, and we're playing a leading role. And I think as we upscale our coverage and our advisory capabilities, I think you'll see more growth in those line items, too. And so I look around and we've been pushing on every single driver in the GBM business. And I think that this beat is reflective of every single one of those things hitting well, and we're going to hopefully continue that momentum. And our pipelines remain healthy right now.

Your next question comes from the line of Mario Mendonca with TD Securities.

Can we start on the deposit strategy first? Maybe just in Canada specifically, speak to the sort of runoff of these commercial deposits that we saw this quarter -- not commercial, I'm sorry, term deposits that we saw this quarter and the growth in retail. Maybe just describe what you experienced in the quarter and what your outlook is on the domestic deposit front.

Sure. Thank you for the question. Before I dig into that question, just to remind everyone on the strategy in the Canadian bank. And it's threefold. It's driving the primacy of our clients' debt. That's the first, and that's continues. The second one is the business mix, changing the business mix and changing the operating model, improving them both, and that feeds into the deposit question. And third is a very intentional deployment of capital and marginal costs in our business, and that's what we continue to do.

Now getting back to the deposit question. Since Investor Day, we've added $22 billion in deposits and $15 billion in mutual funds. So we've become a money in bank. This is very different from the way this bank operated in the past. More importantly, as rates have come down and people have gotten out of term, we've been managing to capture that in our day-to-day savings and investment fund business. And we've had a record amount of sales in mutual funds in the quarter in the Canadian bank.

And this idea of getting primacy is driving across the whole value chain, whether it's scorecard improvements in the branches, focus on payroll and focus on very deliberate pricing and personalization strategies to drive more deposits from our existing base, but also what we call competitive steel. That is up 13% quarter-on-quarter as we get more clients from outside into the bank. So all this is driving what you saw in the fourth quarter, improved NIM in our deposit book.

And this continued focus on deposits is what we count on doing quarter after quarter. We're seeing it every quarter and also linking it to the day-to-day savings growth you saw in the quarter. I think we're up in the retail side, 7% on day-to-day and 17 -- or sorry, 14% on the savings. So it's materializing. We're seeing it in the numbers. This will continue quarter-on-quarter. But I think it's also important to talk about how we're getting longer-term relationships to our investment fund sales in the branches, something that we were historically not very strong at, but now we're seeing record levels.

And I would pass it on to Jacqui, who is working very closely wealth in the Canadian bank in creating this connection and getting the right banker in front of the client to ensure we get the wealth of the client. So Jacqui?

Yes. Thanks, Aris. I actually think that's the best marker of our strategy execution of the net sales growth momentum that we have built together between Wealth and Canadian Banking. Obviously, markets have been really constructive for us, both in the quarter and the full year. But together, we saw $4.8 billion in net sales in the quarter between retail and wealth that to put it in perspective, that was a 16-quarter high for us. It's also a record quarter 4. And I'd say also, this isn't a quarter 4 story alone. This has been a consistent trend for us for the whole year. Our whole year net sales, I think, Scott, as you said, is up $11.5 billion versus the prior year, while $7 billion of that improvement came in Canadian retail channels alone.

Just to pile on to Aris' point, since Investor Day, we've seen an 850 basis point improvement in our retail client base for investments, which is quite remarkable. The rest of the growth is coming from our Wealth businesses. Full year net sales in Canadian Wealth Management is up 54%. International Wealth is up 76% from the prior year. And I said that we would expect this momentum to carry into F '26.

All right. If we could move over to mortgages, again, domestic. Could you help me understand that the origination dynamics this quarter, like 30% up in the GTA, it was down sort of meaningfully last quarter. So obviously, something changed in mortgage originations in the GTA. And then also help me understand that the extent to which mortgage growth is emerging in the broker channel versus, say, Scotia Advisors or the branch channel. Those are the 2 mortgage questions I have.

So just a bit of background on the mortgages in the quarter. So we saw a bit of softening in the GTA and the GVA, especially in the condo market. But that said, mortgage applications quarter-on-quarter are up 13% as lower home prices in Toronto and Vancouver are bringing buyers back as well as lower rates. So we're seeing a little bit of a pickup in demand, and we should see that more continuing into 2026 as affordability improves. And there's a very active refi switching market going on, given the big increase in maturities that we will see next year as we saw this year.

Now our growth is being boosted, of course, by the work we've done on renewals. We've been very strong. Our portfolio renewal rate in the fourth quarter was over 90%. We've invested a lot in virtual advisers who are driving renewal volume. So that's been very strong. We're also seeing good front book margins in our mortgage business in the fourth quarter. And of course, Mortgage+, which we've talked about today in our broker channel, 99% of all originations are coming with a mortgage bundle.

In terms of the originations, your question, we're getting roughly 60% in our broker channel. We're getting 35% in our HFA channel and the rest through our branches. Total originations in the quarter, in Toronto, in the Toronto region have grown, I think what's the percentage? I don't know, off the top of my head. But have gone from $3.5 billion to $4.5 billion year-on-year. So it's -- as I said, as the lower home prices are kicking in and affordability, they're starting to see a pickup there in terms of originations in the GTA.

Your next question comes from the line of Darko Mihelic with RBC Capital Markets.

My question is also for Aris. And I'm just trying to pin down a better understanding of your comment that fee revenue will also be stronger in 2026. And what I'm specifically after is I'm trying to understand private equity and how that's helped you. This is the second quarter this year where you mentioned that private equity gains have somehow benefited the Canadian business.

So I'm wondering if you can maybe just size that, like annually, how much are you getting from private equity gains, where it's coming from? I'm -- a little bit unclear to me. And what your expectation is for 2026 on that front?

Darko, I'll start on private equity and then pass it on to Aris on the fee. I'll be quick. Private equity earlier this year in Q1 was over $30 million. I think it was $33 million, if I remember right. And this quarter, it is like a little over $10 million. So it is a reason when you look at year-over-year, which is the comment I made on private equity gains helping us with the noninterest revenue.

And private equity is something that's hard to forecast, Darko. It comes down to our folks who manage that. It's a small portfolio. It's not very big. It's primarily through the Roynat business that is part of the Canadian Banking portfolio. And there from time to time, if they believe that the investments that they made and sometimes many years back, when they realize the full potential value or they end up going public, we realize gains.

So it's not something that we look forward to forecasting, but it does create some noise when you look at noninterest revenue when you look at it quarter-over-quarter or year-over-year. So would it be another $50 million a year? Unlikely, I would say, in 2026. But then it's also very hard to predict if the valuations are there, they will make the decision to take the gains.

Aris, do you want to talk about fees?

Sure. On fees, as I mentioned earlier, there's 4 important fee components in the Canadian bank that we'll see acceleration in F '26. Mutual fund fees as we continue to drive mutual fund sales in the branches, we're starting to really build up momentum there. You see it quarter-on-quarter. I think card fees will also increase as we now reposition the card portfolio to more premium cards, we're seeing the spend per account go up and the actual value of our card business increase as the premium clients take up a greater proportion.

Third is insurance. Of course, insurance is an important part of our business linked not only to our lending business, but also stand-alone. We've invested and continue to invest in our insurance business, we'll start to see some pickup there. And then finally, cash management in commercial and small business. That's another growing component where we're investing a lot of money and effort and sales people in the field to drive transaction banking in Canada to strengthen primacy. So between these 4 drivers, we're going to see close to double digit, if not double-digit fee growth in the Canadian Bank year.

That's very helpful, Aris. I appreciate that. And for the purposes of this call, I'm going to try and keep my last question very, very simple and straightforward. I think it's aimed at Travis, but maybe, Phil, you can also speak to this as well. I'm getting a lot of questions on private credit. And essentially, what we're looking for is we really want to be able to measure Scotia's sort of exposure to private credit relative to others that actually have a call report.

So I wonder if, Travis, maybe you can speak -- I'm assuming most of this is coming from the capital markets business. I wonder if you can tell us sort of the on-balance sheet exposure to private credit and maybe even off-balance sheet or like noncommitted lines. And then, Phil, the pertinent question might be what do losses look like for this kind of business in a stress test?

And Darko, this is Travis. Listen, excellent question. I -- totally -- there's some broader market questions around private credit, and they're very understandable. If you sort of step back and think about it, there's been a massive growth in nonbank financials, a lot of estimates in the U.S. that that's nearly 2/3 of all assets. This is really a result of Dodd-Frank, and you've seen the move. And so it's sort of hard to be a bank and not have some sort of connectivity to the nonbank financial market.

But if you step back and just sort of think about what we do in the nonbank financials, we have roughly $31 billion of loans outstanding. If you just unpack that a little bit, Darko, around half of that is subscription finance and then the other half would be in the private credit -- I'm sorry, about half of that is in the private credit market. And then if you break that half down, half of that would be subscription finance and the other half would be in the CLO business.

But if you look at what we do in those businesses, those are highly rated, where our effective average rating is between A and A+ or AA. So we're not really -- we are not participating, I can tell you, in the equity or the lower quality tranches, if you will. And so we feel like we're participating in a very high-end A+ rated part of the capital structure within this portfolio, and we're quite comfortable with it. We've hired some real experts, both on the risk side and on the banking side. So I'm happy to take any more questions you have on that topic.

And Phil, we do we do frequent stress test as we can talk about. I'm happy to go through that or Phil can on the stress testing side.

And maybe I'll just jump in quickly, Darko. We've been along for the ride with Travis and his team on this journey. And we've been -- obviously, we've been staffing up the risk team as well. And just in terms of stress testing, we do run rigorous stress tests. And I can tell you, even in extreme cases where all exposures are downgraded to noninvestment grade, projected losses in this book would remain a fraction of the net revenue that this business generates, which really underscores the strength of our structures and the underwriting that we have underway.

That's very helpful. Travis, just a quick question. If $31 billion, if half of that is private credit, what's the other half?

The other half would be just traditional insurance companies, pension funds and some other holding companies. Again, all highly rated.

Your next question comes from the line of Jill Shea with UBS.

Perhaps just piggybacking on Mario's earlier question on deposits. You already addressed some of the nice progress you're seeing on your deposit strategies. But perhaps just tying that to your net interest margin outlook, like when we look at the year-over-year margin that's improved with lower funding costs. I'm just curious if there's any more room to go with funding costs continuing to come down or a favorable mix shift away from term?

Sure. I can start this at the all-bank level, Jill. Absolutely, deposits are a big component of where we see the net interest margin expansion coming from, apart from the repricing that we have, it's going to happen in the fixed rate mortgages that I mentioned and we've disclosed it in the 2026 year. So both are going to contribute. 240 basis points NIM this quarter expanded 4 basis points. We see that continuously expanding each quarter at more modest levels to be completely clear. So it's not going to come from the funding cost benefit that we saw in 2025, which is our wholesale funding costs coming down because we're not forecasting any more rate cuts in Canada. Obviously, if it happens, it's going to help us.

But it's primarily going to come from the Canadian bank. It's going to come from our GTB operations. Like this quarter, we have started disclosing GBM's NIM for purpose because GTB has contributed to GBM's NIM expanding 14 basis points in 1 quarter. It's worth a little over 2 basis points for the all-bank. And that's going to continue. We talked a lot on this call about the investments we're making on the GTB front. So it's going to come from good quality deposit growth in the Canadian bank, margin expansion on the mortgage book and from the GTB deposits. You should see this happening incrementally each quarter. Like I said, modestly, not 4 basis points each quarter, to be totally candid with you, Jill, but I think you should see expansion happen throughout 2026.

And there are no further questions on the line. I would now like to turn the meeting over to Raj Viswanathan.

On behalf of the entire management team, I want to thank everyone for participating in our call today. We look forward to speaking to you again at our Q1 call in February. This concludes our fourth quarter results call. Have a great holiday season and a great day.

Great. Good morning. Welcome back, everyone. Our next presentation, we have with us Phil Thomas, Chief Risk Officer. Welcome, Phil.

Thanks, Brian.

You recently reported 3Q results and your impaired PCL ratio came in well below what you had guided to during 2Q's call. Can you remind us what drove that improvement? Why are you cautious about reading too much into that as you look out into Q4?

Sure, Brian. Thank you. And listen, it's a real pleasure to be here today, and thanks for everybody for attending. Maybe before I get into that question, maybe just a few comments. And we had a great quarter last quarter, really proud of how the bank performed. I think you heard on the call, Scott really is starting to shift us towards a growth discussion. And I think that's important to maybe dig into that a little bit. And if you look at our Canadian retail business, there's a tremendous opportunity to continue to enhance and expand that business. Today, we have about 30% of our retail customers that we would consider primary. And primacy for us right now, we're trying to get back to basics, focusing on banking 101 and really trying to deepen relationships with existing clients, and we see that as a huge opportunity.

And if I double-click on that, look at specific segments that we're focused on credit cards, Scotiabank is underweight on credit cards compared to peers, small business, mid-market commercial. These are all businesses and segments that we could generate more net interest margin to really improve the profitability of that business. And from a risk perspective, we've significantly invested in the area over the last 12, 24 months. We've brought in new talent, introduced new technology, enhanced our collections capabilities. Really, really focus on a model enhancement as well. And so we feel from a risk perspective, we're in a really great place to support that level of growth.

