BNS 0001193125-22-226953 6-K as filed: Aug 23, 2022

THE BANK OF NOVA SCOTIA

Date: August 23, 2022

/s/ Roula Kataras

Name: Roula Kataras

Title: Senior Vice-President and Chief Accountant

6-K

false2022-07-31Q30000009631--10-31Includes interest income on financial assets measured at amortized cost and FVOCI, calculated using the effective interest method, of $8,624 for the three months ended July 31, 2022 (April 30, 2022 – $6,915; July 31, 2021 – $5,989) and for the nine months ended July 31, 2022 – $21,870 (July 31, 2021 – $18,467).Includes undistributed retained earnings of $63 (July 31, 2021 – $59) related to a foreign associated corporation, which is subject to local regulatory restriction.Represents amounts on account of share-based payments (refer to Note 14).Includes Share from associates, Employee benefits and Own credit risk.Excludes debt investment securities measured at amortized cost of $18,157. Represents cash and non-interest-bearing deposits with financial institutions (refer to Note 6).Net of allowances of $3 (April 30, 2022 – $2; October 31, 2021 – $1).Includes changes to non-controlling interests arising from business combinations and related transactions (refer to Note 21 for significant transactions).The fair value of precious metals is determined based on quoted market prices and forward spot prices, where applicable, less the cost to sell.Excludes debt investment securities measured at amortized cost of $21,548 (April 30, 2022 – $16,699)Gains or losses for items in Level 3 may be offset with losses or gains on related hedges in Level 1 or Level 2.These amounts represent the gains and losses from fair value changes of Level 3 instruments still held at the end of the period that are recorded in the Consolidated Statement of Income. Certain unrealized gains and losses on derivative assets and liabilities are largely offset by mark-to-market changes on other instruments included in trading revenues in the Consolidated Statement of Income, since these instruments act as an economic hedge to certain derivative assets and liabilities.Balances are net of allowances, which are $1.Allowance for credit losses on acceptances are recorded against the financial asset in the Consolidated Statement of Financial Position.Allowance for credit losses on off-balance sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.Excludes allowance for credit losses of $105 for other financial assets including acceptances, investment securities, deposits with banks and off-balance sheet credit risks.Interest income on impaired loans for residential mortgages, personal and credit cards, and business and government loans for the three months ended July 31, 2022 totaled $0 (July 31, 2021 – $61) and for the nine months ended July 31, 2022 totaled $0 (July 31, 2021 – $212).Includes credit risk changes as a result of significant increases in credit risk, changes in credit risk that did not result in a transfer between stages, changes in model inputs and assumptions and changes due to drawdowns of undrawn commitments.Excludes allowance for credit losses of $0 for other financial assets including acceptances, investment securities, deposits with banks, off-balance sheet credit risks and reverse repos.Excludes allowance for credit losses of $153 for other financial assets including acceptances, investment securities, deposits with banks and off-balance sheet credit risks.Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.Stage 3 includes purchased or originated credit-impaired loans.Stage 3 includes purchased or originated credit impaired loans.For loans where payment deferrals were granted, deferred payments are not considered past due and such loans are not aged further during the deferral period. Regular ageing of the loans resumes, after the end of the deferral period.All loans that are over 90 days past due are considered impaired with the exception of credit card receivables which are considered impaired when 180 days past due.Represents principal amount owed net of write-offs.This measure has been disclosed in this document in accordance with OSFI Guideline – Leverage Requirements (November 2018).The interest income/expense on financial assets/liabilities are calculated using the effective interest method.Earnings per share calculations are based on full dollar and share amounts.Certain options as well as acquisition-related put/call options that the Bank may settle at its own discretion by issuing common shares were not included in the calculation of diluted earnings per share as they were anti-dilutive.Includes dividend income on equity securities.Changes in discount rates and return on plan assets are reviewed and updated on a quarterly basis. In the absence of legislated changes, all other assumptions are updated annually.This measure has been disclosed in this document in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018).This measure has been disclosed in this document in accordance with OSFI Guideline – Total Loss Absorbing Capacity (September 2018). Results for October 31, 2021 are shown for comparative purposes and were not a regulatory requirement.As at July 31, 2022, April 30, 2022 and October 31, 2021, the Bank did not have a regulatory capital floor add-on for CET1, Tier 1, Total capital and TLAC RWA.Includes interest on lease liabilities for the three months ended July 31, 2022 – $27 (April 30, 2022 – $26; July 31, 2021 – $26) and for the nine months ended July 31, 2022 – $80 (July 31, 2021 – $80).Includes exposure to one-month, two-month and three-month tenors for CDOR and Bankers’ Acceptance (BA) rates.Non-derivative financial assets include carrying amounts of debt securities, loans, and customers’ liability under acceptances (debt securities, loans and customers’ liability under acceptances measured at amortized cost are gross of allowance for credit losses). Non-derivative financial liabilities include carrying amounts of deposits, acceptances, obligations related to securities sold short and subordinated debentures. Excludes Series 2006-1 Bank Deposit Note of $750 million that is currently at a fixed rate and will subsequently reset to a six-month CDOR-based rate after December 31, 2036.Includes exposure to one-month, two-month, and three-month CDOR tenors.For single currency interest rate swaps, where both legs are referencing rates directly impacted by the benchmark reform, the relevant notional amount for both legs are shown separately to reflect the risks relating to the reform for each rate. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form

6-K

Report of Foreign Private Issuer

Pursuant to Rule

13a-16

15d-16

the Securities Exchange Act of 1934

For the month of: August, 2022

Commission File Number:

002-09048

THE BANK OF NOVA SCOTIA

(Name of registrant)

44 King Street West, Scotia Plaza, Toronto, Ontario, M5H 1H1

(416)

933-4103

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form

20-F

or Form

40-F:

Form

20-F ☐ Form

40-F

☒

Indicate by check mark if the registrant is submitting the Form

6-K

in paper as permitted by Regulation

S-T

Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form

6-K

in paper as permitted by Regulation

S-T

Rule 101(b)(7): ☐

This report on Form

6-K

shall be deemed to be incorporated by reference in The Bank of Nova Scotia’s registration statements on Form

S-8

(File

No. 333-199099)

and Form

F-3

(File

No. 333-261476)

and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX


Exhibit		Description of Exhibit

99.1		2022 Third Quarter Report to Shareholders

101		Interactive Data File (formatted as Inline XBRL)

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

EX-99.1

Exhibit 99.1


Live audio Web broadcast of the Bank’s analysts’ conference call. See page 90 for details.		Quarterly Report to Shareholders Scotiabank reports third quarter results TORONTO, August 23, 2022 – Scotiabank reported third quarter net income of $2,594 million compared to $2,542 million in the same period last year. Diluted earnings per share (EPS) were $2.09, compared to $1.99 in the same period a year ago. Adjusted net income (1) for the third quarter was $2,611 million and EPS were $2.10, up from $2.01 last year. Adjusted return on equity was 15.4% compared to 15.1% a year ago. “The quarter saw EPS growth of 4% and a return on equity of 15.4%. Strong credit quality, while growing the loan book across all business lines, prudent expense management and resilient customers were positive highlights against the backdrop of a more challenging macro environment this quarter” said Brian Porter, President and CEO of Scotiabank. Canadian Banking earnings grew 12% underpinned by strong net interest income growth, driven by 14% loan growth and net interest margin expansion. The division reported its seventh consecutive quarter of positive operating leverage. International Banking earnings grew 28% driven by higher net interest income with loans growing at 12%, expanding margins and prudent management of expenses. International Banking earnings also benefitted from lower income taxes and lower provision for credit losses. Global Wealth Management delivered earnings of $383 million. Lower fee income resulting from a market driven decline in assets under management was partly offset by higher net interest income from robust loan growth and lower volume-related expenses. Global Banking and Markets earnings of $378 million declined 26% driven by lower capital markets revenue as a result of market conditions and lower advisory fees. Strong internal capital generation was deployed to grow the Bank’s risk-weighted assets in support of future earnings, while returning capital to shareholders, resulting in a Common Equity Tier 1 Ratio (2) of 11.4%. “I am proud of the many recognitions Scotiabank received this quarter including being named Best Bank in Canada, North America’s Best Bank for Sustainable Finance and Best Investment Bank in Chile at the 2022 Euromoney Awards for Excellence. These awards showcase the Bank’s focus on putting our customers first, providing great advice and offering products and services that meet their needs” said Brian Porter. “We also welcomed Empire Company Limited to the Scene+ program, creating a uniquely flexible loyalty program for Canadians with options to earn and redeem points on nearly all of their daily purchases,” added Mr. Porter. “The Bank continues to demonstrate its commitment to the communities where we operate, as evidenced by the release of our inaugural ScotiaRISE Impact Report, which showcases more than 200 community partnerships, and $26 million in community investments globally.” (1) Refer to Non-GAAP Measures section on page 4. (2) This measure has been disclosed in this document in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018).

Table of Contents

Enhanced Disclosure Task Force (EDTF) Recommendations

Below is the index of EDTF recommendations to facilitate easy reference in the Bank’s public disclosure documents available on www.scotiabank.com/investorrelations.


Reference Table for EDTF
				Q3 2022				2021 Annual Report
Type of risk	Number		Disclosure	Quarterly Report		Supplementary Regulatory Capital Disclosures		MD&A		Financial Statements
General		1	The index of risks to which the business is exposed.						14
		2	The Bank’s risk to terminology, measures and key parameters.						82-85
		3	Top and emerging risks, and the changes during the reporting period.						87-88, 92-98
		4	Discussion on the regulatory development and plans to meet new regulatory ratios.		42,46-49				61-64, 106-109, 122-124
Risk governance, risk management and business model		5	The Bank’s Risk Governance structure.						79-81
		6	Description of risk culture and procedures applied to support the culture.						82-85
		7	Description of key risks from the Bank’s business model.						86
		8	Stress testing use within the Bank’s risk governance and capital management.						82-83
Capital Adequacy and risk-weighted assets		9	Pillar 1 capital requirements, and the impact for global systemically important banks.		46		3		61-64		216
		10	a) Regulatory capital components.		46, 77		18-21		65
			b) Reconciliation of the accounting balance sheet to the regulatory balance sheet.				15-16
		11	Flow statement of the movements in regulatory capital since the previous reporting period, including changes in common equity tier 1, additional tier 1 and tier 2 capital.		46		70		66-67
		12	Discussion of targeted level of capital, and the plans on how to establish this.						61-64
		13	Analysis of risk-weighted assets by risk type, business, and market risk RWAs.				5,34,36-47,55-57, 61,73,79		69-73, 86, 131		185, 240
		14	Analysis of the capital requirements for each Basel asset class.				13-14,34-48,54-57, 61,66-69		69-73		185, 233-240
		15	Tabulate credit risk in the Banking Book.		81		13-14, 34-48, 66-69		69-73		235
		16	Flow statements reconciling the movements in risk-weighted assets for each risk-weighted asset type.				49,60,72		69-73
		17	Discussion of Basel III Back-testing requirement including credit risk model performance and validation.				77		70-72
Liquidity Funding		18	Analysis of the Bank’s liquid assets.		37-40				104-109
		19	Encumbered and unencumbered assets analyzed by balance sheet category.		37-40				106
		20	Consolidated total assets, liabilities and off-balance sheet commitments analyzed by remaining contractual maturity at the balance sheet date.		44-45				110-112
		21	Analysis of the Bank’s sources of funding and a description of the Bank’s funding strategy.		42-43				109-110
Market Risk		22	Linkage of market risk measures for trading and non-trading portfolios and the balance sheet.		36-37				103
		23	Discussion of significant trading and non-trading market risk factors.		82-83				99-104		239-240
		24	Discussion of changes in period on period VaR results as well as VaR assumptions, limitations, backtesting and validation.		35, 83				99-104		239-240
		25	Other risk management techniques e.g. stress tests, stressed VaR, tail risk and market liquidity horizon.						99-104		240
Credit Risk		26	Analysis of the aggregate credit risk exposures, including details of both personal and wholesale lending.				5,34,36-47,55-57		92-98, 125-131		194-196, 236-238
		27	Discussion of the policies for identifying impaired loans, defining impairments and renegotiated loans, and explaining loan forbearance policies.								163-165, 196
		28	Reconciliations of the opening and closing balances of impaired loans and impairment allowances during the year.		65		31, 32		94, 125-126, 128-129		196
		29	Analysis of counterparty credit risk that arises from derivative transactions.		47, 81-82		78		90-91		183-186
		30	Discussion of credit risk mitigation, including collateral held for all sources of credit risk.		81-82				90-91, 95
Other risks		31	Quantified measures of the management of operational risk.						73, 113
		32	Discussion of publicly known risk items.		48				78

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

The Management’s Discussion and Analysis (MD&A) is provided to enable readers to assess the Bank’s financial condition and results of operations as at and for the period ended July 31, 2022. The MD&A should be read in conjunction with the Bank’s unaudited Condensed Interim Consolidated Financial Statements included in this Report to Shareholders, and the Bank’s 2021 Annual Report. This MD&A is dated August 23, 2022.

Additional information relating to the Bank, including the Bank’s 2021 Annual Report, is available on the Bank’s website at www.scotiabank.com. As well, the Bank’s 2021 Annual Report and Annual Information Form are available on SEDAR at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov.


Contents



		Management’s Discussion and Analysis

4		Non-GAAP Measures

12		Financial Highlights

13		Overview of Performance

15		Group Financial Performance

17		Business Segment Review



29		Geographic Highlights

30		Quarterly Financial Highlights

31		Financial Position

31		Risk Management

46		Capital Management

47		Financial Instruments



48		Off-Balance Sheet Arrangements

48		Regulatory Developments

49		Accounting Policies and Controls

50		Share Data

51		Glossary

Forward-looking statements

From time to time, our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. In addition, representatives of the Bank may include forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this document, the Management’s Discussion and Analysis in the Bank’s 2021 Annual Report under the headings “Outlook” and in other statements regarding the Bank’s objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results, and the outlook for the Bank’s businesses and for the Canadian, U.S. and global economies. Such statements are typically identified by words or phrases such as “believe,” “expect,” “foresee,” “forecast,” “anticipate,” “intend,” “estimate,” “plan,” “goal,” “project,” and similar expressions of future or conditional verbs, such as “will,” “may,” “should,” “would” and “could.”

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved.

We caution readers not to place undue reliance on these statements as a number of risk factors, many of which are beyond our control and effects of which can be difficult to predict, could cause our actual results to differ materially from the expectations, targets, estimates or intentions expressed in such forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; changes in currency and interest rates; increased funding costs and market volatility due to market illiquidity and competition for funding; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; changes in laws and regulations or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; changes to our credit ratings; operational and infrastructure risks; reputational risks; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services, and the extent to which products or services previously sold by the Bank require the Bank to incur liabilities or absorb losses not contemplated at their origination; our ability to execute our strategic plans, including the successful completion of acquisitions and dispositions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; global capital markets activity; the Bank’s ability to attract, develop and retain key executives; the evolution of various types of fraud or other criminal behaviour to which the Bank is exposed; disruptions in or attacks (including cyber-attacks) on the Bank’s information technology, internet, network access, or other voice or data communications systems or services; increased competition in the geographic and in business areas in which we operate, including through internet and mobile banking and

non-traditional

competitors; exposure related to significant litigation and regulatory matters; climate change and other environmental and social risks, including sustainability that may arise, including from the Bank’s business activities; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the

COVID-19

pandemic and its impact on the global economy, financial market conditions and the Bank’s business, results of operations, financial condition and prospects; and the Bank’s anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank’s business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank’s financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank’s actual performance to differ materially from that contemplated by forward-looking statements. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results, for more information, please see the “Risk Management” section of the Bank’s 2021 Annual Report, as may be updated by quarterly reports.

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2021 Annual Report under the headings “Outlook”, as updated by quarterly reports. The “Outlook” sections are based on the Bank’s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s shareholders and analysts in understanding the Bank’s financial position, objectives and priorities, and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf.

Additional information relating to the Bank, including the Bank’s Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Non-GAAP

Measures

The Bank uses a number of financial measures to assess its performance, as well as the performance of its operating segments. Some of these measures are presented on a

non-GAAP

basis and are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), are not defined by GAAP and do not have standardized meanings that would ensure consistency and comparability among companies using these measures. The Bank believes that

non-GAAP

measures are useful as they provide readers with a better understanding of how management assesses performance. These

non-GAAP

measures are used throughout this report and defined below.

Adjusted results and diluted earnings per share

The following tables present a reconciliation of GAAP reported financial results to

non-GAAP

adjusted financial results. The financial results have been adjusted for the following:

Adjustments impacting current and prior periods:

Amortization of acquisition-related intangible assets:

These costs relate to the amortization of intangibles recognized upon the acquisition of businesses, excluding software, and are recorded in the Canadian Banking, International Banking and Global Wealth Management operating segments.

Adjustments impacting prior periods only:

Restructuring and other provisions, recorded in Q4, 2021:

The Bank recorded a restructuring charge of $126 million

pre-tax,

and settlement and litigation provisions in the amount of $62 million

pre-tax

(collectively $139 million after-tax). These charges were recorded in the Other operating segment.

Acquisition and divestiture-related amounts:

Acquisition-related integration costs are costs that were incurred by the Bank and related to integrating previously acquired businesses. These costs were recorded in the International Banking and Global Wealth Management operating segments. The Bank ceased incurring these costs in fiscal year 2020.

ii.

Net (gain)/loss on divestitures recorded in fiscal year 2020 in the Other operating segment.

Valuation-related adjustments, recorded in Q1, 2020:

The Bank recognized certain valuation-related adjustments totalling $315 million

pre-tax

($233 million after-tax) related to modifying its allowance for credit losses measurement methodology under IFRS 9 ($155 million), enhancement of its fair value methodology primarily relating to uncollateralized OTC derivatives ($116 million) and recognition of an impairment loss related to one software asset ($44 million).

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

T1 Reconciliation of reported and adjusted results and diluted earnings per share


	For the three months ended									For the nine months ended
($ millions)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income	$	4,676		$	4,473		$	4,217		$	13,493		$	12,744
Non-interest income		3,123			3,469			3,540			10,297			10,821
Total revenue		7,799			7,942			7,757			23,790			23,565
Provision for credit losses		412			219			380			853			1,640
Non-interest expenses		4,191			4,159			4,097			12,573			12,347
Income before taxes		3,196			3,564			3,280			10,364			9,578
Income tax expense		602			817			738			2,283			2,182
Net income	$	2,594		$	2,747		$	2,542		$	8,081		$	7,396
Net income attributable to non-controlling interests in subsidiaries (NCI)		54			78			81			220			261
Net income attributable to equity holders		2,540			2,669			2,461			7,861			7,135
Preferred shareholders and other equity instrument holders		36			74			35			154			155
Net income attributable to common shareholders	$	2,504		$	2,595		$	2,426		$	7,707		$	6,980
Diluted earnings per share (in dollars)	$	2.09		$	2.16		$	1.99		$	6.39		$	5.73
Adjustments
Amortization of acquisition-related intangible assets (1)	$	24		$	24		$	24		$	73		$	78
Adjustments (Pre-tax)	$	24		$	24		$	24		$	73		$	78
Income tax expense/(benefit)		(7	)		(6	)		(6	)		(20	)		(21	)
Adjustments (After tax)	$	17		$	18		$	18		$	53		$	57
Adjustment attributable to NCI		–			–			–			–			–
Adjustments (After tax and NCI)	$	17		$	18		$	18		$	53		$	57
Adjusted Results
Net interest income	$	4,676		$	4,473		$	4,217		$	13,493		$	12,744
Non-interest income		3,123			3,469			3,540			10,297			10,821
Total revenue		7,799			7,942			7,757			23,790			23,565
Provision for credit losses		412			219			380			853			1,640
Non-interest expenses		4,167			4,135			4,073			12,500			12,269
Income before taxes		3,220			3,588			3,304			10,437			9,656
Income tax expense		609			823			744			2,303			2,203
Net Income	$	2,611		$	2,765		$	2,560		$	8,134		$	7,453
Net income attributable to NCI		54			78			81			220			261
Net income attributable to equity holders		2,557			2,687			2,479			7,914			7,192
Preferred shareholders and other equity instrument holders		36			74			35			154			155
Net income attributable to common shareholders	$	2,521		$	2,613		$	2,444		$	7,760		$	7,037
Adjusted diluted earnings per share
Adjusted net income attributable to common shareholders	$	2,521		$	2,613		$	2,444		$	7,760		$	7,037
Dilutive impact of share-based payment options and others		6			–			9			92			41
Adjusted net income attributable to common shareholders (diluted)		2,527			2,613			2,453			7,852			7,078
Weighted average number of basic common shares outstanding (millions)		1,195			1,199			1,215			1,201			1,213
Dilutive impact of share-based payment options and others (millions)		8			2			8			20			12
Adjusted weighted average number of diluted common shares outstanding (millions)		1,203			1,201			1,223			1,221			1,225
Adjusted diluted earnings per share (in dollars) (2)	$	2.10		$	2.18		$	2.01		$	6.43		$	5.78
Impact of adjustments on diluted earnings per share (in dollars)	$	0.01		$	0.02		$	0.02		$	0.04		$	0.05

(1)	Recorded in non-interest expenses.

(2)	Earnings per share calculations are based on full dollar and share amounts.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

T1A Reconciliation of reported and adjusted results by business line

(1)


($ millions)	Canadian Banking		International Banking		Global Wealth Management		Global Banking and Markets		Other			Total
	For the three months ended July 31, 2022
Reported net income (loss)	$	1,213	$	677	$	378	$	378	$	(52	)	$	2,594
Net income attributable to non-controlling interests in subsidiaries (NCI)		–		52		2		–		–			54
Reported net income attributable to equity holders	$	1,213	$	625	$	376	$	378	$	(52	)	$	2,540
Adjustments:
Amortization of acquisition-related intangible assets (2)		4		6		7		–		–			17
Adjusted net income (loss)	$	1,217	$	683	$	385	$	378	$	(52	)	$	2,611
Adjusted net income attributable to equity holders	$	1,217	$	631	$	383	$	378	$	(52	)	$	2,557

	For the three months ended April 30, 2022
Reported net income (loss)	$	1,179	$	681	$	409	$	488	$	(10	)	$	2,747
Net income attributable to NCI		–		76		2		–		–			78
Reported net income attributable to equity holders	$	1,179	$	605	$	407	$	488	$	(10	)	$	2,669
Adjustments:
Amortization of acquisition-related intangible assets (2)		4		8		6		–		–			18
Adjusted net income (loss)	$	1,183	$	689	$	415	$	488	$	(10	)	$	2,765
Adjusted net income attributable to equity holders	$	1,183	$	613	$	413	$	488	$	(10	)	$	2,687

	For the three months ended July 31, 2021
Reported net income (loss)	$	1,079	$	564	$	392	$	513	$	(6	)	$	2,542
Net income attributable to NCI		–		78		2		–		1			81
Reported net income attributable to equity holders	$	1,079	$	486	$	390	$	513	$	(7	)	$	2,461
Adjustments:
Amortization of acquisition-related intangible assets (2)		4		7		7		–		–			18
Adjusted net income (loss)	$	1,083	$	571	$	399	$	513	$	(6	)	$	2,560
Adjusted net income attributable to equity holders	$	1,083	$	493	$	397	$	513	$	(7	)	$	2,479



	For the nine months ended July 31, 2022
Reported net income (loss)	$	3,593	$	1,988	$	1,202	$	1,427	$	(129	)	$	8,081
Net income attributable to NCI		–		213		7		–		–			220
Reported net income attributable to equity holders	$	3,593	$	1,775	$	1,195	$	1,427	$	(129	)	$	7,861
Adjustments:
Amortization of acquisition-related intangible assets (2)		12		21		20		–		–			53
Adjusted net income (loss)	$	3,605	$	2,009	$	1,222	$	1,427	$	(129	)	$	8,134
Adjusted net income attributable to equity holders	$	3,605	$	1,796	$	1,215	$	1,427	$	(129	)	$	7,914

	For the nine months ended July 31, 2021
Reported net income (loss)	$	2,917	$	1,548	$	1,187	$	1,573	$	171		$	7,396
Net income attributable to NCI		–		253		7		–		1			261
Reported net income attributable to equity holders	$	2,917	$	1,295	$	1,180	$	1,573	$	170		$	7,135
Adjustments:
Amortization of acquisition-related intangible assets (2)		12		25		20		–		–			57
Adjusted net income (loss)	$	2,929	$	1,573	$	1,207	$	1,573	$	171		$	7,453
Adjusted net income attributable to equity holders	$	2,929	$	1,320	$	1,200	$	1,573	$	170		$	7,192

(1)	Refer to Business Segment Review on page 17.

(2)	Recorded in non-interest expenses.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Reconciliation of International Banking’s reported, adjusted and constant dollar results

International Banking business segment results are analyzed on a constant dollar basis. Under the constant dollar basis, prior period amounts are recalculated using current period average foreign currency rates. The following table presents the reconciliation between reported, adjusted and constant dollar results for International Banking for prior periods. The Bank believes that constant dollar is useful for readers to understand business performance without the impact of foreign currency. The tables below are computed on a basis that is different than the table “Impact of foreign currency translation” in Overview of Performance on page 13.

T2 Reconciliation of International Banking’s reported and adjusted results and constant dollar results


Reported Results	For the three months ended														For the nine months ended
($ millions)	April 30, 2022							July 31, 2021							July 31, 2021
(Taxable equivalent basis)	Reported		Foreign exchange			Constant dollar		Reported		Foreign exchange			Constant dollar		Reported		Foreign exchange		Constant dollar
Net interest income	$	1,687	$	20		$	1,667	$	1,586	$	1		$	1,585	$	5,036	$	180	$	4,856
Non-interest income		720		4			716		776		10			766		2,265		88		2,177
Total revenue		2,407		24			2,383		2,362		11			2,351		7,301		268		7,033
Provision for credit losses		276		3			273		339		(4	)		343		1,260		49		1,211
Non-interest expenses		1,268		11			1,257		1,299		(1	)		1,300		3,995		123		3,872
Income tax expense		182		(1	)		183		160		6			154		498		23		475
Net income	$	681	$	11		$	670	$	564	$	10		$	554	$	1,548	$	73	$	1,475
Net income attributable to non-controlling interest in subsidiaries (NCI)	$	76	$	4		$	72	$	78	$	5		$	73	$	253	$	20	$	233
Net income attributable to equity holders of the Bank	$	605	$	7		$	598	$	486	$	5		$	481	$	1,295	$	53	$	1,242
Other measures
Average assets ($ billions)	$	204	$	3		$	201	$	191	$	2		$	189	$	195	$	7	$	188
Average liabilities ($ billions)	$	149	$	3		$	146	$	146	$	2		$	144	$	149	$	6	$	143


Adjusted Results	For the three months ended														For the nine months ended
($ millions)	April 30, 2022							July 31, 2021							July 31, 2021
(Taxable equivalent basis)	Adjusted		Foreign exchange			Constant dollar adjusted		Adjusted		Foreign exchange			Constant dollar adjusted		Adjusted		Foreign exchange		Constant dollar adjusted
Net interest income	$	1,687	$	20		$	1,667	$	1,586	$	1		$	1,585	$	5,036	$	180	$	4,856
Non-interest income		720		4			716		776		10			766		2,265		88		2,177
Total revenue		2,407		24			2,383		2,362		11			2,351		7,301		268		7,033
Provision for credit losses		276		3			273		339		(4	)		343		1,260		49		1,211
Non-interest expenses		1,258		11			1,247		1,288		(2	)		1,290		3,960		120		3,840
Income tax expense		184		(2	)		186		164		7			157		508		25		483
Net income	$	689	$	12		$	677	$	571	$	10		$	561	$	1,573	$	74	$	1,499
Net income attributable to NCI	$	76	$	4		$	72	$	78	$	5		$	73	$	253	$	20	$	233
Net income attributable to equity holders of the Bank	$	613	$	8		$	605	$	493	$	5		$	488	$	1,320	$	54	$	1,266

Reconciliation of average total assets, core earning assets and core net interest income

Earning assets

Earning assets are defined as income generating assets which include interest-bearing deposits with banks, trading assets, investment securities, investments in associates, securities borrowed or purchased under resale agreements, loans net of allowances, and customers’ liability under acceptances.

Non-earning

assets

Non-earning

assets are defined as cash and

non-interest

bearing deposits with financial institutions, precious metals, derivative financial instruments, property and equipment, goodwill and other intangible assets, deferred tax assets and other assets.

Core earning assets

Core earning assets are defined as interest-bearing deposits with banks, investment securities and loans net of allowances.

Core net interest income

Core net interest income is defined as net interest income earned from core earning assets.

Net interest margin

Net interest margin is calculated as core net interest income (annualized) divided by average core earning assets.

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MANAGEMENT’S DISCUSSION & ANALYSIS

T3 Average total assets, average earning assets, average core earning assets and net interest margin by business line


	As at and for the three months ended July 31, 2022
($ millions)	Canadian Banking			International Banking (1)			GWM, GBM & Other Segments (2)			Total
Average total assets (3)	$	437,269		$	209,076		$	648,820		$	1,295,165
Average non-earning assets (3)		4,089			18,448			88,787			111,324
Average total earning assets (3)	$	433,180		$	190,628		$	560,033		$	1,183,841
Less:
Trading assets		–			4,860			124,030			128,890
Securities purchased under resale agreements and securities borrowed		–			2,245			143,757			146,002
Other deductions		24,646			2,228			35,836			62,710
Average core earning assets (3)	$	408,534		$	181,295		$	256,410		$	846,239
Net interest income on core earning assets	$	2,361		$	1,760		$	608		$	4,729
Net interest margin		2.29	%		3.85	%		nm	(4)		2.22	%

(1)	Net interest margin methodology has been refined on a prospective basis to align to the Bank’s definition. Prior periods have not been restated.

(2)	Includes Global Wealth Management, Global Banking and Markets, and Other Segments.

(3)	Average balances represent the average of daily balances for the period.

(4)	Not meaningful


	As at and for the three months ended April 30, 2022
($ millions)	Canadian Banking			International Banking			GWM, GBM & Other Segments (1)			Total
Average total assets	$	423,218		$	203,875		$	637,100		$	1,264,193
Average non-earning assets		4,035			17,371			81,495			102,901
Average total earning assets	$	419,183		$	186,504		$	555,605		$	1,161,292
Less:
Trading assets		–			4,376			140,125			144,501
Securities purchased under resale agreements and securities borrowed		–			145			127,110			127,255
Other deductions		22,478			2,216			34,924			59,618
Average core earning assets	$	396,705		$	179,767		$	253,446		$	829,918
Net interest income on core earning assets	$	2,144		$	1,691		$	671		$	4,506
Net interest margin		2.22	%		3.86	%		nm	(2)		2.23	%

(1)	Includes Global Wealth Management, Global Banking and Markets, and Other Segments.

