Good morning. Welcome to Scotiabank's 2025 Q2 Results Call. My name is Meny Grauman, and I'm Head of Investor Relations here at Scotiabank. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Phil Thomas, our Chief Risk Officer. Following their 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. In what remains a period of global economic uncertainty, we continue to execute on our strategy focusing on areas we can control, including strengthening our balance sheet, investing in our business while delivering positive operating leverage and capitalizing on revenue opportunities as they emerge. We delivered adjusted earnings in the quarter of $2.1 billion or $1.52 per share. This included a significant performing build in Canada, reflecting a conservative estimate of the potential impact of the evolving macroeconomic backdrop driven by tariffs. This quarter, we continued to invest in our Canadian Banking franchise as we execute on our strategy to grow our primary client base and deepen client relationships. We demonstrated strong expense discipline in International Banking, grew our Wealth earnings and delivered strong results in our Global Banking and Markets franchise, led by impressive growth in fee income. Underpinning all of this is our continued commitment to strong balance sheet metrics, which positions us well to support clients through this period of uncertainty. Our CET1 ratio was 13.2%, up 30 basis points quarter-over-quarter, and our liquidity metrics remained strong. We built almost $200 million of allowances this quarter for a cumulative build of $1.8 billion since the end of 2022. While we have not seen a meaningful deterioration in credit, our base case forward-looking indicators have worsened. The outlook continues to evolve, and we are operating in a unique environment. Against this dynamic scenario, an overlay of expert credit judgment contributed to our provision approach this quarter. Our strong balance sheet allows us to remain focused on driving forward our key strategic objectives, delivering growth and shareholder value over the long-term. Moving to a brief review of our strategic priorities. First is a continued focus on disciplined capital allocation. We announced a return to growth of our quarterly dividends, increasing our quarterly dividend by $0.04 to $1.10 per share. This morning, we also announced the launch of a share buyback program for 20 million shares. This demonstrates our confidence in the trajectory of internal capital generation and strength of our capital ratio. We expect to use the NCIB as one of the tools in our toolkit to allow us optionality to return capital to our shareholders if our valuation remains depressed. Second, we remain focused on our North Star, earning client primacy and growing core deposits. The bank continues to improve its loan-to-deposit ratio to 104%, the tenth consecutive quarter of improvement. Clients are cautious in this environment, and we are seeing this in their deposit behavior, with deposits up year-over-year across most business lines. Since we launched our strategy, we have added approximately 392,000 new retail primary clients across the bank. Although primary client growth has decelerated in Canada due to the immigration slowdown, we are focused on converting near-primary clients and are seeing improved client retention rates compared to the prior period. International Banking continues to execute on its segmentation strategy, and we expect to see primacy accelerate once this is fully deployed. Our primary clients contribute more than five times the revenue of non-primary clients, and we're seeing continued growth in primacy across our priority segments. Our focus on primacy means we are having more conversations with clients, particularly when it matters most. In Canadian retail, our advisors are making 20% more calls to clients compared to the prior quarter. Our Canadian wealth business delivered over 4,000 financial plans year-to-date, and we continue to build out our team of retail specialist advisors, up 8% this year. In addition, our small business banking team added 17,000 clients in Q2 alone, contributing to a robust net client acquisition rate of 5% year-to-date, well above the market. Third, we continue to demonstrate operational excellence and return discipline. We delivered positive operating leverage for the fifth straight quarter, while continuing to invest in our businesses to drive longer-term sustainable growth and improving client experience. We continue to invest in AI to drive productivity. For example, in Canada, over 70% of commercial client emails received by our business service center are now processed by AI to create structured case files, delivering faster service and at a lower cost. While year-to-date ROE was down slightly compared to the prior period, this was driven by the significant Q2 performing allowance build. We remain steadfast in our focus to achieve 14%-plus ROE over the medium-term. We feel good about the momentum we have heading into the second half of the year and are confident that we'll be able to grow EPS by 5% to 7% in fiscal 2025. Now, I will briefly turn to highlights from our business lines. Global Wealth Management continued its positive momentum, delivering $405 million of earnings, which is up 17% year-over-year with strength across all of our businesses. Our global asset management business continues to expand its offerings by adding new private asset solutions. Our expanding active ETF product suite is resonating with clients as we are seeing strong asset growth