And then lastly, maybe a couple of comments on international, an area of the bank I know quite well. I spent a good part of my career in that business on the business side. And the focus right now is on top -- 3 top-tier segments. So we're very focused on affluent, emerging affluent and the very top of the mass segment. And that's gone very well. There's been a big shift towards that primary customer focus in that business. And again, from a risk perspective, very much involved with Francisco and his team to try to drive that opportunity to build that business over the coming years.

Now going back to Q3 to your question. Yes, it was -- I was very pleased with the results, particularly on the impaired side this quarter. If -- maybe tell you how I think -- if I think about international, we had -- I would probably describe the quarter as stable. And we've seen that business performing well from an impaired PCL perspective quarter-over-quarter, we've seen marginal improvements. And I like where we are right now with that business. If I think about the nonretail business, we were down about $14 million quarter-over-quarter. It is a lumpy business. As you know, you have 1 or 2 credits that could potentially throw things off. I'm very focused on the Canadian commercial business right now, just given the uncertainties around trade. And I would say there's nothing in that business that particularly worries me. There's no systemic issue. There's a few files that management is just digesting the new reality of this sort of the tariff headwinds that they're facing.

And then maybe turning to Canadian retail. Lastly, that is where we saw the largest improvement on impaired PCLs in the quarter. And that was primarily driven by 2 portfolios. Although every portfolio was either flat to improved on the impaired side this quarter but our auto book, we saw significant improvements in impaired, and that was mainly driven by pardon the pun, by the cohorts that were originated in 2022, 2023 at the tail end of the pandemic when you had a lot of -- not a lot of used cars, people buying -- or sorry, not a lot of new cars, people buying used vehicles. And that portfolio is aging and we should see that migrating out of our portfolio -- good lines of credit. We're also quite down this quarter. But so were credit cards, mortgages, mortgage delinquency was essentially flat quarter-over-quarter. We did see some uptick in variable rate -- or sorry, in fixed rate and a big improvement in variable rate. But I would say, Brian, generally, if I look back at the quarter, very happy with the -- how impaired PCLs have been trending.

And then maybe looking beyond Q4, how do you think impaired PCL ratio is likely to evolve from here? Have we seen the peak? And if so, should we expect a slow decline from here? And what are the factors at play in this assessment?

Yes. Listen, it's -- there's so much uncertainty right now in the macro. We had an unemployment print at 7.1 this past week, which obviously, that has an impact to the consumer. If you dig into that unemployment number, it's actually quite interesting. If you look first geographically, you're seeing Ontario, which is where we have our largest customer base, quite flat in terms of unemployment. You have the Western BC and Alberta that are up slightly. Atlantic Canada, which is flat to down, Quebec, which is improving. And so if you look at where we have our biggest market shares in Ontario, Atlantic Canada, and where we have opportunity to grow is probably in the western part of the country. That will have some impact, but it will be balanced and managed.

And so you take all these different factors that are coming at us. The other, I would say, on unemployment, the other area of watch is young Canadians are tending to be more impacted through this. I think the segment is between 15 and 24. And you're seeing some of that in our portfolio as well. As I mentioned on the call, it's usually young Canadians that we're seeing that are having some stress. Now for us, that's not a significant part of our portfolio. It's less than 1% or 2% of the portfolio. So it's not a significant worry, but it's a watch and a bellwether for what's going on in the economy. So as I look into Q4, you have all these variables that are happening. I like the impaired PCLs are trending, but we have all of this macroeconomic uncertainty. And so I would say we'll give guidance on the Q4 call. But if impaired were plus or minus or up a little bit, I think that would probably be a good outcome still.

And then maybe what is the current state of the Canadian consumer? It appears that things are looking better versus Q2, but the labor market is still challenged and trade uncertainty has not gone away. What are spending trends telling you right now?

Yes, it's a good question. I think the general pulse, there's still -- people are still trying to digest what's going on with the trade uncertainty. And whether you're speaking to large corporate clients, commercial clients or just the average Canadian that's looking at buying a mortgage. And they're not sure given the impact of trade uncertainty, what's going to happen. I will say there's positive signs in the market. We are really encouraged by what the Carney government is doing and how they're bringing large infrastructure projects to bear. I think defense spending, increase in defense spending will add a shot in the arm for the Canadian economy as well. And so we view these things as very positive. Lots of still constructive discussions about interprovincial trade barriers.

And so there's a lot going on, and there's very much a pent-up demand to deploy capital into the market, and we're very encouraged by that. In terms of spend patterns, we -- for this quarter, we actually saw discretionary spending increase for the first time since Liberation Day, and I think that's also positive. However, we're seeing certain things that we see more Canadians spending more money at home, less travel into the U.S. We see border communities in the U.S. that normally we would see spending in our consumers. That's not happening as much. And so I think the sooner we can get some stability around the trade situation and the better it is for both the U.S. and the Canadian economies.

Great. And then focusing in on Canada. The Canadian housing market has been very resilient for a very long time. But it does feel like prices are under more pressure than they have been in a long time as well, especially in the condo market. Can you give us an update on the state of the market right now?

Yes. I mean I think, again, we're mindful and it's an area that we monitor and watch very carefully as well. The Canadian mortgage market is very resilient, and it's a cornerstone of how the Canadian economy operates. I would say from a condo perspective, at least as it relates to Scotiabank, we don't have a great exposure. We've been very purposeful on the developer side how we've been lending into that business. So we've been very focused over the last 5 years on Tier 1 developers in Tier 1 cities. We're not seeing a lot of customers walking away from condos, which I think is fairly consistent with what's happening within the industry. And so as we look at the market, we'll continue to be guided. We're doing our ongoing stress tests. And frankly, it's not -- it wouldn't be in the biggest area of concern for me right now.

It doesn't sound like you or any of your peers are particularly worried about the impact of housing on credit performance. Why is that? And despite that, what areas of the market are you most concerned about?

I would say, even with this new unemployment number coming out, there's -- I think the market is priced in about an 80% probability that interest rates will continue to go down, and that's credit positive as we look at repayment rates in the mortgage business. I think right now, the average payment increase from point of origination to current payment is about $200. And so that's -- we view that as manageable. Next year, that number goes down to about $130. Now these are averages. And so obviously, you could have a number at the higher end or the lower end of that. But we view that on average to be quite manageable. And I think my peers would probably agree with that.

Sorry, what was the second part of your question, Brian?

Just what areas of the markets are you most concerned about?

I mentioned Canadian commercial right now. But I think again, I'm worried -- I'm not -- I wouldn't say I'm worried about it. I would say, I am -- we're watching it very carefully because it's not a systemic issue. Again, it's certain businesses just digesting the uncertainty as it relates to trade. And so we're working with our customers as we always do during periods of stress. But as I said, I'm encouraged by the infrastructure projects that Canadian government is pushing. I am encouraged by the opportunities that we have in the defense sector. And I think that, as I said, there's a pent-up demand to deploy capital. So I still hold myself cautiously optimistic that we'll get through this period in really good shape as a country.

All right. Given the move down in rates, investors seem to be less concerned about payment shocks in the big mortgage renewal years of 2026 and 2027. But can you give us an update on what kind of shock your customers are likely to experience? Can you talk about the tail risk here?

Yes. So as I mentioned before, that's that $200 per payment. That's what that shock is right now. And so if you think about it, maybe that's you go out to dinner with somebody, you're spending that much money. So maybe it's -- we're seeing -- it's those type of choices that people have to make in their day-to-day to be able to afford that. And as I said, into 2026, that number declines down to about $130 per monthly payment. And so again, quite manageable. If I think about tail risk, it's still below 1%. And so again, still quite manageable.

All right. Maybe taking a deeper dive into your International Banking segment. The impaired PCL ratio there was 129 basis points in 3Q, down from 131 in 2Q and 146 in 3Q of 2024. What has driven that improvement? And how sustainable is that?

Yes. A number of things have driven the improvement. As I've mentioned in my opening remarks, this push towards primacy is very helpful. And you do see when you have the primary relationship with the customer, there's more -- there's a higher propensity for repayment. And so we like that from a risk perspective. Within that number also is the sale of CrediScotia, which is a microfinance business that we had in Peru. So that's contributing to that number as well. But I think primarily, what I like about what I'm seeing in International is that shift -- is the strategy shift away from that mass market lower-end growth to that affluent -- emerging affluent and top of mass. And that's really the space that Scotiabank wants to play in, in these markets moving forward.

All right. Despite the decline in the impaired PCL ratio in your IB segment, we can clearly see delinquencies rising in mortgages. Is that all in Mexico? And can you help us understand what's going on in that portfolio?

Yes, that's a great question. And that is really -- it's similar to some of the comments I made about Canadian auto. That is the write-off policy in Mexico is a 5-year write-off policy. And so that is just us aging through mortgages that were deferred through the pandemic. So again, it's just working through and seasoning of that portfolio. That's the only issue that's driving that number.

All right. In Q3, we saw GIL formations rise in both Canadian and international commercial. Starting with the Canadian commercial, what is driving that?

Yes. I mean as I mentioned, we're seeing some stress in that Canadian commercial portfolio. But it's important to note that increases in GILs don't lead to a 1:1 increase in impaired PCLs. And most of the lending that we do, we're very focused on having strong collateral. And so again, it's just us working through difficult times with the customers. And it's similar if you look at in Chile, as an example, where we had stress in the commercial real estate portfolio in that market. We are in a process right now of working with our customers trying to finish the projects that they have ongoing in order for us to be able to -- or for them and us to be able to sell out and to get out of those loans. Now in Chile, you see there's a demand for housing that market is really starting to come back. And so as I said, we're working with developers to finish the projects, and so that those GILs will not result in losses. And as I've said publicly, but we're not going to lose any money in these businesses in Chile.

All right. So you're not -- it doesn't sound like you're very concerned about.

No. And if I go back to Mexico again, and just in the commercial space, I actually view that as an opportunity. We've spent a lot of time with the business team and the risk teams trying to figure out what is the right spot that we want to play in, in that business in Mexico. We've invested in both talent and in tools and technology and controls in that business to really restart how we think about acquiring customers in Mexico commercial. As I said -- as Scott has said and others, our portfolio -- our strategy rather, is really focused around this North American corridor, so Canada, U.S. and Mexico, and we want to be a player in that space in Mexico, and we see an opportunity to do that.

So -- and I say in overall, then why don't you expect this to lead to elevated impaired PCLs going forward?

Yes. So as I said, strong collateral. We -- Scotiabank tends to be a more conservative lender. And so while there's some stress in these portfolios, we're not expecting them to lead to losses for the reasons I stated earlier.

On the call, you talked about younger demographics facing challenges. How big is your exposure to this particularly hard hit cohort?

Yes. I think I mentioned earlier, it's less than 1% or 2%. And so I mean, we're not a big credit card player. As you know, as I said earlier, I think it's a big opportunity for this bank to go deeper into credit cards. And usually with younger -- that younger demographic, it's usually an unsecured line of credit or a credit card. I said it's 1% to 2%. So it's not a significant portion of our portfolio. But I think if you -- again, you look at what -- where unemployment rates are headed in the country, that data, it's easy to understand where -- that's where the stress is coming in the economy.

On credit card, do you think there's much difference between the dynamics in the card market in Canada versus the U.S.? When you look at U.S., I mean that's not a little bit credit focused, but a lot of the cards are driven by rewards programs. If you think about -- as you look at your risk in cards, are there areas that you think that where you're going to like maybe take market share that way?

Yes. It's a wonderful question. Thank you for it. We have this fantastic asset called Scene+ in Canada. And we have this wonderful partnerships with travel, with groceries through the Empire brand with Cineplex and movies and others. And there's right now, 15-plus million people in this loyalty program. And we haven't yet penetrated that to a great extent. And so I do think from a credit card perspective, as we look at expanding the credit card portfolio, it will first happen with our own customers. As I mentioned, we only have 30% primacy with our current customer base. And so there's an opportunity to go deeper with those customers by leveraging Scene+. It's a fantastic loyalty program. I think it's very difficult for anyone on the street to compete with that. And we need to do a better job in talking about it and marketing it and then really deepening that with our customers. It's a great asset that we have yet to fully exploit.

All right. And then have you done any stress testing on this scenario where like the U.S., Mexico and Canada agreement is not renewed? What would the impacts be? Have you done the exposure to tariff exposed industry?

We sure have. That's definitely been a big focus for us over the last 2 or 3 quarters. And so obviously, we do the macro stress tests. And then we've also been through portfolio by portfolio and then customer by customer to see the impact. And so for us, on the corporate or nonretail side, corporate and commercial side of the business that really equates to about 8% or 9%. And so probably very similar across the Canadian peer groups, but that would be what we would consider potential tariff-impacted industries. And again, if you look at -- as I start to look at customer by customer, and we've been doing this on quite a consistent basis, you have -- many of our customers, even those that are impacted by tariffs are well capitalized, lots of liquidity and strong collateral. So we're -- I think we're -- obviously, there's going to be potential headwinds coming up. But as I said before, I'm cautiously optimistic.