(2)	Not meaningful


	As at and for the three months ended July 31, 2021
($ millions)	Canadian Banking			International Banking			GWM, GBM & Other Segments (1)			Total
Average total assets	$	383,918		$	190,698		$	573,481		$	1,148,097
Average non-earning assets		4,090			14,141			74,058			92,289
Average total earning assets	$	379,828		$	176,557		$	499,423		$	1,055,808
Less:
Trading assets		–			6,007			136,453			142,460
Securities purchased under resale agreements and securities borrowed		–			–			117,271			117,271
Other deductions		18,193			2,528			33,335			54,056
Average core earning assets	$	361,635		$	168,022		$	212,364		$	742,021
Net interest income on core earning assets	$	2,030		$	1,574		$	565		$	4,169
Net interest margin		2.23	%		3.72	%		nm	(2)		2.23	%

(1)	Includes Global Wealth Management, Global Banking and Markets, and Other Segments.

(2)	Not meaningful


	As at and for the nine months ended July 31, 2022
($ millions)	Canadian Banking			International Banking (1)			GWM, GBM & Other Segments (2)			Total
Average total assets	$	424,088		$	203,007		$	638,054		$	1,265,149
Average non-earning assets		4,085			17,284			80,564			101,933
Average total earning assets	$	420,003		$	185,723		$	557,490		$	1,163,216
Less:
Trading assets		–			4,846			140,549			145,395
Securities purchased under resale agreements and securities borrowed		–			872			133,997			134,869
Other deductions		22,569			2,175			35,422			60,166
Average core earning assets	$	397,434		$	177,830		$	247,522		$	822,786
Net interest income on core earning assets	$	6,638		$	5,087		$	1,831		$	13,556
Net interest margin		2.23	%		3.82	%		nm	(3)		2.20	%

(1)	Net interest margin methodology has been refined on a prospective basis to align to the Bank’s definition. Prior periods have not been restated.

(2)	Includes Global Wealth Management, Global Banking and Markets, and Other Segments.

(3)	Not meaningful

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS


	As at and for the nine months ended July 31, 2021
($ millions)	Canadian Banking			International Banking			GWM, GBM & Other Segments (1)			Total
Average total assets	$	374,918		$	194,765		$	582,243		$	1,151,926
Average non-earning assets		4,102			15,101			76,237			95,440
Average total earning assets	$	370,816		$	179,664		$	506,006		$	1,056,486
Less:
Trading assets		–			5,933			135,456			141,389
Securities purchased under resale agreements and securities borrowed		–			–			116,032			116,032
Other deductions		16,911			2,453			31,162			50,526
Average core earning assets	$	353,905		$	171,278		$	223,356		$	748,539
Net interest income on core earning assets	$	5,948		$	5,000		$	1,656		$	12,604
Net interest margin		2.25	%		3.90	%		nm	(2)		2.25	%

(1)	Includes Global Wealth Management, Global Banking and Markets, and Other Segments.

(2)	Not meaningful

Return on equity

Return on equity is a profitability measure that presents the net income attributable to common shareholders (annualized) as a percentage of average common shareholders’ equity.

The Bank attributes capital to its business lines on a basis that approximates 10.5% of Basel III common equity capital requirements which includes credit, market and operational risks and leverage inherent within each business segment.

Return on equity for the business segments is calculated as a ratio of net income attributable to common shareholders (annualized) of the business segment and the capital attributed.

Adjusted return on equity represents adjusted net income attributable to common shareholders (annualized) as a percentage of adjusted average common shareholders’ equity.

T4 Return on equity by operating segment


	For the three months ended July 31, 2022
($ millions)	Canadian Banking			International Banking			Global Wealth Management			Global Banking and Markets			Other			Total
Reported
Net income attributable to common shareholders	$	1,212		$	625		$	375		$	377		$	(85	)	$	2,504
Total average common equity		18,433			19,085			9,631			13,488			4,301			64,938
Return on equity		26.1	%		13.0	%		15.5	%		11.1	%		nm	(1)		15.3	%
Adjusted (2)
Net income attributable to common shareholders	$	1,216		$	631		$	382		$	377		$	(85	)	$	2,521
Total average common equity		18,433			19,085			9,631			13,488			4,346			64,983
Return on equity		26.2	%		13.1	%		15.7	%		11.1	%		nm	(1)		15.4	%

(1)	Not meaningful

(2)	Refer to Tables on page 5.



	For the three months ended April 30, 2022																		For the three months ended July 31, 2021
($ millions)	Canadian Banking			International Banking			Global Wealth Management			Global Banking and Markets			Other			Total			Canadian Banking			International Banking			Global Wealth Management			Global Banking and Markets			Other			Total
Reported
Net income attributable to common shareholders	$	1,178		$	603		$	407		$	487		$	(80	)	$	2,595		$	1,075		$	481		$	387		$	509		$	(26	)	$	2,426
Total average common equity		17,848			18,804			9,529			12,832			6,490			65,503			16,358			17,207			9,298			12,542			8,684			64,089
Return on equity		27.1	%		13.2	%		17.5	%		15.6	%		nm	(1)		16.2	%		26.1	%		11.1	%		16.5	%		16.1	%		nm	(1)		15.0	%
Adjusted (2)
Net income attributable to common shareholders	$	1,182		$	611		$	413		$	487		$	(80	)	$	2,613		$	1,079		$	488		$	394		$	509		$	(26	)	$	2,444
Total average common equity		17,848			18,804			9,529			12,832			6,517			65,530			16,358			17,207			9,298			12,542			8,733			64,138
Return on equity		27.2	%		13.3	%		17.8	%		15.6	%		nm	(1)		16.4	%		26.2	%		11.3	%		16.8	%		16.1	%		nm	(1)		15.1	%

(1)	Not meaningful

(2)	Refer to Tables on page 5.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS



	For the nine months ended July 31, 2022																		For the nine months ended July 31, 2021
($ millions)	Canadian Banking			International Banking			Global Wealth Management			Global Banking and Markets			Other			Total			Canadian Banking			International Banking			Global Wealth Management			Global Banking and Markets			Other			Total
Reported
Net income attributable to common shareholders	$	3,588		$	1,770		$	1,192		$	1,423		$	(266	)	$	7,707		$	2,900		$	1,276		$	1,170		$	1,560		$	74		$	6,980
Total average common equity		17,885			18,482			9,534			13,014			6,285			65,200			16,288			17,402			9,287			12,339			8,280			63,596
Return on equity		26.8	%		12.8	%		16.7	%		14.6	%		nm	(1)		15.8	%		23.8	%		9.8	%		16.8	%		16.9	%		nm	(1)		14.7	%
Adjusted (2)
Net income attributable to common shareholders	$	3,600		$	1,791		$	1,212		$	1,423		$	(266	)	$	7,760		$	2,912		$	1,301		$	1,190		$	1,560		$	74		$	7,037
Total average common equity		17,885			18,482			9,534			13,014			6,363			65,278			16,288			17,402			9,287			12,339			8,322			63,638
Return on equity		26.9	%		13.0	%		17.0	%		14.6	%		nm	(1)		15.9	%		23.9	%		10.0	%		17.1	%		16.9	%		nm	(1)		14.8	%

(1)	Not meaningful

(2)	Refer to Tables on page 5.

Return on tangible common equity

Return on tangible common equity is a profitability measure that is calculated by dividing the net income attributable to common shareholders (annualized), adjusted for the amortization of intangibles (excluding software), by average tangible common equity. Tangible common equity is defined as common shareholders’ equity adjusted for goodwill and intangible assets (excluding software), net of deferred taxes.

Adjusted return on tangible common equity represents adjusted net income attributable to common shareholders as a percentage of adjusted average tangible common equity.

T5 Return on tangible common equity



	For the three months ended									For the nine months ended
($ millions)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported
Average common equity	$	64,938		$	65,503		$	64,089		$	65,200		$	63,596
Average goodwill (1)		(9,157	)		(9,263	)		(9,380	)		(9,195	)		(9,486	)
Average acquisition-related intangibles (net of deferred tax)		(3,791	)		(3,817	)		(3,882	)		(3,813	)		(3,910	)
Average tangible common equity	$	51,990		$	52,423		$	50,827		$	52,192		$	50,200
Net income attributable to common shareholders – reported	$	2,504		$	2,595		$	2,426		$	7,707		$	6,980
Amortization of acquisition-related intangible assets (after tax) (2)		17			18			18			53			57
Net income attributable to common shareholders adjusted for amortization of acquisition-related intangible assets (after tax)	$	2,521		$	2,613		$	2,444		$	7,760		$	7,037
Return on tangible common equity – reported (3)		19.2	%		20.4	%		19.1	%		19.9	%		18.7	%
Adjusted
Net income attributable to common shareholders adjusted for amortization of acquisition-related intangible assets (after tax)	$	2,521		$	2,613		$	2,444		$	7,760		$	7,037
Average tangible common equity – adjusted (2)	$	52,035		$	52,450		$	50,876		$	52,270		$	50,241
Return on tangible common equity – adjusted (3)		19.2	%		20.4	%		19.1	%		19.9	%		18.7	%

(1)	Includes imputed goodwill from investments in associates.

(2)	Refer to Tables on page 5.

(3)	Calculated on full dollar amounts.

Productivity ratio

Management uses the productivity ratio as a measure of the Bank’s efficiency. This ratio represents

non-interest

expenses as a percentage of total revenue. A lower ratio indicates improved productivity.

Adjusted productivity ratio represents adjusted

non-interest

expenses as a percentage of adjusted total revenue.

Operating leverage

This financial metric measures the rate of growth in total revenue less the rate of growth in

non-interest

expenses.

Adjusted operating leverage represents the rate of growth in adjusted total revenue less the rate of growth in adjusted

non-interest

expenses.

Provision for credit losses (PCL) as a % of average net loans and acceptances

The ratio represents PCL (annualized) expressed as a % of average net loans and acceptances.

Adjusted provision for credit losses as a % of average net loans and acceptances represents adjusted PCL (annualized) expressed as a % of average net loans and acceptances.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Taxable equivalent basis

The Bank analyzes certain net interest income and

non-interest

income items on a taxable equivalent basis (TEB). This methodology grosses up

tax-exempt

income earned on certain securities reported in either net interest income or

non-interest

income to an equivalent before tax basis. A corresponding increase is made to the provision for income taxes; hence, there is no impact on net income. Management believes that this basis for measurement provides a uniform comparability of net interest income and

non-interest

income arising from both taxable and

non-taxable

sources and facilitates a consistent basis of measurement. While other banks also use TEB, their methodology may not be comparable to the Bank’s methodology.

Effective tax rate

The effective tax rate is the overall tax rate paid by the Bank on its earned income. The effective tax rate is calculated by dividing the Bank’s income tax expense by income before taxes.

Adjusted effective tax rate is calculated by dividing adjusted income tax expense by adjusted income before taxes.

Effective tax rate (TEB) basis is calculated by dividing income tax expense, adjusted to a tax equivalent basis, by income before taxes, adjusted to a tax equivalent basis.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Financial Highlights

T6 Financial highlights


	As at and for the three months ended						For the nine months ended
(Unaudited)	July 31 2022		April 30 2022		July 31 2021		July 31 2022		July 31 2021
Operating results ($ millions)
Net interest income		4,676		4,473		4,217		13,493		12,744
Non-interest income		3,123		3,469		3,540		10,297		10,821
Total revenue		7,799		7,942		7,757		23,790		23,565
Provision for credit losses		412		219		380		853		1,640
Non-interest expenses		4,191		4,159		4,097		12,573		12,347
Income tax expense		602		817		738		2,283		2,182
Net income		2,594		2,747		2,542		8,081		7,396
Net income attributable to common shareholders		2,504		2,595		2,426		7,707		6,980
Operating performance
Basic earnings per share ($)		2.10		2.16		2.00		6.41		5.75
Diluted earnings per share ($)		2.09		2.16		1.99		6.39		5.73
Return on equity (%) (1)		15.3		16.2		15.0		15.8		14.7
Return on tangible common equity (%) (2)		19.2		20.4		19.1		19.9		18.7
Productivity ratio (%) (1)		53.7		52.4		52.8		52.8		52.4
Net interest margin (%) (2)		2.22		2.23		2.23		2.20		2.25
Financial position information ($ millions)
Cash and deposits with financial institutions		67,715		85,910		75,881
Trading assets		118,605		133,644		141,120
Loans		713,378		689,702		627,749
Total assets		1,292,102		1,288,506		1,163,429
Deposits		879,582		876,554		794,386
Common equity		65,043		64,833		64,720
Preferred shares and other equity instruments		7,052		5,552		5,299
Assets under administration (1)(3)		630,087		640,227		636,426
Assets under management (1)(3)		319,612		326,223		340,853
Capital and liquidity measures
Common Equity Tier 1 (CET1) capital ratio (%) (4)		11.4		11.6		12.2
Tier 1 capital ratio (%) (4)		13.0		12.8		13.7
Total capital ratio (%) (4)		15.0		15.0		15.7
Total loss absorbing capacity (TLAC) ratio (%) (5)		28.4		30.1		25.3
Leverage ratio (%) (6)		4.2		4.2		4.8
TLAC Leverage ratio (%) (5)		9.3		9.8		8.8
Risk-weighted assets ($ millions) (4)		452,800		445,273		414,169
Liquidity coverage ratio (LCR) (%) (7)		122		125		123
Net stable funding ratio (NSFR) (%) (8)		109		109		112
Credit quality
Net impaired loans ($ millions)		2,695		2,660		2,976
Allowance for credit losses ($ millions) (9)		5,295		5,375		6,232
Gross impaired loans as a % of loans and acceptances (1)		0.58		0.60		0.73
Net impaired loans as a % of loans and acceptances (1)		0.36		0.37		0.46
Provision for credit losses as a % of average net loans and acceptances (annualized) (1)(10)		0.22		0.13		0.24		0.16		0.35
Provision for credit losses on impaired loans as a % of average net loans and acceptances (annualized) (1)(10)		0.21		0.24		0.53		0.23		0.60
Net write-offs as a % of average net loans and acceptance (annualized) (1)		0.21		0.25		0.62		0.24		0.60
Adjusted results (2)
Adjusted net income ($ millions)		2,611		2,765		2,560		8,134		7,453
Adjusted diluted earnings per share ($)		2.10		2.18		2.01		6.43		5.78
Adjusted return on equity (%)		15.4		16.4		15.1		15.9		14.8
Adjusted return on tangible common equity (%)		19.2		20.4		19.1		19.9		18.7
Adjusted productivity ratio (%)		53.4		52.1		52.5		52.5		52.1
Adjusted provision for credit losses as a % of average net loans and acceptances (annualized) (10)		0.22		0.13		0.24		0.16		0.35
Common share information
Closing share price ($) (TSX)		78.01		81.35		77.87
Shares outstanding (millions)
Average – Basic		1,195		1,199		1,215		1,201		1,213
Average – Diluted		1,203		1,201		1,223		1,221		1,225
End of period		1,193		1,198		1,215
Dividends paid per share ($)		1.03		1.00		0.90		3.03		2.70
Dividend yield (%) (1)		5.2		4.5		4.5		4.9		5.2
Market capitalization ($ millions) (TSX)		93,059		97,441		94,620
Book value per common share ($) (1)		54.52		54.13		53.26
Market value to book value multiple (1)		1.4		1.5		1.5
Price to earnings multiple (trailing 4 quarters) (1)		9.3		9.8		10.8
Other information
Employees (full-time equivalent)		90,978		90,619		90,833
Branches and offices		2,392		2,405		2,555

(1)	Refer to Glossary on page 51 for the description of the measure.

(2)	Refer to page 4 for a discussion of Non-GAAP measures.

(3)	Prior period amounts have been restated to appropriately reflect certain intercompany items.

(4)	This measure has been disclosed in this document in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018).

(5)	This measure has been disclosed in this document in accordance with OSFI Guideline – Total Loss Absorbing Capacity (September 2018).

(6)	This measure has been disclosed in this document in accordance with OSFI Guideline – Leverage Requirements (November 2018).

(7)	This measure has been disclosed in this document in accordance with OSFI Guideline – Public Disclosure Requirements for Domestic Systemically Important Banks on Liquidity Coverage Ratio (April 2015).

(8)	This measure has been disclosed in this document in accordance with OSFI Guideline – Net Stable Funding Ratio Disclosure Requirements (January 2021).

(9)	Includes allowance for credit losses on all financial assets – loans, acceptances, off-balance sheet exposures and other financial assets.

(10)	Includes provision for credit losses on certain financial assets – loans, acceptances and off-balance sheet exposures.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Overview of Performance

Financial performance summary

The Bank’s reported net income this quarter was $2,594 million, compared to $2,542 million in the same period last year, and $2,747 million last quarter. Diluted earnings per share were $2.09 compared to $1.99 in the same period last year and $2.16 last quarter. Return on equity was 15.3%, compared to 15.0% in the same period last year and 16.2% last quarter.

Adjusted net income was $2,611 million compared to $2,560 million last year, an increase of 2%. Adjusted diluted earnings per share were $2.10 compared to $2.01 last year. Adjusted return on equity was 15.4% compared to 15.1% a year ago. The increase in net income was due primarily to higher net interest income and lower provision for income taxes.

Adjusted net income was $2,611 million this quarter compared to $2,765 million last quarter. Adjusted diluted earnings per share were $2.10, compared to $2.18 last quarter, and adjusted return on equity was 15.4% compared to 16.4% last quarter. The decrease in net income was due mainly to lower non-interest income and higher provision for credit losses, partly offset by lower provision for income taxes.

Economic summary and outlook

The global outlook continues to soften as a result of COVID policies in China, high energy prices, expectations of higher interest rates and the associated rise in the risk of recession in key economies. The lockdown in China is having a depressing impact on commodity prices that is being reinforced by concerns of a potential recession in the U.S. and, more likely, in Europe. Despite this softening in commodity prices, inflationary pressures have persisted, pushing the inflation outlook upwards. Owing to these concerns, financial markets are pricing in more aggressive monetary policy in a large number of countries.

In Canada, historically high levels of pent-up household demand and strong consumer balance sheets are key mitigants to a possible downturn, despite the headwinds coming from a sharp drop in consumer confidence and the loss of purchasing power driven by higher inflation and higher interest costs. We remain of the view that a recession is a risk to the outlook rather than a certainty, the likelihood of which will depend on the Bank of Canada’s ability to reign in inflation with a few additional policy rate increases. Should a recession occur, we believe it would be relatively mild given the historical strength of both corporate and household balance sheets and the incredible strength of the labour market.

While inflation in the U.S. and Canada is expected to soften in upcoming months owing to the pullback in gas prices and further easing of supply bottlenecks, it is expected to remain above its 2% target. Despite the softening growth outlook, incoming inflation has been stronger than anticipated and wage pressures suggest that inflation will be stronger than earlier anticipated in 2023. As a result, we now expect additional rate increases by both countries’ central banks. We forecast the Bank of Canada will increase by an additional 100bps this year and the Federal Reserve Bank by an additional 75bps.

There is little indication of a recession in Colombia, Mexico and Peru but political uncertainty, lower commodity prices and rising inflation and interest rates are beginning to weigh on economic activity. Economic activity has slowed in Chile early this year and a recession is expected in 2023, but this dynamic is a healthy adjustment and principally reflects a moderation from the extremely rapid pace of growth observed in 2021 where the rise in economic activity was twice as large as the decline observed during COVID. On balance in the region, growth is coming down from post-pandemic rebound highs to more sustainable medium-term rates. Central banks in all Pacific Alliance Countries are expected to continue to tighten policy aggressively in response to stubbornly high inflation, as observed elsewhere in the world. Higher U.S. interest rates have fueled depreciations of domestic currencies adding to inflation pressures.

Impact of foreign currency translation

The table below reflects the estimated impact of foreign currency translation on key income statement items and is computed on a basis that is different than the “

Constant dollar

” table in

Non-GAAP

Measures on page 7.

T7 Impact of foreign currency translation


	Average exchange rate						% Change
For the three months ended	July 31, 2022		April 30, 2022		July 31, 2021		July 31, 2022 vs. April 30, 2022			July 31, 2022 vs. July 31, 2021
U.S dollar/Canadian dollar		0.778		0.790		0.814		(1.5	)%		(4.5	)%
Mexican Peso/Canadian dollar		15.678		16.072		16.265		(2.5	)%		(3.6	)%
Peruvian Sol/Canadian dollar		2.957		2.964		3.152		(0.2	)%		(6.2	)%
Colombian Peso/Canadian dollar		3,199.898		3,033.704		3,050.455		5.5	%		4.9	%
Chilean Peso/Canadian dollar		690.164		637.946		594.658		8.2	%		16.1	%


	Average exchange rate				% Change
For the nine months ended	July 31, 2022		July 31, 2021		July 31, 2022 vs. July 31, 2021
U.S dollar/Canadian dollar		0.785		0.795		(1.2	)%
Mexican Peso/Canadian dollar		16.044		16.025		0.1	%
Peruvian Sol/Canadian dollar		3.022		2.963		2.0	%
Colombian Peso/Canadian dollar		3,121.586		2,890.508		8.0	%
Chilean Peso/Canadian dollar		660.947		580.104		13.9	%

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS


	For the three months ended						For the nine months ended
Impact on net income (1) ($ millions except EPS)	July 31, 2022 vs. July 31, 2021			July 31, 2022 vs. April 30, 2022			July 31, 2022 vs. July 31, 2021
Net interest income	$	(2	)	$	(18	)	$	(204	)
Non-interest income (2)		13			15			(96	)
Total revenue		11			(3	)		(300	)
Non-interest expenses		(9	)		8			123
Other items (net of tax)		1			2			71
Net income	$	3		$	7		$	(106	)
Earnings per share (diluted)	$	–		$	0.01		$	(0.09	)
Impact by business line ($ millions)
Canadian Banking	$	2		$	1		$	1
International Banking (2)		(13	)		(5	)		(95	)
Global Wealth Management		–			–			(4	)
Global Banking and Markets		12			5			9
Other (2)		2			6			(17	)
Net income	$	3		$	7		$	(106	)

(1)	Includes the impact of all currencies.

(2)	Includes the impact of foreign currency hedges.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Group Financial Performance

Net income

Q3 2022 vs Q3 2021

Net income was $2,594 million compared to $2,542 million. Adjusted net income was $2,611 million compared to $2,560 million, an increase of 2%, due mainly to higher net interest income and lower provision for income taxes, partly offset by lower

non-interest

income, higher

provision for credit losses and higher

non-interest

expenses.

Q3 2022 vs Q2 2022

Net income was $2,594 million compared to $2,747 million. Adjusted net income was $2,611 million compared to $2,765 million, a decrease of 6%, due mainly to lower

non-interest

income and higher provision for credit losses, partly offset by higher net interest income and lower provision for income taxes.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income was $8,081 million compared to $7,396 million. Adjusted net income was $8,134 million compared to $7,453 million, an increase of 9%, due mainly to higher net interest income and lower provision for credit losses, partly offset by lower

non-interest

income, higher

non-interest

expenses and higher provision for income taxes.

Total revenue

Q3 2022 vs Q3 2021

Revenues were $7,799 million compared to $7,757 million, an increase of 1%, due mainly to higher net interest income, partly offset by lower

non-interest

income.

Q3 2022 vs Q2 2022

Revenues were down 2%, due to lower

non-interest

income, partly offset by higher net interest income.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Revenues were $23,790 million compared to $23,565 million, an increase of 1%, due mainly to higher net interest income, partly offset by lower

non-interest

income.

Net interest income

Q3 2022 vs Q3 2021

Net interest income was $4,676 million, up $459 million or 11% driven primarily by strong asset growth across all business lines.

Net interest margin was down 1 basis point to 2.22%, driven by lower contribution from asset/liability management activities and increased levels of high quality, lower-margin liquid assets, partly offset by higher margins across all business lines, which benefited from central bank rate increases.

Q3 2022 vs Q2 2022

Net interest income was up $203 million or 5% primarily from the impact of three more days in the quarter and loan growth across all business lines.

Net interest margin was down 1 basis point to 2.22%, driven by lower contribution from asset/liability management activities, partly offset by a higher Canadian Banking margin, which benefited from Bank of Canada rate increases, and decreased levels of high quality, lower-margin liquid assets.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net interest income was $13,493 million, an increase of $749 million or 6%. Strong mortgage, commercial, and corporate loan growth was partly offset by margin compression and the negative impact of foreign currency translation.

Net interest margin was down 5 basis points to 2.20%, driven primarily by lower margins in International Banking and Canadian Banking mainly related to changes in business mix, as well as a lower contribution from asset/liability management activities, partly offset by the benefit of central bank rate increases.

Non-interest income

Q3 2022 vs Q3 2021

Non-interest

income was $3,123 million, down $417 million or 12%. The decrease was due mainly to lower capital market and wealth management revenues related to market conditions, and lower investment gains. These were partly offset by higher banking revenues and insurance revenues.

Q3 2022 vs Q2 2022

Non-interest

income was down $346 million or 10%, due primarily to lower capital market and wealth management revenues related to market conditions, and lower income from associated corporations.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

income was $10,297 million, down $524 million or 5%. The decrease was due mainly to lower capital market revenues related to market conditions, lower investment gains, as well as the negative impact of foreign currency translation. These were partly offset by higher banking and wealth management revenues.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Provision for credit losses

Q3 2022 vs Q3 2021

The provision for credit losses was $412 million compared to $380 million, an increase of $32 million or 8%. The provision for credit losses ratio decreased two basis points to 22 basis points.

Provision for credit losses on performing loans was $23 million, compared to a net reversal of $461 million. The provision was driven by the less favorable macroeconomic forecast and portfolio growth in the retail and commercial portfolios, partly offset by provision reversals in retail due to improved portfolio credit quality. Higher provision reversals last year were due mainly to the more favourable macroeconomic outlook and credit migration to impaired, primarily in International Banking.

Provision for credit losses on impaired loans was $389 million, compared to $841 million, a decrease of $452 million or 54% due primarily to lower retail provisions in International Banking, driven by lower formations across most markets. The provision for credit losses ratio on impaired loans decreased 32 basis points to 21 basis points.

Q3 2022 vs Q2 2022

The provision for credit losses was $412 million compared to $219 million, an increase of $193 million or 88%. The provision for credit losses ratio increased nine basis points to 22 basis points.

Provision for credit losses on performing loans was $23 million, compared to a net reversal of $187 million. The provision was driven by the less favorable macroeconomic forecast and portfolio growth in the retail and commercial portfolios, offset by provision reversals in retail due to improved portfolio credit quality expectations. The provision this quarter includes approximately $65 million reversal, compared to $210 million in prior period, due to the release of allowances built in fiscal year 2020 no longer required, primarily in the Canadian retail portfolio, reflecting improved portfolio credit quality expectations.

Provision for credit losses on impaired loans was $389 million, compared to $406 million, a decrease of $17 million or 4% driven primarily by lower retail formations in International Banking, mainly Peru, Mexico and Central America, partly offset by higher formations in the Canadian retail portfolio. The provision for credit losses ratio on impaired loans was 21 basis points, a decrease of three basis points.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The provision for credit losses was $853 million compared to $1,640 million, a decrease of $787 million or 48%. The provision for credit losses ratio decreased 19 basis points to 16 basis points.

Provision for credit losses on performing loans was a net reversal of $347 million compared to a net reversal of $1,155 million. The provision reversals were primarily in the retail portfolio driven by improved credit quality and in the energy portfolio due to increased commodity prices. This was partly offset by the less favorable macroeconomic forecast and portfolio growth. The provision reversals included approximately $485 million (July 31, 2021 - $380 million) of allowance releases from those built in fiscal year 2020 no longer required.

The provision for credit losses on impaired loans was $1,200 million, compared to $2,795 million, a decrease of $1,595 million or 57% due primarily to lower formations across all portfolios. The provision for credit losses ratio on impaired loans decreased 37 basis points to 23 basis points.

Non-interest expenses

Q3 2022 vs Q3 2021

Non-interest

expenses were $4,191 million, up $94 million or 2%. Higher personnel costs, share-based compensation, and advertising costs to support business growth, were partly offset by lower performance-based compensation and professional fees.

The productivity ratio was 53.7% compared to 52.8%. On an adjusted basis, the productivity ratio was 53.4% compared to 52.5%.

Q3 2022 vs Q2 2022

Non-interest

expenses were up $32 million or 1%. The increase was due primarily to higher personnel costs, including the impact of three more days in the quarter, and advertising and technology-related costs to support business growth. Partly offsetting were lower performance-based compensation and share-based compensation expenses.

The productivity ratio was 53.7% compared to 52.4%. On an adjusted basis, the productivity ratio was 53.4% compared to 52.1%.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

expenses were up $226 million or 2%. Higher personnel costs, share-based payments, professional fees, advertising and technology related costs to support business growth were partly offset by the positive impact of foreign currency translation. The prior year’s expenses included the increased investment in the SCENE loyalty program and higher performance-based compensation related to elevated wealth management performance fees.

The productivity ratio was 52.8% compared to 52.4%. On an adjusted basis, the productivity ratio was 52.5% compared to 52.1%. Operating leverage was negative 0.9%.

Taxes

The effective tax rate was 18.8% for the quarter, compared to 22.5% in the prior year and 22.9% in the prior period, due primarily to higher inflationary adjustments in Mexico and Chile.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The effective tax rate was 22.1% compared to 22.8% due primarily to higher inflationary adjustments in Mexico and Chile, partly offset by changes in business mix and earnings across jurisdictions.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Business Segment Review

Business segment results are presented on a taxable equivalent basis, adjusted for the following:

•

The Bank analyzes revenues on a taxable equivalent basis (TEB) for business lines. This methodology grosses up

tax-exempt

income earned on certain securities reported in either net interest income or

non-interest

income arising from both taxable and

non-taxable

sources and facilitates a consistent basis of measurement. While other banks may also use TEB, their methodology may not be comparable to the Bank’s methodology. A segment’s revenue and provision for income taxes are grossed up by the taxable equivalent amount. The elimination of the TEB

gross-up

is recorded in the Other segment.

•

For business line performance assessment and reporting, net income from associated corporations, which is an after tax number, is adjusted to normalize for income taxes. The tax normalization adjustment grosses up the amount of net income from associated corporations and normalizes the effective tax rate in the business lines to better present the contribution of the associated corporations to the business line results.