in these solutions despite market volatility. Our Canadian wealth business saw strong growth in fee-based assets, driven by sales momentum in our advisory channels, while market volatility drove higher trading volumes, particularly in iTRADE. Our private bank continues to innovate, and this year, we launched our Signature Banking offering tailored to a wider segment of high-net-worth clients with a service-focused banking solution. We are delivering on our commitment to provide holistic solutions to clients with closed referrals between our Canadian wealth, retail and commercial businesses at $6.7 billion year-to-date, up 6% year-over-year. We are seeing continued momentum on our retail advice strategy in partnership with Canadian Banking with year-to-date net inflows up $1.6 billion compared to the prior year. Global Banking and Markets delivered earnings of $413 million as we continue to generate better results with less capital. In Canada, we maintained the #1 league table ranking in debt capital markets. Capital markets activity was strong in the first two months, slowing down in April as the tariff uncertainty escalated. Our M&A business generated near-record revenue this quarter. Fees for the first half of fiscal 2025 already exceed the full year of 2024. Despite observing a slowdown in announced M&A due to the market uncertainty, our pipeline remains strong and we are ready to capitalize when activity resumes. We remain focused on our balance sheet velocity and continue to deliberately grow our capabilities in strategic products such as mortgage capital markets, leveraged finance and structured credit. Canadian Banking continues to diversify its business mix while executing on its primacy strategy. Canadian Banking deposits were up 5% year-over-year and our retail business continues to see strong retention of maturing term deposits, driven by the advice-led strategy. We continue to deliver enhancements to our Scotia Smart Investor solution, which helps clients plan and manage their savings and retirement targets. We are also making it easier for clients to bank how and where they want by continuing to grow our virtual advice for clients. While mortgage growth is slowing, our Mortgage+ solution, a major driver of client primacy, accounted for 88% of our originations this quarter, and mortgage renewal retention rates remain high. We are also seeing traction in our card strategy with almost 26% of the 15 million Scene+ members now holding a payment product. Scene+ members are seeing the value of the loyalty program as key metrics such as active users, point issuances and redemptions grew year-over-year. This engagement should contribute to client acquisition as rewards are amplified for Scene+ members who hold Scotiabank payment solutions. In partnership with private banking, Canadian Banking also launched a new premium credit card tailored to high-net-worth clients combining the value of Scene+ with exclusive benefits for cardholders. Moving to International Banking, earnings were $681 million, driven by another quarter of strong expense discipline and lower impaired loan loss provisions. Return on equity improved both year-over-year and quarter-over-quarter as earnings grew, while capital attributed was lower. Our productivity ratio improved to 51%, and we remain on track to achieve our medium-term run rate savings commitment of $800 million with significant components of our regionalization strategy complete by the end of the fiscal year. We continue to execute on our retail segmentation strategy with leadership roles for the regional structure largely in place. Looking ahead, we expect to roll out a tailored value proposition for priority segments by the end of the fiscal year across our core markets. In commercial, our segmentation efforts are complete. Clients have been partnered with relationship managers best suited to their needs, and we are starting to see the benefits. We are also driving an improved client experience and have deployed an enhanced onboarding solution across our key markets, allowing us to onboard clients in one-third of the time. In International Banking GBM, earnings were up 8% year-over-year, driven by capital markets as the bank capitalized on strong market activity. Looking ahead, with the Canadian election now behind us, I am optimistic the country has entered a period of relative political stability and can now focus on a growth-first agenda. This will require Canada to tackle its underlying productivity issues, address the obstacles that stand in the way of big infrastructure projects and realize the country's potential as a natural resources powerhouse. It also includes creating the conditions for strong and mutually beneficial economic growth across Canada, the United States and Mexico. We intend to work with stakeholders across the country to execute on the growth agenda as the country focuses on supporting its producers, manufacturers, builders and innovators in creating jobs, building affordable homes, producing what the world needs and getting those goods to global markets. In summary, while weaker consumer and business confidence is impacting near-term loan growth and capital markets activity, the future looks bright for Canada, and our team remains focused on executing on our strategic priorities. We remain committed to building deeper, more advice-driven client relationships and positioning ourselves to capitalize on growth opportunities that drive shareholder returns. I will now turn it to Raj for a more detailed financial review of the quarter.

Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis, which includes the usual amortization of acquisition-related intangibles. Moving to Slide 6 for a review of the second quarter results. The bank reported quarterly earnings of $2.1 billion and diluted EPS of $1.52. Return on equity was 10.4%, down 90 basis points year-over-year, primarily driven by higher-performing PCLs. Revenues grew a strong 9% year-over-year. Net interest income grew 12% year-over-year, primarily from a higher net interest margin and loan growth, which included the impact of the bankers' acceptance conversion. All bank net interest margin expanded 14 basis points year-over-year. Quarter-over-quarter, NIM expanded 8 basis points, driven by lower funding costs as a result of rate cuts and higher margins in International Banking. Non-interest income was $3.8 billion, up 5% year-over-year, primarily due to higher income from associated corps, fee and commission revenues and wealth management revenues, partly offset by lower banking revenues. The expenses grew 8% year-over-year, driven by higher technology, personnel costs, including performance and stock-based compensation and professional fees to support strategic and regulatory initiatives. As a result, pre-tax pre-provision profit grew 10% year-over-year. The provision for credit losses was approximately $1.4 billion and the PCL ratio was 75 basis points, up 15 basis points quarter-over-quarter, primarily due to higher-performing loan provisions. Quarter-over-quarter expenses were down 1%, driven by seasonally lower share-based compensation and three fewer days, partially offset by unfavorable impact of foreign exchange and higher professional fees. The bank generated year-to-date positive operating leverage of 2%. The productivity ratio was 55.7%, an improvement of 50 basis points compared to the prior year. The bank's effective tax rate increased to 21.3% from 20.5% last year due to the implementation of the global minimum tax and lower income in lower tax jurisdictions that were partly offset by favorable adjustments related to prior periods. Quarter-over-quarter, the effective tax rate decreased due to lower taxes in International Banking. Moving to Slide 7, which shows the evolution of the CET1 ratio and risk-weighted assets during the quarter. The bank CET1 capital ratio was 13.2%, an increase of 30 basis points quarter-over-quarter. Earnings, less dividends, contributed 12 basis points, while lower regulatory capital deductions relating to the higher-performing PCL - ACL build contributed 8 basis points. A decline in risk-weighted assets contributed 4 basis points this quarter, while FX impact was 2 basis points. The total risk-weighted assets was $459 billion, down $1 billion from the prior quarter excluding the $8 billion impact from foreign currency translation. This was driven primarily by benefits from retail LGD parameter updates, the close of CrediScotia that were partly offset by higher book size mainly from retail growth and higher operational risk capital. Looking ahead, the bank remains committed to maintaining strong capital and liquidity ratios in 2025. Turning now to the business line results beginning on Slide 8. Canadian Banking reported earnings of $613 million, down 31% year-over-year. The earnings were impacted by significant performing PCLs, while pre-tax pre-provision profit was down only 1% year-over-year. The average loans were up 4% year-over-year, with real estate secured lending that was up 6%, while credit cards grew a modest 4%. We continue to see deposit growth as year-over-year deposits grew 5%, outpacing loan growth, driven by an increase of 8% in non-personal deposits, mostly in demand, and 3% in personal deposits. Net interest income grew 2% year-over-year, primarily from solid asset and deposit growth and the benefits of the BA conversion. The net interest margin, however, declined by 4 basis points quarter-over-quarter and 14 basis points year-over-year, driven by deposit margin compression due to rate cuts. Non-interest income was up 1% year-over-year, primarily due to higher insurance income and mutual fund fees, partly offset by lower banking fees, including the impact of the BA conversion. The PCL ratio was 72 basis points, up 32 basis points year-over-year and 25 basis points quarter-over-quarter, primarily due to higher-performing loan provisions. The expenses increased 4% year-over-year, primarily due to technology costs related to new systems and infrastructure and increased project spend supporting strategic and regulatory initiatives. Quarter-over-quarter, expenses declined 2% due to three fewer days in the quarter. The year-to-date operating leverage for the segment was negative 2%. Turning now to Global Wealth Management on Slide 9. Earnings of $405 million were up 17% year-over-year as Canadian earnings were up 19%, driven by higher revenues from AUM growth across asset management and advisory businesses, iTRADE volumes and strong private banking loan growth. Revenues were up 12% year-over-year from higher mutual fund fees, brokerage revenues and investment management fees and higher net interest income driven by loan and deposit growth. Expenses were up 10% year-over-year from higher volume-related expenses, technology costs and sales force expansion. Year-to-date, operating leverage was positive 2.4%. Spot AUM increased 9% year-over-year to $380 billion and AUA grew 6% over the same period to over $710 billion, driven by market appreciation and higher net sales. International wealth management generated earnings of $57 million, up 7% year-over-year, driven by growth in Mexico, partly offset by the impact of foreign currency translation. Turning to Slide 10, Global Banking and Markets. Global Banking and Markets delivered earnings of $413 million, that was up 10% year-over-year. Revenue increased 18% year-over-year, driven by higher performance in both capital markets and business banking. Underwriting and advisory fees grew a strong 26% year-over-year. Revenues decreased $136 million or 9% quarter-over-quarter from lower trading-related revenues in equities and fixed income. The net interest income increased 49% year-over-year due to higher corporate lending margins, lower trading-related funding costs and the positive impact of foreign currency. Loan balances declined 16% year-over-year, reflecting market conditions and continued balance sheet optimization. Non-interest income was up $106 million or 11% year-over-year due to higher underwriting and advisory fees, trading-related revenue from fixed income, equities and FX, and the impact of foreign currency translation. The expenses were up 15% 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 FX. The operating leverage was a strong 6.2% 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 $681 million, up 2% sequentially and 4% year-over-year. Revenue was flat year-over-year as non-interest income, that was up 12%, driven by higher trading revenues in Chile, Peru and Mexico. Net interest income was down 4% year-over-year, driven by lower business loan volumes in Brazil and Mexico. The net interest margin expanded by 4 basis points year-over-year, mainly in Chile and Mexico, driven by changes in business mix. Net interest margin was up 10 basis points quarter-over-quarter, driven by lower funding costs and inflation benefits in Mexico and Chile. Year-over-year loans were down 3%. Business loans declined 8%, partly offset by 3% growth in retail loans. Deposits were down 2% year-over-year. While personal deposits grew 1%, non-personal deposits declined 3%. The provision for credit losses was $550 million, translating to 137 basis points, down 9 basis points quarter-over-quarter. Expenses were in line with the prior year and were down 3% quarter-over-quarter, driven by lower depreciation and amortization and seasonality in expenses in Jamaica last quarter. The operating leverage year-to-date was 0.9%. The effective tax rate decreased by 220 basis points quarter-over-quarter to 19.5% due to higher inflationary adjustments in Chile and favorable adjustments related to prior periods in Peru. GBM International Banking generated earnings of $303 million, up 8% year-over-year, primarily from growth in Peru, Mexico and Chile. Turning to Slide 12, the Other segment reported an adjusted net loss of $80 million, an improvement of $97 million compared to the prior quarter. This was mainly driven by higher revenues from net interest income that was higher by $147 million quarter-over-quarter, benefiting from lower funding costs and a full quarter of KeyCorp earnings contribution. I'll now turn the call over to Phil to discuss risk.