Talking about the USMCA agreement, even though it doesn't -- it renews in July, you're going to start seeing like U.S. trade representative has to file with -- in the CFR and make a review, I think, by the end of the year or starting in October this process. Do you think that could be like a catalyst of in terms of improved reduction of the uncertainty around trade?

I hope so. I mean I hope that whether it's the Sheinbaum, the Carney and the Trump administration can really come up with a solid plan for USMCA moving forward because I think it's far none probably one of the best trade arrangements globally. And again, I'm really encouraged by the meetings that we've had with the Carney government or recently with the Sheinbaum government administration. And I think there's a willingness to work bilaterally and trilaterally with. And I think as someone who's had the opportunity to work in each one of these markets, I think there's -- it's a huge opportunity for us to be a powerhouse as a trading block. And Scotiabank's so uniquely positioned because we're the only bank that operates in Mexico, the U.S. and Canada and to be able to -- it's a great opportunity for us to be able to leverage that platform, especially for our corporate and commercial clients that want to have that multilateral trade arrangements across geographies.

Speaking of the Scotiabank's North American corridor strategy, it's been about a year since the investment in Key. And one of the things we talked a lot about is like partnerships with Key. Can you talk about how -- like from your perspective as a Chief Risk Officer, aligning kind of risk visions, culture and strategies of that partnership with Key?

I think Key is a great bank. And I was involved in the due diligence when we're looking at partnering with Key, and I was very impressed with how they think about risk. And in fact, the Chief Risk Officer was up visiting us in Toronto a few weeks ago, and he and I had a wonderful discussion. We had a bit of a roundtable with his direct reports and my direct reports. Just talking about the economic outlook, the regulatory outlook. And there's a lot of great thinking. And one of the things I loved about Key when we were first talking with them is just the cultural fit between BNS and Key. And certainly, from a risk perspective, very similar thinking about how to take risk, where we want to take risk. And so again, I think it's -- I think Key is a tremendous business, and I think we're really lucky to have that partnership with them.

Great. Before we open up to the audience, is there any other areas that you'd like to mention or talk about?

Again, I think I go back to some of my earlier comments about the Canadian bank. And I really think that the retail business there, there's a couple of tremendous assets that we have to be able to exploit. And I mentioned Scene+. And certainly, from a risk perspective, we're very much getting geared up to support credit card growth, small business and mid-market commercial. And we think that getting the basics right is important in that business, really focused on the proper credit landscape, the proper credit lens, but really working with the bankers to be able to grow that in a really profitable and healthy way. And so that's going to be a large part of my and my team's focus as we look forward into 2026.

Great. I open up any questions in the audience? Very quiet. I pretty much covered it. Thank you very much, Phil, everyone. Please join me in thanking Phil for his presentation.

Good morning, everyone. So I'm told I can't ask questions today, which I'm okay with, but I can welcome you all on behalf of the bank to the 26th Annual Scotiabank Financial Summit. And I also want to thank you for your business and for your support. For the next 2 days, this room really is the center of the Canadian financial services universe, and we're tremendously proud of that.

I'd like to call up Mike to the stage as formally passing the baton on to him. And it is my pleasure. Please join me in welcoming our first speaker, Scott Thomson, Scotiabank's President and CEO. Have a great conference, everyone.

Good morning, everyone, and good morning, Scott. Nice to see you as always.

Welcome to your first conference.

Thank you very much. I'm excited to be here and getting right into it. I thought maybe we could just start on the quarter. Obviously, we never want to fix it on any given quarter, but just the way the market perceived the quarter, the stock was up 7%. And the biggest gain in the day since May of 2020. So obviously, a lot of things that the investors liked about the quarter. Do you want to just maybe offer some high-level thoughts, really high level and the notion that maybe this is kind of like an inflection point for Scotia, I think investors are thinking that way.

Yes. Listen, we're 7 quarters into the journey, right, that we laid out at Investor Day. And the north star of primacy and the kind of the philosophy change from volume to value. And it was good to see coming through this quarter. It actually came through last quarter as well. It's just with the big performing build that was hard to see. But coming through this quarter, you started to see that optimized balance sheet, but still actually driving revenue growth and whether it was in our commercial bank, where loans were flat, but PTPP was up or in our GBM business, where you saw a 14% reduction in the balance sheet, a 29% increase in fees or what we've seen in our international bank over the last 2 years now where you've seen income grow and return on equity increased by 350 basis points yet balance sheet is kind of flat to down and GBM LatAm is actually down.

And so overall, this optimization of the balance sheet, making sure we get the organization focused on value over volume has been important. And now the pivot starts, right, in terms of profitably, sustainably growing into the future. And that's how we're going to meet our medium-term targets that we laid out at Investor Day. So it was a good quarter. Huge credit to the 90,000 Scotia bankers who have been relentlessly executing on the strategy for the last 2 years but more good quarters to come.

And then just on that value versus volume dynamic and obviously, the focus being on the customer primacy. Can you talk about some of the tangible benefits that you're seeing? I know it's not just in the numbers, but in terms of those client relationships developing into something greater than they were in years past. Just maybe touch on that a little bit.

Yes. I mean I think one of the observations through the strategy work that we did with the Board and with the team is we were great lenders, and we used our balance sheet effectively. But primarily, we had a lot of monoline clients that didn't surround the whole bank and the capabilities of the bank. And in some cases, we didn't have the capabilities to drive the fee income, which is more capital-light and higher return on equity driver. And so that is this kind of pivot that we're doing is making sure that we're really focused on multiproduct clients in our retail business and really focused on cash management and a holistic relationship with our corporate and commercial clients.

Now that requires -- it takes time because you have to develop the products, you have to make sure the incentives are right. You have to have the capabilities in place. And that's what we've been doing in the last 2 years. And so changing the FTP, the fund transfer pricing was a big step forward for this company because I think historically, we were subsidizing the balance sheet and under incenting deposits. You get that FTP right, allocate the costs appropriately to the business lines and then you start to see the right price incentives. Similarly, getting the capabilities in place, think about Travis' business in GBM, we've been adding product capabilities, whether it's securitization, whether it's CLO whether it's mortgage capital markets. A little bit of leverage lending, DCM, right, which then allows you to create that holistic relationship with your primary clients, make sure you're lending to the right clients and ultimately seeing a higher ROE.

And you saw that higher ROE come through. I think it's a 200 or 300 basis point improvement in ROE in our GBM business over the last couple of years as well. So that's the volume-over-value philosophy. I think loan growth is important. It's a primary indicator of client health and macro health. And we will continue to double down with primary clients who need the balance sheet, but are also thinking about other product capabilities. And next year, as you go into 2026, I think you're going to see a combination of this operational excellence approach in terms of effectiveness, efficiency on the cost line and you're going to see loan growth, which will allow you to have positive operating leverage, positive revenue growth and increased ROE as we go into 2026.

So fair to say that optimization of the client base is well into the later innings and then the loan growth dynamic is going to come as a result of...

I mean listen, we've been at it for 2 years. So I'd say Francisco has been very consistent in IB that, that was a 2-year period transition. I think we're probably a little bit ahead of where we thought we'd be in IB because of the great expense discipline. Going forward now, we've got to get that retail business in IB, firing in all cylinders. And we have to -- we've taken the last couple of years as Mexico has gone through their transition to get the foundations in place. But yes, you're going to see growth in IB next year, modest growth, but you're going to see growth on the asset side.

In Canada, I think commercial has been such a great kind of example of this philosophy because you've seen PTPP growth up 16% and loan growth flat. But ultimately, we would like to grow more into the mid-market where we haven't been a player historically. We've been primarily in the real estate sector, so moving into the mid-market. And then in business banking, where we're kind of ranked fifth in Canada relative to RBC at #1. We've got to get that business banking business growing. It's deposit rich. It comes with a great return on risk-weighted assets. And for the last 2 years, we've been growing at 2x the market rate. So there's a path here, but it takes some time in an environment that's competitively tough and macro tough as well. So just keep going quarter by quarter by quarter by quarter.

Got it. So before we get into some of the business lines, maybe a question on credit. I know it's always topical for your investors. Obviously, it's been somewhat volatile for all the banks with the tariff risk and how that's evolved over the past few quarters. Can you offer any thoughts on the bank's sort of view on credit right now? It was a better quarter. There was some good trends in the Canadian retail part of the book as well. And yet it sounded like there was still a bit of cautiousness on the part of -- I guess every Chief Risk Officer tends to be on the more conservative side, but anything beyond just caution for the sake of being seen as prudent as opposed to -- you're not seeing anything necessarily in the book that would concern you?

Well, back up 2.5 years ago when we started, one of the objectives was to get a strong balance sheet, right? And so we've built $2 billion of ACL, $1.3 billion of that is performing. I think our ACL ratio right now is 94 basis points. It was 73 when we started this journey. And so we've really fortified that balance sheet. When Liberation Day came, we had a big performing build last quarter to prepare us for any eventuality. So we didn't have to have that performing build this quarter. And encouragingly, impaired came down this quarter. That was primarily driven by the Canadian retail book. And so we saw some improvements in auto, and that's coming off that 2021, 2022 moment where we're volume-based focus and ended up with some auto loans that we probably shouldn't have.

But that's kind of that as Phil said, the pig in the python is coming through. We're going to see that improvement continue. I think our consumer clients or our Canadian clients are still under stress, but they're managing effectively. I'm not really worried about the mortgage book. I continue to worry a little bit about the cards business, but we're fifth out of a relative basis. And then one area where we need to keep an eye on is commercial. And we had a couple of accounts in that commercial side that we're keeping a really close eye on and that had a little bit of an uptick in impaired in this quarter. So we have to be thoughtful about that. In IB, just continued discipline, continued discipline to drive that impaired performance down quarter by quarter by quarter.

And so the messaging that Phil said was we're not through the woods, but we do have a pretty good confidence that you're going to see impaired come down throughout 2026. But as it relates to the fourth quarter, I think we said the expectation of about where we are today. So that was a -- whether you call that conservatism or just thoughtful given the uncertain environment we're in, I think that's the right place to be.

Got it. And maybe now we can touch on some of the business lines. Obviously, Canadian Banking has been a big focus for investors. It had been underperforming the peer group for a while. And I guess people are now starting to ask, have we sort of hit that point where Canadian Banking has now truly turned around? And again, not to make too much of one single quarterly result, but certainly, that was probably a big part of why investors really liked the stock's reaction, I guess, on earnings day was largely.

Yes. I mean, you have to -- I mean, take a step back, too, right? I mean when you allocate the fund transfer pricing out, which we did, you see that Canadian bank is gapping to its peers by about 500 basis points on ROE, right? And so historically, we've been a very strong mortgage player and a very strong auto player and we've been under penetrated in cards. We've been under penetrated small business. We've been under penetrated commercial mid-market. So there's nothing revolutionary about this strategy. This isn't a 101 strategy to change the business mix over time. And so you start with your service, make sure you're providing great service. We saw very significant NPS results improvements this quarter. You think about sales effectiveness. We've had sales effectiveness up, I think, 11% year-over-year. You think about new product innovation. So we're increasing the product shelf in terms of our deposits and savings programs.

I think our deposit market share direct day-to-day was up 70 basis points year-over-year. Our savings was up $1.6 billion. You really start to penetrate into small business and commercial mid-market. We didn't have a small business team effectively before 2 years ago, so really focusing on that. You put the technology investments in place to drive the cards business, which we've done over the last year. And you really focus on the channel mix to get that digital-first mindset. And I think historically, we've been more branch first. And so you start to put all those things in place and quarter by quarter by quarter, you're going to see some improvement. And you're right, this quarter, we saw some green shoots, right?

You saw some green shoots in the small business growing at 2x the market. You saw some green shoots in the commercial with that PTPP growth, volume versus value. You saw some green shoots in the day-to-day savings and checking up 6% year-over-year. But we've got a long way to go, right? And this is going to be hard, hard one fight because you've got a macro environment that's not overly positive and you've got a competitive environment that's very strong. So quarter by quarter by quarter, we're going to show improvement to our shareholders, and we'll build credibility in that Canadian bank over time.

Okay. And how about the competitive dynamics in Canada for assets and deposits? Can you talk a little bit about what you're seeing? I'm not sure if it's been changing much with -- it depend on where the rate cycle goes, but how do you sort of see that dynamic?

Yes, it's competitive. I mean, I think if you look at the mortgage rates, we're actually priced a little bit higher than our competitors on the deposit rates were right in line with our competitors. So listen, I think it's a competitive market and Canadian -- Canada is a great banking business with 20% plus ROEs. And so -- and then you've got also some disruptors as well. So it's a market that is really important for us because it's got the highest ROEs in the whole book. We're putting all of our focus in terms of capabilities, resources, technology into this Canadian business. And quarter-by-quarter, you're going to see some improvements.