Canadian Banking
T8 Canadian Banking financial performance
	For the three months ended									For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income	$	2,361		$	2,144		$	2,030		$	6,638		$	5,948
Non-interest income (1)		758			759			765			2,258			2,119
Total revenue		3,119			2,903			2,795			8,896			8,067
Provision for credit losses		93			(12	)		69			46			429
Non-interest expenses		1,385			1,324			1,267			3,991			3,700
Income tax expense		428			412			380			1,266			1,021
Net income	$	1,213		$	1,179		$	1,079		$	3,593		$	2,917
Net income attributable to non-controlling interest in subsidiaries	$	–		$	–		$	–		$	–		$	–
Net income attributable to equity holders of the Bank	$	1,213		$	1,179		$	1,079		$	3,593		$	2,917
Other financial data and measures
Return on equity (2)		26.1	%		27.1	%		26.1	%		26.8	%		23.8	%
Net interest margin (2)		2.29	%		2.22	%		2.23	%		2.23	%		2.25	%
Provision for credit losses – performing (Stage 1 and 2)	$	(50	)	$	(143	)	$	(66	)	$	(353	)	$	(162	)
Provision for credit losses – impaired (Stage 3)	$	143		$	131		$	135		$	399		$	591
Provision for credit losses as a percentage of average net loans and acceptances (annualized) (3)		0.09	%		(0.01	)%		0.07	%		0.01	%		0.16	%
Provision for credit losses on impaired loans as a percentage of average net loans and acceptances (annualized) (3)		0.13	%		0.13	%		0.14	%		0.13	%		0.21	%
Net write-offs as a percentage of average net loans and acceptances (annualized) (3)		0.12	%		0.14	%		0.18	%		0.13	%		0.21	%
Average assets ($ billions)	$	437		$	423		$	384		$	424		$	375
Average liabilities ($ billions)	$	337		$	326		$	317		$	328		$	311

(1)	Includes income (on a taxable equivalent basis) from associated corporations for the three months ended July 31, 2022 – $15 (April 30, 2022 – $18; July 31, 2021 – $23) and for the nine months ended July 31, 2022 – $41 (July 31, 2021 – $69).

(2)	Refer to Non-GAAP Measures on page 4 for the description of the measure.

(3)	Refer to Glossary on page 51 for the description of the measure.


T8A Adjusted Canadian Banking financial performance
	For the three months ended							For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022		April 30 2022			July 31 2021		July 31 2022		July 31 2021
Adjusted Results (1)
Net interest income	$	2,361	$	2,144		$	2,030	$	6,638	$	5,948
Non-interest income		758		759			765		2,258		2,119
Total revenue		3,119		2,903			2,795		8,896		8,067
Provision for credit losses		93		(12	)		69		46		429
Non-interest expenses (2)		1,380		1,319			1,262		3,975		3,684
Income tax expense		429		413			381		1,270		1,025
Net income	$	1,217	$	1,183		$	1,083	$	3,605	$	2,929
Net income attributable to non-controlling interest in subsidiaries	$	–	$	–		$	–	$	–	$	–
Net income attributable to equity holders of the Bank	$	1,217	$	1,183		$	1,083	$	3,605	$	2,929

(1)	Refer to Non-GAAP Measures on page 4 for adjusted results.

(2)	Includes adjustment for amortization of acquisition-related intangible assets, excluding software for the three months ended July 31, 2022 – $5 (April 30, 2022 – $5; July 31, 2021 – $5) and for the nine months ended July 31, 2022 – $16 (July 31, 2021 – $16).

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Net income

Q3 2022 vs Q3 2021

Net income attributable to equity holders was $1,213 million, compared to $1,079 million. Adjusted net income attributable to equity holders was $1,217 million, an increase of $134 million or 12%. The increase was due primarily to higher revenues, partly offset by higher

non-interest

expenses and provision for credit losses.

Q3 2022 vs Q2 2022

Net income attributable to equity holders increased $34 million or 3%. The increase was due primarily to higher revenues, partly offset by higher provision for credit losses and

non-interest

expenses.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was $3,593 million, compared to $2,917 million. Adjusted net income attributable to equity holders was $3,605 million, an increase of $676 million or 23%. The increase was due primarily to higher revenues and lower provision for credit losses, partly offset by higher

non-interest

expenses.

Average assets

Q3 2022 vs Q3 2021

Average assets increased $53 billion or 14% to $437 billion. The growth included $35 billion or 14% in residential mortgages, $14 billion or 23% in business loans and acceptances, $2 billion or 3% in personal loans, and $1 billion or 11% in credit card loans.

Q3 2022 vs Q2 2022

Average assets increased $14 billion or 3%. The growth included $7 billion or 2% in residential mortgages, $5 billion or 7% in business loans and acceptances, and $2 billion or 2% in personal loans.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average assets increased $49 billion or 13% to $424 billion. The growth included $35 billion or 15% in residential mortgages, $12 billion or 19% in business loans and acceptances, and $1 billion or 1% in personal loans.

Average liabilities

Q3 2022 vs Q3 2021

Average liabilities increased $20 billion or 6% to $337 billion. The growth included $7 billion or 7% in

non-personal

deposits and $6 billion or 3% in personal deposits.

Q3 2022 vs Q2 2022

Average liabilities increased $11 billion or 3%. The growth included $6 billion or 3% in personal deposits and $3 billion or 2% in

non-personal

deposits.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average liabilities increased $17 billion or 5% to $328 billion. The growth included $9 billion or 9% in

non-personal

deposits and $2 billion or 1% in personal deposits.

Total revenue

Q3 2022 vs Q3 2021

Revenues were $3,119 million, up $324 million or 12%, due to higher net interest income partly offset by lower

non-interest

income.

Q3 2022 vs Q2 2022

Revenues increased $216 million or 7%, due to higher net interest income.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Revenues were $8,896 million, up $829 million or 10%, due to higher net interest income and

non-interest

income.

Net interest income

Q3 2022 vs Q3 2021

Net interest income of $2,361 million increased $331 million or 16%, due primarily to strong loan and deposit growth, as well as margin expansion. The net interest margin increased six basis points to 2.29%, due primarily to higher deposit spreads and the impact of the Bank of Canada rate increases, partly offset by lower loan spreads.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Q3 2022 vs Q2 2022

Net interest income increased $217 million or 10%, driven by strong loan and deposit growth, margin expansion, and the impact of three more days in the quarter. The net interest margin increased seven basis points to 2.29%, due primarily to higher deposit spreads and the impact of the Bank of Canada rate increases, partly offset by lower loan spreads.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net interest income of $6,638 million increased $690 million or 12%, due primarily to strong loan and deposit growth, partly offset by margin compression. The net interest margin declined two basis points to 2.23%, due primarily to lower loan spreads and changes in business mix, partly offset by higher deposit spreads.

Non-interest income

Q3 2022 vs Q3 2021

Non-interest

income of $758 million declined $7 million or 1%. The decline was due primarily to elevated private equity gains in the prior year and lower income from associated corporations, partly offset by higher banking revenue, insurance fees, and foreign exchange fees.

Q3 2022 vs Q2 2022

Non-interest income was in line with prior quarter.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

income of $2,258 million increased $139 million or 7%. The increase was due primarily to higher banking revenue, foreign exchange fees, and mutual fund distribution fees, partly offset by lower income from associated corporations and elevated private equity gains in the prior year.

Provision for credit losses

Q3 2022 vs Q3 2021

The provision for credit losses was $93 million, an increase of $24 million. The provision for credit losses ratio increased by two basis points to nine basis points.

Provision for credit losses on performing loans was a net reversal of $50 million, compared to a net reversal of $66 million in the prior year. The provision reversal this period was driven by improved retail portfolio credit quality expectations, partly offset by the less favourable macroeconomic forecast, and growth in the retail and commercial portfolios.

Provision for credit losses on impaired loans was $143 million compared to $135 million, an increase of $8 million or 6% due primarily to higher retail provisions driven by higher formations, partly offset by lower commercial provisions due to a recovery on one commercial account. The provision for credit losses ratio on impaired loans was 13 basis points, a decrease of one basis point.

Q3 2022 vs Q2 2022

The provision for credit losses was $93 million, an increase of $105 million. The provision for credit losses ratio increased ten basis points to nine basis points.

Provision for credit losses on performing loans was a net reversal of $50 million, compared to a net reversal of $143 million in the prior quarter. The provision reversal this period was driven by improved retail portfolio credit quality expectations, partly offset by the less favourable macroeconomic forecast and portfolio growth.

Provision for credit losses on impaired loans was $143 million compared to $131 million, an increase of $12 million or 9% due primarily to higher retail provisions driven by higher formations, partly offset by lower commercial provisions due to a recovery on one commercial account. The provision for credit losses ratio on impaired loans remained unchanged at 13 basis points.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The provision for credit losses was $46 million, a decrease of $383 million. The provision for credit losses ratio was one basis point, a decrease of 15 basis points.

Provision for credit losses on performing loans was a net reversal of $353 million, compared to a net reversal of $162 million in the prior year. The provision reversal this period was driven primarily by improved retail portfolio credit quality, partly offset by the less favourable macroeconomic forecast and portfolio growth.

Provision for credit losses on impaired loans was $399 million compared to $591 million, a decrease of $192 million due primarily to lower retail provisions driven by lower formations. The provision for credit losses ratio on impaired loans was 13 basis points, a decrease of eight basis points.

Non-interest expenses

Q3 2022 vs Q3 2021

Non-interest

expenses were $1,385 million, up $118 million or 9%, due primarily to higher technology, advertising, and personnel costs to support business growth.

Q3 2022 vs Q2 2022

Non-interest

expenses were up $61 million or 5%, due primarily to the impact of three more days in the quarter, and higher advertising and technology costs to support business growth.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

expenses were $3,991 million, up $291 million or 8%, due primarily to higher technology, personnel, and advertising costs to support business growth.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Taxes

The effective tax rate was 26.1% for the quarter, compared to 26.0% in the prior year and 25.9% in the prior quarter.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The effective tax rate of 26.1% increased from 25.9% in the prior year.


International Banking
T9 International Banking financial performance
	For the three months ended									For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income	$	1,759		$	1,687		$	1,586		$	5,094		$	5,036
Non-interest income (1)		660			720			776			2,129			2,265
Total revenue		2,419			2,407			2,362			7,223			7,301
Provision for credit losses		325			276			339			875			1,260
Non-interest expenses		1,295			1,268			1,299			3,848			3,995
Income tax expense		122			182			160			512			498
Net income	$	677		$	681		$	564		$	1,988		$	1,548
Net income attributable to non-controlling interest in subsidiaries	$	52		$	76		$	78		$	213		$	253
Net income attributable to equity holders of the Bank	$	625		$	605		$	486		$	1,775		$	1,295
Other financial data and measures
Return on equity (2)		13.1	%		13.2	%		11.1	%		12.8	%		9.8	%
Net interest margin (2)		3.85	% (3)		3.86	%		3.72	%		3.82	% (3)		3.90	%
Provision for credit losses – performing (Stage 1 and 2)	$	63		$	(2	)	$	(364	)	$	49		$	(912	)
Provision for credit losses – impaired (Stage 3)	$	262		$	278		$	703		$	826		$	2,172
Provision for credit losses as a percentage of average net loans and acceptances (annualized) (4)		0.84	%		0.77	%		1.00	%		0.80	%		1.23	%
Provision for credit losses on impaired loans as a percentage of average net loans and acceptances (annualized) (4)		0.68	%		0.77	%		2.08	%		0.75	%		2.12	%
Net write-offs as a percentage of average net loans and acceptances (annualized) (4)		0.74	%		0.76	%		2.37	%		0.79	%		2.11	%
Average assets ($ billions)	$	209		$	204		$	191		$	203		$	195
Average liabilities ($ billions)	$	155		$	149		$	146		$	149		$	149

(1)	Includes income (on a taxable equivalent basis) from associated corporations for the three months ended July 31, 2022 – $54 (April 30, 2022 – $77; July 31, 2021 – $52) and for the nine months ended July 31, 2022 – $199 (July 31, 2021 – $154).

(2)	Refer to Non-GAAP Measures on page 4 for the description of the measure.

(3)	Net interest margin methodology has been refined on a prospective basis to align to the Bank’s definition. Prior periods have not been restated.

(4)	Refer to Glossary on page 51 for the description of the measure.


T9A Adjusted International Banking financial performance
	For the three months ended						For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022		April 30 2022		July 31 2021		July 31 2022		July 31 2021
Adjusted Results (1)
Net interest income	$	1,759	$	1,687	$	1,586	$	5,094	$	5,036
Non-interest income		660		720		776		2,129		2,265
Total revenue		2,419		2,407		2,362		7,223		7,301
Provision for credit losses		325		276		339		875		1,260
Non-interest expenses (2)		1,285		1,258		1,288		3,818		3,960
Income tax expense		126		184		164		521		508
Net income	$	683	$	689	$	571	$	2,009	$	1,573
Net income attributable to non-controlling interest in subsidiaries	$	52	$	76	$	78	$	213	$	253
Net income attributable to equity holders of the Bank	$	631	$	613	$	493	$	1,796	$	1,320

(1)	Refer to Non-GAAP Measures on page 4 for adjusted results.

(2)	Includes adjustment for amortization of acquisition-related intangible assets, excluding software for the three months ended July 31, 2022 – $9 (April 30, 2022 – $10; July 31, 2021 – $11) and for the nine months ended July 31, 2022 – $29 (July 31, 2021 – $35).

Net income

Q3 2022 vs Q3 2021

Net income attributable to equity holders was $625 million, compared to $486 million. Adjusted net income attributable to equity holders was $631 million, an increase from $493 million. This increase was driven by higher net interest income, lower provision for income taxes, and lower provision for credit losses, partly offset by lower non-interest income.

Q3 2022 vs Q2 2022

Net income attributable to equity holders increased by $20 million or 3% from $605 million. Adjusted net income attributable to equity holders increased by $18 million or 3%, compared to $613 million last quarter. This was due largely to higher net interest income and lower provision for income taxes, partly offset by lower non-interest income, higher provision for credit losses and higher non-interest expenses.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was $1,775 million, an increase of $480 million. Adjusted net income attributable to equity holders was $1,796 million, an increase of $476 million. This increase was due largely to lower provision for credit losses,

non-interest

expenses and higher net interest income, partly offset by lower

non-interest

income, and the negative impact of foreign currency translation.

Financial Performance on an Adjusted and Constant Dollar Basis

The discussion below on the results of operations is on an adjusted and constant dollar basis. Constant dollar basis excludes the impact of foreign currency translation, which is a

non-GAAP

financial measure (refer to

Non-GAAP

Measures). The Bank believes that reporting in constant dollar is useful for readers in assessing ongoing business performance. Ratios are on a reported basis.

T10 International Banking financial performance on adjusted and constant dollar basis


	For the three months ended						For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022		April 30 2022		July 31 2021		July 31 2022		July 31 2021
Constant dollars – Adjusted (1)
Net interest income	$	1,759	$	1,667	$	1,585	$	5,094	$	4,856
Non-interest income (2)		660		716		766		2,129		2,177
Total revenue		2,419		2,383		2,351		7,223		7,033
Provision for credit losses		325		273		343		875		1,211
Non-interest expenses		1,285		1,247		1,290		3,818		3,840
Income tax expense		126		186		157		521		483
Net income	$	683	$	677	$	561	$	2,009	$	1,499
Net income attributable to non-controlling interest in subsidiaries	$	52	$	72	$	73	$	213	$	233
Net income attributable to equity holders of the Bank	$	631	$	605	$	488	$	1,796	$	1,266
Other financial data and measures
Average assets ($ billions)	$	209	$	201	$	189	$	203	$	188
Average liabilities ($ billions)	$	155	$	146	$	144	$	149	$	143

(1)	Refer to Non-GAAP Measures on page 4 for adjusted results.

(2)	Includes income (on a taxable equivalent basis) from associated corporations for the three months ended July 31, 2022 – $54 (April 30, 2022 – $76; July 31, 2021 – $55) and for the nine months ended July 31, 2022 – $199 (July 31, 2021 – $158).

Net income

Q3 2022 vs Q3 2021

Net income attributable to equity holders was $625 million, compared to $481 million. Adjusted net income attributable to equity holders increased to $631 million from $488 million. This increase was driven by higher net interest income, lower provision for income taxes, and lower provision for credit losses, partly offset by lower

non-interest

income.

Q3 2022 vs Q2 2022

Net income attributable to equity holders increased by $27 million or 5% from $598 million. Adjusted net income attributable to equity holders increased by $26 million or 5%, compared to $605 million last quarter. This was due largely to higher net interest income and lower provision for income taxes, partly offset by lower

non-interest

income, higher provision for credit losses and higher

non-interest

expenses.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was $1,775 million, an increase of $533 million. Adjusted net income attributable to equity holders was $1,796 million, up $530 million. This increase was due largely to lower provision for credit losses, and higher net interest income, partly offset by lower

non-interest

income and higher provision for income taxes.

Average assets

Q3 2022 vs Q3 2021

Average assets were $209 billion, an increase of $20 billion. Total loan growth of 13% was driven by a 16% increase in residential mortgages, a 14% increase in commercial loans, and a 7% increase in personal loans and credit card balances.

Q3 2022 vs Q2 2022

Average assets increased by $8 billion. Loans grew by 4%, driven by a 4% increase in commercial loans, a 4% increase in residential mortgages and a 4% increase in personal loans and credit card balances.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average assets were $203 billion and increased by $15 billion. Total loan growth of 10% was driven by an 11% increase in commercial loans, a 14% increase in residential mortgages, and a 1% increase in personal loans and credit card balances.

Average liabilities

Q3 2022 vs Q3 2021

Average liabilities of $155 billion were up $11 billion. Total deposits increased 5%, driven by a 7% increase in

non-personal

deposits and a 2% increase in personal deposits.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Q3 2022 vs Q2 2022

Average liabilities were up $9 billion. Total deposits increased by 3%, driven by a 4% increase in

non-personal

deposits and a 1% increase in personal deposits.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average liabilities of $149 billion were up $6 billion. Total deposits increased by 4%, driven by a 5% increase in

non-personal

deposits and a 2% increase in personal deposits.

Total revenue

Q3 2022 vs Q3 2021

Revenues were $2,419 million, an increase of $68 million or 3%, driven by higher net interest income, partly offset by lower

non-interest

income.

Q3 2022 vs Q2 2022

Revenues increased by $36 million, or 2%, driven by higher net interest income, partly offset by lower

non-interest

income.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Revenues were $7,223 million, up $190 million or 3%, driven by higher net interest income, partly offset by lower

non-interest

income.

Net interest income

Q3 2022 vs Q3 2021

Net interest income of $1,759 million was up 11%, driven by growth in commercial loans and residential mortgages. Net interest margin increased by 13 basis points to 3.85% due mainly to higher central bank rates, changes in business mix and the refinement of the margin methodology, partly offset by higher funding costs and changes in deposits mix.

Q3 2022 vs Q2 2022

Net interest income increased by $92 million, or 6%, from three more days in the quarter and a 4% growth in total loans. Net interest margin decreased by 1 basis point to 3.85% driven primarily by margin compression due to higher funding cost driven by central bank rate increases and changes in deposits mix.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net interest income was $5,094 million, up 5%, due mainly to an increase in commercial loans and residential mortgages, partly offset by margin compression. Net interest margin declined by 8 basis points due to margin compression from higher funding costs and changes in the business mix, partly offset by the refinement of the margin methodology.

Non-interest income

Q3 2022 vs Q3 2021

Non-interest

income was $660 million, down 14%, due mainly to lower capital markets revenue related to market conditions, investment gains and insurance fees, partly offset by higher banking and card revenues.

Q3 2022 vs Q2 2022

Non-interest

income decreased by $56 million or 8%, due primarily to asset/liability management activities, and lower income from associated corporations.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

income was $2,129 million, down 2%, due primarily to lower capital markets revenue related to market conditions and insurance fees, partly offset by higher banking revenues and income from associated corporations.

Provision for credit losses

Q3 2022 vs Q3 2021

The provision for credit losses was $325 million, compared to $343 million, a decrease of $18 million or 5%. The provision for credit losses ratio decreased 16 basis points to 84 basis points.

Provision for credit losses on performing loans was $63 million, compared to a net reversal of $363 million. The provision this period related mainly to the retail portfolio driven by the less favourable macroeconomic forecast and portfolio growth partly offset by improved portfolio credit quality. Provision reversals last year were due mainly to the more favourable macroeconomic outlook and credit migration to impaired in the retail portfolio.

Provision for credit losses on impaired loans was $262 million, compared to $706 million, a decrease of $444 million or 63% due primarily to lower retail provisions driven by lower formations, mainly in Peru, Colombia and Mexico. The provision for credit losses ratio on impaired loans was 68 basis points, a decrease of 140 basis points.

Q3 2022 vs Q2 2022

The provision for credit losses was $325 million, compared to $273 million, an increase of $52 million or 19%. The provision for credit losses ratio increased seven basis points to 84 basis points.

Provision for credit losses on performing loans was $63 million, an increase of $65 million. The provision this period related mainly to the retail portfolio driven by the less favourable macroeconomic forecast and portfolio growth partly offset by improved portfolio credit quality expectations.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Provision for credit losses on impaired loans was $262 million compared to $275 million, a decrease of $13 million or 5% due primarily to lower retail provisions driven by lower formations, mainly in Peru, Mexico, and Central America. The provision for credit losses ratio on impaired loans decreased 9 basis points to 68 basis points.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The provision for credit losses was $875 million, a decrease of $336 million or 28%. The provision for credit losses ratio was 80 basis points, a decrease of 43 basis points.

Provision for credit losses on performing loans was $49 million, compared to a net reversal of $900 million. The provision this period related mainly to the retail portfolio driven primarily by the less favourable macroeconomic forecast and portfolio growth with offsets mainly related to improved portfolio credit quality. Provision reversals in the prior period were driven primarily by allowance releases built in the fiscal year 2020, and credit migration to impaired, primarily in the retail portfolio.

Provision for credit losses on impaired loans was $826 million, compared to $2,111 million, a decrease of $1,285 million due primarily to lower retail provisions driven by lower formations across most markets. The provision for credit losses ratio on impaired loans was 75 basis points, a decrease of 137 basis points.

Non-interest expenses

Q3 2022 vs Q3 2021

Non-interest

expenses were $1,295 million, in line with the prior year. Adjusted non-interest expenses were $1,285 million, in line with the prior year. Increases related to business growth and inflationary impacts were mostly offset by the benefit from efficiency initiatives executed last year.

Q3 2022 vs Q2 2022

Non-interest

expenses were $1,295 million compared to $1,257 million, an increase of 3%. Adjusted

non-interest

expenses increased by $38 million or 3% from $1,247 million last quarter. The increase was related to business growth.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

expenses were $3,848 million, down 1%. On an adjusted basis,

non-interest

expenses were $3,818 million, a decrease of 1%. The decline was due to benefits from efficiency initiatives, partly offset by higher inflation.

Taxes

The effective tax rate was 15.4% for the quarter, compared to 22.1% in the prior year and 21.0% in the prior quarter. This was due primarily to higher inflationary adjustments in Mexico and Chile.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The effective tax rate was 20.5%, compared to 24.3%, due primarily to higher inflationary adjustments in Mexico and Chile, partly offset by changes in business mix and earnings across jurisdictions.


Global Wealth Management

T11 Global Wealth Management financial performance

	For the three months ended									For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income	$	200		$	184		$	160		$	558		$	467
Non-interest income		1,112			1,174			1,175			3,534			3,566
Total revenue		1,312			1,358			1,335			4,092			4,033
Provision for credit losses		5			1			(1	)		5			1
Non-interest expenses		796			803			812			2,461			2,431
Income tax expense		133			145			132			424			414
Net income	$	378		$	409		$	392		$	1,202		$	1,187
Net income attributable to non-controlling interest in subsidiaries	$	2		$	2		$	2		$	7		$	7
Net income attributable to equity holders of the Bank	$	376		$	407		$	390		$	1,195		$	1,180
Other financial data and measures
Return on equity (1)		15.5	%		17.5	%		16.5	%		16.7	%		16.8	%
Assets under administration ($ billions) (2)(3)	$	581		$	591		$	582		$	581		$	582
Assets under management ($ billions) (2)(3)	$	320		$	326		$	341		$	320		$	341
Average assets ($ billions)	$	33		$	32		$	29		$	32		$	28
Average liabilities ($ billions)	$	48		$	48		$	46		$	48		$	44

(1)	Refer to Non-GAAP Measures on page 4 for the description of the measure.

(2)	Refer to Glossary on page 51 for the description of the measure.

(3)	Prior period amounts have been restated to appropriately reflect certain intercompany items.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS


T11A Adjusted Global Wealth Management financial performance

	For the three months ended							For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022		April 30 2022		July 31 2021			July 31 2022		July 31 2021
Adjusted Results (1)
Net interest income	$	200	$	184	$	160		$	558	$	467
Non-interest income		1,112		1,174		1,175			3,534		3,566
Total revenue		1,312		1,358		1,335			4,092		4,033
Provision for credit losses		5		1		(1	)		5		1
Non-interest expenses (2)		787		794		804			2,434		2,404
Income tax expense		135		148		133			431		421
Net income	$	385	$	415	$	399		$	1,222	$	1,207
Net income attributable to non-controlling interest in subsidiaries	$	2	$	2	$	2		$	7	$	7
Net income attributable to equity holders of the Bank	$	383	$	413	$	397		$	1,215	$	1,200

(1)	Refer to Non-GAAP Measures on page 4 for adjusted results.

(2)	Includes adjustment for Amortization of acquisition-related intangible assets, excluding software for the three months ended July 31, 2022 – $9 (April 30, 2022 – $9; July 31, 2021 – $8) and for the nine months ended July 31, 2022 – $27 (July 31, 2021 – $27).

Net income

Q3 2022 vs Q3 2021

Net income attributable to equity holders was $376 million, a decrease of $14 million or 3%. The decline is due primarily to lower fee income driven by market conditions, partly offset by higher net interest income and lower volume-related expenses.

Q3 2022 vs Q2 2022

Net income attributable to equity holders decreased $31 million or 8%. Lower fee income driven by market conditions was partly offset by higher net interest income and lower expenses.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was $1,195 million, up $15 million or 1%. Higher brokerage revenues and net interest income were partly offset by lower mutual fund fees, higher volume-related expenses, and the 5% impact of elevated seasonal performance fees in the prior year.

Assets under management (AUM) and assets under administration (AUA)

Q3 2022 vs Q3 2021

Assets under management of $320 billion decreased $21 billion or 6% driven primarily by market depreciation. Assets under administration of $581 billion decreased $1 billion due primarily to market depreciation, partly offset by higher net sales.

Q3 2022 vs Q2 2022

Assets under management decreased $6 billion or 2% due primarily to lower net sales and market depreciation. Assets under administration decreased $10 billion or 2% due primarily to market depreciation, partly offset by higher net sales.

Total revenue

Q3 2022 vs Q3 2021

Revenues were $1,312 million, down $23 million or 2%. The decrease is due primarily to lower fee income driven by lower AUM and trading volumes, partly offset by higher net interest income from strong loan growth and improved deposit margins.

Q3 2022 vs Q2 2022

Revenues were down $46 million or 3%, due primarily to lower fee income driven by lower AUM and trading volumes, partly offset by higher net interest income from improved deposit margins and the impact of three more days in the quarter.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Revenues were $4,092 million, up $59 million or 1%. The increase was due primarily to higher brokerage revenues and net interest income driven by strong loan growth and improved deposit margins, partly offset by lower mutual fund fees and the 3% impact of elevated seasonal performance fees in the prior year.

Provision for credit losses

Q3 2022 vs Q3 2021

The provision for credit losses was $5 million, an increase of $6 million. The provision for credit losses ratio increased 11 basis points to eight basis points.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Q3 2022 vs Q2 2022

The provision for credit losses was $5 million, an increase of $4 million. The provision for credit losses ratio increased seven basis points to eight basis points.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The provision for credit losses was $5 million, compared to $1 million, driven primarily by the less favourable macroeconomic forecast. The provision for credit losses ratio was three basis points, an increase of two basis points.

Non-interest expenses

Q3 2022 vs Q3 2021

Non-interest

expenses of $796 million were down $16 million or 2%. Lower volume-related expenses, primarily performance-based compensation, were partly offset by higher technology costs to support business initiatives.

Q3 2022 vs Q2 2022

Non-interest

expenses were down $7 million or 1%, driven mainly by lower volume-related expenses, primarily related to distribution. This was partly offset by the impact of three more days in the quarter.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

expenses of $2,461 million were up $30 million or 1%. This increase was driven mainly by volume-related expenses, primarily performance-based compensation and distribution expenses, along with technology costs to support business initiatives.

Taxes

The effective tax rate was 26.1% for the quarter, compared to 25.2% in the prior year and 26.2% in the prior quarter.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The effective tax rate was 26.1% compared to 25.8% in the prior year.

Global Banking and Markets

T12 Global Banking and Markets financial performance


	For the three months ended									For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income	$	405		$	360		$	363		$	1,138		$	1,071
Non-interest income		747			902			890			2,680			2,775
Total revenue		1,152			1,262			1,253			3,818			3,846
Provision for credit losses		(15	)		(46	)		(27	)		(77	)		(50	)
Non-interest expenses		655			653			620			1,978			1,867
Income tax expense		134			167			147			490			456
Net income	$	378		$	488		$	513		$	1,427		$	1,573
Net income attributable to non-controlling interest in subsidiaries	$	–		$	–		$	–		$	–		$	–
Net income attributable to equity holders of the Bank	$	378		$	488		$	513		$	1,427		$	1,573
Other financial data and measures
Return on equity (1)		11.1	%		15.6	%		16.1	%		14.6	%		16.9	%
Provision for credit losses – performing (Stage 1 and 2)	$	3		$	(42	)	$	(33	)	$	(47	)	$	(83	)
Provision for credit losses – impaired (Stage 3)	$	(18	)	$	(4	)	$	6		$	(30	)	$	33
Provision for credit losses as a percentage of average net loans and acceptances (annualized) (2)		(0.05	)%		(0.16	)%		(0.11	)%		(0.09	)%		(0.07	)%
Provision for credit losses on impaired loans as a percentage of average net loans and acceptances (annualized) (2)		(0.06	)%		(0.01	)%		0.03	%		(0.03	)%		0.04	%
Net write-offs as a percentage of average net loans and acceptances (2)		(0.11	)%		0.02	%		0.03	%		(0.03	)%		0.06	%
Average assets ($ billions)	$	443		$	431		$	401		$	440		$	398
Average liabilities ($ billions)	$	419		$	400		$	373		$	409		$	386

(1)	Refer to Non-GAAP Measures on page 4 for the description of the measure.

(2)	Refer to Glossary on page 51 for the description of the measure.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Net income

Q3 2022 vs Q3 2021

Net income attributable to equity holders was $378 million, a decrease of $135 million or 26%. This was due to lower

non-interest

income driven by challenging market conditions and lower customer activity, higher

non-interest

expenses, and lower recovery on provision for credit losses, partly offset by higher net interest income.