Thank you, Raj, and good morning, everyone. There is still significant uncertainty on the path forward for the global economy and Canada in particular. As a result, we remain thoughtful in our posture and continue to proactively manage our credit exposures. Against this backdrop of increased uncertainty and a deterioration in our base case economic outlook, all bank PCL this quarter were approximately $1.4 billion or 75 basis points, up $236 million quarter-over-quarter. The increase from last quarter was driven entirely by performing provisions as impaired PCLs fell $12 million. This quarter, we had significant performing PCLs of $346 million or 18 basis points, up 13 basis points from Q1. This performing build was driven by deterioration in our forward-looking indicators and the use of expert credit judgment to reflect trade uncertainty. Compared to last quarter, our base case scenario also incorporates the impact of higher tariffs. In retail, the performing build was driven by weaker FLIs, primarily lower GDP growth and higher unemployment. We used expert credit judgment to increase the allowances further. In our non-retail portfolio, we conducted a comprehensive review of our portfolio to identify more trade-sensitive industries and, again, used expert credit judgment to increase our allowances. Turning to Canadian Banking. PCLs were $805 million or 72 basis points, up 25 basis points quarter-over-quarter. In retail, PCLs were $613 million, up $190 million quarter-over-quarter, driven primarily by an increase in performing provisions across portfolios. Retail performing PCLs increased $175 million quarter-over-quarter, driven by a weaker macroeconomic outlook, higher delinquencies and the ECJ overlay mentioned before. Our retail impaired PCL ratio was up 3 basis points quarter-over-quarter to 45 basis points, driven by higher net write-offs in our unsecured portfolio and auto. 90-day mortgage delinquency remained stable at 24 basis points as delinquency in our variable rate clients continued to stabilize on the back of central bank rate cuts. Looking at our Canadian commercial portfolio, PCLs were $192 million, up $77 million quarter-over-quarter, driven by a performing build of $97 million skewed towards industries more likely to be impacted by tariffs such as auto, agriculture and manufacturing. Impaired commercial PCLs were down $14 million quarter-over-quarter due to elevated PCLs in the prior quarter from a single account. Moving to International Banking, PCLs were down 9 basis points quarter-over-quarter, resulting in a PCL ratio of 137 basis points. Impaired PCLs fell $52 million quarter-over-quarter, while performing provisions were flat. Looking specifically at retail, total PCLs were down $55 million quarter-over-quarter or down $68 million excluding FX, driven by lower impairments across most of our retail footprint. Performing retail PCLs fell slightly by $2 million quarter-over-quarter due to improved credit quality across Colombia, unsecured portfolios and Peru portfolios. However, Mexico saw a performing provision of $17 million to reflect weaker macroeconomic outlook. More specifically, we have increased the total Mexico ACL by $94 million or 16% in the last two quarters. Commercial PCLs were $92 million, up a modest $2 million quarter-over-quarter. Looking at GBM, PCLs increased $22 million quarter-over-quarter, mainly due to a single impaired account. In closing, our outlook at the beginning of the year did not consider the current operating environment and the accompanying uncertainty. Since then, trade tensions have intensified. Due to this ongoing uncertainty, we anticipate that our impaired PCL ratio will stay at or slightly exceed the Q2 level of 57 basis points for the remainder of the year. In International Banking, our impaired ratio has decreased since Q3 2024 from 146 basis points to 131 basis points as we continue to implement our strategy focused on client primacy and collections, aided by the sale of CrediScotia in Peru. In Canadian Banking, while impaired PCLs are on the rise, the pace of growth has slowed as clients benefit from rate cuts, especially in variable rate mortgages, alongside a similar emphasis on collections effectiveness and client primacy. Our total impaired PCL ratio this quarter was 44 basis points, an increase of just 1 basis point compared to the previous quarter. This segment-by-segment analysis reinforces our confidence in the trajectory of our impaired PCL ratio for the rest of 2025. Our outlook is further supported by the significant performing provision we established this quarter to address the underlying uncertainty. With this provision, we increased our all bank ACL ratio to 95 basis points, up 4 basis points from the previous quarter to $7.3 billion. This represents a total increase of $1.8 billion since the end of 2022, with about 70% allocated to our performing allowances. Despite continuing uncertainty in the macroeconomic outlook, we believe that the allowance build this quarter, combined with a well-capitalized balance sheet and strong liquidity, positions the bank to navigate this challenging period while supporting our clients. With that, I will pass it back to Meny for Q&A.