I think one of the areas that we do need to address relatively soon is just this effectiveness efficiency dynamic in that Canadian business. Overall, over the last 2 years, we've driven operating leverage positive across the whole bank, which is good, driven in large part by our international bank, which has had a really strong expense discipline. And then more recently, you've seen a pretty good revenue lift in GBM and a pretty good revenue lift in wealth, but our Canadian bank has been at negative operating leverage. And ultimately, I want that bank to run at positive operating leverage, which then creates the space to make the investments that you need to be successful. And so we've got work to do on that, both being more effective and more efficient in that Canadian bank, and we'll get after that over time.

And not to pin you on a specific time line, but any sort of high-level time line that you'd like to see that operating leverage get to positive territory?

Yes, I think by next year, we want to be running at positive operating leverage in the Canadian bank.

Got it. Okay. So maybe switching over to International Banking. Again, something that investors care a lot about when it comes to Scotiabank. It's been a pretty good 2025. You noted some of the improvements in PTPP earnings despite optimizing the balance sheet. What do you sort of see coming up in the next few quarters? Obviously, expense management and portfolio optimization have been the big drivers. Does that sort of start to shift into that sort of next leg of seeing growth maybe start to come in?

So it's a combination of both. I mean, when we were at Investor Day several quarters ago, we said, and I think ultimately, by 2028, we'd get to 46% productivity ratio, and we were starting at 55%, and we're now at 51%. So we're kind of halfway through that journey on expense management. And this is on the back of regionalization where we historically ran these countries all separately. And now we're taking a much more regional approach, and we're segmenting our client base consistently across the region and coming up with value propositions that are consistent, which helps on the client experience side. It helps getting primacy. It also helps on the expense side. So you've seen some great results from that team over the last year or 2 years on the expense side, you're right. The plan always was to focus on expense first, create the opportunity then to move to growth. We've actually segmented that retail population effectively now into affluent, high worth, high net worth and top of mass.

We're rolling out value propositions for them as we speak. We've got now a cash management proposition that we've been working on for the last 2 years, which I should come back to because I think it's going to be a huge competitive advantage for us, which allows us to not only focus on the asset side of the balance sheet, but also to the liability side. And we'll start to see growth modest growth as we go into 2026. I think some of the things that we've done on Central America have been really helpful as you think about getting out of Central America, getting out of Colombia, merging that into Davivienda which will be value maximizing for shareholders, exiting CrediScotia was a monoline mass proposition. We've got another monoline mass proposition in Chile that we need to be thoughtful about how to execute on that. But in general, now that transition is complete in IB, and we need to move to profitable, sustainable growth, which includes on the asset side as well as the liability side of the equation.

So you mentioned cash management. I'm guessing there's other -- the breadth of products is increasing as you get those deeper relationships, you're offering more to clients. It's really that simple. I'm obviously paraphrasing, but it's a function of just getting more breadth to the client?

I mean, it's not simple at all because it's transaction banking, it's cash management. It's not only management cash, it's accounts receivables, payables, working capital. And as you think about the starting point, we had a very good proposition in Canada. We didn't have a proposition in the U.S. We had an emerging proposition in Mexico. And so over the last 2 years, building that proposition out, which allows us to then approach the client, both with transaction banking proposition and a lending proposition is huge. If you think about Travis' business in GBM, it's the oxygen for Travis' business to grow that U.S. business you need to have sticky deposits to actually grow Travis' business.

So that's going to be an important proposition. We just started to pilot our U.S. opportunity. And then in Canada, a big part of that PTPP growth in Canada in flat lending has been GTB, has been our global transaction banking, where we've gotten a pretty good pipeline of clients. We're bringing new product capabilities to them. And therefore, you're actually seeing some nice fee revenue growth come into that commercial bank in Canada. The kind of the end game here is trying to stitch that together, Canada, U.S. and Mexico. And that's going to be the competitive advantage for us when we think about competing with the other Canadian banks. And when you think about competing with the U.S. banks who don't have fully deployed capabilities in Mexico and aren't obviously in Canada. That's when we can actually provide a unique proposition to our multinational clients that others won't be able to.

Got it. And then maybe switching to Global Banking and Markets. Obviously, it's been a pretty good environment for all the banks in the last few quarters? And maybe talk about the outlook there. And obviously, the U.S. is a big part of that. I think it was probably surprising to some investors that the U.S. was as much of a contributor as it was in Q3 north of 40%.

42%.

Maybe talk a little bit about that dynamic and sort of how that translates?

Yes. Well, this is -- we've been working on this for a while as well. And you think about these new capabilities, I'm talking about the CLO now we're top 5 in North America, our DCM, we've increased the league tables. We've added securitization capabilities. We've added this mortgage capital markets capability, done our first couple of transactions JPMorgan team that we brought on, leverage lending. We started enter into leverage lending business and really starting to build out our investment banking capabilities. And so 14% down on balance sheet, yet 29% up on fee. And yes, it was a conducive market, but you've seen, I think, pretty significant outperformance from us throughout the whole year around fee income.

Right now, credit to the GBM team, our investment banking advisory fees are at an all-time high, and we're 3 quarters through the year. That's the best ever, 200 years of this bank, best ever right now. And I think a little bit is this kind of changing focus to old industry, oil and gas, mining, et cetera, power and utilities, which we do well at, but also it's been adding the capabilities in Canada and in the U.S. And so league tables improvement continue. I'm not a big focus on the league table guy, more on profitability, but it is an indicator that we're moving in the right direction.

And so this GBM transition, I'm really, really excited about. Now we have to keep it in context. It's 14% ROE, right, relative to the Canadian bank, which is 20%, 25% ROE and relative to our wealth business, that's 20% ROE. And so we're going to continue to invest, particularly on the people side in our GBM business, but we're going to do that thoughtfully, recognize the opportunities we have in the other parts of the portfolio as well.

So maybe touch on that a bit more. Obviously, there's some big differences between the Canadian market where the banks have a very solid position across the board in every business that they operate in versus the U.S., it sounds like it's a more strategic approach. You play in the areas where you can participate successfully and then win share and maybe talk about that dynamic.

Yes, I mean you have to be really careful about the segments that you're going after in the U.S. You don't want to be in areas where you're competing against the JPMorgan, the Goldman and the Morgans of the world. But I do think there's real opportunity as you think about just pick a couple of sectors, oil and gas, right? I mean we've got a world-class oil and gas team in Calgary. We've got a great opportunity in Houston. You think about mining where that crossover plays well. Telco is another one where rails is another one where you've got great Canadian capabilities, and you can play that into the U.S. by having cross-border opportunities. And in terms of U.S. and Canada.

Similarly, on cash management, a lot of our cash management clients in Canada need that U.S. cash management opportunity. And so figuring out which sectors, which clients that you then build the capabilities into the U.S., I think, is going to be the starting point. And then there's other places where we've deployed a lot of capital into the U.S. through the balance sheet, but haven't necessarily had the advisory capabilities to harvest that capital that's deployed. And so those are other things that we think about as we think about the sectors that we're going to invest behind.

So more capital efficiency is a big priority?

Actually, I think in the case of GBM, a lot of that optimization has been done, right? I mean, you think for the last 2 years in terms of the amount of capital that we've optimized in GBM and growing fee income. I think now you move to a phase where you start to deploy more capital to that GBM business alongside more fee income, which actually provides NIAT growth at a reasonable ROE?

So you get some operating leverage there? You got your beachhead there?

Yes, I'm not sure you'll see necessarily operating leverage in our GBM business, but I think we have some more investments to make on the people side. But what you will see is you'll see net income growth and over time, you'll see strong sustainable ROE growth.

Got it. And then maybe switching over to just capital allocation more broadly in a more broad sense. Obviously, the stock is still at a discounted valuation to peers. Maybe starting with the buyback dynamic. Are you sort of a big fan of buybacks? Or is it more strategic? I know it's not your #1 priority. It's organic growth, but...

Listen, I'm a big fan of buyback. It was outstanding. I think we bought 1/4 of the company back, right, over a 10-year period. And I think particularly when you have valuation disparities, you should be thinking about buying your own stock, especially when we believe in the momentum and the outlook for the business. And so we started last quarter. We -- it probably was a quarter or 2 later than I was envisioning initially because we had that opportunistic key investment that had better economic dynamics than a share buyback. But once we were through that, you now have share repurchases that are an important lever. Growth, organic growth always comes first, right? And so we'll continue to do that. Then you go to share repurchases, particularly when you see this valuation disconnect. And then lastly, inorganic type opportunities. And so we're continuing to repurchase shares. We got an NCIB in place. We did it through the third quarter. We're doing it as we speak, and we'll continue to balance those 3 levers as we move forward.

Maybe on the M&A dynamic, obviously, the bank has been very acquisitive in years past to get built into what it looks like today. Any thoughts on the M&A? Like if you're looking at M&A and organic opportunities, is it more so tuck-in type acquisitions? Or would you also be open to something a bit more transparent?

We have such an opportunity in front of us to just improve from an operational excellence perspective, what we're doing. And you look at that 500 basis point gap in ROE in Canada, you look at similar type gaps in our international business. Right now, the focus is squarely on better, faster, safer and at a lower cost in our overall footprint. I mean, never say never because you don't control timing and some things. Long term, I do believe we need wealth connectivity between our great international wealth franchise, which is growing at 20% and our Canadian wealth franchise is growing at 16%. Longer-term commercial in the U.S. might make sense when you think about connectivity between Mexico and Canada. But for right now, we're really focused on just doing what we can better to achieve those objectives we laid out in the Investor Day.

Got it. And then just maybe on just capital deployment across the bank. And from a geographical perspective, obviously, Canada, highest ROE, great opportunity in the U.S., Mexico is a big part of the strategy as well. Maybe talk about how the current environment shapes your views on how you think about allocating capital to those different regions?

Yes. So on Investor Day, we said Canada first, U.S., second, Mexico third, focus on North American corridor. And as you think about how that's played out, given the uncertainty in Mexico, we haven't allocated a lot of capital to Mexico. We've been kind of watching with interest as the new administration came in and then obviously, Liberation Day. And we've taken advantage of that opportunity to strengthen the foundations. We have a new leader in Mexico. We have a new retail head in Mexico. We've really enhanced the controls in our Mexican business and now set the foundation for growth. And I think that will happen once USMCA is signed, but there hasn't been a lot of capital that's gone into our Mexican business.

The main uses of our capital have obviously been in Canada as we think about strengthening the foundations, whether it be from a technology perspective or a product shelf perspective, we've allocated a lot of capital to our Canadian business. And then ultimately, we'll now start to grow our U.S. business as well. We saw 42% in NIAT, but I think there's more opportunities to allocate more capital to the U.S. business, particularly as you get GTB up and running and you have those really sticky operating deposits. We've asked Chile and Peru to do more with less, and they've done that really well. If you think back to the Investor Day, actually, the economic outlook in Chile and Peru is better. The economic outlook in Canada, U.S. and Mexico is not as good.

That doesn't take us away from our strategy, though. We've asked these teams. They've got a lot of capital. We've asked these teams to pivot from a monoline perspective to primacy perspective, and they've done really well. That Peru ROE is really impressive. I think we've got work to do in our Chilean business. That ROE is not where I want it to be. So we've got work to do there. But in general, that team has done pretty well operating outside that North American corridor perspective, and we'll continue to hold them to a high standard to continue to deliver.

And do you have any sort of longer-term thoughts on international? What it sort of looks like 3 to 5 years out as opposed to what it was looks like?

We're just trying to create value for shareholders, right? And you look at where we were from a performance perspective on this business, and there was a big gap from ROE. We're from ROE in-market competitors. We're starting to close that gap. We're enhancing franchise value as we go through that piece. And actually, the diversity of the portfolio has helped us in this environment. And so as you've seen Mexico lag, you've actually seen Chile and Peru do pretty well. And so that diversity of portfolio has helped us. We're just going to keep executing against that Investor Day plan and demonstrate the ROE improvements that we know we can do.

Okay. On the NAFTA dynamic, the customer primacy, that cross-border clientele, do you have any sort of tidbits on what you've sort of seen from clients? I'm sure clients are happy when you can offer them a lot more.

Particularly on the multinational clients. I mean, when we see a lot of clients, whether it's the CPs, the TransCanada, the [ bridges ] the Magnas of the world who are dealing with 7 or 8 banks across their footprint. And I think we are really open to dealing with one internationally institution of high standing and so I do think there's opportunities there. I think there's opportunities across the commercial side, but you have to have the GTB technology platform up and running to do that. So good news is we're piloting that program right now in the U.S. I think we've got our first 2 clients on it. We'll roll that out to more clients in October. And that will be the foundation to allow us to start to meet the needs of some of these multinational clients.

Got it. And maybe just touching on AI. If you have any thoughts to share. Obviously, it's something that all the [ key ] banks are talking about more and more these days. Just in terms of that progression, and it's supposed to help on the cost side, potentially over time. Any thoughts on -- I'm sure there's a lot of exciting things going on in the background that investors just don't see. Any thoughts?

Yes, we talked a little bit about it on the call with getting AI capabilities into the frontline for dealing with customers, AI chatbot and then also dealing with internal issues, which has seen pretty significant productivity improvements. I think where we see the most opportunity, we put it into 3 buckets. One is our client experience centers. There's a significant opportunity to improve effectiveness and efficiency in our client experience centers. And so we're spending time mapping that progression out.