Q3 2022 vs Q2 2022

Net income attributable to equity holders decreased by $110 million or 23%. This was due to lower

non-interest

income driven by lower customer activity, as well as lower recovery on provision for credit losses, partly offset by higher net interest income.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was $1,427 million, a decrease of $146 million or 9%. This was due to higher

non-interest

expenses and lower

non-interest

income driven by lower customer activity, partly offset by higher net interest income and higher recovery on provision for credit losses.

Average assets

Q3 2022 vs Q3 2021

Average assets were $443 billion, an increase of $42 billion or 10%. This was due mainly to increases in loans and securities purchased under resale agreements, and the impact of foreign currency translation, partly offset by lower trading securities. Loan balances increased 22%, reflecting growth in most regions, with the largest contribution from the U.S.

Q3 2022 vs Q2 2022

Average assets increased $12 billion or 3%, due mainly to increases in securities purchased under resale agreements and loans, partly offset by lower trading securities. Loan balances increased 9%, primarily in Canada and the U.S.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average assets were $440 billion, an increase of $42 billion or 11%, due mainly to increases in securities purchased under resale agreements and loans. Loan balances increased 14%, primarily in the U.S.

Average liabilities

Q3 2022 vs Q3 2021

Average liabilities were $419 billion, an increase of $46 billion or 12%, due mainly to increases in deposits, securities sold under repurchase agreements, derivative-related liabilities, and the impact of foreign currency translation.

Q3 2022 vs Q2 2022

Average liabilities increased $19 billion or 5% due mainly to increases in deposits and derivative-related liabilities.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Average liabilities were $409 billion, an increase of $23 billion or 6% due mainly to increases in deposits and derivative-related liabilities.

Total revenue

Q3 2022 vs Q3 2021

Revenues were $1,152 million, a decrease of $101 million or 8% due primarily to lower

non-interest

income, partly offset by higher net interest income.

Q3 2022 vs Q2 2022

Revenues decreased by $110 million or 9% due mainly to lower

non-interest

income, partly offset by higher net interest income.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Revenues decreased by $28 million or 1% due primarily to lower

non-interest

income, partly offset by higher net interest income.

Net interest income

Q3 2022 vs Q3 2021

Net interest income was $405 million, an increase of $42 million or 12%. This was due mainly to higher deposit margins and lending volumes and the positive impact of foreign currency translation, partly offset by higher trading-related funding costs.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Q3 2022 vs Q2 2022

Net interest income increased by $45 million or 13%, due mainly to higher deposit margins, partly offset by higher trading-related funding costs.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net interest income increased by $67 million or 6%, due mainly to higher deposit margins and lending volumes and higher loan origination fees, partly offset by higher trading-related funding costs.

Non-interest

income

Q3 2022 vs Q3 2021

Non-interest

income was $747 million, a decrease of $143 million or 16% due mainly to lower underwriting and advisory fees and trading revenues in the fixed income business.

Q3 2022 vs Q2 2022

Non-interest

income decreased by $155 million or 17%, due mainly to lower underwriting and advisory fees and trading revenues in the fixed income business.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

income was $2,680 million, a decrease of $95 million or 3%, due mainly to lower underwriting and advisory fees.

Provision for credit losses

Q3 2022 vs Q3 2021

The provision for credit losses was a net reversal of $15 million compared to a net reversal of $27 million. The provision for credit losses ratio was negative five basis points, an increase of six basis points.

Provision for credit losses on performing loans was $3 million, an increase of $36 million. The provision this period was driven primarily by the less favourable macroeconomic forecast and portfolio growth.

Provision for credit losses on impaired loans was a net reversal of $18 million, a decrease of $24 million, due primarily to a recovery on one account in the energy sector. The provision for credit losses ratio on impaired loans was negative six basis points, a decrease of nine basis points.

Q3 2022 vs Q2 2022

The provision for credit losses was a net reversal of $15 million compared to a net reversal of $46 million. The provision for credit losses ratio was negative five basis points.

Provision for credit losses on performing loans was $3 million, an increase of $45 million. The provision this period was driven primarily by the less favourable macroeconomic forecast and portfolio growth.

Provision for credit losses on impaired loans was a net reversal of $18 million compared to a net reversal of $4 million. The reversal this period was due primarily to a recovery on one account in the energy sector. The provision for credit losses ratio on impaired loans was negative six basis points, a decrease of five basis points.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The provision for credit losses was a net reversal of $77 million, compared to a net reversal of $50 million. The provision for credit losses ratio decreased two basis points to negative nine basis points.

Provision for credit losses on performing loans was a net reversal of $47 million, compared to a net reversal of $83 million. The provision reversals this period were driven primarily by reversals of allowances in the energy portfolio as a result of increased commodity prices, partly offset by the less favourable macroeconomic forecast.

Provision for credit losses on impaired loans was a net reversal of $30 million, a decrease of $63 million due primarily to lower formations and recoveries. The provision for credit losses ratio on impaired loans was negative three basis points, a decrease of seven basis points.

Non-interest

expenses

Q3 2022 vs Q3 2021

Non-interest

expenses were $655 million, up $35 million or 6%, due mainly to increases in technology costs to support business development, partly offset by lower personnel costs.

Q3 2022 vs Q2 2022

Non-interest

expenses increased $2 million as lower personnel costs were offset by increases in technology costs to support business development.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Non-interest

expenses of $1,978 million increased $111 million or 6% due mainly to increases in technology costs to support business development, partly offset by lower personnel costs.

Taxes

Q3 2022 vs Q3 2021

The effective tax rate for the quarter was 26.1% compared to 22.3% in the prior year. The changes were due mainly to prior year recoveries and the change in earnings mix across jurisdictions.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Q3 2022 vs Q2 2022

The effective tax rate for the quarter was 26.1% compared to 25.5%.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

The effective tax rate was 25.6% compared to 22.5% due mainly to prior year recoveries and the change in earnings mix across jurisdictions.

Other

(1)

T13 Other financial performance


	For the three months ended									For the nine months ended
(Unaudited) ($ millions) (Taxable equivalent basis)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021
Reported Results
Net interest income (2)	$	(49)		$	98		$	78		$	65		$	222
Non-interest income (2)(3)		(154	)		(86	)		(66	)		(304	)		96
Total revenue		(203	)		12			12			(239	)		318
Provision for credit losses		4			–			–			4			–
Non-interest expenses		60			111			99			295			354
Income tax expense/(benefit) (2)		(215	)		(89	)		(81	)		(409	)		(207	)
Net income (loss)	$	(52	)	$	(10	)	$	(6	)	$	(129	)	$	171
Net income (loss) attributable to non-controlling interest in subsidiaries	$	–		$	–		$	1		$	–		$	1
Net income (loss) attributable to equity holders	$	(52	)	$	(10	)	$	(7	)	$	(129	)	$	170
Other measures
Average assets ($ billions)	$	173		$	174		$	143		$	166		$	156
Average liabilities ($ billions)	$	263		$	269		$	194		$	258		$	191

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income,

non-interest

income and provision for income taxes and differences in the actual amount of costs incurred and charged to the operating segments.

(2)

Includes the elimination of the

tax-exempt

income

gross-up

reported in net interest income,

non-interest

income and provision for income taxes for the three months ended July 31, 2022 – $92 (April 30, 2022 – $92; July 31, 2021 – $74) and for nine months ended July 31, 2022 – $276 (July 31, 2021 – $219) to arrive at the amounts reported in the Consolidated Statement of Income.

(3)

Income (on a taxable equivalent basis) from associated corporations and the provision for income taxes in each period include the tax normalization adjustments related to the

gross-up

of income from associated companies for the three months ended July 31, 2022 – $(28) (April 30, 2022 – $(16); July 31, 2021 – $(5)) and for the nine months ended July 31, 2022 – $(30) (July 31, 2021 – $10).

The Other segment includes Group Treasury, smaller operating segments, Net gain/loss on divestitures and other corporate items which are not allocated to a business line.

Net interest income,

non-interest

income, and the provision for income taxes in each period include the elimination of

tax-exempt

income

gross-up.

This amount is included in the operating segments, which are reported on a taxable equivalent basis.

Net income from associated corporations and the provision for income taxes in each period include the tax normalization adjustments related to the

gross-up

of income from associated companies. This adjustment normalizes the effective tax rate in the divisions to better present the contribution of the associated companies to the divisional results.

Q3 2022 vs Q3 2021

Net income attributable to equity holders was a net loss of $52 million, compared to a net loss of $7 million in the prior year. The decrease of $45 million was due primarily to a lower contribution from asset/liability management activities, and significantly lower investment gains, partly offset by lower income taxes and lower

non-interest

expenses.

Q3 2022 vs Q2 2022

Net income attributable to equity holders decreased $42 million from the prior quarter, due primarily to lower contribution from asset/liability management activities and lower investment gains, partly offset by lower income taxes and lower

non-interest

expenses.

Year-to-date

Q3 2022 vs

Year-to-date

Q3 2021

Net income attributable to equity holders was a net loss of $129 million compared to net income of $170 million in the prior year. The decrease of $299 million was due mainly to significantly lower investment gains and a lower contribution from asset/liability management activities. This was partly offset by lower

non-interest

expenses, mainly related to the Bank’s increased investment in the SCENE loyalty program in the prior year.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Geographic Highlights

T14 Geographic highlights


	For the three months ended July 31, 2022
(Unaudited) ($ millions)	Canada		U.S.		Mexico		Peru		Chile		Colombia		Caribbean and Central America		Other		Total
Reported results
Net interest income	$	2,571	$	236	$	429	$	304	$	415	$	151	$	367	$	203	$	4,676
Non-interest income		1,956		235		195		81		106		89		184		277		3,123
Total revenue		4,527		471		624		385		521		240		551		480		7,799
Provision for credit losses		64		29		60		92		49		60		53		5		412
Non-interest expenses		2,429		254		314		153		214		162		333		332		4,191
Income tax expense		381		49		37		39		12		7		32		45		602
Net income		1,653		139		213		101		246		11		133		98		2,594
Net income attributable to non-controlling interests in subsidiaries		–		–		6		1		16		6		25		–		54
Net income attributable to equity holders of the Bank	$	1,653	$	139	$	207	$	100	$	230	$	5	$	108	$	98	$	2,540
Adjusted results (1)
Adjustments		10		–		–		1		4		–		1		1		17
Adjusted net income (loss) attributable to equity holders of the Bank	$	1,663	$	139	$	207	$	101	$	234	$	5	$	109	$	99	$	2,557
Average Assets ($ billions)	$	777	$	203	$	47	$	28	$	52	$	14	$	32	$	142	$	1,295


	For the three months ended April 30, 2022																				For the three months ended July 31, 2021
(Unaudited) ($ millions)	Canada			U.S.			Mexico		Peru		Chile		Colombia		Caribbean and Central America		Other		Total		Canada		U.S.			Mexico		Peru		Chile		Colombia		Caribbean and Central America		Other		Total
Reported results
Net interest income	$	2,480		$	207		$	412	$	295	$	410	$	175	$	329	$	165	$	4,473	$	2,338	$	187		$	411	$	269	$	372	$	157	$	324	$	159	$	4,217
Non-interest income		2,191			254			192		108		141		104		194		285		3,469		2,215		251			192		154		169		99		159		301		3,540
Total revenue		4,671			461			604		403		551		279		523		450		7,942		4,553		438			603		423		541		256		483		460		7,757
Provision for credit losses		(35	)		(22	)		51		89		38		53		39		6		219		48		(12	)		72		126		47		40		48		11		380
Non-interest expenses		2,421			259			287		156		219		169		319		329		4,159		2,374		225			289		163		229		171		344		302		4,097
Income tax expense		534			57			54		46		31		20		49		26		817		501		34			50		24		58		24		19		28		738
Net income		1,751			167			212		112		263		37		116		89		2,747		1,630		191			192		110		207		21		72		119		2,542
Net income attributable to non-controlling interests in subsidiaries		(1	)		–			4		3		34		16		22		–		78		–		–			4		3		46		8		20		–		81
Net income attributable to equity holders of the Bank	$	1,752		$	167		$	208	$	109	$	229	$	21	$	94	$	89	$	2,669	$	1,630	$	191		$	188	$	107	$	161	$	13	$	52	$	119	$	2,461
Adjusted results (1)
Adjustments		9			–			–		2		5		–		1		1		18		11		–			–		1		5		–		1		–		18
Adjusted net income (loss) attributable to equity holders of the Bank	$	1,761		$	167		$	208	$	111	$	234	$	21	$	95	$	90	$	2,687	$	1,641	$	191		$	188	$	108	$	166	$	13	$	53	$	119	$	2,479
Average Assets ($ billions)	$	751		$	210		$	44	$	27	$	53	$	14	$	31	$	134	$	1,264	$	673	$	172		$	41	$	25	$	53	$	12	$	29	$	143	$	1,148


	For the nine months ended July 31, 2022																			For the nine months ended July 31, 2021
(Unaudited) ($ millions)	Canada			U.S.		Mexico		Peru		Chile		Colombia		Caribbean and Central America		Other		Total		Canada		U.S.			Mexico		Peru			Chile		Colombia		Caribbean and Central America		Other		Total
Reported results
Net interest income	$	7,437		$	644	$	1,262	$	878	$	1,230	$	488	$	1,021	$	533	$	13,493	$	6,848	$	545		$	1,261	$	923		$	1,130	$	528	$	1,029	$	480	$	12,744
Non-interest income		6,459			767		560		308		386		296		561		960		10,297		6,948		732			535		426			505		298		495		882		10,821
Total revenue		13,896			1,411		1,822		1,186		1,616		784		1,582		1,493		23,790		13,796		1,277			1,796		1,349			1,635		826		1,524		1,362		23,565
Provision for credit losses		(8	)		1		171		256		126		159		132		16		853		393		(26	)		257		486			162		162		172		34		1,640
Non-interest expenses		7,312			768		890		458		657		506		986		996		12,573		7,037		693			911		507			718		507		1,027		947		12,347
Income tax expense		1,455			165		151		133		95		45		115		124		2,283		1,442		88			156		78			168		63		73		114		2,182
Net income		5,137			477		610		339		738		74		349		357		8,081		4,924		522			472		278			587		94		252		267		7,396
Net income attributable to non-controlling interests in subsidiaries		(1	)		–		14		6		100		33		68		–		220		1		–			10		(2	)		152		40		60		–		261
Net income attributable to equity holders of the Bank	$	5,138		$	477	$	596	$	333	$	638	$	41	$	281	$	357	$	7,861	$	4,923	$	522		$	462	$	280		$	435	$	54	$	192	$	267	$	7,135
Adjusted results (1)
Adjustments		29			–		–		4		14		–		3		3		53		30		–			–		5			15		–		3		4		57
Adjusted net income (loss) attributable to equity holders of the Bank	$	5,167		$	477	$	596	$	337	$	652	$	41	$	284	$	360	$	7,914	$	4,953	$	522		$	462	$	285		$	450	$	54	$	195	$	271	$	7,192
Average Assets ($ billions)	$	748		$	209	$	45	$	26	$	52	$	14	$	31	$	140	$	1,265	$	687	$	162		$	41	$	27		$	53	$	13	$	30	$	139	$	1,152

(1)	Refer to page 4 for a discussion of Non-GAAP Measures.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Quarterly Financial Highlights

T15 Quarterly financial highlights


	For the three months ended
(Unaudited) ($ millions)	July 31 2022			April 30 2022			January 31 2022			October 31 2021			July 31 2021			April 30 2021			January 31 2021			October 31 2020
Reported results
Net interest income	$	4,676		$	4,473		$	4,344		$	4,217		$	4,217		$	4,176		$	4,351		$	4,258
Non-interest income		3,123			3,469			3,705			3,470			3,540			3,560			3,721			3,247
Total revenue	$	7,799		$	7,942		$	8,049		$	7,687		$	7,757		$	7,736		$	8,072		$	7,505
Provision for credit losses		412			219			222			168			380			496			764			1,131
Non-interest expenses		4,191			4,159			4,223			4,271			4,097			4,042			4,208			4,057
Income tax expense		602			817			864			689			738			742			702			418
Net income	$	2,594		$	2,747		$	2,740		$	2,559		$	2,542		$	2,456		$	2,398		$	1,899
Basic earnings per share ($)		2.10			2.16			2.15			1.98			2.00			1.89			1.87			1.44
Diluted earnings per share ($)		2.09			2.16			2.14			1.97			1.99			1.88			1.86			1.42
Net interest margin (%) (1)		2.22			2.23			2.16			2.17			2.23			2.26			2.27			2.22
Effective tax rate (%) (2)		18.8			22.9			24.0			21.2			22.5			23.2			22.7			18.0
Adjusted results (1)
Adjusting items:
Acquisition-related costs	$	24		$	24		$	25		$	25		$	24		$	26		$	28		$	46
Restructuring and other provisions		–			–			–			188			–			–			–			–
Net (gain)/ loss on divestitures		–			–			–			–			–			–			–			8
Tax on adjusting items		(7	)		(6	)		(7	)		(56	)		(6	)		(7	)		(8	)		(15	)
Adjustments (After tax)		17			18			18			157			18			19			20			39
Adjusted net income	$	2,611		$	2,765		$	2,758		$	2,716		$	2,560		$	2,475		$	2,418		$	1,938
Adjusted diluted earnings per share	$	2.10		$	2.18		$	2.15		$	2.10		$	2.01		$	1.90		$	1.88		$	1.45

(1)	Refer to page 4 for a discussion of Non-GAAP Measures.

(2)	Refer to Glossary on page 51 for the description of the measure.

Trending analysis

Earnings have generally trended upward over the period, mainly from higher net interest income, lower provision for credit losses and prudent expense management. Earnings this quarter were impacted by lower non-interest income and higher provision for credit losses.

Canadian Banking results have been trending upward over the period, driven by strong revenue growth, consistent positive operating leverage, and lower provision for credit losses as a result of improved credit quality.

International Banking results have trended upward over the period. Provision for credit losses have generally decreased due to lower formations and improved credit quality, and expenses remain well controlled driven by cost management initiatives.

Global Wealth Management has delivered strong earnings growth over the period driven by solid revenue growth and positive operating leverage. The current quarter was impacted by market conditions.

Global Banking and Markets results are affected by market conditions that impact revenue from client activity in the capital markets and corporate and investment banking businesses. Provision for credit losses have generally decreased over the period.

Provision for credit losses

Provision for credit losses have generally trended downward during the period driven by performing loan provision reversals and lower impaired loan provisions. The current quarter was impacted by a less favourable macroeconomic forecast.

Non-interest

expenses

Non-interest

expenses have been relatively stable over the period, with certain quarters impacted by seasonality or adjusting items. The trend has been driven by the favourable impact of foreign currency translation and ongoing expense management and efficiency initiatives.

Provision for income taxes

The effective tax rate was 18.8% this quarter and averaged 21.7% over the period. Effective tax rates were impacted by divestitures, varying levels of provision for credit losses and net income earned in foreign jurisdictions, as well as the variability of

tax-exempt

dividend income and inflationary adjustments.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Financial Position

T16 Condensed statement of financial position


	As at
(Unaudited) ($ billions)	July 31 2022		October 31 2021
Assets
Cash, deposits with financial institutions and precious metals	$	68.6	$	87.1
Trading assets		118.6		146.3
Securities purchased under resale agreements and securities borrowed		155.2		127.7
Investment securities		108.2		75.2
Loans		713.4		637.0
Other		128.1		111.5
Total assets	$	1,292.1	$	1,184.8
Liabilities
Deposits	$	879.6	$	797.3
Obligations related to securities sold under repurchase agreements and securities lent		128.1		123.5
Other liabilities		202.4		184.8
Subordinated debentures		8.4		6.3
Total liabilities	$	1,218.5	$	1,111.9
Equity
Common equity	$	65.0	$	64.8
Preferred shares and other equity instruments		7.1		6.0
Non-controlling interests in subsidiaries		1.5		2.1
Total equity	$	73.6	$	72.9
Total liabilities and equity	$	1,292.1	$	1,184.8

The Bank’s total assets were $1,292 billion as at July 31, 2022, up $107 billion or 9% from October 31, 2021. Investment securities increased $33 billion due primarily to higher holdings of U.S. government debt. Loans increased $76 billion. Residential mortgages increased $24 billion mainly in Canada. Personal loans and credit cards increased $6 billion reflecting increased consumer spending. Business and government loans increased $45 billion mainly in Canada and the U.S. Securities purchased under resale agreements and securities borrowed increased $27 billion due to higher client demand. Derivative instrument assets increased by $5 billion due to changes in foreign exchange rates, interest rates and higher activity. Other assets increased $13 billion due mainly to higher collateral requirements. Trading securities decreased $29 billion due to market conditions and lower client activity. Cash and deposits with financial institutions decreased $19 billion due primarily to lower balances with central banks.

Total liabilities were $1,219 billion as at July 31, 2022, up $107 billion or 10% from October 31, 2021. Total deposits increased $82 billion. Personal deposits of $260 billion increased $16 billion due primarily to growth in Canada. Business and government deposits grew by $56 billion mainly in Canada and the U.S. Deposits by financial institutions increased $11 billion due to higher deposits in Asia and Canada. Obligations related to securities sold under repurchase agreements and securities lent increased by $5 billion due to higher activity and funding requirements. Obligations related to securities sold short increased by $3 billion due mainly to larger Canadian government positions. Derivative instrument liabilities increased $15 billion due to changes in interest rates, foreign exchange rates and commodities.

Total shareholders’ equity increased $693 million from October 31, 2021. Equity was higher due to current year earnings of $8,081 million and net issuance of preferred shares and other equity instruments of $1 billion. Partly offsetting these items were dividends paid of $3,785 million, share buybacks of $2,745 million, other comprehensive loss of $1,129 billion due mainly to change in derivative instruments designated as cash flow hedges and a reduction in

non-controlling

interests in subsidiaries of $684 million due primarily to the Bank’s increased ownership in Scotiabank Chile.

Risk Management

The Bank’s risk management policies and practices have not substantially changed from those outlined in the Bank’s 2021 Annual Report. For a complete discussion of the risk management policies and practices and additional information on risk factors, refer to the “Risk Management” section in the 2021 Annual Report.

Significant developments that took place during this quarter are as follows:

Credit risk

Allowance for credit losses

IFRS 9

Financial Instruments

, requires the consideration of past events, current conditions and reasonable and supportable forward-looking information over the life of the exposure to measure expected credit losses. Furthermore, to assess significant increases in credit risk, IFRS 9 requires that entities assess changes in the risk of a default occurring over the expected life of a financial instrument when determining staging.

The Bank’s models are calibrated to consider past performance and macroeconomic forward-looking variables as inputs as further described below. Expert credit judgement may be made in circumstances where, in the Bank’s view, the inputs, assumptions, and/or modelling techniques do not capture all relevant risk factors, including the emergence of economic or political events of the market up to the date of the financial statements. Expert credit judgement continues to be applied in the assessment of underlying credit deterioration and migration of balances to progressive stages. Consistent with the requirements of IFRS 9, the Bank considers both quantitative and qualitative information in the assessment of a significant increase in risk.

The Bank has no direct credit exposure to Russia or Ukraine but does have credit exposure to businesses that are impacted either directly or indirectly by higher energy costs or commodity prices, or potential disruption within their supply chains. The Bank monitors both the internal and

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

external indicators for signs of contagion risk and any second or third order risks that may arise from the war in Ukraine above and beyond those captured in the macroeconomic outlook. Such impacts are not significant and are appropriately mitigated.

The Bank has generated a forward-looking base case scenario and three alternate forward-looking scenarios (one optimistic and two pessimistic) as key inputs into the expected credit loss provisioning models. The base case is less favourable this quarter, with the growth outlook revised lower due to higher inflationary pressures and rising rate environment. Relative to the base case, the optimistic scenario features somewhat stronger economic activity. The two pessimistic scenarios were updated this quarter to reflect the potential risk of stagflation and recession.

In light of current economic uncertainty, the updated pessimistic scenarios feature a protracted period of high commodity prices, elevated financial market uncertainty and a further disruption to supply chains. All these elements lead to much higher inflation compared to the base case scenario. Central banks respond by increasing rates more aggressively in the pessimistic scenarios, pushing rates across the yield curve higher compared to the base case scenario and resulting in a rapid deceleration of growth. In the pessimistic scenario, stagflation is short-lived, while in the very pessimistic scenario, the stagflation shock is stronger and persists for a longer period of time.

This quarter, the Bank increased the weight of the pessimistic scenarios in calculating the allowance for credit losses on performing loans to capture the elevated downside risks to the outlook.

The table below shows a comparison of projections for the next 12 months, as at July 31, 2022, April 30, 2022 and October 31, 2021, of select macroeconomic variables used to calculate the modelled estimate for the allowance for credit losses (see page 67 for all key variables). Further deterioration in these variables up to the date of the financial statements is incorporated through expert credit judgment:

T17 Select macroeconomic variable projections


	Base Case Scenario						Alternative Scenario - Optimistic						Alternative Scenario - Pessimistic						Alternative Scenario - Very Pessimistic
Next 12 months	As at July 31 2022		As at April 30 2022		As at October 31 2021		As at July 31 2022		As at April 30 2022		As at October 31 2021		As at July 31 2022		As at April 30 2022		As at October 31 2021		As at July 31 2022		As at April 30 2022		As at October 31 2021
Canada
Real GDP growth, y/y % change		3.2		4.6		3.4		5.0		6.6		5.3		-2.8		-0.8		-1.3		-3.9		-2.2		-7.4
Consumer price index, y/y %		5.5		5.6		3.0		5.9		6.1		3.4		9.7		8.1		2.0		11.8		9.5		1.6
Bank of Canada overnight rate target, average %		2.9		2.2		0.3		3.3		2.8		0.9		4.2		3.5		0.3		4.2		3.5		0.3
Unemployment rate, average %		5.1		5.0		6.3		4.3		4.2		5.6		9.1		9.1		8.8		9.6		9.6		11.7
U.S.
Real GDP growth, y/y % change		2.4		3.9		5.7		3.3		5.3		7.3		-3.4		-1.9		2.4		-4.7		-3.5		-1.4
Consumer price index, y/y %		6.5		7.1		4.0		6.8		7.5		4.5		10.4		9.9		3.3		12.7		11.5		2.6
Target federal funds rate, upper limit, average %		2.9		1.9		0.3		3.8		2.5		0.8		4.2		3.2		0.3		4.2		3.2		0.3
Unemployment rate, average %		3.9		3.8		3.8		3.7		3.5		3.4		7.5		7.4		5.6		7.9		7.8		6.8
Global
WTI oil price, average USD/bbl		106		96		69		111		102		75		133		129		61		142		140		57

The table below shows a quarterly breakdown of the projections for the above macroeconomic variables, as at July 31, 2022 and April 30, 2022, under the base case scenario:


Next 12 months	Base Case Scenario
	Calendar Quarters								Average July 31 2022		Calendar Quarters								Average April 30 2022
	Q3 2022		Q4 2022		Q1 2023		Q2 2023		Average July 31 2022		Q2 2022		Q3 2022		Q4 2022		Q1 2023		Average April 30 2022
Canada
Real GDP growth, y/y % change		4.2		3.1		3.0		2.5		3.2		5.3		5.0		4.1		4.1		4.6
Consumer price index, y/y %		6.8		6.5		5.3		3.6		5.5		5.9		6.2		5.8		4.6		5.6
Bank of Canada overnight rate target, %		2.5		3.0		3.0		3.0		2.9		1.3		2.0		2.5		3.0		2.2
Unemployment rate, average %		5.0		5.0		5.1		5.2		5.1		5.3		5.0		4.9		4.9		5.0
U.S.
Real GDP growth, y/y % change		2.7		1.6		2.6		2.4		2.4		3.9		4.1		3.4		4.0		3.9
Consumer price index, y/y %		7.9		7.2		6.1		4.7		6.5		8.1		7.8		6.8		5.6		7.1
Target federal funds rate, upper limit, %		2.5		3.0		3.0		3.0		2.9		1.0		1.8		2.3		2.5		1.9
Unemployment rate, average %		3.7		3.9		4.1		4.2		3.9		3.7		3.7		3.8		3.8		3.8
Global
WTI oil price, average USD/bbl		109		107		106		101		106		107		98		91		89		96

The total allowance for credit losses as at July 31, 2022, was $5,295 million. The allowance for credit losses on loans was $5,147 million, a decrease of $147 million from the prior quarter. The decrease was due primarily to impact of foreign currency translation and provision releases due to improved portfolio credit quality. This was partly offset by allowance build for the impact of macroeconomic forecast.

The allowance on performing loans was lower at $3,590 million compared to $3,690 million as at April 30, 2022. The decrease was due primarily to the impact of foreign currency translation and provision releases due to improved portfolio credit quality. This was partly offset by provisions driven by the less favorable macroeconomic forecast and portfolio growth.

The allowance on impaired loans decreased to $1,557 million from $1,604 million last quarter. The decrease was primarily related to the International Banking Retail portfolio driven by lower formations, and higher write-offs in the International commercial portfolio.

Impaired loans

Gross impaired loans decreased to $4,252 million as at July 31, 2022, compared to $4,264 million last quarter. The decrease was due primarily to commercial and corporate repayments and the impact of foreign currency translation partly offset by new formations in International Banking. The gross impaired loan ratio was 58 basis points as at July 31, 2022, a decrease of two basis points from last quarter.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Net impaired loans in Canadian Banking were $355 million as at July 31, 2022, a decrease of $66 million from last quarter, due primarily to lower commercial gross impaired loans due to a recovery on one account, partly offset by new formations. International Banking’s net impaired loans were $2,202 million as at July 31, 2022, an increase of $134 million from last quarter, due primarily to higher commercial gross impaired loans. In Global Wealth Management, net impaired loans were $18 million as at July 31, 2022, a decrease of $5 million from last quarter, due primarily to write off and repayment on one account. In Global Banking and Markets, net impaired loans were $120 million as at July 31, 2022, a decrease of $28 million from last quarter, due primarily to repayment and a recovery on one account in the energy sector, partly offset by provisions. Net impaired loans as a percentage of loans and acceptances were 0.36% as at July 31, 2022, a decrease of one basis point from 0.37% last quarter.

Overview of loan portfolio

The Bank has a well-diversified portfolio by product, business, and geography. Details of certain portfolios of current focus are highlighted below.

Real estate secured lending

A large portion of the Bank’s lending portfolio is comprised of residential mortgages and consumer loans, which are well diversified by borrower. As at July 31, 2022, these loans amounted to $454 billion or 62% of the Bank’s total loans and acceptances outstanding (April 30, 2022 – $446 billion or 62%). Of these, $366 billion or 81% are real estate secured loans (April 30, 2022 – $359 billion or 81%). The tables below provide more details by portfolios.

Insured and uninsured mortgages and home equity lines of credit

(1)

The following table presents amounts of insured and uninsured residential mortgages and home equity lines of credit (HELOCs), by geographic areas.