Thanks, Phil. Before we open the line for questions, reminder to please limit yourself to one or two questions and then re-queue. Operator, we're ready for the first question.

Thank you. We will take the first question from Ebrahim Poonawala from Bank of America. Please go ahead.

Good morning. I have a question for Phil. You've mentioned a significant increase in the performing PCL build and a deterioration in macro indicators based on expert judgment. Could you break that down for us? Specifically, you mentioned that impaired PCLs could be slightly higher. What fundamental deterioration has already occurred, and what do you realistically expect in the coming weeks and months regarding write-offs and impaired PCLs? Is it possible that 2026 could see even more impaired PCLs than 2025? From a realistic scenario perspective, how do you view this?

I appreciate the question, Ebrahim. Let me break it down for you. In Canadian Banking, we've seen a slight increase in impaired loans, up 1 basis point to 44 basis points from the previous quarter. In Canadian retail, there's been a 3 basis point increase to 45 basis points. Over the last three quarters, the rate of increase in impaired loans has started to slow down. On Page 38 of our investor slide, you can see the 90-day delinquency rates, which appear relatively stable. Looking ahead to the next two quarters, our forecast suggests that these rates will remain stable around the current levels in Q2, with a possibility of being slightly elevated, but we are confident that impaired loans will stay close to where they are now for the rest of the year. We're not noticing any major areas of strain in our portfolios. I'm optimistic about the Canadian market, as mortgage delinquencies have stabilized, and auto delinquencies are also showing signs of stabilization. We are closely monitoring credit card delinquencies. Additionally, as I mentioned earlier, we are putting a significant focus on collections, having invested in new tools, technology, and personnel to better position ourselves in this environment.

That's helpful. If I could follow up on that, maybe, Scott, for you. As we consider the increase in customer activity, what are we looking for? Is it a positive announcement from Mark Carney and the White House regarding trade issues? What would stimulate customer activity in a scenario where you or your customers would feel less concerned about the macroeconomic outlook? Thank you.

Yeah, sure. Thanks, Ebrahim. I mean, a couple of things. I think, making some progress on USMCA would be helpful for sure, and hopefully, that happens over the next six months, year. But what I would say is we've already seen a little bit more certainty in Canada as we've navigated this kind of Prime Ministerial transition and you have Prime Minister Carney now enroll with his cabinet as an example, who's out in Calgary last week talking about the need to get things done. That is resonating very well with the business community. And so, we have seen softness, we have seen uncertainty, but as we look to the back half of this year and into '26, I do think there's a moment here where you're going to see an inflection point with a little bit more loan growth. So, I am optimistic, particularly as we look up to 2026 that things will be better than where we are today.

That's helpful. Thank you.

Thank you. The next question is from Gabriel Dechaine, National Bank Financial. Please go ahead.

Good morning. I have a technical question regarding your mortgage portfolio. It appears that 17% of your loans are in condos. We’ve heard reports of borrowers withdrawing from pre-construction agreements. Are you exposed to any lending risks related to this situation?

Sure. It's a great question. Condos make up 20% of our mortgage portfolio. On the developer side, we've been paying close attention to the news. Over the past few years, we've intentionally focused on Tier 1 developers who have experience navigating downturns in Tier 1 cities. Therefore, we believe we are not as vulnerable to some of the concerns highlighted in the headlines. Additionally, condo developers account for only about 6% of the commercial real estate portfolio in Canada, which is quite small, and approximately 80% of that is investment grade. While we are monitoring the situation, it is not one of my primary concerns at the moment.

Okay, great. Continuing with the mortgage business, I noticed you mentioned that the credit performance and delinquency rates in your mortgage portfolio are stable due to the rate cuts. This makes sense given the uniqueness of your portfolio. However, I observed that Stage 2 classifications increased by $9 billion quarter-over-quarter, with over 100% of that amount coming from the Canadian RESL book. This seems like a divergence. Can you explain how you determine when a mortgage moves from Stage 1, which is low risk or no risk, to a higher risk category? Is it based on regional factors, such as Southern Ontario, or on borrower analysis and their industry? How does that transition occur?

Thanks, Gab. You're right, it is technical. As we approached this quarter, our models were focused on evaluating FLI increases related to unemployment and GDP. Consequently, we had to establish a significant ECJ for the quarter, with a considerable portion allocated to the RESL portfolio. However, I want to emphasize that we are not noticing any deterioration in specific areas. This was a broad addition to the RESL Stage 2 that we decided to implement as an ECJ. Additionally, since Q4, we have built about $302 million in Stage 2, with approximately $200 million in retail and around $100 million in non-retail. Our focus has been on identifying potential negative outcomes, but we hope for a positive result. We aimed to be prudent and conservative in establishing allowances this quarter.

Is there a straightforward way to interpret the 10% unemployment in Toronto? It might be better to discuss this further offline if that makes more sense.

Yeah. No, happy to chat with you offline. I mean, obviously, we've been talking about GVA, GTA for a while now in terms of exposures, but for the purposes of what we built from the ECJ here, it wasn't directed at any sort of geography or region.