I would also say AML and the whole AML progress with the amount of data coming through transaction monitoring. We're doing some pilot projects on that, which are really encouraging in terms of suspicious trading and seeing the benefits of having AI help us with that. And then the third would be fraud. And I think given the increasing instances of fraud across all the banks, there's a real opportunity in AI to help on the fraud side. Longer term, I think there's a big revenue opportunity to for sure, with AI as well. But right now, we're focused on more the client experience on the cost side as opposed to the revenue generation side.

Got it. And then maybe one thing I forgot to ask you about just on Global Wealth. Obviously, that's a big part of the strategy as well. Getting that link with commercial clients and wealth side. Can you just talk at the high level, just some thoughts on how that's been going and what your sort of focus?

I mean, we've been on this journey for about 10 years building out our wealth business and is doing really well. And the growth is -- it's a 15% CAGR business. It is a 20% potential ROE business over time. I think we have that competitive dimension or dynamic because of our footprint to deliver something different for clients. What I was really pleased with this quarter was 2 things. One was the net fund flow. I mean, obviously, wealth businesses do well and the market appreciates, and you're seeing that across all of the banks. But for us, last year, we saw $5 billion of outflows. This year, we saw $6 billion of inflows. So an $11 billion switch in terms of fund flows in our wealth business.

ScotiaMcLeod at all-time highs in terms of asset under management, our private bank doing really well in terms of assets under management. And so really pleased with where that wealth business is. I have talked at length around the opportunity in commercial and wealth to drive cross-sell and enterprise-wide thinking. Referrals, close referrals are up 13% year-over-year across that retail, commercial and wealth business. And so much more work to do because I think the opportunity is so large. But the team has responded, and we've got plans in place to really drive that enterprise-wide thinking.

That's all the questions I had. Scott, I'll just turn it over to you. Any key messages, a couple of key messages to investors from our discussion today?

Yes. I mean back to where we started here, we laid out at Investor Day the objective of achieving profitable, sustainable growth. And we're 7 quarters into that. And we've done what we said we were going to do, which I'm pleased with. I'm particularly pleased with the balance sheet. If you look at capital, if you look at ACLs, you look at loan-to-deposit ratio, you look at wholesale funding ratio, that's put us in a really good place to now capitalize on the growth agenda. And I think there's FTP, the fund transfer pricing decision that we made to drive a better outcome, pricing our balance sheet more effectively is really good.

In Canada, a massive opportunity. It's going to be hard fought in terms of -- because of the competitive environment because of the macro environment, combination of service, sales, digital channel mix, incentives and investments, both on the asset and liability side will really help. And so when I think about where we are, we're tracking ahead of what we said at Investor Day in terms of 2025 earnings, which gives me really good confidence as I look to 2026 about double-digit earnings growth. And then more broadly, as I think back to those medium-term targets that we talked about at Investor Day, we're on track to achieve or even beat those medium-term targets we laid out. So lots more work to do quarter by quarter by quarter, but we're getting after it, and thanks for the support from this room.

Thank you very much, Scott. Thanks for the chat. Very insightful as always. And that's -- we'll wrap it up with Scott today.

Great. Thanks, Mike.

Good morning, and welcome to Scotiabank's Q3 results presentation. My name is Meny Grauman, and I'm Head of IR 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'll be glad to take your questions. Also present to take questions are the following Scotiabank 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.

Thank you, Meny, and good morning, everyone.

Our strong Q3 results highlight the steady progress we are making towards our Investor Day commitments. We continue to focus on what we can control as we drive profitable and sustainable growth. And we are doing this through the disciplined execution of our strategy, which includes building deeper client relationships, driving efficiency gains while making the necessary investments for the future and maintaining strong balance sheet metrics to deal with unexpected challenges. For Q3, we delivered adjusted earnings of $2.5 billion or $1.88 per share. This is up 15% year-over-year, while pretax pre-provision earnings were up 17% year-over-year.

We also delivered a return on equity of 12.4%, up 110 basis points compared to the same quarter last year. After taking a conservative stance on credit last quarter that featured an 18 basis point performing provision driven by U.S. tariff uncertainty, our performing build this quarter is back down to 4 basis points. Meanwhile, our impaired PCL ratio came in at 51 basis points, down 6 basis points quarter-over-quarter.

We are pleased with this outcome, but remain committed to managing our business conservatively. Moving to our operating segments. This quarter, we reported improved results in Canadian Banking, helped by better credit performance versus Q2, but also improved revenue growth, boosted by 2 basis points of sequential margin expansion. In Canada, we are focused on building deeper and more profitable multiproduct relationships with our clients, and I'm very pleased with the progress we are making. Importantly, retail savings and day-to-day deposits are up 6% year-over-year.

Our Mortgage Plus solution continues to help drive multiproduct banking relationships by providing preferred mortgage rates for customers with a day-to-day account and at least one other eligible product. Year-to-date, Mortgage Plus has accounted for approximately 90% of our new mortgage originations, including in the independent broker channel. Since the launch of this product, 95% of new clients have retained their day-to-day accounts after 1 year, and the average balance per client is 1.5x our standard day-to-day acquisitions. Year-to-date, 30% of new Mortgage Plus clients opened a credit card with average credit card balances higher than our standard card acquisitions.

We are also seeing strong portfolio retention rates of 90% plus. Our renewals typically happen in our branches and therefore, do not incur additional commission-related costs. Our focus on primacy is also driving strong cooperation between Canadian Banking and Wealth with combined referrals between retail, commercial and wealth at $11 billion year-to-date, which is up 13% versus the same period last year. In commercial, we have largely completed our balance sheet optimization. And in small business, we are acquiring clients at approximately 2x the market rate with around 50% of those new clients being primary by month 3, and we continue to see above-market growth of our core deposits.

Although the Canadian business performance is steadily improving, we do see the opportunity to continue to address expense efficiency with our ultimate objective of delivering positive operating leverage while also making the required investments to drive the business mix shift we see as necessary to deliver our return on equity objectives. The modest quarter-over-quarter expense growth is a step in the right direction. Global Wealth Management continued its positive momentum with strength across all of its businesses. In the quarter, we had strong results in Asset Management, Private Banking and International Wealth Management.

Our net fund inflows across our retail and advisory businesses demonstrates that our strategy is working. Year-to-date net sales in our collective wealth channels is $6.2 billion versus $5 billion in net redemptions in the same period last year, an $11.2 billion improvement in net sales. In Canadian Wealth Management, we are seeing strong momentum in our Private Bank with double-digit loan and deposit growth, along with all-time high fee-based assets within ScotiaMcLeod. In our Global Asset Management business, we remain focused on delivering investment advice through our branch network with year-to-date net sales trending positively at $1.7 billion.

Notably, we have increased our percentage of retail clients who have a mutual fund product over the last 18 months, making strong progress towards the best-in-class. And in our International Wealth business, earnings are up 21% year-over-year with 18% asset growth in Mexico. We also demonstrated continued progress in our International Banking segment with results continuing to trend ahead of our Investor Day commitments. Performance continues to be driven by solid execution, including another quarter of a strong expense discipline and improved profitability metrics, including a Q3 return on equity of 15%, up 180 basis points year-over-year.

We are delivering on our regionalization strategy and laying the groundwork to segment our retail client base with the aim of improving customer experience, boosting revenue growth and lowering the cost to serve. Finally, Global Banking and Markets delivered another great quarter as we once again reported strong trading revenues and advisory fees. In Canada, year-to-date, GBM is #2 in league table ranking for debt capital markets. And in the United States, GBM continues to reach new highs in its investment-grade DCM market share. Overall, the U.S. contributed 42% of GBM earnings in Q3, and we continue to invest in our U.S. capabilities to drive future growth.

We also launched a pilot of our modern U.S. cash management offering, a pivotal step in connecting our North American footprint and strengthening our ability to achieve primacy with our clients. Moving to a brief review of our strategic priorities. We remain committed to optimizing our capital and liquidity to drive increased shareholder returns. One key strategy for achieving this is focusing on value over volume and enhancing the velocity of our balance sheet. While loan growth is important and a key indicator of economic and client activity, it is not our sole focus. Over the past 24 months, we have diligently repositioned our balance sheet by cross-selling and rightsizing our lending relationships, which has helped drive improved client primacy.

This approach has resulted in lower loan growth compared to historical levels, but has significantly helped improve our return on equity, capital capacity and liquidity, which in turn is driving share buybacks. We believe we have effectively repositioned a notable portion of our balance sheet and anticipate that key areas and new initiatives within the bank will reflect increased yet profitable loan growth next year. Let me give you a few key examples of our strategy results along with key insights into our new initiatives. In Canadian Commercial, loan growth is flat, but revenue has risen by 16% year-to-date and pretax pre-provision earnings is up 25%.

We are gearing up for the next phase of growth, focusing on mid-market and global transaction banking. In Canadian auto, where we are market leaders, we have scrutinized our lending relationships and client flows over the past 2 years, aiming to expand our risk-adjusted margins. This has led to solid year-over-year margin expansion and an improvement in return on risk-weighted assets. In our Global Banking and Markets unit, loans have decreased by 14% year-over-year, yet pretax pre-provision earnings have increased by 29% and return on equity has increased by 310 basis points. This improvement is largely due to increased noninterest revenue, including 28% year-to-date growth in underwriting and advisory fees as well as very robust trading-related revenues, which are up 50% for the year-to-date.

Our GBM business is meeting its fee growth objectives. And this quarter, we successfully launched our first mortgage capital markets funding transaction in the U.S. We have more investments to make in additional capabilities, but record high M&A fees in 2025 give us confidence we are heading in the right direction. In International Banking, we have enhanced profitability by optimizing our balance sheet and redeploying capital more effectively. Since Q4 2023, pretax pre-provision earnings increased by 22%, contributing to a 360 basis point improvement in return on equity. And in our International Global Banking and Markets business, loans are down almost $9 billion over that same time frame, while earnings have risen by approximately $76 million or 32%.

At the all bank level, our balance sheet optimization efforts have also led to better funding metrics. The loan-to-deposit ratio has improved to 104% in Q3 2025, down from 116% in Q4 2022, and the wholesale funding to total assets ratio has decreased by 280 basis points to 18.8% from 21.6% in Q4 2022. Beyond balance sheet optimization, we also continue to focus on productivity initiatives to improve our effectiveness. At the all bank level, we delivered positive operating leverage for the sixth straight quarter. And while we remain focused on accelerating top line growth as we demonstrated this quarter, we are also very committed to managing the expense line carefully with an eye to doing things better, faster, safer and at a lower cost.

At the same time, we remain committed to investing in our businesses to deliver improved client experiences and capabilities to drive sustainable future growth. A key area of investment is AI, where we are focused on getting this technology directly into the hands of our frontline staff. This past quarter, we completed the rollout of our AskAI internal chatbot to all of our Canadian bank retail branches and client experience centers. Developed using large language models, this platform is designed to assist frontline employees with a whole range of client inquiries. Additionally, our external AI chatbot handles over 125,000 inquiries monthly.

Finally, we continue to focus on maintaining strong capital levels and a disciplined approach to capital allocation. We ended the quarter with a CET1 ratio of 13.3% after repurchasing 3.2 million shares under current NCIB. This highlights our confidence in the trajectory of our internal capital generation, which we are focused on continuing to improve. In closing, we expect to deliver strong earnings growth in 2025 that will position us well heading into 2026. We will provide a more detailed outlook on our fourth quarter call. We are on track to meet our medium-term financial objectives and are laser-focused on execution, both at home and across our diversified international footprint.

I will now turn it to Raj for a more detailed financial review of the quarter.

Thank you, Scott, and good morning, everyone.

The adjustments are shown on Slide 51, and all my comments that follow will be on an adjusted basis. Starting on Slide 6 for a review of the third quarter results. The bank reported quarterly earnings of $2.5 billion and diluted earnings per share of $1.88. Return on equity was 12.4%, up 110 basis points year-over-year, driven by strong revenue growth of 12% year-over-year. The net interest income grew 13% year-over-year due primarily to a higher net interest margin and loan growth, which included the impact of the BA conversion.

The all bank net interest margin expanded a strong 22 basis points year-over-year. Quarter-over-quarter, NIM also expanded 5 basis points, driven by lower funding costs and higher business line margins. Noninterest income was $4 billion, up 10% year-over-year, primarily from higher wealth management revenues, trading income and fee and commission revenues that were partly offset by lower banking revenues due to the BA conversion. The expenses grew 7% year-over-year, driven by the growth in our market-facing businesses. Quarter-over-quarter, expenses were up a modest 1%.