T18 Insured and uninsured residential mortgages and HELOCs, by geographic areas


	As at July 31, 2022
	Residential mortgages															Home equity lines of credit
	Insured (2)					Uninsured					Total					Insured (2)					Uninsured					Total
($ millions)	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Canada: (3)
Atlantic provinces	$	5,223		1.7	%	$	6,524		2.2	%	$	11,747		3.9	%	$	–		–	%	$	1,041		4.8	%	$	1,041		4.8	%
Quebec		8,153		2.7			12,241		4.1			20,394		6.8			–		–			1,059		4.8			1,059		4.8
Ontario		34,802		11.6			130,402		43.4			165,204		55.0			–		–			12,597		57.5			12,597		57.5
Manitoba & Saskatchewan		5,618		1.9			4,857		1.6			10,475		3.5			–		–			650		3.0			650		3.0
Alberta		17,353		5.8			15,685		5.2			33,038		11.0			–		–			2,438		11.1			2,438		11.1
British Columbia & Territories		11,849		3.9			47,830		15.9			59,679		19.8			–		–			4,108		18.8			4,108		18.8
Canada (4)(5)	$	82,998		27.6	%	$	217,539		72.4	%	$	300,537		100	%	$	–		–	%	$	21,893		100	%	$	21,893		100	%
International		–		–			43,428		100			43,428		100			–		–			–		–			–		–
Total	$	82,998		24.1	%	$	260,967		75.9	%	$	343,965		100	%	$	–		–	%	$	21,893		100	%	$	21,893		100	%
	As at April 30, 2022
Canada (4)(5)	$	82,017		27.9	%	$	212,303		72.1	%	$	294,320		100	%	$	–		–	%	$	21,239		100	%	$	21,239		100	%
International		–		–			43,394		100			43,394		100			–		–			–		–			–		–
Total	$	82,017		24.3	%	$	255,697		75.7	%	$	337,714		100	%	$	–		–	%	$	21,239		100	%	$	21,239		100	%
	As at October 31, 2021
Canada (4)(5)	$	86,386		30.8	%	$	193,783		69.2	%	$	280,169		100	%	$	–		–	%	$	20,464		100	%	$	20,464		100	%
International		–		–			39,509		100			39,509		100			–		–			–		–			–		–
Total	$	86,386		27.0	%	$	233,292		73.0	%	$	319,678		100	%	$	–		–	%	$	20,464		100	%	$	20,464		100	%

(1)	The measures in this section have been disclosed in this document in accordance with OSFI Guideline – B20 – Residential Mortgage Underwriting Practices and Procedures (January 2018).

(2)

Default insurance is contractual coverage for the life of eligible facilities whereby the Bank’s exposure to real estate secured lending is protected against potential shortfalls caused by borrower default. This insurance is provided by either government-backed entities or private mortgage insurers.

(3)	The province represents the location of the property in Canada.

(4)	Includes multi-residential dwellings (4+ units) of $3,843 (April 30, 2022–$3,815; October 31, 2021–$3,783) of which $2,547 are insured (April 30, 2022–$2,487; October 31, 2021–$2,793).

(5)	Variable rate mortgages account for 37% (April 30, 2022 - 35%; October 31, 2021–28%) of the Bank’s total Canadian residential mortgage portfolio.

Amortization period ranges for residential mortgages

(1)

The following table presents the distribution of residential mortgages by remaining amortization periods, and by geographic areas.

T19 Distribution of residential mortgages by amortization periods, and by geographic areas


	As at July 31, 2022
	Residential mortgages by amortization period
	Less than 20 years			20-24 years			25-29 years			30-34 years			35 years and greater			Total residential mortgages
Canada		28.7	%		37.8	%		31.9	%		1.4	%		0.2	%		100	%
International		63.1	%		17.2	%		17.3	%		2.4	%		0.0	%		100	%
	As at April 30, 2022
Canada		29.2	%		37.3	%		31.7	%		1.6	%		0.2	%		100	%
International		62.9	%		17.6	%		17.5	%		2.0	%		0.0	%		100	%
	As at October 31, 2021
Canada		29.9	%		38.5	%		30.1	%		1.3	%		0.2	%		100	%
International		62.7	%		17.4	%		15.6	%		4.3	%		0.0	%		100	%

(1)	The measures in this section have been disclosed in this document in accordance with OSFI Guideline – B20–Residential Mortgage Underwriting Practices and Procedures (January 2018).

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MANAGEMENT’S DISCUSSION & ANALYSIS

Loan to value ratios

(1)

The Canadian residential mortgage portfolio is 72% uninsured (April 30, 2022 – 72%; October 31, 2021 – 69%). The average

loan-to-value

(LTV) ratio of the uninsured portfolio is 46% (April 30, 2022 – 47%; October 31, 2021 – 49%).

The following table presents the weighted average LTV ratio for total newly-originated uninsured residential mortgages and home equity lines of credit, which include mortgages for purchases, refinances with a request for additional funds and transfers from other financial institutions, by geographic areas in the current quarter.

T20 Loan to value ratios


	Uninsured LTV ratios
	For the three months ended July 31, 2022
	Residential mortgages			Home equity lines of credit (2)
	LTV%			LTV%
Canada: (3)(4)
Atlantic provinces		62.9	%		64.0	%
Quebec		65.2			69.1
Ontario		62.7			61.5
Manitoba & Saskatchewan		68.6			60.9
Alberta		67.7			71.5
British Columbia & Territories		62.3			60.5
Canada (3)(4)		63.2	%		62.3	%
International		72.1	%		n/a
	For the three months ended April 30, 2022
Canada (3)(4)		63.4	%		62.5	%
International		72.1	%		n/a
	For the three months ended October 31, 2021
Canada (3)(4)		64.7	%		64.7	%
International		72.4	%		n/a

(1)	The measures in this section have been disclosed in this document in accordance with OSFI Guideline – B20–Residential Mortgage Underwriting Practices and Procedures (January 2018).

(2)

Includes all home equity lines of credit (HELOC). For Scotia Total Equity Plan HELOCs, LTV is calculated based on the sum of residential mortgages and the authorized limit for related HELOCs, divided by the value of the related residential property, and presented on a weighted average basis for newly originated mortgages and HELOCs.

(3)	The province represents the location of the property in Canada.

(4)	Weighted by mortgage balances and adjusted for property values based on the Teranet – National Bank National Composite House Price Index.

Potential impact on residential mortgages and real estate home equity lines of credit in the event of an economic downturn

The Bank undertakes regular stress testing of its mortgage book to determine the impact of various combinations of home price declines and unemployment increases. Those results continue to show that credit losses and impacts on capital ratios are within a level the Bank considers manageable. In addition, the Bank has undertaken extensive

all-Bank

scenario analyses to assess the impact to the enterprise of different scenarios and is confident that it has the financial resources to withstand even a very negative outlook. In practice, the mortgage portfolio is robust to such scenarios due to the low LTV of the book, the high proportion of insured exposures and the diversified composition of the portfolio.

Regional

non-retail

exposures

The Bank’s exposures outside Canada and the U.S. are diversified by region and product and are sized appropriately relative to the credit worthiness of the counterparties (65% of the exposures are to investment grade counterparties based on a combination of internal and external ratings). The Bank’s exposures are carried at amortized cost or fair value using observable inputs, with negligible amounts valued using models with unobservable inputs (Level 3). There were no significant events in the quarter that have materially impacted the Bank’s exposures.

The Bank has no direct exposure to Russia or Ukraine. While some customers may be negatively impacted by the conflict in the region and by trade restrictions as a result of sanctions, the impact to the Bank, to date, is immaterial and appropriately mitigated.

The Bank’s exposures to sovereigns was $59.7 billion as at July 31, 2022 (April 30, 2022 – $58.7 billion; October 31, 2021 – $59.9 billion), $13.5 billion to banks (April 30, 2022 – $15.6 billion; October 31, 2021 – $13.4 billion) and $122.3 billion to corporates (April 30, 2022 – $120.2 billion; October 31, 2021 – $111.2 billion).

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MANAGEMENT’S DISCUSSION & ANALYSIS

The Bank’s regional credit exposures are distributed as follows:

T21 Bank’s regional credit exposures distribution


	As at
	July 31, 2022														April 30 2022		October 31 2021
($ millions)	Loans and loan equivalents (1)		Deposits with financial institutions		Securities (2)		SFT and derivatives (3)		Funded total		Undrawn commitments (4)		Total		Total		Total
Latin America (5)	$	84,361	$	8,396	$	19,063	$	2,983	$	114,803	$	9,970	$	124,773	$	121,275	$	114,711
Caribbean and Central America		11,739		3,415		4,086		18		19,258		3,451		22,709		22,502		21,746
Europe, excluding U.K.		6,750		1,167		4,586		1,838		14,341		8,664		23,005		21,816		22,361
U.K.		7,711		5,247		931		3,089		16,978		7,561		24,539		26,523		24,046
Asia		13,631		806		13,158		1,200		28,795		8,534		37,329		37,226		37,290
Other (6)		584		3		188		240		1,015		257		1,272		1,586		1,766
Total	$	124,776	$	19,034	$	42,012	$	9,368	$	195,190	$	38,437	$	233,627	$	230,928	$	221,920

(1)

Individual allowances for credit losses are $471. Letters of credit and guarantees are included as funded exposure as they have been issued. Included in loans and loans equivalent are letters of credit and guarantees which total $14,486 as at July 31, 2022 (April 30, 2022–$13,304; October 31, 2021–$12,755).

(2)	Exposures for securities are calculated taking into account derivative positions where the security is the underlying reference asset and short trading positions, with net short positions in brackets.

(3)

SFT comprise of securities purchased under resale agreements, obligations related to securities sold under repurchase agreements and securities lending and borrowing transactions. Gross and net funded exposures represent all net positive positions after taking into account collateral. Collateral held against derivatives was $5,685 and collateral held against SFT was $107,420.

(4)	Undrawn commitments represent an estimate of the contractual amount that may be drawn upon by the obligor and include commitments to issue letters of credit on behalf of other banks in a syndicated bank lending arrangement.

(5)	Includes countries in the Pacific Alliance plus Brazil, Uruguay, Venezuela, Ecuador and Argentina.

(6)	Includes Middle East and Africa.

Market risk

Value at Risk (VaR) is a key measure of market risk in the Bank’s trading activities. VaR includes both general market risk and debt specific risk components. The Bank also calculates a Stressed VaR measure.

T22 Market Risk Measures


	Average for the three months ended
Risk factor ($ millions)	July 31 2022			April 30 2022			July 31 2021
Credit spread plus interest rate	$	13.5		$	10.4		$	10.8
Credit spread		5.8			5.7			4.5
Interest rate		12.5			9.6			10.6
Equities		4.5			4.0			3.6
Foreign exchange		2.5			2.0			2.5
Commodities		4.5			2.8			3.5
Debt specific		2.2			2.1			2.2
Diversification effect		(11.7	)		(9.4	)		(10.3	)
Total VaR	$	15.5		$	11.9		$	12.3
Total Stressed VaR	$	28.6		$	26.4		$	35.0

In the third quarter of 2022, the average

one-day

Total VaR increased by 30% to $15.5 million, due to increased market volatility in the quarter.

The average

one-day

Total Stressed VaR stayed relatively stable quarter-over-quarter. Stressed VaR is calculated using the worst-case scenario from fixed historical periods and in Q3 2022, the Stressed VaR was calculated from 2008/2009 credit crisis period.

There were 2 trading loss days this quarter. The quality and accuracy of the VaR models is validated by backtesting, which compares daily actual and theoretical profit and loss with the daily output of the VaR model.

Interest rate risk

Interest rate risk is the risk of loss due to the following: changes in the level, slope and curvature of the yield curve; the volatility of interest rates and changes in customer preferences (e.g. mortgage prepayment rates).

Non-trading

interest rate sensitivity

The following table shows the

pro-forma

pre-tax

impact on the Bank’s net interest income over the next twelve months and economic value of shareholders’ equity of an immediate and sustained 100 basis points increase and decrease in interest rate across major currencies as defined by the Bank. Corresponding with the current interest rate environment, starting in Q3 2022, the net interest income and economic value for a down shock scenario are measured using 100 basis points decline. These calculations are based on models that consider a number of inputs and are on a constant balance sheet and make no assumptions for management actions to mitigate the risk.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

T23 Structural interest sensitivity


	As at
	July 31, 2022																			April 30, 2022						July 31, 2021 (1)
	Net interest income									Economic value of equity
($ millions)	Canadian dollar			Other currencies			Total			Canadian dollar			Other currencies			Total				Net interest income			Economic value of equity			Net interest income			Economic value of equity
+100 bps	$	(99	)	$	(168	)	$	(267	)	$	(637	)	$	(942	)	$	(1,579	)	+100 bps	$	(126	)	$	(1,699	)	$	435		$	(418	)
-100 bps		71			160			231			244			783			1,027		-25 bps		–			296			(119	)		(1	)

(1)	Prior period amounts have been restated to conform with current period presentation

During the third quarter of 2022, both interest rate sensitivities remained within the Bank’s approved consolidated limits.

The Bank’s Asset/Liability Committee provides strategic direction for the management of structural interest rate risk within the risk appetite framework authorized by the Board of Directors. The asset/liability management strategy is executed by Group Treasury with the objective of protecting and enhancing net interest income within established risk tolerances.

The Bank supplements the immediate rate change impact analysis described above with more sophisticated analyses and tools for actual risk management purposes.

Market risk linkage to Consolidated Statement of Financial Position

Trading assets and liabilities are marked to market daily and included in trading risk measures such as VaR. Derivatives captured under trading risk measures are related to the activities of Global Banking and Markets, while derivatives captured under

non-trading

risk measures comprise those used in asset/liability management and designated in a hedge relationship. A comparison of Consolidated Statement of Financial Position items which are covered under the trading and

non-trading

risk measures is provided in the table below.

T24 Market risk linkage to Consolidated Statement of Financial Position of the Bank


As at July 31, 2022	Market risk measure
($ millions)	Consolidated Statement of Financial Position		Trading risk		Non-trading risk		Not subject to market risk		Primary risk sensitivity of non-trading risk
Precious metals	$	837	$	837	$	–	$	–		n/a
Trading assets		118,605		117,782		823		–		Interest rate, FX
Derivative financial instruments		47,139		40,317		6,822		–		Interest rate, FX, equity
Investment securities		108,222		–		108,222		–		Interest rate, FX, equity
Loans		713,378		–		713,378		–		Interest rate, FX
Assets not subject to market risk (1)		303,921		–		–		303,921		n/a
Total assets	$	1,292,102	$	158,936	$	829,245	$	303,921
Deposits	$	879,582	$	–	$	832,162	$	47,420		Interest rate, FX, equity
Financial instruments designated at fair value through profit or loss		22,876		–		22,876		–		Interest rate, equity
Obligations related to securities sold short		44,220		44,220		–		–		n/a
Derivative financial instruments		56,880		39,461		17,419		–		Interest rate, FX, equity
Trading liabilities (2)		385		385		–		–		n/a
Pension and other benefit liabilities		1,610		–		1,610		–		Interest rate, credit spread, equity
Liabilities not subject to market risk (3)		212,964		–		–		212,964		n/a
Total liabilities	$	1,218,517	$	84,066	$	874,067	$	260,384

(1)	Includes goodwill, intangibles, other assets and securities purchased under resale agreements and securities borrowed.

(2)	Gold and silver certificates and bullion included in other liabilities.

(3)	Includes obligations related to securities sold under repurchase agreements and securities lent and other liabilities.

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MANAGEMENT’S DISCUSSION & ANALYSIS


As at October 31, 2021	Market risk measure
($ millions)	Consolidated Statement of Financial Position		Trading risk		Non-trading risk		Not subject to market risk		Primary risk sensitivity of non-trading risk
Precious metals	$	755	$	755	$	–	$	–		n/a
Trading assets		146,312		146,238		74		–		Interest rate, FX
Derivative financial instruments		42,302		35,379		6,923		–		Interest rate, FX, equity
Investment securities		75,199		–		75,199		–		Interest rate, FX, equity
Loans		636,986		–		636,986		–		Interest rate, FX
Assets not subject to market risk (1)		283,290		–		–		283,290		n/a
Total assets	$	1,184,844	$	182,372	$	719,182	$	283,290
Deposits	$	797,259	$	–	$	751,862	$	45,397		Interest rate, FX, equity
Financial instruments designated at fair value through profit or loss		22,493		–		22,493		–		Interest rate, equity
Obligations related to securities sold short		40,954		40,954		–		–		n/a
Derivative financial instruments		42,203		35,702		6,501		–		Interest rate, FX, equity
Trading liabilities (2)		417		417		–		–		n/a
Pension and other benefit liabilities		1,820		–		1,820		–		Interest rate, credit spread, equity
Liabilities not subject to market risk (3)		206,806		–		–		206,806		n/a
Total liabilities	$	1,111,952	$	77,073	$	782,676	$	252,203

(1)	Includes goodwill, intangibles, other assets and securities purchased under resale agreements and securities borrowed.

(2)	Gold and silver certificates and bullion included in other liabilities.

(3)	Includes obligations related to securities sold under repurchase agreements and securities lent and other liabilities.

Liquidity risk

Effective liquidity risk management is essential to maintain the confidence of depositors and counterparties, manage the Bank’s cost of funds and to support core business activities, even under adverse circumstances.

Liquidity risk is managed within a framework of policies and limits that are approved by the Board of Directors, as outlined in Note 19 to the Condensed Interim Consolidated Financial Statements and in Note 36 to the Consolidated Financial Statements in the Bank’s 2021 Annual Report.

Liquid assets are a key component of this framework. The determination of the appropriate levels for liquid asset portfolios is based on the amount of liquidity the Bank might need to fund expected cash flows in the normal course of business, as well as what might be required in periods of stress to meet cash outflows. Stress events include periods when there are disruptions in the capital markets or events which may impair the Bank’s access to funding markets or liquidity. The Bank uses stress testing to assess the impact of stress events and to assess the amount of liquid assets that would be required in various stress scenarios.

Liquid assets

Liquid assets are a key component of liquidity management and the Bank holds these types of assets in sufficient quantity to meet potential needs.

Liquid assets can be used to generate cash either through sale, repurchase transactions or other transactions where these assets can be used as collateral to generate cash, or by allowing the asset to mature. Liquid assets include unrestricted deposits with central banks, deposits with financial institutions, call and other short-term loans, marketable securities, precious metals and securities received as collateral from securities financing and derivative transactions.

Marketable securities are securities traded in active markets, which can be converted to cash within a timeframe that is in accordance with the Bank’s liquidity management framework. Assets are assessed considering a number of factors, including the expected time it would take to convert them to cash.

Marketable securities included in liquid assets are comprised of securities specifically held as a liquidity buffer or for asset/liability management purposes, trading securities primarily held by Global Banking and Markets, and collateral received from securities financing and derivative transactions.

The Bank maintains large holdings of unencumbered liquid assets to support its operations. These assets generally can be sold or pledged to meet the Bank’s obligations. As at July 31, 2022 unencumbered liquid assets were $244 billion (October 31, 2021 – $246 billion). Securities including National Housing Act (NHA) mortgage-backed securities, comprised 74% of liquid assets (October 31, 2021 – 67%). Other unencumbered liquid assets, comprising cash and deposits with central banks, deposits with financial institutions, precious metals and call and short loans were 26% (October 31, 2021 – 33%). The decrease in total unencumbered liquid assets was mainly attributable to a decrease in cash and deposits with central banks, Canadian government and other liquid securities and NHA mortgage-backed securities, partly offset by an increase in foreign government securities.

The carrying values outlined in the liquid asset table are consistent with the carrying values in the Bank’s Consolidated Statement of Financial Position as at July 31, 2022. The liquidity value of the portfolio will vary under different stress events as different assumptions are used for the stress scenarios.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

The Bank’s liquid asset pool is summarized in the following table:

T25 Liquid asset pool


	As at July 31, 2022
	Bank-owned liquid assets		Securities received as collateral from securities financing and derivative transactions		Total liquid assets		Encumbered liquid assets				Unencumbered liquid assets
($ millions)	Bank-owned liquid assets				Total liquid assets		Pledged as collateral		Other (1)		Available as collateral		Other
Cash and deposits with central banks	$	59,589	$	–	$	59,589	$	–	$	4,666	$	54,923	$	–
Deposits with financial institutions		8,126		–		8,126		–		373		7,753		–
Precious metals		837		–		837		–		–		837		–
Securities:
Canadian government obligations		50,869		23,498		74,367		49,763		–		24,604		–
Foreign government obligations		93,120		95,705		188,825		88,085		–		100,740		–
Other securities		69,213		84,994		154,207		119,634		–		34,573		–
Loans:
NHA mortgage-backed securities		28,623		–		28,623		8,205		–		20,418		–
Call and short loans		–		–		–		–		–		–		–
Total	$	310,377	$	204,197	$	514,574	$	265,687	$	5,039	$	243,848	$	–

	As at October 31, 2021
	Bank-owned liquid assets		Securities received as collateral from securities financing and derivative transactions		Total liquid assets		Encumbered liquid assets				Unencumbered liquid assets
($ millions)	Bank-owned liquid assets				Total liquid assets		Pledged as collateral		Other (1)		Available as collateral		Other
Cash and deposits with central banks	$	77,695	$	–	$	77,695	$	–	$	5,858	$	71,837	$	–
Deposits with financial institutions		8,628		–		8,628		–		197		8,431		–
Precious metals		755		–		755		–		–		755		–
Securities:
Canadian government obligations		47,772		20,311		68,083		30,490		–		37,593		–
Foreign government obligations		62,288		81,296		143,584		77,571		–		66,013		–
Other securities		98,476		69,368		167,844		128,979		–		38,865		–
Loans:
NHA mortgage-backed securities		30,153		–		30,153		8,114		–		22,039		–
Call and short loans		20		–		20		–		–		20		–
Total	$	325,787	$	170,975	$	496,762	$	245,154	$	6,055	$	245,553	$	–

(1)	Assets which are restricted from being used to secure funding for legal or other reasons.

A summary of total unencumbered liquid assets held by the parent bank and its branches, and domestic and foreign subsidiaries, is presented below:

T26 Total unencumbered liquid assets held by the parent bank and its branches, and domestic and foreign subsidiaries


	As at
($ millions)	July 31 2022		October 31 2021
The Bank of Nova Scotia (Parent)	$	183,411	$	185,903
Bank domestic subsidiaries		14,705		18,267
Bank foreign subsidiaries		45,732		41,383
Total	$	243,848	$	245,553

The Bank’s liquidity pool is held across major currencies, mostly comprised of Canadian and U.S. dollar holdings. As shown above, the vast majority (81%) of liquid assets are held by the Bank’s corporate office, branches of the Bank, and Canadian subsidiaries of the Bank. To the extent a liquidity reserve held in a foreign subsidiary of the Bank is required for regulatory purposes, it is assumed to be unavailable to the rest of the Group. Other liquid assets held by a foreign subsidiary are assumed to be available only in limited circumstances. The Bank monitors and ensures compliance in relation to minimum levels of liquidity required and assets held within each entity, and/or jurisdiction.

Encumbered assets

In the course of the Bank’s

day-to-day

activities, securities and other assets are pledged to secure an obligation, participate in clearing or settlement systems, or operate in a foreign jurisdiction. Securities are also pledged under repurchase agreements. A summary of encumbered and unencumbered assets is presented below:

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MANAGEMENT’S DISCUSSION & ANALYSIS

T27 Asset Encumbrance


	As at July 31, 2022
	Bank-owned assets		Securities received as collateral from securities financing and derivative transactions			Total assets		Encumbered assets				Unencumbered assets
($ millions)	Bank-owned assets					Total assets		Pledged as collateral		Other (1)		Available as collateral (2)		Other (3)
Cash and deposits with central banks	$	59,589	$	–		$	59,589	$	–	$	4,666	$	54,923	$	–
Deposits with financial institutions		8,126		–			8,126		–		373		7,753		–
Precious metals		837		–			837		–		–		837		–
Liquid securities:
Canadian government obligations		50,869		23,498			74,367		49,763		–		24,604		–
Foreign government obligations		93,120		95,705			188,825		88,085		–		100,740		–
Other liquid securities		69,213		84,994			154,207		119,634		–		34,573		–
Other securities		3,558		11,581			15,139		4,410		–		–		10,729
Loans classified as liquid assets:
NHA mortgage-backed securities		28,623		–			28,623		8,205		–		20,418		–
Call and short loans		–		–			–		–		–		–		–
Other loans		693,050		–			693,050		3,789		73,276		11,249		604,736
Other financial assets (4)		226,678		(138,553	)		88,125		17,458		–		–		70,667
Non-financial assets		58,439		–			58,439		–		–		–		58,439
Total	$	1,292,102	$	77,225		$	1,369,327	$	291,344	$	78,315	$	255,097	$	744,571

	As at October 31, 2021
	Bank-owned assets		Securities received as collateral from securities financing and derivative transactions			Total assets		Encumbered assets				Unencumbered assets
($ millions)	Bank-owned assets					Total assets		Pledged as collateral		Other (1)		Available as collateral (2)		Other (3)
Cash and deposits with central banks	$	77,695	$	–		$	77,695	$	–	$	5,858	$	71,837	$	–
Deposits with financial institutions		8,628		–			8,628		–		197		8,431		–
Precious metals		755		–			755		–		–		755		–
Liquid securities:
Canadian government obligations		47,772		20,311			68,083		30,490		–		37,593		–
Foreign government obligations		62,288		81,296			143,584		77,571		–		66,013		–
Other liquid securities		98,476		69,368			167,844		128,979		–		38,865		–
Other securities		3,811		13,254			17,065		6,028		–		–		11,037
Loans classified as liquid assets:
NHA mortgage-backed securities		30,153		–			30,153		8,114		–		22,039		–
Call and short loans		20		–			20		–		–		20		–
Other loans		614,926		–			614,926		5,964		65,647		10,527		532,788
Other financial assets (4)		194,100		(111,892	)		82,208		6,651		–		–		75,557
Non-financial assets		46,220		–			46,220		–		–		–		46,220
Total	$	1,184,844	$	72,337		$	1,257,181	$	263,797	$	71,702	$	256,080	$	665,602

(1)	Assets which are restricted from being used to secure funding for legal or other reasons.

(2)	Assets that are readily available in the normal course of business to secure funding or meet collateral needs including central bank borrowing immediately available.

(3)

Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but the Bank would not consider them to be readily available. These include loans, a portion of which may be used to access central bank facilities outside of the normal course or to raise secured funding through the Bank’s secured funding programs.

(4)	Securities received as collateral against other financial assets are included within liquid securities and other securities.

As at July 31, 2022 total encumbered assets of the Bank were $370 billion (October 31, 2021 – $335 billion). Of the remaining $1,000 billion (October 31, 2021 – $922 billion) of unencumbered assets, $255 billion (October 31, 2021 – $256 billion) are considered readily available in the normal course of business to secure funding or meet collateral needs as detailed above.

In some

over-the-counter

derivative contracts, the Bank would be required to post additional collateral or receive less collateral in the event its credit rating was downgraded. The Bank maintains access to sufficient collateral to meet these obligations in the event of a downgrade of its ratings by one or more of the rating agencies. As at July 31, 2022 the potential adverse impact on derivatives collateral that would result from a

one-notch

two-notch

downgrade of the Bank’s rating below its lowest current rating was $38 million or $100 million, respectively.

Encumbered liquid assets are not considered to be available for liquidity management purposes. Liquid assets which are used to hedge derivative positions in trading books or for hedging purposes are considered to be available for liquidity management provided they meet the criteria discussed in liquid assets above.

Liquidity coverage ratio

The Liquidity Coverage Ratio (LCR) measure is based on a

30-day

liquidity stress scenario, with assumptions defined in the Liquidity Adequacy Requirements (LAR) Guideline issued by the Office of the Superintendent of Financial Institutions (OSFI). The LCR is calculated as the ratio of high quality liquid assets (HQLA) to net cash outflows. The Bank is subject to a regulatory minimum LCR of 100%.

HQLA are defined in the LAR Guideline and are grouped into three main categories with varying haircuts applied to arrive at the amount included in the total weighted value in the table that follows.

The total weighted values for net cash outflows for the next 30 days are derived by applying the assumptions specified in the LAR Guideline to specific items, including loans, deposits, maturing debt, derivative transactions and commitments to extend credit.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

The following table presents the Bank’s LCR for the quarter ended July 31, 2022, based on the average daily positions in the quarter:

T28 Bank’s average LCR

(1)


For the quarter ended July 31, 2022 ($ millions) (2)	Total unweighted value (Average) (3)		Total weighted value (Average) (4)
High-quality liquid assets
Total high-quality liquid assets (HQLA)		*	$	211,072

Cash outflows
Retail deposits and deposits from small business customers, of which:	$	239,054	$	20,549
Stable deposits		95,555		3,072
Less stable deposits		143,499		17,477
Unsecured wholesale funding, of which:		296,114		132,949
Operational deposits (all counterparties) and deposits in networks of cooperative banks		104,979		25,193
Non-operational deposits (all counterparties)		163,273		79,894
Unsecured debt		27,862		27,862
Secured wholesale funding		*		48,413
Additional requirements, of which:		247,972		47,201
Outflows related to derivative exposures and other collateral requirements		37,991		20,712
Outflows related to loss of funding on debt products		3,653		3,653
Credit and liquidity facilities		206,328		22,836
Other contractual funding obligations		1,774		1,670
Other contingent funding obligations (5)		518,530		6,393
Total cash outflows		*	$	257,175

Cash inflows
Secured lending (e.g. reverse repos)	$	209,907	$	42,945
Inflows from fully performing exposures		30,585		19,212
Other cash inflows		22,007		22,007
Total cash inflows	$	262,499	$	84,164
			Total adjusted value (6)
Total HQLA		*	$	211,072
Total net cash outflows		*	$	173,011
Liquidity coverage ratio (%)		*		122	%
For the quarter ended April 30, 2022 ($ millions)			Total adjusted value (6)
Total HQLA		*	$	214,110
Total net cash outflows		*	$	171,524
Liquidity coverage ratio (%)		*		125	%

*	Disclosure is not required under regulatory guideline.

(1)	This measure has been disclosed in this document in accordance with OSFI Guideline – Public Disclosure Requirements for Domestic Systemically Important Banks on Liquidity Coverage Ratio (April 2015).

(2)	Based on the average of daily positions of the 63 business days in the quarter.

(3)	Unweighted values represent outstanding balances maturing or callable within the next 30 days.

(4)	Weighted values represent balances calculated after the application of HQLA haircuts or inflow and outflow rates, as prescribed by the OSFI LAR guideline.

(5)	Total unweighted value includes uncommitted credit and liquidity facilities, guarantees and letters of credit, outstanding debt securities with remaining maturity greater than 30 days, and other contractual cash outflows.

(6)	Total adjusted value represents balances calculated after the application of both haircuts and inflow and outflow rates and any applicable caps.