Okay. Thanks. Sorry for the three questions there.

Okay.

Thank you. Next question is from Mario Mendonca, TD Securities. Please go ahead.

Good morning. Phil, can we stick with you there? So, your comments about credit conditions not deteriorating as abruptly, the slowdown. I think Scott's comments early on that credit still looks good. All of that is in direct contrast to what appears to be a lot of stress for the Canadian consumer. And I'm referring to the Equifax numbers, any number of articles that I've read about the Canadian consumer. And you've got every economist in Canada talking about how unemployment is moving higher, GDP growth is slowing, but we're simply not seeing it in the bank results, not in the two banks that have reported so far. I don't understand that. I don't understand how the banks that account for, I don't know, 85%, 90% of all the lending in Canada could not be seeing the same stress that we're seeing in the aggregate data. Is there something I'm missing here?

I want to acknowledge that you're one of the top analysts out there, Mario. You have a keen eye for detail. So, let me share what I'm observing in my portfolio. I analyze the TransUnion data similarly to you, as it provides valuable insights into the economy and the trends among my peers. At the beginning of this year, we were hopeful that 2025 would resemble 2024, but the current level of uncertainty inevitably leads to some stress. When I examine our customer analytics, particularly in light of the deposit account growth, we aren’t seeing the spending levels we anticipated, which is evident in our credit card receivables. There’s also a lack of demand for foreign travel, and customers are shifting from higher-end to budget groceries. This indicates a general hesitation among consumers, though it hasn’t yet translated into significant stress with delinquencies. Overall, I would describe the situation as one of caution in consumer activity.

I would like to add to what Phil mentioned. In Canada, there are two major trends. First, there has been a general decrease in demand for taking on debt, which is evident in the auto sector, credit cards, and unsecured loans. Secondly, people are choosing to hold onto more cash instead of investing in mutual funds, leading to cautious behavior. Consumers are hesitant to spend, particularly on discretionary items, as reflected in our credit card transaction volumes. While this caution hasn't yet resulted in significant increases in delinquencies, it indicates a general hesitance in activity.

All right. I have a slightly different type of question. Regarding wholesale and international loan growth, there has been an extended period where the bank isn't experiencing growth. I understand that your primary focus is on client primacy. Will there be a time when you can grow those two loan books again? Is that expected to happen in late 2025 or 2026? Or is this period of decline going to continue for a much longer duration?

Thank you for the question. Francisco here. We have been laser-focused on delivering on the outcome that you're seeing. When you see the trajectory on our reduction on RWA, we have been: number one, extremely selective on how we do it; and two, being very mindful of how, through that exercise, we create the proper robustness in terms of sustainable results. So, what you have seen is that in spite of the reduction in RWA allocation to certain clients and the international business, we have been able to maintain strong earnings growth, and that is expected to continue. We're moving from being primarily a lender to a relationship bank client-centric, where we're introducing the whole bank in every conversation. And that brings a very different dialogue with clients, which you're seeing resulting in those relationships that we have been tackling, reducing RWA while we introduce other products into the relationship. You're going to see growth, but we're not there yet. We see 2025 still as a transitional year where more needs to be done in terms of cleaning up the book from monoline clients, primarily lending, while we grow other components of the GBM portfolio. We are, however, very confident that in every conversation we're having with these clients, they're very open to do more with us, and they want to grow the relationship with us as we ask for ancillary business around our lending activity. And that is what you're seeing across the rest of the products in the portfolio. So that's the way we're managing it across IB. And we see that, as I said, throughout '25. 2026, though, you're going to begin to see a more broad deployment, particularly around GTB as the engine for growth internationally around the GBM portfolio as well as investment banking and capital markets.

So, both portfolios, international commercial and capital markets portfolios could start to grow in '26?

That's the plan, yes.

This is Travis. I want to reiterate what Francisco mentioned. We're fully aligned on this. There are two other factors to consider from a GBM perspective. First, most of our portfolio is investment grade, and utilization remains quite low, having declined over the last two years. This is evident in the outstanding loans, as clients aren't using their lines as much due to decreased demand for some lending products. Secondly, as we shift from a lending-only approach for some of our clients to the total relationship strategy that Francisco mentioned, we are mostly past that transition. We expect to begin growing our loan portfolio depending on economic conditions. Lastly, new initiatives such as mortgage capital markets will continue to support the growth of our loan portfolio, and we believe this offers a significantly better economic value proposition for the bank.

What I was really pleased with, Mario, is to see the fee growth as an example in GBM. So, yes, you have lower capital deployment, but you have significantly higher fees, which is changing that mix. And it's the relationship model that we're trying to go after, value over volume. And you're starting to see that those results come through at higher ROE in the international bank and better fee income in our wholesale bank.

All right. Thank you.

Thank you. The next question is from John Aiken, Jefferies. Please go ahead.

Thanks. I wanted to focus on the buyback. Now, I know in normal times, it's basically level of capital and relative valuation to share price, but considering that our outlook is softer economic growth, some concern about what the full impact is, how much does the economic outlook going to impact how conservative or how aggressive you are on the buyback moving forward?

