Good morning and welcome to Scotiabank's Q1 2026 results presentation. My name is Manny Grumman and I'm Head of Investor Relations. Presenting to you this morning are Scott Thompson, 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 Bogdanaris from Canadian Banking, Jackie Allard from Global Wealth Management, Francisco Aristeguieta from International Banking and Travis Manchin from Global Banking and Markets. Before we start, and on behalf of those speaking today, I will refer you to slide two 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, Manny, 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 SETI-1 ratio was 13.3% even after repurchasing 4.9 million shares in the first quarter under our current NCIV. Our capital deployment priorities remain investing in organic growth opportunities, following 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 median term target one year ahead of plan 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're 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've 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 volume, leveraging our internal AML AI subject matter expertise to design and implement while minimizing false positives at a lower cost, 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 26 stands as a pivotal year for our Canadian banking unit where we expect earnings to grow by double digits. Distant 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. 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. It 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. We used 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. I'm delighted to announce that Shell Canada has joined the ScenePlus 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. 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 Scotiable Cloud Brokerage Unit, where we had another quarter. In our global asset management business, we continue to see positive net sales, including ongoing strength retail mutual funds, 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. 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. Global banking and markets delivered another strong quarter as we continue to benefit from constructive markets, but also from the productive investments we've 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. The 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 on equity came in above 14% for the segment. 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 case. 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. We were pleased to confirm our partnership in the Defense 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. 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 Columbia and Central America operations and the usual amortization of acquisition-related intangibles. Starting on slide 8, for a review of the first quoted quarterly earnings of $2.7 billion and 20 basis points year-over-year or 110 basis points, excluding divestitures, driven by strong revenue growth, includes the impact of divestiture. Revenue grew a strong 11% year-over-year. Net interest income grew 13% year-over-year as net interest margin grew 27 basis points. Non-interest income was up 10% year-over-year from higher wealth management and trading-related revenues and translations. Mainly due to seasonally higher volume-driven compensation from higher revenue, the technology-related spend that educational fees and approximately $1.3 billion was up $38 million year-over-year. The pre-tax 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. 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, we generated capital from the WB&A 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 shared repurchases. The model and methodology changes include the impact of periodic update to risk parameters and a clarification of capital methodology relating to certain exposures from the regulator. The total risk-weighted asset was $474 billion, $2 billion quarter over quarter, excluding the benefit from the increase in credit risk associated assets from portfolio growth migration and model and methodology remains committed to maintaining strong capital ratio Canadian banking report pre-tax preprovision strong expense discipline loans grew three percent year-over-year with mortgages up five percent while business and personal deposits declined two percent year-over-year day-to-day savings that was more than offset by a two percent decrease and non-personal deposits. Turning to the P&L, net interest income grew 3% year-over-year from loan. Net interest margin expanded two 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. Non-interest income was up 2% year-over-year impacted by lower private equity gains. Fee and commission income grew 8% from higher mutual fund fees. The PCL ratio was The expenses were flat year-over-year, benefiting from efficiency initiatives. The business generated strong positive operating leverage of 2.8% and the return on equity improved to 18.1%. 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 4% year-over-year, primarily from higher volume-related expenses that resulted in positive operating leverage of 1.9%. Triash of 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 Net interest income was up 25% year-over-year, primarily due to higher margin and robust capital markets activities. The non-interest 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 divestia The segment delivered earnings of $717 million that was up a strong 8% year-over-year and 11% quarter-over-year. Revenue was up 4% year-over-year with net interest income up 5% from lower funding costs, mainly in Mexico, while non-interest 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, where loans were down 1% year-over-year while retail loans grew. 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 remain elevated, in line with our expectations as we continue to operate in an environment of heightened macroeconomic uncertainty. Against this backdrop, all banked PCLs were approximately $1.2 billion. Performing PCLs were three basis points and impaired PCLs were 58 basis points, with two basis points of impaired PCLs related to the Central America and Columbia 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 dollars, 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, dollars, mainly in Canadian retail and GBM. The bank's ACL ratio remains strong at 94 basis points, an increase of two 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 three accounts in GBM. The remaining relate 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 banked PCLs were approximately $1.2 billion this quarter. Excluding about $40 million recorded in the one 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 a 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 one basis point quarter over quarter. In international retail, total PCLs were 218 basis points, down three 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 three 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 three basis points to the all-bank impaired PCLs from three 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 gills, given the strong credit quality of the book and low average LTVs of approximately 55% in the unassured 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 ULOC 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 many for Q&A thanks