HQLA is substantially comprised of Level 1 assets (as defined in the LAR guideline), such as cash, deposits with central banks available to the Bank in times of stress, and highly rated securities issued or guaranteed by governments, central banks and supranational entities.

The decrease in the Bank’s average LCR for the quarter ended July 31, 2022 versus the average of the previous quarter was attributable to normal business activities. The Bank monitors its significant currency exposures, Canadian and U.S. dollars, in accordance with its liquidity risk management framework and risk appetite.

Net stable funding ratio

The Net Stable Funding Ratio (NSFR) requires institutions to maintain a stable funding profile in relation to the composition of their assets and

off-balance

sheet exposures. It is calculated as the ratio of available stable funding (ASF) to required stable funding (RSF), with assumptions defined in the OSFI LAR Guideline. The Bank is subject to a regulatory minimum NSFR of 100%.

ASF is defined as the portion of capital and liabilities expected to be reliable over the time horizons considered by the NSFR. RSF is a function of the liquidity characteristics and residual maturities of the various assets held by the Bank as well as those of its

off-balance

sheet exposures.

The total weighted values for ASF and RSF included in the table that follows are derived by applying the assumptions specified in the LAR Guideline to balance sheet items, including capital instruments, wholesale funding, deposits, loans and mortgages, securities, derivatives and commitments to extend credit.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

The following table presents the Bank’s NSFR as at July 31, 2022:

T29 Bank’s NSFR

(1)


	Unweighted Value by Residual Maturity								Weighted value (3)
As at July 31, 2022 ($ millions)	No maturity (2)		< 6 months		6-12 months		≥ 1 year		Weighted value (3)
Available Stable Funding (ASF) Item
Capital:	$	81,365	$	–	$	–	$	–	$	81,365
Regulatory capital		81,365		–		–		–		81,365
Other capital instruments		–		–		–		–		–
Retail deposits and deposits from small business customers:		210,757		48,391		23,680		33,657		289,643
Stable deposits		85,356		12,143		8,341		8,306		108,854
Less stable deposits		125,401		36,248		15,339		25,351		180,789
Wholesale funding:		180,395		312,865		53,679		121,405		302,169
Operational deposits		105,752		11,831		–		–		58,792
Other wholesale funding		74,643		301,034		53,679		121,405		243,377
Liabilities with matching interdependent assets (4)		–		2,425		1,854		19,882		–
Other liabilities:		69,382		88,073						19,736
NSFR derivative liabilities				12,211
All other liabilities and equity not included in the above categories		69,382		55,205		1,843		18,814		19,736
Total ASF									$	692,913
Required Stable Funding (RSF) Item
Total NSFR high-quality liquid assets (HQLA)									$	17,685
Deposits held at other financial institutions for operational purposes	$	1,522	$	–	$	–	$	–	$	761
Performing loans and securities:		99,856		180,155		56,759		504,530		543,831
Performing loans to financial institutions secured by Level 1 HQLA		134		47,644		4,174		–		4,720
Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions		3,105		64,428		9,472		14,541		29,990
Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which:		53,931		57,760		27,503		209,582		264,174
With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk		–		472		672		2,376		2,116
Performing residential mortgages, of which:		21,458		8,998		15,029		274,777		221,165
With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk		21,458		8,824		14,852		261,067		209,336
Securities that are not in default and do not qualify as HQLA, including exchange-traded equities		21,228		1,325		581		5,630		23,782
Assets with matching interdependent liabilities (4)		–		2,425		1,854		19,882		–
Other assets:		2,609				143,641				53,459
Physical traded commodities, including gold		2,609								2,218
Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs				10,789						9,171
NSFR derivative assets				7,946						–
NSFR derivative liabilities before deduction of variation margin posted				29,530						1,476
All other assets not included in the above categories		–		54,821		–		40,555		40,594
Off-balance sheet items				450,018						17,597
Total RSF									$	633,333
Net Stable Funding Ratio (%)										109	%


As at April 30, 2022 ($ millions)	Weighted value (3)
Total ASF	$	681,853
Total RSF		624,338
Net stable funding ratio (%)		109	%

(1)	This measure has been disclosed in this document in accordance with OSFI Guideline – Net Stable Funding Ratio Disclosure Requirements (January 2021).

(2)	Items in the “no maturity” time bucket do not have a stated maturity. These may include, but are not limited to, items such as capital with perpetual maturity, non-maturity deposits, short positions, open maturity positions, non-HQLA equities, and physical traded commodities.

(3)	Weighted values represent balances calculated after the application of ASF and RSF rates, as prescribed by the OSFI LAR guideline.

(4)	Interdependent assets and liabilities are primarily comprised of transactions related to the Canada Mortgage Bond program.

Available stable funding is primarily provided by the Bank’s large pool of retail, small business and corporate customer deposits; secured and unsecured wholesale funding and capital. Required stable funding primarily originates from the Bank’s loan and mortgage portfolio, securities holdings,

off-balance

sheet items and other assets.

The Bank’s NSFR as at July 31, 2022 was unchanged versus the previous quarter as higher ASF from deposits and wholesale funding and lower RSF from securities was offset by higher RSF from loans and mortgages.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Regulatory liquidity developments

OSFI’s changes to the LAR Guideline will be effective April 2023 and primarily comprise of enhancements to the Net Cumulative Cash Flow supervisory tool. Modifications are focused on the introduction of cash outflow factors for undrawn loan commitments and changes to cash inflow and outflow factors for certain loan and deposit products.

Funding

The Bank ensures that its funding sources are well diversified. Funding concentrations are regularly monitored and analyzed by type. The sources of funding are capital, deposits from retail and commercial clients sourced through the Canadian and international branch network, deposits from financial institutions as well as wholesale debt issuances.

Capital and personal deposits are key components of the Bank’s core funding and these amounted to $342 billion as at July 31, 2022 (October 31, 2021 – $324 billion). The increase since October 31, 2021 is due primarily to growth in personal deposits and net changes in capital. A portion of commercial deposits, particularly those of an operating or relationship nature, are also considered part of the Bank’s core funding. Furthermore, core funding is augmented by longer-term wholesale debt issuances (original maturity of 1 year or more) of $202 billion (October 31, 2021 – $177 billion). Longer-term wholesale debt issuances include senior notes, mortgage securitizations, asset-backed securities and covered bonds.

The Bank operates in many different currencies and countries. From a funding perspective, the most significant currencies are Canadian and U.S. dollars. With respect to the Bank’s operations outside Canada, there are different funding strategies depending on the nature of the activities in each country. For those countries where the Bank operates a branch banking subsidiary, the strategy is for the subsidiary to be substantially self-funding in its local market. For other subsidiaries or branches outside Canada where local deposit gathering capability is not sufficient, funding is provided through the wholesale funding activities of the Bank.

From an overall funding perspective, the Bank’s objective is to achieve an appropriate balance between the cost and the stability of funding. Diversification of funding sources is a key element of the funding strategy.

The Bank’s wholesale debt diversification strategy is primarily executed via the Bank’s main wholesale funding centres, located in Toronto, New York, London and Singapore. The majority of these funds are sourced in Canadian and U.S. dollars. Where required, these funds are swapped to fund assets in different currencies. The funding strategy deployed by wholesale funding centres and the management of associated risks, such as geographic and currency risk, are managed centrally within the framework of policies and limits that are approved by the Board of Directors.

In the normal course, the Bank uses a mix of unsecured and secured wholesale funding instruments across a variety of markets. The choice of instruments and markets is based on a number of factors, including relative cost, market capacity and diversification of funding. Market conditions can change over time, impacting cost and capacity in particular markets or instruments. Changing market conditions can include periods of stress where the availability of funding in particular markets or instruments is constrained. In these circumstances, the Bank would increase its focus on sources of funding in functioning markets and secured funding instruments. Should a period of extreme stress exist such that all wholesale funding sources are constrained, the Bank maintains a pool of liquid assets to mitigate its liquidity risk. This pool includes cash, deposits with central banks and securities.

In Canada, the Bank raises short and longer-term wholesale debt through the issuance of senior unsecured notes. Additional longer-term wholesale debt may be generated through the Bank’s Canadian Debt and Equity Shelf, the securitization of Canadian insured residential mortgages through CMHC programs (such as Canada Mortgage Bonds), uninsured residential mortgages through the Bank’s Covered Bond Program, retail credit card receivables through the Trillium Credit Card Trust II program, retail indirect auto loan receivables through the Securitized Term Auto Receivables Trust program and unsecured personal lines of credit receivables through the Halifax Receivables Trust program. CMHC securitization programs, while included in the Bank’s view of wholesale debt issuance, do not entail the

run-off

risk that can be experienced in funding raised from capital markets.

Outside of Canada, short-term wholesale debt may be raised through the issuance of negotiable certificates of deposit in the United States, Hong Kong, the United Kingdom and Australia and the issuance of commercial paper in the United States. The Bank operates longer-term wholesale debt issuance registered programs in the United States, such as its SEC Registered Debt and Equity Shelf, and

non-registered

programs, such as the securitization of retail indirect auto loan receivables through the Securitized Term Auto Receivables Trust program and retail credit card receivables through the Trillium Credit Card Trust II program. The Bank may issue its Covered Bond Program (listed with the U.K. Listing Authority and the Swiss Stock Exchange), in Europe, the United Kingdom, the United States, Australia and Switzerland. The Bank also raises longer-term funding across a variety of currencies through its Australian Medium Term Note Programme, European Medium Term Note Programme (listed with the U.K. Listing Authority and the Swiss Stock Exchange) and Singapore Medium Term Note Programme (listed with the Singapore Exchange and the Taiwan Exchange).

The Department of Finance’s

bail-in

regulations under the Canada Deposit Insurance Corporation (CDIC) Act and the Bank Act, became effective September 23, 2018. Senior unsecured debt issued by the Bank on or after September 23, 2018, that has an original term greater than 400 days and is marketable, subject to certain exceptions, is subject to the Canadian Bank Recapitalization

(Bail-in)

regime. Under the

Bail-in

regime, in circumstances when the Superintendent of Financial Institutions has determined that a bank may no longer be viable, the Governor in Council may, upon a recommendation of the Minister of Finance that they are of the opinion that it is in the public interest to do so, grant an order directing the CDIC to convert all or a portion of certain shares and liabilities of that bank into common shares. As at July 31, 2022, issued and outstanding liabilities of $70 billion (October 31, 2021 – $50 billion) were subject to conversion under the

bail-in

regime.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

The table below provides the remaining contractual maturities of funding raised through wholesale funding sources. In the Consolidated Statement of Financial Position, these liabilities are primarily included in Business and Government Deposits.

Wholesale funding sources

T30 Wholesale funding

(1)


	As at July 31, 2022
($ millions)	Less than 1 month		1-3 months		3-6 months		6-9 months		9-12 months		Sub-Total ≤ 1 Year		1-2 years		2-5 years		>5 years		Total
Deposit by banks (2)	$	1,897	$	528	$	498	$	217	$	570	$	3,710	$	84	$	–	$	–	$	3,794
Bearer notes, commercial paper and certificate of deposits		6,285		24,022		23,410		13,403		7,810		74,930		952		530		45		76,457
Asset-backed commercial paper (3)		1,272		4,942		865		–		–		7,079		–		–		–		7,079
Senior notes (4)(5)		90		4,244		4,119		8,290		1,852		18,595		4,111		6,010		10,235		38,951
Bail-inable notes (5)		–		–		1,877		1,345		5,324		8,546		16,252		30,961		14,154		69,913
Asset-backed securities		–		–		–		1		1		2		602		616		102		1,322
Covered bonds		–		1,636		858		3,770		–		6,264		3,926		25,254		7,223		42,667
Mortgage securitization (6)		–		720		1,724		806		1,048		4,298		5,822		9,345		4,445		23,910
Subordinated debt (7)		–		45		–		–		–		45		4		1,972		8,442		10,463
Total wholesale funding sources	$	9,544	$	36,137	$	33,351	$	27,832	$	16,605	$	123,469	$	31,753	$	74,688	$	44,646	$	274,556

Of Which:

Unsecured funding	$	8,272	$	28,839	$	29,904	$	23,255	$	15,555	$	105,825	$	21,403	$	39,473	$	32,876	$	199,577
Secured funding		1,272		7,298		3,447		4,577		1,050		17,644		10,350		35,215		11,770		74,979

	As at October 31, 2021
($ millions)	Less than 1 month		1-3 months		3-6 months		6-9 months		9-12 months		Sub-Total ≤ 1 Year		1-2 years		2-5 years		>5 years		Total
Deposit by banks (2)	$	1,348	$	302	$	220	$	151	$	348	$	2,369	$	166	$	–	$	–	$	2,535
Bearer notes, commercial paper and certificate of deposits		5,030		11,249		15,037		18,439		12,169		61,924		537		162		48		62,671
Asset-backed commercial paper (3)		1,328		2,248		965		–		–		4,541		–		–		–		4,541
Senior notes (4)(5)		3		2,254		6,029		1,283		4,476		14,045		8,144		5,224		10,385		37,798
Bail-inable notes (5)		–		77		127		1		–		205		14,421		21,827		13,207		49,660
Asset-backed securities		–		606		–		–		–		606		752		604		85		2,047
Covered bonds		–		1,789		–		–		1,788		3,577		7,412		15,206		5,055		31,250
Mortgage securitization (6)		–		669		1,382		928		720		3,699		6,154		11,008		4,590		25,451
Subordinated debt (7)		26		–		49		–		49		124		–		1,931		6,352		8,407
Total wholesale funding sources	$	7,735	$	19,194	$	23,809	$	20,802	$	19,550	$	91,090	$	37,586	$	55,962	$	39,722	$	224,360

Of Which:

Unsecured funding	$	6,408	$	13,882	$	21,462	$	19,874	$	17,041	$	78,667	$	23,268	$	29,144	$	29,992	$	161,071
Secured funding		1,327		5,312		2,347		928		2,509		12,423		14,318		26,818		9,730		63,289

(1)	Wholesale funding sources exclude obligations related to securities sold under repurchase agreements and bankers’ acceptances, which are disclosed in the contractual maturities table below. Amounts are based on remaining term to maturity.

(2)	Only includes commercial bank deposits.

(3)	Wholesale funding sources also exclude asset-backed commercial paper (ABCP) issued by certain ABCP conduits that are not consolidated for financial reporting purposes.

(4)	Not subject to bail-in.

(5)	Includes structured notes issued to institutional investors.

(6)	Represents residential mortgages funded through Canadian Federal Government agency sponsored programs. Funding accessed through such programs does not impact the funding capacity of the Bank in its own name.

(7)	Although subordinated debentures are a component of regulatory capital, they are included in this table in accordance with EDTF recommended disclosures.

Wholesale funding generally bears a higher risk of

run-off

in a stressed environment than other sources of funding. The Bank mitigates this risk through funding diversification, ongoing engagement with investors and by maintaining a large holding of unencumbered liquid assets. Unencumbered liquid assets of $244 billion as at July 31, 2022 (October 31, 2021 – $246 billion) were well in excess of wholesale funding sources which mature in the next twelve months.

Scotiabank Third Quarter Report 2022

Table of Contents

MANAGEMENT’S DISCUSSION & ANALYSIS

Contractual maturities

The table below provides the maturity of assets and liabilities as well as the

off-balance

sheet commitments as at July 31, 2022, based on the contractual maturity date. From a liquidity risk perspective the Bank considers factors other than contractual maturity in the assessment of liquid assets or in determining expected future cash flows. In particular, for securities with a fixed maturity date, the ability and time horizon to raise cash from these securities is more relevant to liquidity management than contractual maturity. For other assets and deposits the Bank uses assumptions about rollover rates to assess liquidity risk for normal course and stress scenarios. Similarly, the Bank uses assumptions to assess the potential drawdown of credit commitments in various scenarios.

T31 Contractual maturities


	As at July 31, 2022
($ millions)	Less than one month		One to three months		Three to six months		Six to nine months		Nine to twelve months		One to two years		Two to five years		Over five years		No specific maturity			Total

Assets
Cash and deposits with financial institutions and precious metals	$	62,085	$	342	$	358	$	93	$	87	$	244	$	462	$	404	$	4,477		$	68,552
Trading assets		2,938		3,291		7,103		2,549		3,244		7,653		16,026		17,942		57,859			118,605
Securities purchased under resale agreements and securities borrowed		123,747		20,473		6,918		3,211		868		–		–		–		–			155,217
Derivative financial instruments		2,544		3,723		6,618		2,603		1,813		6,420		11,018		12,400		–			47,139
Investment securities – FVOCI		3,440		4,736		6,902		3,791		3,350		13,929		30,142		14,897		3,765			84,952
Investment securities – amortized cost		21		718		773		395		1,839		2,422		4,939		10,441		–			21,548
Investment securities – FVTPL		–		–		–		–		–		–		–		–		1,722			1,722
Loans		53,911		36,249		37,833		27,256		35,643		91,545		329,834		47,116		53,991			713,378
Residential mortgages		2,517		4,695		9,123		8,990		14,845		39,050		229,429		34,671		645	(1)		343,965
Personal loans		3,835		2,379		2,952		3,099		2,967		13,027		22,868		6,297		39,137			96,561
Credit cards		–		–		–		–		–		–		–		–		13,871			13,871
Business and government		47,559		29,175		25,758		15,167		17,831		39,468		77,537		6,148		5,485	(2)		264,128
Allowance for credit losses		–		–		–		–		–		–		–		–		(5,147	)		(5,147	)
Customers’ liabilities under acceptances		15,669		3,902		132		59		55		–		–		–		–			19,817
Other assets		–		–		–		–		–		–		–		–		61,172			61,172
Total assets	$	264,355	$	73,434	$	66,637	$	39,957	$	46,899	$	122,213	$	392,421	$	103,200	$	182,986		$	1,292,102

Liabilities and equity
Deposits	$	79,204	$	60,730	$	55,833	$	45,343	$	46,664	$	45,514	$	82,302	$	25,549	$	438,443		$	879,582
Personal		10,177		8,265		11,440		12,174		13,169		11,166		11,838		487		180,787			259,503
Non-personal		69,027		52,465		44,393		33,169		33,495		34,348		70,464		25,062		257,656			620,079
Financial instruments designated at fair value through profit or loss		209		641		974		745		912		5,195		2,218		11,982		–			22,876
Acceptances		15,696		3,902		132		59		55		–		–		–		–			19,844
Obligations related to securities sold short		4,188		2,048		2,241		1,399		1,473		3,885		8,420		8,427		12,139			44,220
Derivative financial instruments		2,953		4,168		5,091		3,509		2,339		8,201		13,822		16,797		–			56,880
Obligations related to securities sold under repurchase agreements and securities lent		119,577		6,091		2,336		16		–		92		33		–		–			128,145
Subordinated debentures		–		–		–		–		–		–		1,851		6,562		–			8,413
Other liabilities		2,980		1,761		1,496		1,774		1,613		7,153		6,036		7,274		28,470			58,557
Total equity		–		–		–		–		–		–		–		–		73,585			73,585
Total liabilities and equity	$	224,807	$	79,341	$	68,103	$	52,845	$	53,056	$	70,040	$	114,682	$	76,591	$	552,637		$	1,292,102

Off-balance sheet commitments
Credit commitments (3)	$	4,725	$	10,106	$	18,738	$	19,993	$	29,550	$	32,073	$	123,748	$	16,667	$	–		$	255,600
Financial guarantees (4)		–		–		–		–		–		–		–		–		40,527			40,527
Outsourcing obligations (5)		18		36		53		53		53		209		110		38		–			570

(1)	Includes primarily impaired mortgages.

(2)	Includes primarily overdrafts and impaired loans.

(3)	Includes the undrawn component of committed credit and liquidity facilities.

(4)	Includes outstanding balances of guarantees, standby letters of credit and commercial letters of credit which may expire undrawn.

(5)	The Bank relies on outsourcing arrangements for certain support and/or business functions, including, but not limited to, computer operations and cheque and bill payment processing.

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MANAGEMENT’S DISCUSSION & ANALYSIS


	As at October 31, 2021
($ millions)	Less than one month		One to three months		Three to six months		Six to nine months		Nine to twelve months		One to two years		Two to five years		Over five years		No specific maturity			Total

Assets
Cash and deposits with financial institutions and precious metals	$	78,205	$	539	$	312	$	162	$	273	$	397	$	792	$	655	$	5,743		$	87,078
Trading assets		1,880		4,353		2,734		2,558		1,687		6,768		19,130		20,323		86,879			146,312
Securities purchased under resale agreements and securities borrowed		96,026		17,969		9,870		2,446		1,428		–		–		–		–			127,739
Derivative financial instruments		2,744		4,335		3,267		1,677		1,493		11,995		4,451		12,340		–			42,302
Investment securities – FVOCI		3,387		4,523		4,848		3,096		1,923		12,366		14,656		7,846		3,144			55,789
Investment securities – amortized cost		18		578		1,267		1,544		878		3,334		5,821		4,717		–			18,157
Investment securities – FVTPL		–		–		–		–		–		–		–		–		1,253			1,253
Loans		43,467		31,233		27,834		30,467		29,347		94,083		286,993		42,959		50,603			636,986
Residential mortgages		2,453		4,264		7,536		12,387		12,246		47,790		199,553		31,529		1,920	(1)		319,678
Personal loans		3,472		2,195		3,188		3,099		3,103		11,309		22,105		6,227		36,842			91,540
Credit cards		–		–		–		–		–		–		–		–		12,450			12,450
Business and government		37,542		24,774		17,110		14,981		13,998		34,984		65,335		5,203		5,017	(2)		218,944
Allowance for credit losses		–		–		–		–		–		–		–		–		(5,626	)		(5,626	)
Customers’ liabilities under acceptances		15,094		4,099		850		225		136		–		–		–		–			20,404
Other assets		–		–		–		–		–		–		–		–		48,824			48,824
Total assets	$	240,821	$	67,629	$	50,982	$	42,175	$	37,165	$	128,943	$	331,843	$	88,840	$	196,446		$	1,184,844

Liabilities and equity
Deposits	$	63,207	$	49,447	$	44,953	$	33,565	$	29,960	$	42,800	$	61,816	$	22,742	$	448,769		$	797,259
Personal		10,156		13,051		13,358		7,345		6,168		6,512		8,263		102		178,596			243,551
Non-personal		53,051		36,396		31,595		26,220		23,792		36,288		53,553		22,640		270,173			553,708
Financial instruments designated at fair value through profit or loss		86		306		1,069		817		983		4,302		2,613		12,317		–			22,493
Acceptances		15,131		4,099		850		225		136		–		–		–		–			20,441
Obligations related to securities sold short		473		312		956		324		594		2,312		11,388		7,481		17,114			40,954
Derivative financial instruments		2,228		3,668		2,150		2,663		2,622		11,051		5,352		12,469		–			42,203
Obligations related to securities sold under repurchase agreements and securities lent		104,216		9,109		6,126		3,826		87		–		105		–		–			123,469
Subordinated debentures		–		–		–		–		–		–		1,797		4,500		37			6,334
Other liabilities		4,650		1,514		2,122		1,124		2,931		5,176		8,783		6,573		25,926			58,799
Total equity		–		–		–		–		–		–		–		–		72,892			72,892
Total liabilities and equity	$	189,991	$	68,455	$	58,226	$	42,544	$	37,313	$	65,641	$	91,854	$	66,082	$	564,738		$	1,184,844

Off-balance sheet commitments
Credit commitments (3)	$	6,340	$	7,526	$	17,894	$	24,323	$	19,567	$	34,056	$	122,565	$	7,514	$	–		$	239,785
Financial guarantees (4)		–		–		–		–		–		–		–		–		38,598			38,598
Outsourcing obligations (5)		19		38		56		56		56		224		260		46		–			755

(1)	Includes primarily impaired mortgages.

(2)	Includes primarily overdrafts and impaired loans.

(3)	Includes the undrawn component of committed credit and liquidity facilities.

(4)	Includes outstanding balances of guarantees, standby letters of credit and commercial letters of credit which may expire undrawn.

(5)	The Bank relies on outsourcing arrangements for certain support and/or business functions, including, but not limited to, computer operations and cheque and bill payment processing.

Credit ratings

Credit ratings are one of the factors that impact the Bank’s access to capital markets and the terms on which it can conduct derivatives, hedging transactions and borrow funds. The credit ratings and outlook that the rating agencies assign to the Bank are based on their own views and methodologies.

The Bank continues to have strong credit ratings

and its deposits and legacy senior debt are rated AA by DBRS Morningstar, Aa2 by Moody’s, A+ by Standard and Poor’s (S&P), and AA by Fitch. Fitch affirmed its rating and revised the outlook to Stable on July 11, 2022. As of July 31, 2022 all rating agencies have a Stable outlook on the Bank. The Bank’s bail-inable senior debt is rated AA (low) by DBRS Morningstar, A2 by Moody’s,

AA-

by Fitch and

A-

by S&P. No other rating agency has made affirmations of or changes to the Bank’s credit ratings or outlooks during the quarter.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Capital Management

We continue to manage our capital in accordance with the capital management framework as described on pages 61 to 73 of the Bank’s 2021 Annual Report. In addition, in June 2022 OSFI confirmed that the Domestic Stability Buffer (DSB) will remain at 2.50% of total risk-weighted assets. OSFI’s minimum regulatory capital ratio requirements, including the domestic systemically important bank

(D-SIB)

1.0% surcharge and its Domestic Stability Buffer remain at: 10.5%, 12.0% and 14.0% for Common Equity Tier 1 (CET1), Tier 1 and Total capital ratios, respectively.

Effective November 1, 2021,

D-SIBs

are required to maintain a minimum risk-based Total Loss Absorbing Capacity (TLAC) ratio and a minimum TLAC Leverage ratio. TLAC is defined as the aggregate of NVCC Tier 1 capital, NVCC Tier 2 capital, and other TLAC instruments that are subject to conversion in whole or in part into common shares under the CDIC Act and meet all of the eligibility criteria under the guidelines. The Bank’s minimum TLAC ratio requirements consist of 24.0% of risk-weighted assets (including the DSB requirement) and 6.75% of leverage ratio exposures. OSFI may subsequently vary the minimum TLAC requirements for individual

D-SIBs

or groups of

D-SIBs.

Where a

D-SIB

falls below the minimum TLAC requirements, OSFI may take any measures deemed appropriate, including measures set out in the Bank Act.

Commencing the first quarter of 2022, the Bank’s Leverage and TLAC Leverage ratios no longer benefited from the temporary exclusion of sovereign-issued securities from its leverage exposure measure. OSFI had confirmed that central bank reserves continue to be excluded from the Leverage ratio exposure measure until further notice.

Regulatory capital and total loss absorbing capacity ratios

The Bank’s various regulatory capital and total loss absorbing capacity measures consist of the following:

T32 Regulatory capital and total loss absorbing capacity ratios


	As at
($ millions)	July 31 2022		April 30 2022		October 31 2021
Common Equity Tier 1 capital (1)	$	51,639	$	51,547	$	51,010
Tier 1 capital (1)		58,801		57,201		57,915
Total regulatory capital (1)		68,086		66,628		66,101
Total loss absorbing capacity (TLAC) (2)		128,800		133,841		115,681
Risk-weighted assets (1)(3)	$	452,800	$	445,273	$	416,105
Capital ratios (%) (1) :
Common Equity Tier 1 capital ratio		11.4		11.6		12.3
Tier 1 capital ratio		13.0		12.8		13.9
Total capital ratio		15.0		15.0		15.9
Total loss absorbing capacity ratio (2)		28.4		30.1		27.8
Leverage (4) :
Leverage exposures	$	1,388,823	$	1,360,184	$	1,201,766
Leverage ratio (%)		4.2		4.2		4.8
Total loss absorbing capacity leverage ratio (%) (2)		9.3		9.8		9.6

(1)	Regulatory capital ratios are determined in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018).

(2)	This measure has been disclosed in this document in accordance with OSFI Guideline – Total Loss Absorbing Capacity (September 2018). Results for October 31, 2021 are shown for comparative purposes and were not a regulatory requirement.

(3)	As at July 31, 2022, April 30, 2022 and October 31, 2021, the Bank did not have a regulatory capital floor add-on to risk-weighted assets for CET1, Tier 1, Total and TLAC RWA.

(4)	This measure has been disclosed in this document in accordance with OSFI Guideline – Leverage Requirements (November 2018).

The Bank’s Common Equity Tier 1 (CET1) capital ratio was 11.4% as at July 31, 2022, a decrease of approximately 20 basis points from the prior quarter, due primarily to strong organic growth in risk-weighted assets across all business lines and common share buybacks under the Bank’s Normal Course Issuer Bid, partly offset by the Bank’s internal capital generation.

The Bank’s Tier 1 capital ratio was 13.0% as at July 31, 2022, an increase of approximately 20 basis points from the prior quarter, due primarily to a $1.5 billion issuance of Limited Recourse Notes (LRCNs), partly offset by the above noted impacts to the CET1 ratio.

The Bank’s Total capital ratio of 15.0% as at July 31, 2022 remained approximately flat from the prior quarter, due to the above noted impacts to the Tier 1 capital ratio.

The Leverage ratio was 4.2% as at July 31, 2022 also remained flat from the prior quarter, due primarily to higher Tier 1 capital offset by strong growth in the Bank’s on and

off-balance

sheet assets.

The TLAC ratio was 28.4% as at July 31, 2022, a decrease of approximately 170 basis points from the prior quarter, mainly from lower TLAC instruments and the above noted impacts to the Total capital ratio.

The TLAC Leverage ratio was 9.3%, a decrease of approximately 50 basis points, due primarily to lower TLAC instruments and higher leverage exposures.

As at July 31, 2022, the CET1, Tier 1, Total capital, Leverage, TLAC and TLAC Leverage ratios were well above OSFI’s minimum capital ratios.

Changes in regulatory capital

The Bank’s Common Equity Tier 1 capital was $51.6 billion, as at July 31, 2022, an increase of approximately $92 million from the prior quarter, due primarily to strong internal capital generation of $1.28 billion, partly offset by lower accumulated other comprehensive income of $650 million mainly from foreign currency translation, share buybacks of $409 million, lower

non-controlling

interest recognition in regulatory capital of $67 million, and higher regulatory capital deductions of $45 million.

Risk-weighted assets

CET1 risk-weighted assets (RWA) increased during the quarter by $7.5 billion (or 1.7%) to $452.8 billion, due primarily to organic growth in retail mortgages, personal and business lending, partly offset by updates to advanced internal-ratings based models and the impacts from foreign currency translation.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Normal Course Issuer Bid

On November 30, 2021, the Bank announced that OSFI and the Toronto Stock Exchange (TSX) approved its normal course issuer bid (the “2022 NCIB”) pursuant to which it may repurchase for cancellation up to 24 million of the Bank’s common shares.