As a result, pretax pre-provision profit grew a strong 17% year-over-year. The provision for credit losses were approximately $1 billion, and the PCL ratio was 55 basis points, down 20 basis points quarter-over-quarter, primarily due to elevated performing provision in Q2. The bank generated another quarter of positive operating leverage, resulting in year-to-date positive operating leverage of 2.9%. The productivity ratio was 53.7%, an improvement of 230 basis points compared to the prior year. The bank's effective tax rate increased to 25% from 18.6% last year from higher withholding taxes as we optimize capital deployed in foreign jurisdictions, lower income in lower tax jurisdictions and the impact of implementation of the global minimum tax.

Moving to Slide 7, which shows the evolution of the CET1 ratio and RWA during the quarter. The bank's CET1 capital ratio was 13.3%, an increase of 10 basis points quarter-over-quarter. Internal capital generation was a strong 13 basis points. Gains from higher fair values of OCI securities contributed 4 basis points that were partly offset by allocation of capital to share repurchases of 5 basis points. The total RWA was $463 billion, up $4 billion from the prior quarter. The increase was driven primarily by higher book size and book quality changes of $1.7 billion, higher market and operational risk of $1.4 billion and foreign currency translation and other impacts of another $1.4 billion.

The bank remains committed to maintaining strong capital and liquidity positions. Turning now to the business line results beginning on Slide 8. Canadian Banking reported earnings of $959 million, down 2% year-over-year. Pretax pre-provision profit was in line with last year as we continue to invest in the business, but up a strong 7% quarter-over-quarter reflecting good revenue growth and strong expense discipline.

Average loans were up 3% year-over-year as mortgages grew 5% and credit cards grew 1%. Year-over-year deposits grew 2%, driven by an increase of 2% in personal deposits, primarily in checking and savings and 1% in nonpersonal deposits, primarily in demand accounts. The net interest income grew 2% year-over-year from asset and deposit growth and the benefit of BA conversion. The net interest margin expanded by 2 basis points quarter-over-quarter from improving deposit mix with personal checking and savings deposits up $3 billion, while term and other deposits declined by approximately $5 billion. Year-over-year net interest margin was down 7 basis points, primarily due to the impact of the Bank of Canada's rate cuts on deposit margins.

Noninterest income was in line with the prior year as higher mutual fund distribution fees and insurance income were offset by elevated private equity gains in the prior year and lower banking fees, including the impact of the BA conversion. The PCL ratio was 40 basis points, up a modest 1 basis point year-over-year. Expenses increased 4% year-over-year, primarily due to technology costs related to new systems and infrastructure and increased project spending supporting strategic and regulatory initiatives. Quarter-over-quarter expenses increased a modest 1%. Year-to-date operating leverage was negative 2.2%. Turning now to Global Wealth Management on Slide 9.

The earnings of $424 million were up 13% year-over-year as Canadian earnings were up 13% and international Wealth Management were up 21%. The revenues were up 12% year-over-year from higher mutual fund fees, brokerage revenues and investment management fees as a result of higher AUM and higher net interest income. The expenses were up 11% year-over-year from higher volume-related expenses, technology costs and sales force expansion. Year-to-date operating leverage was positive 1.9%. The spot AUM increased 12% year-over-year to $407 billion and AUA grew 9% over the same period to over $750 billion, driven by market appreciation and higher net sales.

International Wealth Management generated earnings of $64 million, driven by growth in Mexico, Peru and Chile. Turning to Slide 10. Global Banking and Markets delivered earnings of $473 million, up 29% year-over-year. The revenue increased 21% year-over-year as capital markets revenues were up 54%. Quarter-over-quarter revenues were up 5% as noninterest income was up 8%, primarily from higher fixed income trading-related revenues that were partly offset by lower net interest income. The net interest income was up 15% year-over-year from higher lending margins and lower trading-related funding costs. The loan balances declined 14% year-over-year, reflecting favorable debt markets and our efforts to optimize the balance sheet, which is largely complete.

Noninterest income was up $220 million or 23% year-over-year due to higher trading-related revenues from fixed income and equities businesses and underwriting and advisory fees. The expenses were up 16% year-over-year, mainly due to higher personnel costs, including performance-based compensation, higher technology costs to support business growth and the negative impact of foreign exchange. The operating leverage was a strong 5.9% year-to-date. 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 $675 million, up 7% year-over-year and up 1% quarter-over-quarter.

For the year-to-date, earnings are up 1%. Revenue was up 3% year-over-year with both NII and noninterest income up 3% from improving margins and higher net banking fees and investment gains. The net interest margin expanded by 13 basis points year-over-year, mainly from lower funding costs due to Central Bank rate cuts. Deposits were flat year-over-year. Loans were down 3% year-over-year as business loans declined 8%, while retail loans grew 3%. The provision for credit losses was $562 million and stable at 139 basis points. Expenses were flat compared to the prior year and prior quarter despite operating in an inflationary environment from disciplined expense management. Operating leverage year-to-date was positive 1.8%. The effective tax rate increased to 23.6% from 19.5% in the prior quarter as Q2 benefited from favorable adjustments in Peru.

The GBM business and International Banking generated earnings of $313 million, up 12% year-over-year, driven by revenue growth in Business Banking and Capital Markets. Turning to Slide 12. The Other segment reported an adjusted net loss of $56 million, an improvement of $24 million compared to the prior quarter. Revenues were up $81 million higher than Q2 as a result of lower funding costs.

I will now turn the call over to Phil to discuss risk.

Thank you, Raj, and good morning, everyone.

Against the backdrop of continued trade uncertainty, all bank PCLs this quarter were approximately $1 billion or 55 basis points, down $357 million quarter-over-quarter. PCLs declined this quarter, driven by performing provisions that were down $280 million to $66 million or 4 basis points, following elevated performing provisions taken in Q2 to address macroeconomic uncertainty. This quarter's performing PCL build was driven primarily by migration in our retail and non-retail portfolios and some portfolio growth. Meanwhile, impaired provisions were $975 million, down 6 basis points from last quarter to 51 basis points. This decline was driven by improved credit performance in Canadian retail and lower impairments in GBM, offset by higher impaired provisions in commercial.

Turning to the business lines. In Canadian Banking, PCLs were $456 million or 40 basis points, down 32 basis points quarter-over-quarter, with 27 basis points of this decrease coming from performing PCLs. The impaired PCL ratio was 39 basis points this quarter, down 5 basis points quarter-over-quarter. In retail, PCLs were $320 million, down $293 million quarter-over-quarter. Performing retail PCLs were $5 million, driven by some migration, partially offset by improvements in prime auto. Impaired retail PCLs of $315 million or 34 basis points were down 11 basis points quarter-over-quarter. This was driven by less migration to Stage 3 across products and lower net write-offs in prime auto as a result of our collection efforts and aging of the 2022 and 2023 vintages.

90-day plus mortgage delinquency held steady at 24 basis points for a third straight quarter as improvements among variable rate clients were offset by rising delinquencies in fixed rate clients as they face higher payment obligations at renewal. We continue to monitor housing and condo market dynamics, particularly in Toronto and Vancouver, although no material impact to credit performance has been observed to date. In our Canadian commercial portfolio, provisions for credit losses totaled $136 million, a decrease of $56 million from Q2, driven by lower performing PCLs. Impaired commercial PCLs were up $37 million quarter-over-quarter, driven by higher formations.

Moving to International Banking. PCLs were up 2 basis points quarter-over-quarter, resulting in a total PCL ratio of 139 basis points, driven almost entirely by performing loans as impaired PCLs increased only $2 million quarter-over-quarter. Looking specifically at international retail, total PCLs were up $12 million quarter-over-quarter, driven by an increase in performing PCLs. Performing retail PCLs increased $26 million quarter-over-quarter due to a modest growth in most geographies and some negative migration. Impaired PCLs fell $14 million quarter-over-quarter as lower net write-offs in Colombia and Peru were partially offset by increased impairments in Mexico, where we continue to manage some pockets of weakness, particularly in mortgages.

Our impaired PCL ratio has trended down for 5 consecutive quarters as we continue to focus on client primacy collections and helped by the sale of Credit Scotia in Peru. International commercial PCLs were flat quarter-over-quarter at $93 million. Finally, in GBM, PCLs were $21 million lower quarter-over-quarter due to impaired account in Q2. In closing, while we are encouraged by our credit performance this quarter, the operating environment remains challenging. In Canada, the lack of a trade deal with the U.S. and recent mixed macroeconomic results continue to add uncertainty to our near-term outlook. In International Banking, credit trends have improved; however, we remain focused on navigating the macroeconomic environment in Mexico.

In our non-retail portfolios, impaired provisions have increased slightly as clients adjust to shifting trade dynamics. While we've observed isolated areas of weakness, these remain contained, and we have not seen signs of widespread portfolio deterioration. Year-to-date, we have built over $470 million in performing allowances and our total ACL ratio is now at 96 basis points, up 1 basis point from Q2. We will continue to be proactive in maintaining a strong balance sheet, which will allow us to manage through a range of credit scenarios while we execute on our strategic objectives. Looking ahead, while our impaired PCL ratio came in better than expected in Q3, we remain cautious as we close out the year.

With that, I'll pass it back to Meny for Q&A.

Thanks, Phil. Operator, we will now take the first question from the line.

[Operator Instructions] And the first question is from Ebrahim Poonawala, Bank of America.

I guess maybe, Scott or Raj, I just wanted to spend some time on how you're thinking about capital and buybacks. So when we think about the CET1 at 13.3% OSFI, I think, said last month where they feel good about 11.5% being the real reg minimum and add some management buffer to it. I'm just wondering, given where the stock trades today from a valuation perspective, the progress you made in getting towards that 14% ROE, like is there any sort of desire to be a little bit more aggressive on buybacks?

And is a sub-13% CET1 an absolute no, no, given where the peers are and no bank probably wants to be below 13%. I just would love to hear how you're thinking about it because in a very simplistic way as a shareholder, I think you would like management to lean in into buybacks and be a little more aggressive given where the stock is, but I would love some color there.

Sure, Ebrahim. It's Raj. So I'll try to provide our thoughts in a sequential manner.

To us, the capital ratio of 13.3%, like you pointed out, is very strong. It's based on a number of deliberate efforts we have taken over the last 2 years to build up this capital ratio to where it is. And in previous calls, we have talked about how we have added over 200 basis points of capital over the last 2 years or so. So it's a great position to be in. And as I mentioned in my prepared remarks, we used about 5 basis points to buy back stock this quarter. You would expect us to continue to keep doing that, and we'll keep going, right? We have approval up to 20 million shares. We'll see how the stock trades.

Valuation is one of the considerations we have. We think of capital deployment in this order. For us, organic growth is the #1 priority for capital deployment. We have a lot of businesses which are now optimized and repositioned for growth. As Scott mentioned, we're going to start growing the books. So that to us is important. The second objective is Phil talked a little bit about the credit situation. Credit migration does absorb capital. We want to be thoughtful about it. This quarter was small, and I expect it to be small, but we always consider that as we think about what is the appropriate level of capital to run.

And third is definitely buybacks. We introduced a buyback program about a quarter back. We've been active. We talked about the 3.2 million shares we have already bought back using 5 basis points. You will see us complete the buyback program as quickly as possible and depending on market conditions and so on, trade uncertainty and so on is always a consideration for capital management. I think prudent capital management is one of the key competencies we have in this bank, and we are committed to maintaining strong balance sheet metrics, capital being a top of the priority over there.

Buybacks, definitely part of the deployment options that we have. We have a lot of capacity to buy back. It's a little hard for me to comment. Would we operate below 13%. At this time, if I think about next quarter with all the programs we have going, including buybacks, this will be comfortably above 13%. I have no issues with that. As we talk about 2026 in the Q4 call, we'll probably give you a better understanding based on the growth rates and so on, what would be the levels we'd be comfortable operating at. But having great buffers over 11.5% is a fantastic position to be in to grow from.

That's helpful. And I guess maybe just one follow-up. Maybe for you, Scott. I think you talked about the focus, value over volume, enhancing sort of the velocity of the balance sheet. I think a few years removed now from the Investor Day in your seat, when you look at the sort of the 3 big businesses, GBM, IB, Canadian P&C, where do you think the progress has been slowest according to you? And what does it take to sort of kind of bridge that gap? Is there additional need for leaning on tech investments, et cetera? But yes, give us a sense in terms of a scorecard of where there are things where you think things have not moved as fast and where we could see an improved pace of execution over the coming year?

Yes. Thanks, Ebrahim. So I mean, if you look at the IB performance, it's significantly ahead of what we said at the Investor Day, and a large part of that has been the optimization of the balance sheet and the cost control, the disciplined cost control. And you just look at the quarter and you see 1% expense increase in these markets, I mean, that is just a great outcome. The trick now for Francisco, which he's talked about a lot, is now pivoting to growth. And that's difficult, but achievable, and we're laying foundations for that through the retail side and also on the GBM side, we've taken to optimize a lot of that capital. So I feel really good about where the IB business is heading over the next couple of years.

On GBM, the output this quarter is a result of a lot of work in that markets business over the last few years. And when you look at those numbers and see balance sheet coming down 14%, yet fee income going up significantly, we've got a lot of momentum in that business. Is every quarter going to be replicable like this quarter? Maybe not. But I think we're building the foundations for sustainability here and a real growth in capital velocity and fee income. So feeling really good about that. The Canadian business, good sequential improvement and a lot of work going on in the Canadian business. We have a lot of work to do in the Canadian business as well.