Hey John, it's Scott. Thanks for the question. Obviously, we have to be thoughtful about the economic environment and will that economic outlook will determine pace and magnitude. But to put it in perspective, we've said we're comfortable running the bank in that 12.5% capital range. 70 basis points of CET1 ratio was $3.5 billion, and 20 million shares is $1.5 billion. So, there's lots of flexibility to deploy through capital share buybacks to help take advantage of what we think is a depressed valuation multiple. And so, we will use that as part of the toolkit. We've been very consistent on that going forward. And of course, we'll keep the macro in mind as we deploy that through the rest of the year.

Thanks, Scott. That was very clear. Since I have you on the line, could I ask about the strategic investment in KeyCorp? Although it's early days, are there any lessons learned or potential synergies we can expect from that investment?

You're seeing the first quarter with the full impact of the changes. We are pleased with their balance sheet repositioning and the growth in net interest income, which contributed $68 million this quarter and will continue to do so. The regulatory environment in the U.S. is undergoing significant changes. From a supervisory and capital viewpoint, we anticipate positive trends for the banking sector in the U.S. This will benefit KeyCorp and our earnings, and it could also positively influence the regulatory environment in Canada, as Canadian regulators are likely to focus on maintaining a level playing field. I am optimistic that this will generate favorable conditions for the banking sector across North America, which we will gain from.

Fantastic. Thanks, Scott. Appreciate it.

Thank you. The next question is from Matthew Lee, Canaccord Genuity. Please go ahead.

Hi, guys. Thanks for taking my questions. Maybe one more on international. PCLs are a bit better than expected both on the performing and impaired. Can you maybe dig into what indicators you're seeing there that make you comfortable in the allowances that you've built in those countries, just particularly given the fact that there's the global macroeconomics and the comments you made about Canada? Is the implication that there's less uncertainty there right now?

I'll start, Matt. Thank you for the question. It's Phil. Recently, some of us were in Chile and Peru, and when talking to corporate clients, they don't seem to be experiencing the same level of anxiety regarding trade and its uncertainties. This change is evident in the quality of our portfolio and the releases from this quarter, particularly in Colombia, Peru, and Chile. Our focus has mainly been on Mexico, where we have increased our Allowance for Credit Losses by about $89 million since the fourth quarter, primarily in retail. Over the last two quarters, our ACL in Mexico has seen an increase of about 16%, which is similar to the 17% increase we experienced in Canadian retail. While there are some trade impacts and tensions beginning to emerge in Mexico, the situation is quite different in Peru, Chile, and Colombia.

Thank you, Phil. This is Francisco. I want to share a couple of thoughts. First, the benefits of our diversification in emerging markets are evident this quarter and will continue throughout the year. We are observing different performances in countries like Chile, Peru, and the Caribbean compared to Mexico, especially concerning GDP growth. Chile aligns with our expected 2.5% growth for the year, while Peru is on track to improve towards around 3% growth. The Caribbean maintains stability, but Mexico is facing a slowdown with negative GDP growth this year. This significant diversification is vital for us and reflects in our projected PCL performance for the year ahead. Additionally, we have been focused on refining our retail approach by segmenting it to create a more client-centric strategy. This focus on client relationships and developing products that add value has resulted in overall improved performance. We are optimistic about continued PCL improvement in the international bank for the remainder of the year, in contrast to some other areas of our portfolio, especially in North America.

Right. And then, maybe to that end, I mean, you've mentioned before that you wanted 90% of incremental capital towards the focused geographies, but I mean, if some of these markets end up becoming better opportunities on a risk-adjusted basis more quickly, would you maybe consider investing more heavily in the Peru and the Chile relative to maybe the Mexico or the United States?

Well, the strategy remains the same, right? And the power of what we're trying to do is this is a long-term journey of optimizing our performance and generating shareholder value, and we're now moving away from that. What you're beginning to see is the execution of this strategy reflected in higher returns, where you see our return on risk-weighted assets now at 2.15% or ROE at 15%. That is the power of what we're executing against, but we are very much at the beginning of the journey. What we explained at Investor Day and we continue to see it the same way is that we have the resources we need. We don't need necessarily to divert capital into these countries to deliver the power of our franchise. We have what we need. What we are now through regionalization is optimizing the way we spend. And that optimization is bringing consistency of the platforms we use, leveraging not only what we do internationally but also in Canada. And that path will continue to deliver more primacy, more competitive solutions, but all at scale. That is the consistency we're looking for, and we believe that we're properly set up to capture that value over the next three to five years.

Okay. That's helpful. Thanks. I'll pass the line.

Thank you. The next question is from Doug Young, Desjardins Capital Markets. Please go ahead.

Good morning. Hopefully, this will be relatively quick. But Raj, on capital, on the CET1 ratio, just two things. Just hoping to get a little color. You talked a bit about parameter updates and that had a decent positive impact on CET1 this quarter. And then, there was a boost in operational RWAs. Just curious what that related to. And then, maybe if you can round it out with just kind of is there any other levers you can pull to bolster the CET1 ratio?