On March 28, 2022, the Bank announced that OSFI and the Toronto Stock Exchange (TSX) approved an amendment to the 2022 NCIB (the “2022 NCIB Amendment”) to increase the number of common shares that the Bank may repurchase for cancellation from 24 million to 36 million. Purchases under the 2022 NCIB commenced on December 2, 2021, and will terminate upon earlier of: (i) the Bank purchasing the maximum number of common shares under the 2022 NCIB Amendment, (ii) the Bank providing a notice of termination, or (iii) December 1, 2022. On a quarterly basis, the Bank will notify OSFI prior to making purchases.

During the nine months ended July 31, 2022, the Bank repurchased and cancelled approximately 31.3 million common shares at an average price of $87.68 per share for a total amount of $2,745 million. In Q3 2022, the Bank repurchased and cancelled approximately 5 million common shares for a total amount of $409 million.

No repurchases of common shares were made during the three and nine months ended July 31, 2021.

Common dividend

The Board of Directors, at its meeting on August 22, 2022, approved a dividend of $1.03 per share. This quarterly dividend is payable to shareholders of record as of October 4, 2022 on October 27, 2022.

Regulatory capital developments

Basel Committee on Banking Supervision – Finalized Basel III Regulatory Capital Reforms

In December 2017, the Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision (BCBS), announced that they have agreed on the remaining Basel III reforms. The previously expected implementation year of 2022 was delayed to 2023.

The final Basel III reforms package includes:

•

a revised standardized approach for credit risk;

•

revisions to the internal ratings-based approach for credit risk;

•

revisions to the credit valuation adjustment (CVA) framework, including the removal of the internally modelled approach and the introduction of a revised standardized approach;

•

a revised market risk framework from a Fundamental Review of the Trading Book (FRTB);

•

a revised standardized approach for operational risk, which will replace the existing standardized approaches and the advanced measurement approach;

•

revisions to the measurement of the leverage ratio and a leverage ratio buffer for global systemically important banks

(G-SIBs),

which will take the form of a Tier 1 capital buffer set at 50% of a

G-SIB’s

risk-weighted capital buffer; and

•

an aggregate output floor, which will ensure that banks’ risk-weighted assets (RWAs) generated by internal models are not lower than 72.5% of RWAs as calculated by the Basel III framework’s standardized approaches.

Banks will also be required to disclose their RWAs based on these standardized approaches. There is a

phase-in

period for the 72.5% output floor from 2023 until 2028.

In January 2022, OSFI finalized revisions to its Capital Adequacy Requirements Guideline, Leverage Requirements Guideline, and Pillar 3 Disclosures Guideline for

D-SIBs.

OSFI’s requirements are substantially aligned with Basel III with some differences, primarily in retail residential real estate and qualifying revolving retail exposures and with respect to an acceleration of the

phase-in

period of the aggregate output floor to 72.5% by 2026. Implementation timelines are Q2 2023, with the exception of CVA and FRTB market risk requirements which are effective Q1 2024.

Financial Instruments

Given the nature of the Bank’s main business activities, financial instruments make up a substantial portion of the balance sheet and are integral to the Bank’s business. There are various measures that reflect the level of risk associated with the Bank’s portfolio of financial instruments. Further discussion of some of these risk measures is included in the Risk Management section. The methods of determining the fair value of financial instruments are detailed on page 175 of the Bank’s 2021 Annual Report.

Management’s judgment on valuation inputs is necessary when observable market data is not available, and in the selection of appropriate valuation models. Uncertainty in these estimates and judgments can affect fair value and financial results recorded. During the quarter, changes in the fair value of financial instruments reflect the current economic environment, industry and market conditions.

Many financial instruments are traded products such as derivatives, and are generally transacted under industry standard International Swaps and Derivatives Association (ISDA) master netting agreements with counterparties, which allow for a single net settlement of all transactions covered by that agreement in the event of a default or early termination of the transactions. ISDA agreements are frequently accompanied by an ISDA Credit Support Annex (CSA), the terms of which may vary according to each party’s view of the other party’s creditworthiness. CSAs can require one party to post initial margin at the onset of each transaction. CSAs also allow for variation margin to be called if total uncollateralized

mark-to-market

exposure exceeds an agreed upon threshold. Such variation margin provisions can be

one-way

(only one party will ever post collateral) or

bi-lateral

(either party may post depending upon which party is

in-the-money).

The CSA will also detail the types of collateral that are acceptable to each party, and the haircuts that will be applied against each collateral type. The terms of the ISDA master netting agreements and CSAs are taken into consideration in the calculation of counterparty credit risk exposure (see also page 91 of the Bank’s 2021 Annual Report).

Total derivative notional amounts were $7,314 billion as at July 31, 2022, compared to $6,892 billion as at April 30, 2022 (October 31, 2021 – $6,067 billion). The quarterly increase was due primarily to higher volume of interest rate and foreign exchange contracts. The total notional amount of

over-the-counter

derivatives was $7,026 billion compared to $6,590 billion as at April 30, 2022 (October 31, 2021 – $5,840 billion), of which $5,269 billion was settled through central counterparties as at July 31, 2022 (April 30, 2022 – $4,863 billion; October 31, 2021 – $4,240 billion). The credit equivalent amount, after taking master netting arrangements into account, was $41.4 billion, compared to $37.4 billion at April 30, 2022. The increase was primarily attributable to the commodity contracts.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Selected credit instruments

A complete discussion of selected credit instruments which markets regarded as higher risk during the financial crisis was provided on page 78 of the Bank’s 2021 Annual Report. The Bank’s net exposures have remained substantially unchanged from year end.

Off-Balance

Sheet Arrangements

In the normal course of business, the Bank enters into contractual arrangements that are either consolidated or not required to be consolidated in its financial statements, but could have a current or future impact on the Bank’s financial performance or financial condition. These arrangements can be classified into the following categories: structured entities, securitizations and guarantees and other commitments.

No material contractual obligations were entered into this quarter by the Bank with the structured entities that are not in the ordinary course of business. Processes for review and approval of these contractual arrangements are unchanged from last year. For a complete discussion of these types of arrangements, please refer to pages 74 to 75 of the Bank’s 2021 Annual Report.

Structured entities

The Bank sponsors two Canadian multi-seller conduits that are not consolidated. These multi-seller conduits purchase high-quality financial assets and finance these assets through the issuance of highly rated commercial paper. Although the Bank has power over the relevant activities of the conduits, it has limited exposure to variability in returns, which results in the Bank not consolidating the two Canadian conduits.

A significant portion of the conduits’ assets have been structured to receive credit enhancements from the sellers, including overcollateralization protection and cash reserve accounts. Each asset purchased by the conduits is supported by a backstop liquidity facility provided by the Bank in the form of a liquidity asset purchase agreement (LAPA). The primary purpose of the backstop liquidity facility is to provide an alternative source of financing in the event the conduits are unable to access the commercial paper market. Under the terms of the LAPA, in most cases, the Bank is not obliged to purchase defaulted assets.

The Bank’s primary exposure to the Canadian-based conduits is the liquidity support provided, with total liquidity facilities of $6.7 billion as at July 31, 2022 (October 31, 2021 – $4.9 billion). As at July 31, 2022, total commercial paper outstanding for these conduits was $3.3 billion (October 31, 2021 – $3.5 billion). Funded assets purchased and held by these conduits as at July 31, 2022, as reflected at original cost, were $3.3 billion (October 31, 2021 – $3.5 billion). The fair value of these assets approximates original cost. There has been no significant change in the composition or risk profile of these conduits since October 31, 2021.

Other

off-balance

sheet arrangements

Guarantees and other indirect commitments increased by 2% from October 31, 2021. The increase is due primarily to securities lending activities and undrawn commitments. Fees from guarantees and loan commitment arrangements recorded as credit fees in

non-interest

income were $158 million for the three months ended July 31, 2022, compared to $162 million in the previous quarter, and $158 million in the same period last year.

Regulatory Developments

The Bank continues to monitor and respond to global regulatory developments relating to a broad spectrum of topics, in order to ensure that control functions and business lines are responsive on a timely basis and business impacts, if any, are minimized. A high-level summary of some of the key regulatory developments that have the potential of impacting the Bank’s operations is included in the Legal and compliance risk section in the Bank’s 2021 Annual Report, as may be updated below.

Regulatory initiatives impacting financial services in Canada

On September 22, 2021, Quebec’s Act to Modernize Legislative Provisions respecting the Protection of Personal Information received royal assent and will come into force over the next three years. This law reforms Quebec Act Respecting the Protection of Personal Information in the Private Sector. It is modeled after the initial versions of the EU’s General Data Protection Regulation, and introduced key changes, including increased enforcement powers for the Commission d’accès à l’information, significant new monetary penalties for

non-compliance,

risk assessments for data transfers outside Quebec, mandatory breach notification and record keeping, and itemized express consent requirements. The Bank has established a project under which it has engaged business stakeholders and key groups to consider the law’s application.

On June 16, 2022, Bill C-27, An Act to enact the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act and the Artificial Intelligence and Data Act was introduced in Parliament. Bill C-27 is designed to replace the Personal Information Protection and Electronic Documents Act with a modernized and stronger legal framework, and includes significant penalties and government enforcement powers. The Bank will continue to closely monitor Bill C-27’s progress through Parliament.

On July 13, 2022, the Office of the Superintendent of Financial Institutions (OSFI) issued its final Guideline B-13 – Technology and Cyber Risk Management. Guideline B-13 is designed to support the development of operational and governance structures in response to greater technology and cyber risks affecting federally regulated financial institutions, which includes the Bank. The Guideline B-13 is organized around three “domains,” each of which sets out key components for sound risk management: Governance and Risk Management, Technology Operations and Resilience, and Cyber Security.

The final Guideline B-13 will be effective as of January 1, 2024, to provide financial institutions sufficient time to self-assess and ensure compliance with this new guideline.

Bill 96 (Quebec) – Charter of the French language

On June 1, 2022, Bill 96, which provides for material amendments to the Charter of the French Language, received assent and officially became law. Some of the changes took effect immediately, while others will take effect at later dates. The new Charter provides for new administrative obligations for organizations and strengthens the recourses available to employees and members of the general public. The Office québécois de la langue française also has the power to impose much stricter penalties than were previously available. The stated objectives of Bill 96 are, in particular, to strengthen the presence and use of the French language in Quebec, to establish a new Charter of the French Language, and to affirm that the only official language of Quebec is French. The main areas impacted by the new law includes labour and employment matters, the language of contracts, consumer rights, public signage, judicial remedies, and penalties.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Interest rate benchmark reform

Major interest rate benchmark reviews have been undertaken globally to either reform or phase out certain interbank offered rates (IBORs), including the Canadian Dollar Offered Rate (CDOR). As an alternative to IBORs, the regulators have recommended markets begin adopting alternative risk-free rates (RFRs). Further to previous announcements by various regulators, the publication of GBP, JPY, CHF, and EUR LIBORs ceased after December 31, 2021, while most of the USD LIBOR tenors (i.e., overnight,

one-month,

three-month,

six-month

and

12-month

tenors) continue to be published until June 30, 2023.

The Federal Reserve Board and other U.S. agencies have encouraged banks to transition away from USD LIBOR and cease entering new contracts after December 31, 2021, to facilitate an orderly transition. Similarly, OSFI stated that Federally Regulated Financial Institutions (FRFIs) should not enter new transactions using USD LIBOR as a reference rate after December 31, 2021. The details regarding the Bank’s Transition Program for IBOR Reform are available in Note 4 of the 2021 annual consolidated financial statements. The Transition Program continues its efforts on the transition of products referencing USD LIBOR and ensuring the Bank is not building on its exposure to USD LIBOR, except as permitted by the regulators.

On May 16, 2022, Refinitiv Benchmark Services (UK) Limited (RBSL), the administrator of CDOR, announced the cessation of the publication of

one-month,

two-month,

and three-month CDOR tenors after June 28, 2024, and this was authorized by the Ontario Securities Commission and the Autorité des marchés financiers. This announcement provides certainty regarding the future of

one-month,

two-month,

and three-month CDOR tenors and serves to set the fixed spread adjustment that will be used in industry standard fallback provisions for both derivative and cash products.

The Canadian Alternative Reference Rate (CARR) committee published a detailed transition roadmap with milestones to guide market participants on the transition away from CDOR across all product types. OSFI has also set out expectations for FRFIs, with transactions linked to CDOR, to transition to new reference rates prior to the respective cessation dates. The Bank’s Transition Program has updated its project plans to align with the CDOR transition roadmap and milestones published by CARR and ensure alignment with OSFI’s expectations for FRFIs.

2022 Proposed Canadian federal tax measures

On August 9, 2022, the Department of Finance released draft legislative proposals relating to tax measures announced in the Federal Budget on April 7, 2022. These tax measures include the Canada Recovery Dividend (“CRD”) under which the Bank will pay a

one-time

15% tax on “taxable income” in excess of $1 billion, as well as an increase of 1.5% to the Bank’s corporate income tax rate on its future taxable income above $100 million. The draft legislation provided more detail on the basis for the CRD, including that “taxable income” will be based on the average taxable income for the 2020 and 2021 taxation years. The proposed tax measures will be recorded for financial statement purposes in the taxation year when substantively enacted, and the CRD will be payable in equal amounts over five years. The public comment period is open until September 30, 2022 before the legislation moves into legislative readings.

The impact of these proposed tax measures have not been recognized in the Bank’s financial results as at July 31, 2022 as they are not substantively enacted, which would only occur after the third legislative reading.

B-20 Combined loan plans (CLP) guidance

On June 28, 2022 OSFI released a new advisory that complements existing expectations under Guideline B-20. This articulates OSFI’s expectations regarding underwriting practices on combined loan plans (CLP), where a customer holds both a mortgage and HELOC. For most borrowers using CLPs, these changes will have no effect in how products are used. For those that owe more than 65% LTV, there will be a gradual period where a portion of the principal payment will go towards reducing their overall mortgage amount until it is below the original loan to value, and until then would not be re-advanceable. Alignment to the B-20 CLP guidance will come into effect in 2023 and requires the existing portfolio be brought into alignment as each CLP reaches maturity/renewal over time. Banks that do not align their CLPs are subject to OSFI’s 2023 Capital Adequacy Requirements (CAR) Guideline which prescribe higher risk weights for CLPs not meeting OSFI’s B-20 CLP guidance. The Bank expects to have a mechanism in place for that alignment to be achieved.

Accounting Policies and Controls

Accounting policies and estimates

The condensed interim consolidated financial statements have been prepared in accordance with IAS 34

Interim Financial Reporting

, using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The significant accounting policies used in the preparation of the condensed interim consolidated financial statements are consistent with those used in the Bank’s audited consolidated financial statements for the year ended October 31, 2021 as described in Note 3 of the Bank’s 2021 annual consolidated financial statements.

Future accounting developments

There are no significant updates to the future accounting developments disclosed in Note 5 of the Bank’s audited consolidated financial statements in the 2021 Annual Report.

Changes in internal control over financial reporting

There have been no changes in the Bank’s internal control over financial reporting during the three months ended July 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

Related party transactions

There were no changes to the Bank’s procedures and policies for related party transactions from those outlined in the Bank’s 2021 Annual Report. All transactions with related parties continued to be at market terms and conditions.

Scotiabank Third Quarter Report 2022

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MANAGEMENT’S DISCUSSION & ANALYSIS

Share Data

T33 Shares and other instruments


July 31, 2022	Amount ($ millions)		Dividends declared per share (1)		Number outstanding (000s)		Conversion feature
Common Shares (2)	$	18,728	$	1.03		1,192,907		n/a

NVCC Preferred Shares (3)
Preferred shares Series 40 (4)	$	300	$	0.303125		12,000		Series 41

NVCC Additional Tier 1 Securities (3)	Amount ($ millions)		Distribution (5)		Yield (%)		Number outstanding (000s)
Subordinated Additional Tier 1 Capital Notes (6)	US$	1,250	US$	23.25		4.650		1,250
Subordinated Additional Tier 1 Capital Notes (7)	US$	1,250	US$	12.25		4.900		1,250
Limited Recourse Capital Notes Series 1 (7)	$	1,250	$	9.25		3.700		1,250
Limited Recourse Capital Notes Series 2 (7)	US$	600	US$	9.0625		3.625		600
Limited Recourse Capital Notes Series 3 (7)(8)	$	1,500	$	17.5575		7.023		1,500

NVCC Subordinated Debentures (3)					Amount ($ millions)		Interest rate (%)
Subordinated debentures due December 2025					US$	1,250		4.50
Subordinated debentures due January 2029					$	1,750		3.89
Subordinated debentures due July 2029					$	1,500		2.836
Subordinated debentures due May 2032					$	1,750		3.934
Subordinated debentures due May 2037					US$	1,250		4.588

Other	Amount ($ millions)		Distribution (5)		Yield (%)		Number outstanding (000s)
Scotiabank Trust Securities – Series 2006-1 issued by Scotiabank Capital Trust (9)	$	750	$	28.25		5.650		750

Options							Number outstanding (000s)
Outstanding options granted under the Stock Option Plans to purchase common shares (2)								10,023

(1)	Dividends are paid quarterly, if and when declared. Represents dividends announced on August 23, 2022. The Board of Directors, at its meeting on August 22, 2022, approved a dividend payable on October 27, 2022 to shareholders of record as of October 4, 2022.

(2)	As at August 12, 2022, the number of outstanding common shares and options were 1,192,209 thousand and 10,021 thousand, respectively. On August 23, 2022, the Bank announced a dividend of $1.03 per common share payable on October 27, 2022 to common shareholders of record as of October 4, 2022.

(3)

These securities contain

Non-Viability

Contingent Capital (NVCC) provisions necessary to qualify as regulatory capital under Basel III. The Bank’s 2021 Annual Report describes the conditions under which the conversion occurs and the conversion mechanics of NVCC Subordinated Debentures (Note 21), NVCC Subordinated Additional Tier 1 Securities (Note 24) and NVCC Preferred Shares (Note 24). The maximum number of common shares issuable on conversion of NVCC subordinated debentures, NVCC Subordinated additional Tier 1 capital notes, including those issued to Scotiabank LRCN Trust as recourse assets in respect of NVCC Limited Recourse Capital Notes, and NVCC Preferred Shares as at July 31, 2022 would be 4,200 million common shares based on the floor price and excluding the impact of any accrued and unpaid interest and any declared but unpaid dividends.

(4)	These preferred shares are entitled to non-cumulative preferential cash dividends payable quarterly. These preferred shares have conversion features. Refer to Note 24 of the Consolidated Financial Statements in the Bank’s 2021 Annual Report for further details.

(5)	Distributions made per face amount of $1,000 or US$1,000 semi-annually or quarterly, as applicable.

(6)	Semi-annual distributions are recorded in the second and fourth fiscal quarters, if and when paid.

(7)	Quarterly distributions are recorded in each fiscal quarter, if and when paid.

(8)

On June 16, 2022, the Bank issued $1,500 million 7.023% Fixed Rate Resetting Limited Recourse Capital Notes Series 3 (NVCC) (“LRCN Series 3”). In connection with the issuance of LRCN Series 3, the Bank issued $1,500 million of Fixed Rate Resetting Perpetual Subordinated Additional Tier 1 Capital Notes (NVCC) (“the Series 3 AT1 Notes”) to a consolidated trust to be held as trust assets in connection with the LRCN structure. For more details, refer to Note 12.

(9)	These securities have exchange features. Refer to Table 30 in the Bank’s 2021 Annual Report for further details.

For further details on outstanding securities of the Bank, including convertibility features, refer to Notes 21, 24 and 26 of the Bank’s consolidated financial statements in the 2021 Annual Report.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Glossary

Allowance for Credit Losses:

An allowance set aside which, in management’s opinion, is adequate to absorb credit-related losses on all financial assets and

off-balance

sheet exposures subject to impairment assessment. It includes allowances for performing financial assets and impaired financial assets.

Allowance against Impaired Loans as a % of Gross Impaired Loans:

The ratio of allowance against impaired loans to gross impaired loans.

Assets Under Administration (AUA):

Assets administered by the Bank which are beneficially owned by clients and therefore not reported on the Bank’s Consolidated Statement of Financial Position. Services provided for AUA are of an administrative nature, such as trusteeship, custodial, safekeeping, income collection and distribution, securities trade settlements, customer reporting, and other similar services.

Assets Under Management (AUM):

Assets managed by the Bank on a discretionary basis and in respect of which the Bank earns investment management fees. AUM are beneficially owned by clients and are therefore not reported on the Bank’s Consolidated Statement of Financial Position. Some AUM are also administered assets and are therefore included in assets under administration.

Bankers’ Acceptances (BAs):

Negotiable, short-term debt securities, guaranteed for a fee by the issuer’s bank.

Basis Point:

A unit of measure defined as

one-hundredth

of one per cent.

Book Value per Common Share:

Common shareholders equity divided by the number of outstanding common shares at the end of the period.

Common Equity Tier 1 (CET1), Tier 1 and Total Capital Ratios:

Under Basel III, there are three primary regulatory capital ratios used to assess capital adequacy, CET1, Tier 1 and Total capital ratios, which are determined by dividing those capital components by their respective risk-weighted assets.

CET1 consists primarily of common shareholders’ equity net of regulatory adjustments. These regulatory adjustments include goodwill, intangible assets net of deferred tax liabilities, deferred tax assets that rely on future profitability, defined-benefit pension fund net assets, shortfall of credit provision to expected losses and significant investments in common equity of other financial institutions.

Tier 1 includes CET1 and additional Tier 1 capital which consists primarily of qualifying

non-cumulative

preferred shares,

non-cumulative

subordinated additional Tier 1 capital notes and limited recourse capital notes. Tier 2 capital consists mainly of qualifying subordinated debentures and the eligible allowances for credit losses.

Total capital is comprised of CET1 capital, Tier 1 capital and Tier 2 capital.

Covered Bonds:

Debt obligations of the Bank for which the payment of all amounts of interest and principal are unconditionally and irrevocably guaranteed by a limited partnership and secured by a pledge of the covered bond portfolio. The assets in the covered bond portfolio held by the limited partnership consist of first lien Canadian uninsured residential mortgages or first lien Canadian residential mortgages insured under CMHC Mortgage Insurance, respectively, and their related security interest.

Derivative Products:

Financial contracts whose value is derived from an underlying price, interest rate, exchange rate or price index. Forwards, options and swaps are all derivative instruments.

Dividend Yield:

Dividends per common share divided by the average of the high and low share price in the relevant period.

Effective Tax Rate:

The effective tax rate is the overall tax rate paid by the Bank on its earned income. The effective tax rate is calculated by dividing the Bank’s income tax expenses by the income before taxes.

Fair Value:

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal, or in its absence, the most advantageous market to which the Bank has access at the measurement date.

Foreign Exchange Contracts:

Commitments to buy or sell a specified amount of foreign currency on a set date and at a predetermined rate of exchange.

Forward Rate Agreement (FRA):

A contract between two parties, whereby a designated interest rate, applied to a notional principal amount, is locked in for a specified period of time. The difference between the contracted rate and prevailing market rate is paid in cash on the settlement date. These agreements are used to protect against, or take advantage of, future interest rate movements.

Futures:

Commitments to buy or sell designated amounts of commodities, securities or currencies on a specified date at a predetermined price. Futures are traded on recognized exchanges. Gains and losses on these contracts are settled daily, based on closing market prices.

Gross Impaired Loans as a % of Loans and Acceptances:

The ratio of gross impaired loans, debt investments and

off-balance

sheet exposures expressed as a percentage of loans and acceptances.

Hedging:

Protecting against price, interest rate or foreign exchange exposures by taking positions that are expected to react to market conditions in an offsetting manner.

Impaired Loans:

Loans on which the Bank no longer has reasonable assurance as to the timely collection of interest and principal, or where a contractual payment is past due for a prescribed period or the customer is declared to be bankrupt. Excludes Federal Deposit Insurance Corporation (FDIC) guaranteed loans.

Leverage Ratio:

The ratio of Basel III Tier 1 capital to a leverage exposure measure which includes

on-balance

sheet assets and

off-balance

sheet commitments, derivatives and securities financing transactions, as defined within the OSFI Leverage Requirements Guideline.

Liquidity Coverage Ratio (LCR):

The ratio of high quality liquid assets to stressed net cash outflows over a 30 calendar day time horizon, as defined within the OSFI Liquidity Adequacy Requirements Guideline.

Marked-To-Market:

The valuation of certain financial instruments at fair value as of the Consolidated Statement of Financial Position date.

Market Value to Book Value Multiple:

This financial valuation metric is calculated by dividing the current closing share price of the period by the book value per common share.

Net Impaired Loans as a % of Loans and Acceptances:

The ratio of net impaired loans, debt investments and

off-balance

sheet exposures expressed as a percentage of loans and acceptances.

Net Interest Margin:

Net interest margin is calculated as core net interest income for the business line divided by average core earning assets.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Net Stable Funding Ratio (NSFR):

The ratio of available stable funding to required stable funding, as defined within the OSFI Liquidity Adequacy Requirements Guideline.

Net Write-offs as a % of Average Net Loans and Acceptances:

The ratio of net write-offs expressed as a percentage of average net loans and acceptances.

Notional Principal Amounts:

The contract or principal amounts used to determine payments for certain

off-balance

sheet instruments and derivatives, such as FRAs, interest rate swaps and cross-currency swaps. The amounts are termed “notional” because they are not usually exchanged themselves, serving only as the basis for calculating amounts that do change hands.

Off-Balance

Sheet Instruments:

These are indirect credit commitments, including undrawn commitments to extend credit and derivative instruments, which are not recorded on the Bank’s balance sheet under IFRS.

Operating Leverage:

This financial metric measures the rate of growth in total revenue less the rate of growth in operating expenses.

Options:

Contracts between buyer and seller giving the buyer of the option the right, but not the obligation, to buy (call) or sell (put) a specified commodity, financial instrument or currency at a set price or rate on or before a specified future date.

OSFI:

The Office of the Superintendent of Financial Institutions Canada, the regulator of Canadian banks.

Other TLAC Instruments:

Prescribed shares and liabilities that are subject to conversion into common shares pursuant to the CDIC Act and which meet all of the eligibility criteria set out in the Total Loss Absorbing Capacity (TLAC) Guidelines.

Pacific Alliance:

Comprises the countries of Chile, Colombia, Mexico and Peru.

Price to Earnings Multiple (Trailing 4 Quarters):

Closing share price at period end divided by cumulative basic earnings per common share (EPS) of the past 4 quarters.

Productivity Ratio:

Management uses the productivity ratio as a measure of the Bank’s efficiency. This ratio represents operating expenses as a percentage of total revenue.

Provision for Credit Losses (PCL) as a % of Average Net Loans and Acceptances:

The ratio of PCL on loans, acceptances and

off-balance

sheet exposures expressed as a percentage of average net loans and acceptances.

Provision for Credit Losses (PCL) on Impaired Loans as a % of Average Net Loans and Acceptances:

PCL on impaired loans ratio under IFRS 9 is calculated using PCL on impaired loans, acceptances and

off-balance

sheet exposures as a percentage of average net loans and acceptances.

Repos:

Repos is short for “obligations related to securities sold under repurchase agreements” – a short-term transaction where the Bank sells assets, normally government bonds, to a client and simultaneously agrees to repurchase them on a specified date and at a specified price. It is a form of short-term funding.

Return on Assets (ROA):

Net income expressed as a percentage of total average assets.

Return on Equity (ROE):

Net income attributable to common shareholders, expressed as a percentage of average common shareholders’ equity. The Bank attributes capital to its business lines on a basis that approximates 10.5% of Basel III common equity capital requirements which includes credit, market and operational risks and leverage inherent in each business segment. Return on equity for the business segments is calculated as a ratio of net income attributable to common shareholders of the business segment and the capital attributed.

Return on Tangible Common Equity (ROTCE):

Return on Tangible Common Equity is calculated by dividing the net income attributable to common shareholders, adjusted for the amortization of intangibles (excluding software), by average tangible common equity. Tangible common equity is defined as common shareholders’ equity adjusted for goodwill and acquisition-related intangible assets (excluding software), net of deferred taxes.

Reverse Repos:

Reverse repos is short for “securities purchased under resale agreements” – a short-term transaction where the Bank purchases assets, normally government bonds, from a client and simultaneously agrees to resell them on a specified date and at a specified price. It is a form of short-term collateralized lending.

Risk-Weighted Assets:

Comprised of three broad categories including credit risk, market risk and operational risk, which are computed under the Basel III Framework in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018). Risk-weighted assets for credit risk are calculated using modelled parameters, formulas and risk-weight requirements as specified by the Basel III Framework. In addition, the Bank uses both internal models and standardized approaches to calculate market risk capital and standardized approaches for operational risk capital which are converted to risk-weighted assets.

Securitization:

The process by which financial assets (typically loans) are transferred to a trust, which normally issues a series of different classes of asset-backed securities to investors to fund the purchase of loans.

Structured Entities:

A structured entity is defined as an entity created to accomplish a narrow and well-defined objective. A structured entity may take the form of a corporation, trust, partnership or unincorporated entity. Structured entities are often created with legal arrangements that impose strict and sometimes permanent limits on the decision-making powers of their governing board, trustee or management over the operations of the entity.

Standby Letters of Credit and Letters of Guarantee:

Written undertakings by the Bank, at the request of the customer, to provide assurance of payment to a third-party regarding the customer’s obligations and liabilities to that third-party.

Structured Credit Instruments:

A wide range of financial products which includes Collateralized Debt Obligations, Collateralized Loan Obligations, Structured Investment Vehicles, and Asset-Backed Securities. These instruments represent investments in pools of credit-related assets, whose values are primarily dependent on the performance of the underlying pools.

Swaps:

Interest rate swaps are agreements to exchange streams of interest payments, typically one at a floating rate, the other at a fixed rate, over a specified period of time, based on notional principal amounts. Cross-currency swaps are agreements to exchange payments in different currencies over predetermined periods of time.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Taxable Equivalent Basis (TEB):

The Bank analyzes net interest income,

non-interest

income, and total revenue on a taxable equivalent basis (TEB). This methodology grosses up

tax-exempt

income earned on certain securities reported in either net interest income or

non-interest

income arising from both taxable and

non-taxable

sources and facilitates a consistent basis of measurement. While other banks also use TEB, their methodology may not be comparable to the Bank’s methodology. For purposes of segmented reporting, a segment’s revenue and provision for income taxes are grossed up by the taxable equivalent amount. The elimination of the TEB gross up is recorded in the Other segment.

Total Annual Shareholder Return (TSR):

Total annual shareholder return is calculated as the overall appreciation in share price, plus any dividends paid during the year; this sum is then divided by the share price at the beginning of the year to arrive at the TSR. Total annual shareholder return assumes reinvestment of quarterly dividends.