What I highlighted in my opening comments was that small business and commercial business mix move. And you don't see loan growth in commercial, but you see PTPP growth up 20%. And that's around the optimization of the balance sheet. That's around the cross-sell. That's around the transaction banking. And that's the area we got to start seeing some growth into next year. And I'm confident by looking at the mid-market by focusing more on transaction banking, we will do that. And so that's the area that this whole team is really leaning into to start to see higher ROEs into '26 and '27. But if you look back at that Investor Day 7 quarters ago, I think we're tracking at or above what we said we were going to do. And we're looking into 2026 with growth rates higher than what we told you 7 quarters ago. So all in all, I think feeling pretty good about strategy execution.

The next question is from John Aiken, Jefferies.

In your commentary, you talked about the negative credit migration within commercial and on the international side. Is there -- was there any particular region or particular sector that was causing that?

Yes. So I think generally, as you -- as we look at international, commercial, it's interesting. So it's basically market dynamics within those particular markets. It's not necessarily related to trade uncertainty. And we're not seeing anything from trade impacting Peru or Chile. As we focus on Mexico, that's where we're starting to see some weaknesses on our portfolio in the commercial business. And so positive on Chile, Peru, still sort of constructive on Mexico. Francisco and I are spending a lot of time there with our teams helping them navigate the uncertainty in that market.

And if I can keep you on your toes and pivot to the domestic 90-day past due. We saw strong sequential improvement on credit cards. How much of that is seasonality and how much of that is actually more strengthening in terms of the Canadian household? Or am I just reading too much into this?

It's a wonderful question. It's -- if I look at the dynamics in the portfolio, it has to do with how we're focused on originations. We've been very thoughtful about how we're looking at growth in that portfolio. We've been very surgical around the type of originations that we're doing into this environment. And we've also spent a lot of time on collections. Aris, myself, our teams collectively as a management group, we're spending time on the operational effectiveness of our collections area, and you're starting to see that pay off there.

I do think from a Canadian consumer health perspective, it's really mixed right now. You're seeing signs of stress, particularly in younger clients. If you look at where we see some -- from a demographic perspective, where we're seeing some pockets of weakness, it's really that 18- to 26-year-old population. Now having said that, we saw retail sales up 2.3% in Q2, which potentially leads to some growth for the remainder of the year. And for the first time since Liberation Day, we saw discretionary spend improving over spend on Essentials in that portfolio and credit as we look at the credit card spend data. And so there's some green shoots coming, but we're still really cautiously optimistic about the outlook.

Next question is from Matthew Lee, Canaccord Genuity.

Maybe for the Canadian banking business and that goal for positive operating leverage. When you think about that inflection point, when do you think we can reach positive operating leverage? And can you do so even if loan growth at an industry level stays pretty muted?

Thank you for the question.

So it's our long-term desire, obviously, to have positive operating leverage on a sustainable basis. And as part of our strategy that we laid out, our primacy strategy at Investor Day, we're investing in our business, and we're investing to get not only revenue growth down the road, but also productivity. And we've been making substantial investments in technology and cloud and our payment platforms and also in our channels to engineer the transformation we want to be a more digital mobile-led bank. And then we're also working on the productivity side with investments to digitize and that will pay dividends going forward. So we're optimistic that over time, as these investments pay out, we're going to drive operating leverage positive on a sustainable basis. So that's the way we're positioning it.

Is that like a 2026 thing or kind of longer term when you think about that?

No, I would say going into next year, that's the aim as these investments start to generate the paybacks and the returns that we envisage.

Okay. Then maybe a follow-up for you, Aris. When we talk about multiproduct customers, does Scene fit into that? Does that program resonate with customers? Or are there maybe other avenues you might explore to better cater to mass affluent and above audiences?

In terms of Scene, as you know, roughly 26% of our Scene+ base today has a payment product, and it's a valuable source going forward of obviously, multiproduct cross-buy with that base. We're working very hard to actually extract the data with our Scene+ partners to try and identify and target the right customer for the right product over time. So that should help product penetration and drive primacy. But we still have a bit of work to do in terms of getting that penetration up, and we're optimistic over the coming periods as we invest in data and in technology that this will be a rich source of future primacy growth for the business.

The next question is from Gabriel Dechaine, National Bank Financial.

First question is just for an updated outlook for the Corporate segment. We've obviously seen the beneficial impact of lower rates on the revenue line there. If we get the type of rate cuts that are being forecasted in Canada and the U.S. over the course of the next half year or so, does that go to 0? And then at some point, could we maybe see a profit? I just want to -- from the corporate segment, I just want to know what the likelihood of that scenario is.

Sure, Gabe. It's Raj.

The Corporate segment, you saw meaningful improvement this quarter, right? So it's now to the mid-50s earnings loss in that segment. I think just to look one quarter forward and to be clear, we are not considering our economists or our house call is not for any more rate cuts this year, both in the U.S. and Canada. And you know we are most sensitive only to the Canadian situation. The U.S. is like borrowing and lending is on a variable basis. So it's not an impact for us.

If assuming we had a rate cut or even without a rate cut, I think it will be somewhere in the low 40s next quarter as it improves on some of the line items over there, including taxes, which we paid this quarter on withholding taxes is in that segment. So I think it's a little hard to predict the segment. There's lots of components that go into it, Gabe, but any rate cuts that happen, the benefit will show up in this segment. That much I can tell you. Could it go around to 0 at some point? I think it's better to have the conversation in November as I get a better understanding of how the rate situation and our forecast plays out across the segments, mortgage repricing, all that stuff. But the intention is to keep it stable and low compared to what we had in the last 2 years where it was volatile and...

Just -- remember, what we're doing here is allocating out the appropriate cost to the business line so they can price effectively as we drive this client primacy, making sure you have the right price discovery, right conversations with your clients, et cetera. And that is why you're starting to see return metrics increase. And while we continue to optimize the balance sheet. So I think this is just taking hold, but you're not going to see big swings in this other segment because the cost of goods sold or the funding rates or costs are going to be sticking with the business line and they're going to be relatively consistent. So that's the objective. It's very strategic, and it's going to drive a great outcome for shareholders over time.

Right. Okay. And then just in the Canadian business, both sides of the balance sheet trigger some questions here. And then just a clarification. Is the message that the debanking phase in the commercial business is at or near an end? And then sometime in next quarter or in 2026, we start having commercial loan growth again? And by extension, could that be one of the primary drivers of a rebound in PTPP growth for the segment? And then on the other side of the balance sheet, I just noticed a small but notable personal deposits were down sequentially. That had been doing nothing but increase over the last couple of years as you're trying to improve your loans-to-deposit ratio. Just wondering if there's a -- you've hit kind of like your target and maybe don't need to be as competitive on deposit pricing going forward, and that's another potential driver for next year in that segment?

Gabe, so let me -- let me cover commercial first. So I think over the last 18 months, we've been on the journey, as Scott referred to, to drive value versus volume as we focus on balance sheet optimization around return enhancement, client primacy and actually getting referrals to wealth bring the whole bank to the client. I think that journey is now coming to an end. And when we look at the pipeline in commercial going into the next year, we should be growing with the market in commercial banking. So I think that phase is coming.

I think I have to again reiterate what Scott said. The PTPP in our commercial is up 25% year-on-year. Our margins are up 16 basis points year-on-year. So we've really been successful in driving more value and more velocity out of the balance sheet that we deploy. This is a big capital consumer. So it's been a really successful run, but now it's time to grow. And of course, the market will predicate a lot of the growth, and we're starting to see the pipelines, as I mentioned, build. In terms of deposits, you mentioned about the deposit growth year-on-year or quarter-on-quarter. I think it's important to separate term deposits, which are falling. That's a market phenomenon. But what's important is we've grown core deposits, that's day-to-day checking savings.

In the last quarter, we've grown more in the last quarter than in the previous 7 months of our business. So the efforts we're doing, as I mentioned in the last call, end-to-end across the value chain from our scorecards in our branches all the way to the products and the whole marketing mix, we're starting to see impact in that core deposit growth. Remember, we've added $50 billion in deposits since 2023, and the loan-to-deposit ratio has shot down by, I think, 10 basis points.

The other important thing that has to be mentioned is along with the core deposit growth, AUM, branch-driven mutual fund growth is also very strong. We grew 7% sequentially, 11% year-on-year. And this is also a very important part of our business that we also highlighted during Investor Day, getting more mutual fund sales in our branches. And this -- to get the core deposits and the AUM growing at the same time in savings is a very big achievement for this business. And it's one quarter, but that's the strategy as we go forward.

Next question is from Doug Young, Desjardins Capital Markets.

Phil, I guess the last comment you had in your prepared remarks was impaired PCLs are below guidance, but you're cautious. And if I go back to last quarter, I think you thought or you stated, I think the second half of fiscal '25 will be at or slightly above Q2 levels on an impaired basis. I think that was 57 basis points. So you came in 51 basis points. I know there's a lot going on here between impaired and performing and macro and trends. But can you maybe dig a little bit more into what you mean by cautious relative to in the fourth quarter? And if you kind of care to talk about next year, that would be great. I'm trying to just get a sense of how we should be thinking about the trend on impaired PCLs.

Yes. No, thanks, Doug. I appreciate the question.

We were really encouraged by how the impaired PCL showed up this quarter. But I think it's too early to tell if the trends are sustainable. There's obviously a lot going on in the Canadian economy, particularly. We still have trade uncertainty that's hitting us. Canadian consumer is still showing some signs of stress, as I mentioned earlier. But maybe let me walk you through each one of the business lines and tell you how we're thinking about it. If I start with IB, impaired PCLs here were generally stable quarter-over-quarter. And I think we're doing a good job in collections, primacy, and that's starting to really bear fruit on those portfolios. But it's a big global footprint, and we're cautious about weakness in Mexico and some variability is possible there.

If I turn to non-retail, impaired PCLs were down $14 million quarter-over-quarter. And we're not really seeing anything in these portfolios that gives us concern. But as you know, these can be a bit lumpy as different clients are sort of navigating some of the economic uncertainty, particularly here in Canada. And that really brings me to Canadian retail, which is where you saw the biggest improvement in impaired this quarter. And I've talked a lot in the past about the automotive portfolio, the prime automotive portfolio, specifically the originations that we did on used cars during the pandemic. And we're starting to see -- and this is a technical risk term, but we're starting to see the pig moving through the python.

We're almost halfway or maybe more through that python now with this -- with those 2022 and 2023 vintages. And so I think the worst is past us as we look at that auto book. And similarly, if you look at unsecured lines of credit, we saw continued improvement this quarter. And so if I look at where we are now versus where we were last quarter, some big improvements, particularly on the retail side. As I look forward, I'm encouraged by the trends; however, I don't think the worst has necessarily past us. And I think we still need to be very thoughtful about the macroeconomic dynamic. We're still waiting for Canada-U.S. trade agreement. And so this uncertainty is still clouding some of the outlook. Hope that helps?

No, no, it is. And then, Raj, just if I look on Slide 7, your internal capital generation, 13 basis points. I'm more interested in through a cycle, what you think that should be. And obviously, ROE improvement kind of would help kind of benefit that metric. But when you think of a target or what you think is a reasonable through the cycle internal capital generation, what is that?

I think through '26, perhaps even into '27, perhaps, right? When I look at it, this bank should generate somewhere between 15 to 20 basis points of internal capital generation per quarter. And that's going to come through some of the growth that we talked about. It's going to come through as our market-facing businesses start performing even better, whether it's wealth or GBM, both of them are hitting their stride at this time. And those are highly accretive to internal capital generation, as you know.

So I think somewhere between 15 to 20 basis points is the right number for this company looking forward to the immediate future. And eventually, our expectation is we want that number to continue to improve. It's all the basis of how do you get better returns for the capital that's deployed, the capital velocity is a term you've heard from a number of my colleagues over here. But looking through into '26, that's probably the right number.

The next question is from Paul Holden, CIBC.

I want to ask a question on the trading called out fixed -- very good quarter for fixed income trading. We see that in the numbers, I think $432, significantly higher than we've seen in any previous quarter. Maybe you can talk through that. Like how much of it is sustainable? How much of it might have been more specific to Q3?

Sure. This is Travis.

I want to reiterate, we had an excellent quarter. We're obviously very proud of our results. We're super focused on our -- the velocity of our balance sheet, as we mentioned, and utilizing our capital efficiently. But you're absolutely right. We benefited from a volatile trading environment and robust equity markets. In addition, we also had a record year in investment banking. So every -- all the pieces are really coming together well.

We are focused on building a more durable franchise. We have lots of new initiatives in place, which should alleviate some of the volatility that you may see in the trading business, and we'll continue to invest in the future. So I think said another way, it's probably difficult, as Scott mentioned, to replicate this quarter every quarter, but we're definitely building a durable franchise where we think this will be more of the norm.