Good morning, Doug. Regarding the LGD parameters, I would say there's nothing particularly different. We regularly update our parameters. Over the last few quarters, we have actually increased our capital for PD updates, which could work in our favor or require absorbing more capital. This quarter, we updated our loss experience, which impacts LGD and RESL parameters. That's where the $4.5 billion you observed comes from. Occasionally, this can benefit us or negatively affect our capital ratio. The increase in operational risk-weighted assets is not significant, just a little over $1 billion. This is influenced by several factors, including our current standardized approach, our earnings, operational near misses, losses, and occasionally fraud risk. Overall, as the bank grows and operations become more complex, I anticipate a slight rise in operational risk RWA, consuming a bit more capital, though not significantly—just a few basis points each quarter, as we noticed this time. We always have various levers to consider. We use Synthetic Risk Transfer twice, as you know, in the last two years. There will be opportunity, but it will always be driven by what is the utilization of that capital. If you believe it's a good trade, how we can deploy that capital and make a superior return, we'd always be happy to do that. And that's the benefit of having a very high-quality corporate loan book. It has the ability to be securitized and produce a capital which is economically meaningful. But at 13.2%, I don't think we need any of those. We're actually looking to see how we can deploy capital, so I think they improve the returns of the company.

And just a follow-up, Scott, you said you're comfortable taking the ratio down to 12.5%. Is that kind of the bottom end of the range?

Yeah, I think so. I mean, I think that's the right capital ratio for this bank. As we started this journey, we're at 11.3%. We're now at 13%. We've been able to execute on the Columbia transaction and the KeyBanc transaction, and now a share repurchase. And so, obviously, sensitive to the macro, but running in that kind of 12.5% to 13% range is the right capital ratio for this bank in my opinion.

And then just lastly, Phil, can you quantify the total expert credit judgment tariff or trade overlay that you have in your ACL that you've done in the last two quarters or in whatever way you want to kind of portray it?

If I focus on this quarter and consider both quarters, it’s likely that ECJ would be over 60%.

North of 60% of the performing build in the last two quarters would be ECJ?

Correct. ECJ, yeah.

Okay, perfect. Thank you very much.

Thank you. Good morning. Couple of questions on Canadian P&C banking. I guess, first off, in terms of the investments the bank is making in digital and technology, understand the requirement for them. Just want to get a better understanding of the cadence of how we should be thinking about the productivity ratio. Is this something that can improve in '26 following the investments of '25 or is this sort of maybe a little bit of a longer-term game plan here in terms of the ultimate efficiency improvements?

Hi, this is Aris. Let me quickly remind you of what we committed to during Investor Day. We focused on two key areas: first, strengthening our balance sheet; second, increasing customer engagement. Since then, we've added $36 billion in deposits in assets under management, compared to $14 billion in lending, which has greatly improved our loan-to-deposit ratio. Additionally, we have enhanced our pricing governance, which is evident in the higher asset net interest margins across most of our product lines. Furthermore, we have increased our balance sheet allowance for credit losses by $600 million to improve coverage ratios in our retail and commercial banking sectors. On the customer depth side, we've added 375,000 primary customers, 75,000 of which were added in the first half of this year alone. You can see those depth metrics reflected in the number of customers holding three or more products. We're observing a decrease in attrition and an increase in mortgage volume, with $66 billion originated from customers with three or more products since the program began. Additionally, we are seeing day-to-day debt balances rise sequentially, along with annual increases in savings balances. This overall trend of strengthening our debt and balance sheet continues to develop. However, we are aware of revenue challenges due to declining rates, compressed deposit net interest margins, and structurally decreasing revenues, combined with sluggish loan demand. Thus, we need to respond proactively in terms of productivity, and we have been working diligently in this area. Notably, we have not increased full-time employees in the past 12 months to enhance productivity in this environment. That said, we want to continue to invest in our primacy strategy. And here you see investments in cloud, technology, what I call the channel mix of trying to shift from the assisted channels physical to digital as I talked about also on Investor Day. So, those investments are critical to getting that primacy strategy in place. So, in terms of the loan-to-deposit ratio and in terms of the cost-to-income, we manage it, but we also manage our strategy. And so, in terms of going forward, we'll continue to invest, but we'll continue to be very prudent in how we add people and where we add people and how we manage the cost base. So that's what I would say.

So, given the current macro outlook, roughly when would you expect the efficiency ratio to stabilize or inflect higher?

I think as Raj might have mentioned, we expect that NIM compression to probably stabilize by year end. And then, starting next year, as things start to materialize, we can expect the productivity ratio to start to come back down. So, you're going to see that in 2026.

Okay.

Thank you. So, given the current macro outlook, roughly when would you expect the efficiency ratio to stabilize or inflect higher? I think as Raj might have mentioned, we expect that NIM compression to probably stabilize by year end. And then, starting next year, as things start to materialize, we can expect the productivity ratio to start to come back down. So, you're going to see that in 2026.

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