Okay. And I want to go back to Phil for my second question. So GIL formations are up 7% quarter-over-quarter, not a huge move, but still directionally going the opposite way of impaired PCLs. Sometimes when investors see that, they're like, oh, great. Is that a sign that impaired PCLs next quarter are going to be higher? And we know that's not always the case. So maybe you could talk through in Scotia's specific circumstance why that hopefully is not true, but why or why not it might be an indication of future impaired PCLs.

Thanks, Paul. I appreciate it. We definitely saw some higher formations in certain pockets of the business. And if I look at Canada, I mentioned Canadian commercial earlier, you still have consumers that are customers, clients that are still moving through this -- the uncertainty with the trade environment. I think in international, I mentioned some of the activity in Mexico. And then in GBM, there's something there, too. But -- sorry, the GILs were lower rather in GBM. So more so an improvement in that business.

And I think in this case, though, Paul, if I look forward in terms of what I'm seeing in our forecasting, I don't think you're going to see the translation of these GILs enter into higher PCLs. And so we're feeling confident that we're digesting these GILs. We're working out through the situation, and it's not going to translate into higher loan losses next year.

Next question is from Jill Shea, UBS.

Perhaps just on the margin, the Canadian banking margin was up a little bit this quarter, and I think you had mentioned the deposit mix was a helper and Aris talked about the core deposit growth. Should we expect that deposit mix improvement to continue? And maybe bigger picture, how should we think about the Canadian NIM going forward?

Sure, Jill, it's Raj. Yes, I think the 2 basis points improvement quarter-over-quarter, mostly driven from deposit margin expansion. Aris talked about the business mix shift, like you mentioned, on savings and demand. This is going to be our area of focus completely like when we think about deposits, term deposits will always be part of the solution. It's about customer preferences and so on. But we really want to focus on primacy. We want to improve the deposit mix over there. We want to get more savings. And likewise, we want to have more demand deposits, be it in commercial or in the retail book.

The expansion, I'll caveat it with only one item. It depends on if there are future rate cuts in the Bank of Canada's annual, right? Like I mentioned in my previous answer, we don't have any assumptions of rate cuts for the remainder of the fiscal year or even the calendar year for that matter in Canada. If rate cuts happen, it obviously impacts the deposit NIM in the Canadian business. It will benefit the bank as a whole, but the Canadian bank NIM could be impacted. But excluding that, because that's not our assumption, we think we should be continuously seeing sequential but small improvements in the Canadian bank NIM starting next quarter as well.

Okay. Very helpful. And then perhaps just turning to the International Banking segment as well and just same theme. The margin was a little bit better than we expected. I think it's trending better than that 4.45%, 4.50% range you guys had talked about and the margin has been sort of drifting higher over the past year. Could you just talk about the puts and takes there and how we should think about the international banking margin as well?

Sure. International Banking NIM, as you know, lots of countries, right? The Latin American countries are impacted by local rate changes. The Caribbean is dependent on the U.S. rate changes. So there's a lot of dynamics over there. Then there is inflation. So multiple factors impact that NIM. You're right. I think our sustained NIM expectation is 4.45% to 4.50%. This quarter, we picked up a few more basis points because we just had opportunistic trades in Brazil because of the significant arbitrage between, say, offshore rates and onshore rates in Brazil. A couple of transactions, that's all that moved it. But to put it in perspective, the 4 basis points improvement, the 450 to 454 in International Banking is about 0.5 basis point for the bank as a whole because of the proportionality. But International Banking is on the same path as the Canadian banking answer I gave you.

They want to grow core deposits. That's our strategy, whether it's in retail or commercial. We'll continue to be thoughtful about it. We want to increase primacy over there. That NIM will be likely stable between 4.45% to 4.50% for the foreseeable future and should start improving afterwards as we track better core deposit growth in the business. And we have better primacy on the lending side where the lending margins could start improving, but that's likely a 2027 story.

Next question is from Darko Mihelic from RBC Capital Markets.

My questions are for Francisco, and maybe it's easiest to do this if you look at Slide 27 and Slide 28 of your presentation. And if what I'm getting -- I'm getting the sense that maybe the client deselection program is sort of nearing its end. And I'm trying to get a sense of magnitude. So for example, if I look at Slide 27, I see the balances down year-over-year. And let's say, on a constant currency basis, that's $5 billion. But there's 2 moving parts, right? There's the part where you've deselected and there's originations. And so for all I know, you've removed $10 billion and you've had originations of 5.

So that's what I'm trying to get at, Francisco, is how much of this has been client deselection? What's the underlying sort of origination rate? And as we get past the deselection, like should we be expecting significant growth once you're -- what sounds like you're done with deselection. I hope you understand that question, and maybe you can give me an order of magnitude, please.

No, thanks for the question and being thorough on this because this is very much at the core of the strategy and the changes that we're driving. The first element that I will draw you in is a little bit of the big picture. When we started at Investor Day, we were growing at 1%. We're now growing at 3% revenue and earnings at 6%. And when we committed the 2-year transformation, we did not anticipate growth. This is in spite of client deselection and a deliberate effort to improve our asset mix and reducing RWA below target. So we are way ahead in terms of that RWA optimization. That's not to say that the discipline is going to change. We will remain absolutely focused on maintaining that target of about 2% return on risk-weighted assets, and that's driving a lot of the decision-making across all businesses. So that's not going to change.

Now in terms of client deselection, a significant effort went on primarily in commercial, where we moved really to focus on clients where we can drive GTB or transaction banking opportunities. And that process is well advanced, and I would say pretty much done. On the retail bank, our effort has been really around the mass market, first, understanding it to segmenting across all segments. And today, we're now, as we speak, rolling out the new value propositions, Mexico first, with the new image and branding campaign being launched next week. And all of that will just continue to drive the right acquisition with the right value proposition, multiproduct, getting us closer from inception to primacy.

So in the exercise of this selection, it's primarily mass market focused. And in that exercise, what we're doing is separating clients where we cannot penetrate further, and therefore, we're deselecting. But also when we see mass market, we see a lot of opportunity closer to top of mass because mass market not only gives us scale to pay for all expenses, therefore, a necessary evil to keep in our target market, but also it's a very strong feeder to the top of mass, where we see significant opportunity across all markets. So you're going to see us continuing probably to deselect some mass market. But also going forward, the acquisition pace in the mass market is slower. I'm acquiring 20% less in the mass market that I was historically acquiring.

And I'm growing faster in retail than I ever was growing because I'm penetrating more in the core segments, affluent, emerging affluent and top of mass. And this is without the new value props fully rolled out. So as I look forward and the core to your question is when are we going to see growth? Well, number one, we are growing, and we're growing much faster than we anticipated during the transformation. But more importantly, the concept we're introducing as we look at plan 2026 and beyond is the pivot to growth. And that is now that we have the organization in place, we will have the new value propositions in place. We need to translate all of that into targeted deliberate growth in a segment basis as we go quarter in, quarter out.

So it will be a gradual transition where we want to see the right returns, the right path to primacy, the right acquisition trends by segment. So I will see 2026 as that pivot year. And you're going to see that pivot year in Commercial Banking and in retail banking, where both businesses are now regionalized, repositioned and consistently organized throughout the International Banking footprint. So it's a very exciting time because this is where we see all the effort pay off as we begin to look at growth probably sooner than we anticipated when we did the Investor Day presentation.

Okay. And just a follow-up on the commercial and corporate books, proportionately a bigger decline in investment grade. Is that the way forward to think of really a bigger push on noninvestment grade? Is that how we should think about that?

No, not at all, not at all. No, this is just a simple exercise where we looked at share of wallet, where we looked at returns as we had balance sheet out there and understand how can we improve returns with those clients and with that asset deployment. And in many instances, the conclusion was that, number one, we were overdeployed, so we have narrowed down some of that capital out there. Number two, we've gone to clients trying to get more of the share of wallet beyond just lending. And number three, where we are now is that we are pretty much done in GBM, and we're looking to grow. So one of the elements to keep in mind is that this growth cannot come at the expense of lower returns, and that is just not going to happen.

Every dollar of lending needs to come with very powerful cash management penetration, and that's what we're operating at. So you're going to see higher returns around every dollar of capital deployed. Mexico is a key engine for growth around our GBM business. No secret, the economy is contracting 1.5% this year. So that is impacting our growth. Brazil has been deliberately bringing assets down because we had a high concentration on low-returning high-quality assets. So we're going to see that reconverting into higher returning, more cross-sold penetration around wallet share.

So our aim, as I mentioned, commercial and retail in 2026 is a pivot to growth. But the engine for growth is wallet share. It's not just assets. We want to see those returns reflective of the underlying risk as we operate in emerging markets. So there's got to be a premium return for the risk we take. And that comes through deeper penetration of the wallet.

Francisco, does it make sense to touch on GTB and all the work that's been done because it's global. So it impacts Travis' business and Aris' business and your IB. But maybe just for the audience a little bit on what we're doing on transactions.

Absolutely. And I think the key element here is, one, we have the team in place, and it's a world-class team, not only with the very strong talent we had at Scotiabank, but we complemented that strong talent with key hires from the market that has strengthened our product capability and knowledge that has strengthened our sales knowledge from world-class players in this space and also brought alternative experiences to how to leapfrog competitors that have been in this business for much longer than what we have.

So it's an exciting time. Our pipeline has grown 5x over the last year as we focus in Canadian commercial, GBM, U.S. GBM. Very exciting time in the U.S. as October 1, we rolled out fully our cash management capabilities for the first time in the U.S. And as the North America corridor connectivity, that is a fundamental piece of the puzzle that we did not have that will contribute greatly to this aspiration of deeper penetration on wallet share. And internationally, it's a connected proposition. So when you look at how we come differently to these conversations is that we come connected, meaning we're going to service you in every country we're in, and you're going to connect these countries through the treasury management portal. And that's something that we did not have. That is something that we have strongly rolled out and will be core to the way we come across our clients as a platform they should operate in the North America corridor and beyond.

So we are very well set up for it. We are investing heavily in this business, but very targeted in terms of the capabilities we want. So this is not more of the same. This is a different proposition for our clients. And when you look at other Canadian banks or U.S. banks, we are uniquely positioned to win here because we are a universal bank in these countries. Let's not forget, I have the opportunity to provide payroll services to multinational clients in all these countries at scale. And when you look at traditional cash management providers, that's not the case. So that's a big differentiating factor that when you add to that a powerful treasury management portal with strong capabilities across markets with a sales force that is coordinated across commercial and GBM across countries, I think, is a very exciting proposition, and our clients are all for it.

Operator, we have time for one last question.

So the last question will be from Sohrab Movahedi, BMO Capital Markets.

I appreciate you squeezing me in. Maybe just to bring it all together, I mean, we've heard from Aris, he's targeting positive operating leverage. Francisco has turned things around. Which one of these 2 segments is likely to outgrow the other segment when you think over the next 6 quarters?

Yes. Sohrab, it's Scott. I mean I think one of the things we haven't talked about today is our wealth business and that connectivity between Canada and wealth and IB and wealth, which you actually see in the numbers, which we've been talking about a lot. But Jackie, maybe just give Sohrab an overview of the progress we're making on wealth.

Yes, sure. Like we really see wealth as being, I think, the glue to the client primacy strategy that we're trying to drive at the all bank level. And if I think about the progress that we've made since Investor Day, I probably hit on 4 key areas. The first would be around what Aris talked about, our retail investment advice must-win priority. Really happy with the progress here, $1.7 billion in acquisitions year-to-date compared to same period last year would be $900 million in net redemption. So really good progress there. A lots more to come. Most importantly, though, improving our penetration, which is again driving primacy. The second area would be our Canadian wealth advisory businesses. That would be McLeod, Teck, Jarislowsky, Scotia Private Wealth as well as MD.

These businesses are really firing on all cylinders. We're seeing really strong growth in net sales, about 85% up year-over-year. So really strong growth engines for wealth. The third would be private banking. We're seeing double-digit loan and deposit growth so far this year. We've also launched our Signature Banking initiative. We're probably on track to convert roughly 2x the number of households that we had targeted for this business by year-end. And then I'd have to end with International Wealth Management. We still have a tremendous opportunity there. We're thrilled by hitting our record earnings in IWM this quarter, but we also hit record earnings in our Mexican Wealth Management business. So lots more to come from Wealth Management.

That's great. And that connection that we're seeing between Canada and wealth is -- I mean, through the referrals through the redemption has been fantastic. I think if your question was Canada and IB, we are pivoting to growth in IB for sure. I think that's going to take some time to see -- well, we're never going to see that back to 10% growth. We're going to be kind of in that, I don't know, Francisco, 5%, 6% growth.

5% to 7%...

But what we are going to see in Canada as we move to '26 and '27 is significant growth, significant growth in net income on the back of that operating leverage that we talked about, significant growth on the back of commercial optimization, small business movement and then having some traction on retail. So the Canadian bank, as I look to '26 and '27 is what I'm really excited about is this pivot from optimization to growth.

This is all the time we have for questions. I would now like to turn the meeting over to Raj Viswanathan.

Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today. We look forward to speaking to you again at our Q4 call in December.

Have a great day.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.