Total Loss Absorbing Capacity (TLAC):

The aggregate of NVCC Tier 1 capital, NVCC Tier 2 capital, and other TLAC instruments that are subject to conversion in whole or in part into common shares under the CDIC Act and meet all of the eligibility criteria under the OSFI guideline – Total Loss Absorbing Capacity (September 2018).

Value At Risk (VaR):

An estimate of the potential loss that might result from holding a position for a specified period of time, with a given level of statistical confidence.

Yield Curve:

A graph showing the term structure of interest rates, plotting the yields of similar quality bonds by term to maturity.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Basel III Glossary

Credit Risk Parameters

Exposure at Default (EAD):

Generally represents the expected gross exposure – outstanding amount for

on-balance

sheet exposure and loan equivalent amount for

off-balance

sheet exposure at default.

Probability of Default (PD):

Measures the likelihood that a borrower will default within a

one-year

time horizon, expressed as a percentage.

Loss Given Default (LGD):

Measures the severity of loss on a facility in the event of a borrower’s default, expressed as a percentage of exposure at default.

Exposure Types

Non-retail

Corporate:

Defined as a debt obligation of a corporation, partnership, or proprietorship.

Bank:

Defined as a debt obligation of a bank or bank equivalent (including certain public sector entities (PSEs) treated as bank equivalent exposures).

Sovereign:

Defined as a debt obligation of a sovereign, central bank, certain multi development banks and certain PSEs treated as sovereign.

Securitization:

On-balance

sheet investments in asset-backed securities, mortgage-backed securities, collateralized loan obligations and collateralized debt obligations,

off-balance

sheet liquidity lines to the Bank’s own sponsored and third-party conduits and credit enhancements.

Retail

Residential Mortgage:

Loans to individuals against residential property (four units or less).

Secured Lines Of Credit:

Revolving personal lines of credit secured by residential real estate.

Qualifying Revolving Retail Exposures:

Credit cards and unsecured lines of credit for individuals.

Other Retail:

All other personal loans.

Exposure

Sub-types

Drawn:

Outstanding amounts for loans, leases, acceptances, deposits with banks and FVOCI debt securities.

Undrawn:

Unutilized portion of authorized committed credit lines.

Other Exposures

Repo-Style Transactions:

Reverse repurchase agreements (reverse repos) and repurchase agreements (repos), securities lending and borrowing.

OTC Derivatives:

Over-the-counter

derivatives contracts refers to financial instruments which are traded through a dealer network rather than through an exchange.

Other

Off-balance

Sheet:

Direct credit substitutes, such as standby letters of credit and guarantees, trade letters of credit, and performance letters of credit and guarantees.

Exchange-Traded Derivative Contracts:

Exchange-traded derivative contracts are derivative contracts (e.g., futures contracts and options) that are transacted on an organized futures exchange. These include futures contracts (both long and short positions), purchased options and written options.

Qualifying Central Counterparty (QCCP):

A licensed central counterparty is considered “qualifying” when it is compliant with the International Organization of Securities Commissions (IOSCO) standards and is able to assist clearing member banks in properly capitalizing for CCP exposures.

Asset Value Correlation Multiplier (AVC):

Basel III has increased the risk-weights on exposures to certain Financial Institutions (FIs) relative to the

non-financial

corporate sector by introducing an AVC. The correlation factor in the risk-weight formula is multiplied by this AVC factor of 1.25 for all exposures to regulated FIs whose total assets are greater than or equal to US $100 billion and all exposures to unregulated FIs.

Specific

Wrong-Way

Risk (WWR):

Specific

Wrong-Way

Risk arises when the exposure to a particular counterparty is positively correlated with the probability of default of the counterparty due to the nature of the transactions with the counterparty.

Basel II Regulatory Capital Floor:

Since the introduction of Basel II in 2008, OSFI has prescribed a minimum regulatory capital floor for institutions that use the advanced internal ratings-based approach for credit risk. Effective Q2 2018, the Basel II capital floor

add-on

is determined by comparing a capital requirement calculated by reference to the Basel II standardized approach for credit risk. Revised Basel II capital floor requirements also include risk-weighted assets for market risk and CVA. A shortfall in the Basel III capital requirement as compared with the Basel II floor is added to RWA.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


Condensed Interim Consolidated Financial Statements (unaudited) TABLE OF CONTENTS



56	Condensed Interim Consolidated Financial Statements

61	Notes to the Condensed Interim Consolidated Financial Statements

	61	Note 1 - Reporting entity

	61	Note 2 - Basis of preparation

	61	Note 3 - Significant accounting policies

	62	Note 4 - Interest rate benchmark reform

	63	Note 5 - Future accounting developments

	63	Note 6 - Cash and deposits with financial institutions

	63	Note 7 - Investment securities

	65	Note 8 - Loans, impaired loans and allowance for credit losses

	74	Note 9 - Derecognition of financial assets



		75		Note 10 - Investments in associates

		76		Note 11 - Deposits

		76		Note 12 - Capital and financing transactions

		77		Note 13 - Capital management

		77		Note 14 - Share-based payments

		78		Note 15 - Employee benefits

		78		Note 16 - Operating segments

		80		Note 17 - Interest income and expense

		81		Note 18 - Earnings per share

		81		Note 19 - Financial instruments

		88		Note 20 - Corporate income taxes

		89		Note 21 - Acquisition and divestiture

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position


		As at
(Unaudited) ($ millions)	Note	July 31 2022			April 30 2022			October 31 2021
Assets
Cash and deposits with financial institutions	6	$	67,715		$	85,910		$	86,323
Precious metals			837			1,056			755
Trading assets
Securities			108,538			123,413			137,148
Loans			8,295			8,483			8,113
Other			1,772			1,748			1,051
			118,605			133,644			146,312
Securities purchased under resale agreements and securities borrowed			155,217			148,706			127,739
Derivative financial instruments			47,139			54,608			42,302
Investment securities	7		108,222			100,487			75,199
Loans
Residential mortgages	8		343,965			337,714			319,678
Personal loans	8		96,561			94,437			91,540
Credit cards	8		13,871			13,622			12,450
Business and government	8		264,128			249,223			218,944
			718,525			694,996			642,612
Allowance for credit losses	8(c)		5,147			5,294			5,626
			713,378			689,702			636,986
Other
Customers’ liability under acceptances, net of allowance			19,817			19,043			20,404
Property and equipment			5,529			5,571			5,621
Investments in associates	10		2,733			2,760			2,604
Goodwill and other intangible assets			16,580			16,712			16,604
Deferred tax assets			905			1,137			2,051
Other assets			35,425			29,170			21,944
			80,989			74,393			69,228
Total assets		$	1,292,102		$	1,288,506		$	1,184,844
Liabilities
Deposits
Personal	11	$	259,503		$	252,847		$	243,551
Business and government	11		566,966			569,268			511,348
Financial institutions	11		53,113			54,439			42,360
			879,582			876,554			797,259
Financial instruments designated at fair value through profit or loss	1 9 (b)		22,876			21,927			22,493
Other
Acceptances			19,844			19,070			20,441
Obligations related to securities sold short			44,220			44,620			40,954
Derivative financial instruments			56,880			57,123			42,203
Obligations related to securities sold under repurchase agreements and securities lent			128,145			131,978			123,469
Subordinated debentures			8,413			8,447			6,334
Other liabilities			58,557			56,820			58,799
			316,059			318,058			292,200
Total liabilities			1,218,517			1,216,539			1,111,952
Equity
Common equity
Common shares	12		18,728			18,799			18,507
Retained earnings			53,151			52,209			51,354
Accumulated other comprehensive income (loss)			(6,684	)		(6,034	)		(5,333	)
Other reserves			(152	)		(141	)		222
Total common equity			65,043			64,833			64,750
Preferred shares and other equity instruments	12		7,052			5,552			6,052
Total equity attributable to equity holders of the Bank			72,095			70,385			70,802
Non-controlling interests in subsidiaries			1,490			1,582			2,090
Total equity			73,585			71,967			72,892
Total liabilities and equity		$	1,292,102		$	1,288,506		$	1,184,844

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Income


		For the three months ended						For the nine months ended
(Unaudited) ($ millions)	Note		July 31 2022		April 30 2022		July 31 2021		July 31 2022		July 31 2021
Revenue
Interest income (1)
Loans		$	7,707	$	6,418	$	5,648	$	20,119	$	17,408
Securities			802		500		354		1,660		1,124
Securities purchased under resale agreements and securities borrowed			132		71		49		250		133
Deposits with financial institutions			244		103		50		411		135
	17		8,885		7,092		6,101		22,440		18,800
Interest expense
Deposits			3,475		2,024		1,540		7,072		4,952
Subordinated debentures			77		55		43		177		134
Other			657		540		301		1,698		970
	17		4,209		2,619		1,884		8,947		6,056
Net interest income			4,676		4,473		4,217		13,493		12,744
Non-interest income
Card revenues			187		207		177		584		562
Banking services fees			447		430		400		1,314		1,184
Credit fees			398		397		382		1,196		1,117
Mutual funds			538		575		580		1,741		1,789
Brokerage fees			276		287		263		861		774
Investment management and trust			247		254		252		757		743
Underwriting and advisory fees			98		137		198		407		580
Non-trading foreign exchange			209		216		194		650		608
Trading revenues			311		453		478		1,373		1,624
Net gain on sale of investment securities			–		1		80		3		336
Net income from investments in associated corporations			44		84		73		219		243
Insurance underwriting income, net of claims			113		105		83		319		296
Other fees and commissions			143		145		171		444		524
Other			112		178		209		429		441
			3,123		3,469		3,540		10,297		10,821
Total revenue			7,799		7,942		7,757		23,790		23,565
Provision for credit losses			412		219		380		853		1,640
			7,387		7,723		7,377		22,937		21,925
Non-interest expenses
Salaries and employee benefits			2,194		2,175		2,131		6,649		6,487
Premises and technology			612		590		597		1,788		1,753
Depreciation and amortization			381		381		373		1,137		1,128
Communications			88		93		86		271		276
Advertising and business development			123		108		93		340		278
Professional			200		195		211		587		547
Business and capital taxes			135		132		122		407		391
Other			458		485		484		1,394		1,487
			4,191		4,159		4,097		12,573		12,347
Income before taxes			3,196		3,564		3,280		10,364		9,578
Income tax expense	20		602		817		738		2,283		2,182
Net income		$	2,594	$	2,747	$	2,542	$	8,081	$	7,396
Net income attributable to non-controlling interests in subsidiaries			54		78		81		220		261
Net income attributable to equity holders of the Bank		$	2,540	$	2,669	$	2,461	$	7,861	$	7,135
Preferred shareholders and other equity instrument holders			36		74		35		154		155
Common shareholders		$	2,504	$	2,595	$	2,426	$	7,707	$	6,980
Earnings per common share (in dollars)
Basic	18	$	2.10	$	2.16	$	2.00	$	6.41	$	5.75
Diluted	18		2.09		2.16		1.99		6.39		5.73
Dividends paid per common share (in dollars)			1.03		1.00		0.90		3.03		2.70

(1)

Includes interest income on financial assets measured at amortized cost and FVOCI, calculated using the effective interest method, of $8,624 for the three months ended July 31, 2022 (April 30, 2022 – $6,915; July 31, 2021 – $5,989) and for the nine months ended July 31, 2022 – $21,870 (July 31, 2021 – $18,467).

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income


	For the three months ended									For the nine months ended
(Unaudited) ($ millions)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			July 31 2021

Net income	$	2,594		$	2,747		$	2,542		$	8,081		$	7,396
Other comprehensive income (loss)
Items that will be reclassified subsequently to net income
Net change in unrealized foreign currency translation gains (losses):
Net unrealized foreign currency translation gains (losses)		(977	)		74			(94	)		597			(3,456	)
Net gains (losses) on hedges of net investments in foreign operations		234			(190	)		(56	)		(515	)		1,075
Income tax expense (benefit):
Net unrealized foreign currency translation gains (losses)		(7	)		(4	)		2			1			(22	)
Net gains (losses) on hedges of net investments in foreign operations		62			(50	)		(15	)		(135	)		282
		(798	)		(62	)		(137	)		216			(2,641	)
Net change in fair value due to change in debt instruments measured at fair value through other comprehensive income:
Net gains (losses) in fair value		242			(1,794	)		(18	)		(1,873	)		(694	)
Reclassification of net (gains) losses to net income		(321	)		1,154			(128	)		950			228
Income tax expense (benefit):
Net gains (losses) in fair value		56			(465	)		11			(489	)		(157	)
Reclassification of net (gains) losses to net income		(109	)		320			(33	)		246			52
		(26	)		(495	)		(124	)		(680	)		(361	)
Net change in gains (losses) on derivative instruments designated as cash flow hedges:
Net gains (losses) on derivative instruments designated as cash flow hedges		(1,700	)		(5,692	)		230			(8,368	)		487
Reclassification of net (gains) losses to net income		1,620			2,528			72			4,817			(654	)
Income tax expense (benefit):
Net gains (losses) on derivative instruments designated as cash flow hedges		(482	)		(1,532	)		(10	)		(2,265	)		47
Reclassification of net (gains) losses to net income		452			699			81			1,322			(86	)
		(50	)		(2,331	)		231			(2,608	)		(128	)
Other comprehensive income (loss) from investments in associates		17			17			4			38			31
Items that will not be reclassified subsequently to net income
Net change in remeasurement of employee benefit plan asset and liability:
Actuarial gains (losses) on employee benefit plans		(231	)		1,055			(111	)		972			1,417
Income tax expense (benefit)		(70	)		279			(32	)		278			374
		(161	)		776			(79	)		694			1,043
Net change in fair value due to change in equity instruments designated at fair value through other comprehensive income:
Net gains (losses) in fair value		(175	)		35			84			54			436
Income tax expense (benefit)		(45	)		(9	)		17			14			99
		(130	)		44			67			40			337
Net change in fair value due to change in own credit risk on financial liabilities designated under the fair value option:
Change in fair value due to change in own credit risk on financial liabilities designated under the fair value option		567			787			72			1,585			(246	)
Income tax expense (benefit)		149			206			19			416			(64	)
		418			581			53			1,169			(182	)
Other comprehensive income (loss) from investments in associates		–			1			–			2			5
Other comprehensive income (loss)		(730	)		(1,469	)		15			(1,129	)		(1,896	)
Comprehensive income	$	1,864		$	1,278		$	2,557		$	6,952		$	5,500
Comprehensive income (loss) attributable to non-controlling interests		(32	)		56			29			173			152
Comprehensive income attributable to equity holders of the Bank		1,896			1,222			2,528			6,779			5,348
Preferred shareholders and other equity instrument holders		36			74			35			154			155
Common shareholders	$	1,860		$	1,148		$	2,493		$	6,625		$	5,193

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Changes in Equity


							Accumulated other comprehensive income (loss)
(Unaudited) ($ millions)	Common shares			Retained earnings (1)			Foreign currency translation			Debt instruments FVOCI			Equity instruments FVOCI			Cash flow hedges			Othe r (2)			Other reserves			Total common equity			Preferred shares and other equity instruments			Total attributable to equity holders			Non- controlling interests in subsidiaries			Total
Balance as at October 31, 2021	$	18,507		$	51,354		$	(4,709	)	$	(270	)	$	291		$	(214	)	$	(431	)	$	222		$	64,750		$	6,052		$	70,802		$	2,090		$	72,892
Net income		–			7,707			–			–			–			–			–			–			7,707			154			7,861			220			8,081
Other comprehensive income (loss)		–			–			193			(680	)		69			(2,590	)		1,926			–			(1,082	)		–			(1,082	)		(47	)		(1,129	)
Total comprehensive income	$	–		$	7,707		$	193		$	(680	)	$	69		$	(2,590	)	$	1,926		$	–		$	6,625		$	154		$	6,779		$	173		$	6,952
Shares issued		701			–			–			–			–			–			–			(17	)		684			1,500			2,184			–			2,184
Shares repurchased/redeemed		(480	)		(2,265	)		–			–			–			–			–			–			(2,745	)		(500	)		(3,245	)		–			(3,245	)
Dividends and distributions paid to equity holders		–			(3,631	)		–			–			–			–			–			–			(3,631	)		(154	)		(3,785	)		(89	)		(3,874	)
Share-based payments (3)		–			–			–			–			–			–			–			9			9			–			9			–			9
Other		–			(14	)		(180	)		–			(40	)		(49	)		–			(366	) (4)		(649	)		–			(649	)		(684	) (4)		(1,333	)
Balance as at July 31, 2022	$	18,728		$	53,151		$	(4,696	)	$	(950	)	$	320		$	(2,853	)	$	1,495		$	(152	)	$	65,043		$	7,052		$	72,095		$	1,490		$	73,585

Balance as at October 31, 2020	$	18,239		$	46,345		$	(1,328	)	$	330		$	(163	)	$	639		$	(1,603	)	$	360		$	62,819		$	5,308		$	68,127		$	2,376		$	70,503
Net income		–			6,980			–			–			–			–			–			–			6,980			155			7,135			261			7,396
Other comprehensive income (loss)		–			–			(2,519	)		(361	)		366			(164	)		891			–			(1,787	)		–			(1,787	)		(109	)		(1,896	)
Total comprehensive income	$	–		$	6,980		$	(2,519	)	$	(361	)	$	366		$	(164	)	$	891		$	–		$	5,193		$	155		$	5,348		$	152		$	5,500
Shares issued		254			–			–			–			–			–			–			(23	)		231			1,250			1,481			–			1,481
Shares repurchased/redeemed		–			–			–			–			–			–			–			–			–			(1,259	)		(1,259	)		–			(1,259	)
Dividends and distributions paid to equity holders		–			(3,276	)		–			–			–			–			–			–			(3,276	)		(155	)		(3,431	)		(98	)		(3,529	)
Share-based payments (3)		–			–			–			–			–			–			–			6			6			–			6			–			6
Other		–			(5	)		(59	)		–			(6	)		(9	)		–			(174	) (4)		(253	)		–			(253	)		(288	) (4)		(541	)
Balance as at July 31, 2021	$	18,493		$	50,044		$	(3,906	)	$	(31	)	$	197		$	466		$	(712	)	$	169		$	64,720		$	5,299		$	70,019		$	2,142		$	72,161

(1)	Includes undistributed retained earnings of $63 (July 31, 2021 – $59) related to a foreign associated corporation, which is subject to local regulatory restriction.

(2)	Includes Share from associates, Employee benefits and Own credit risk.

(3)	Represents amounts on account of share-based payments (refer to Note 14).

(4)	Includes changes to non-controlling interests arising from business combinations and related transactions (refer to Note 21 for significant transactions).

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows


(Unaudited) ($ millions)	For the three months ended						For the nine months ended
Sources (uses) of cash flows	July 31 2022			July 31 2021			July 31 2022			July 31 2021
Cash flows from operating activities
Net income	$	2,594		$	2,542		$	8,081		$	7,396
Adjustment for:
Net interest income		(4,676	)		(4,217	)		(13,493	)		(12,744	)
Depreciation and amortization		381			373			1,137			1,128
Provision for credit losses		412			380			853			1,640
Equity-settled share-based payment expense		1			1			9			6
Net gain on sale of investment securities		–			(80	)		(3	)		(336	)
Net (gain)/loss on divestitures		–			–			–			15
Net income from investments in associated corporations		(44	)		(73	)		(219	)		(243	)
Income tax expense		602			738			2,283			2,182
Changes in operating assets and liabilities:
Trading assets		14,409			4,453			29,007			(27,387	)
Securities purchased under resale agreements and securities borrowed		(8,060	)		3,508			(27,574	)		(14,122	)
Loans		(28,266	)		(20,304	)		(77,358	)		(39,848	)
Deposits		9,445			35,925			82,080			68,099
Obligations related to securities sold short		(155	)		1,217			3,408			12,094
Obligations related to securities sold under repurchase agreements and securities lent		(2,497	)		(4,531	)		5,058			(19,987	)
Net derivative financial instruments		5,692			(2,216	)		1,682			743
Other, net		(4,494	)		(1,339	)		(7,280	)		(8,393	)
Dividends received		284			230			857			685
Interest received		8,284			6,205			21,494			19,297
Interest paid		(3,444	)		(2,058	)		(7,951	)		(6,837	)
Income tax paid		(389	)		(688	)		(2,761	)		(2,192	)
Net cash from/(used in) operating activities		(9,921	)		20,066			19,310			(18,804	)
Cash flows from investing activities
Interest-bearing deposits with financial institutions		16,618			(22,696	)		19,821			(4,783	)
Purchase of investment securities		(23,386	)		(16,284	)		(81,143	)		(50,990	)
Proceeds from sale and maturity of investment securities		14,985			20,147			46,642			77,213
Acquisition/divestiture of subsidiaries, associated corporations or business units, net of cash acquired		(62	)		(481	)		(714	)		(667	)
Property and equipment, net of disposals		(196	)		(89	)		(394	)		(271	)
Other, net		(169	)		(219	)		(549	)		(339	)
Net cash from/(used in) investing activities		7,790			(19,622	)		(16,337	)		20,163
Cash flows from financing activities
Proceeds from issue of subordinated debentures		–			–			3,356			–
Redemption of subordinated debentures		(2	)		–			(1,252	)		(750	)
Redemption of preferred shares		–			(500	)		(500	)		(1,259	)
Proceeds from preferred shares and other equity instruments issued		1,500			1,250			1,500			1,250
Proceeds from common shares issued		7			116			132			254
Common shares purchased for cancellation		(409	)		–			(2,745	)		–
Cash dividends and distributions paid		(1,265	)		(1,128	)		(3,785	)		(3,431	)
Distributions to non-controlling interests		(13	)		(13	)		(89	)		(98	)
Payment of lease liabilities		(83	)		(70	)		(253	)		(242	)
Other, net		1,317			481			387			794
Net cash from/(used in) financing activities		1,052			136			(3,249	)		(3,482	)
Effect of exchange rate changes on cash and cash equivalents		(151	)		33			(4	)		(447	)
Net change in cash and cash equivalents		(1,230	)		613			(280	)		(2,570	)
Cash and cash equivalents at beginning of period (1)		10,643			7,940			9,693			11,123
Cash and cash equivalents at end of period (1)	$	9,413		$	8,553		$	9,413		$	8,553

(1)	Represents cash and non-interest-bearing deposits with financial institutions (refer to Note 6).

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

1.	Reporting entity

The Bank of Nova Scotia (the Bank) is a chartered bank under the Bank Act (Canada) (the Bank Act). The Bank is a Schedule I bank under the Bank Act and is regulated by the Office of the Superintendent of Financial Institutions (OSFI). The Bank is a global financial services provider offering a diverse range of products and services, including personal, commercial, corporate and investment banking. The head office of the Bank is located at 1709 Hollis Street, Halifax, Nova Scotia, Canada and its executive offices are at Scotia Plaza, 44 King Street West, Toronto, Canada. The common shares of the Bank are listed on the Toronto Stock Exchange and the New York Stock Exchange.

2.	Basis of preparation

Statement of compliance

These condensed interim consolidated financial statements of the Bank have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and accounting requirements of OSFI in accordance with Section 308 of the Bank Act. Section 308 states that except as otherwise specified by OSFI, the financial statements are to be prepared in accordance with IFRS.

These condensed interim consolidated financial statements were prepared in accordance with International Accounting Standard 34,

Interim Financial Reporting

(IAS 34) and do not include all of the information required for full annual financial statements. These condensed interim consolidated financial statements should be read in conjunction with the Bank’s annual audited consolidated financial statements for the year ended October 31, 2021.

The condensed interim consolidated financial statements for the quarter ended July 31, 2022 have been approved by the Board of Directors for issue on August 23, 2022.

Basis of measurement

The condensed interim consolidated financial statements have been prepared on the historical cost basis except for the following material items that are measured at fair value in the Consolidated Statement of Financial Position:

•

Financial assets and liabilities measured at fair value through profit or loss

•

Financial assets and liabilities designated at fair value through profit or loss

•

Derivative financial instruments

•

Equity instruments designated at fair value through other comprehensive income

•

Debt instruments measured at fair value through other comprehensive income

Functional and presentation currency

These condensed interim consolidated financial statements are presented in Canadian dollars, which is the Bank’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest million unless otherwise stated.

Use of estimates and judgments

The preparation of financial statements, in conformity with IFRS, requires management to make estimates, apply judgments and make assumptions that affect the reported amount of assets and liabilities at the date of the condensed interim consolidated financial statements, and income and expenses during the reporting period. Estimates made by management are based on historical experience and other assumptions that are believed to be reasonable. Key areas where management has made difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain, include those relating to the allowance for credit losses, the fair value of financial instruments (including derivatives), corporate income taxes, employee benefits, the fair value of all identifiable assets and liabilities as a result of business combinations, impairment of

non-financial

assets and derecognition of financial assets and liabilities. While management makes its best estimates and assumptions, actual results could differ from these estimates and assumptions.

3.	Significant accounting policies

These condensed interim consolidated financial statements should be read in conjunction with the Bank’s audited consolidated financial statements for the year ended October 31, 2021.

The significant accounting policies used in the preparation of the condensed interim consolidated financial statements are consistent with those used in the Bank’s audited consolidated financial statements for the year ended October 31, 2021 as described in Note 3 of the Bank’s 2021 annual consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4.	Interest rate benchmark reform

Overview

Major interest rate benchmark reviews have been undertaken globally to either reform or phase out certain interbank offered rates (IBORs), including the Canadian Dollar Offered Rate (CDOR). As alternatives to IBORs, regulators have recommended markets begin adopting alternative risk-free rates (RFRs). Further to previous announcements by various regulators, the publication of GBP, JPY, CHF, and EUR LIBORs ceased after December 31, 2021, while most of the USD LIBOR tenors (i.e., overnight, one-month, three-month, six-month and 12-month tenors) continue to be published until June 30, 2023.

On May 16, 2022, Refinitiv Benchmark Services (UK) Limited (RBSL), the administrator of the Canadian Dollar Offered Rate (CDOR), announced the cessation of the publication of one-month, two-month, and three-month CDOR tenors after June 28, 2024, and this was authorized by the Ontario Securities Commission and the Autorité des marchés financiers. This announcement provides certainty regarding the future of one-month, two-month, and three-month CDOR tenors and serves to set the fixed spread adjustment that will be used in industry standard fallback provisions for both derivative and cash products. The Canadian Alternative Reference Rate (CARR) committee published a detailed transition roadmap with milestones to guide market participants on the transition away from CDOR across all product types. OSFI has also set out expectations for FRFIs, with transactions linked to CDOR, to transition to new reference rates prior to the respective cessation dates.

IBOR reform and the associated move from IBORs to RFRs carry systemic and market risks. These risks, such as increased volatility, lack of liquidity and uneven fallback practices, may impact market participants. In addition to these inherent risks, the Bank is exposed to operational risk arising from the renegotiation of contracts, technology readiness to issue and trade products referencing RFRs, and conduct with clients and counterparties.

The Bank has established an enterprise-wide program (the “Transition Program”) to support the Bank’s transition away from IBORs to RFRs. The focus of the Transition Program is to address risks by identifying the exposures to various IBORs, evaluating the existing contract language in the event when the IBORs cease to be published or available, developing the capabilities to issue and trade products referencing RFRs and communicating with clients and counterparties regarding industry developments pertaining to IBOR reform. The Transition Program provides quarterly updates to the Bank’s Regulatory Oversight Committee and annually to the Risk Committee of the Board of Directors regarding the status of transition plans for migrating the Bank’s IBOR-linked products and upgrading systems and processes. The details regarding the Bank’s Transition Program for IBOR Reform are available in Note 4 of the 2021 annual consolidated financial statements. The Transition Program continues its efforts on the transition of products referencing USD LIBOR and ensuring the Bank is not building on its exposure to USD LIBOR, except as permitted by the regulators. As well, the Bank’s Transition Program has updated its project plans to align with the CDOR transition roadmap and milestones published by the CARR committee and ensure alignment with OSFI’s expectations for FRFIs.

Non-derivative

financial assets and financial liabilities

The following table reflects the Bank’s exposure to

one-month,

two-month,

and three-month CDOR

non-derivative

financial assets and financial liabilities that have yet to transition to alternative benchmark rates and mature after June 28, 2024. Six-month and 12-month CDOR tenors ceased to be published after May 17, 2021.


	Carrying Amount
As at November 1, 2021 ($ millions)	CDOR (1)
	Maturing after June 28, 2024
Non-derivative financial assets (2)	$	11,284
Non-derivative financial liabilities (3) (4)		13,424

(1)

Includes exposure to

one-month,

two-month

and three-month tenors for CDOR and Bankers’ Acceptance (BA) rates.

(2)

Non-derivative financial assets include carrying amounts of debt securities, loans, and customers’ liability under acceptances (debt securities, loans and customers’ liability under acceptances measured at amortized cost are gross of allowance for credit losses).

(3)

Non-derivative

financial liabilities include carrying amounts of deposits, acceptances, obligations related to securities sold short and subordinated debentures.

(4)

Excludes Series 2006-1 Bank Deposit Note of $750 million that is currently at a fixed rate and will subsequently reset to a six-month CDOR-based rate after December 31, 2036.

Derivatives and undrawn commitments

The following table shows the notional balance of the Bank’s exposure to

one-month,

two-month,

and three-month CDOR derivatives and undrawn commitments that have yet to transition to alternative benchmark rates and mature after June 28, 2024. Six-month and 12-month CDOR tenors ceased to be published after May 17, 2021.


	Notional Amount
As at November 1, 2021 ($ millions)	CDOR (1)
	Maturing after June 28, 2024
Derivatives
Single currency interest rate swaps (2)	$	574,897
Cross currency interest rate swaps		71,047
Other (3)		1,355
Undrawn commitments		2,875

(1)

Includes exposure to

one-month,

two-month,

and three-month CDOR tenors.

(2)

For single currency interest rate swaps, where both legs are referencing rates directly impacted by the benchmark reform, the relevant notional amount for both legs are shown separately to reflect the risks relating to the reform for each rate.

(3)

Other derivatives include total return swaps and options.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Hedging derivatives

The following table shows the notional balance o

f th

e Bank’s CDOR exposure to hedging derivatives that have yet to transition to alternative benchmark rates and mature after June 28, 2024.


	Notional Amount
As at November 1, 2021 ($ millions)	CDOR (1)
	Maturing after June 28, 2024
Hedging Derivatives (2)		104,175

(1)

Includes exposure to one-month, two-month, and three-month CDOR tenors.

(2)

5.	Future accounting developments

There are no significant updates to the future accounting developments disclosed in Note 5 of the Bank’s audited consolidated financial statements in the 2021 Annual Report.

6.	Cash and deposits with financial institutions


	As at
($ millions)	July 31 2022			April 30 2022			October 31 2021
Cash and non-interest-bearing deposits with financial institutions	$	9,413		$	10,643		$	9,693
Interest-bearing deposits with financial institutions		58,302			75,267			76,630
Total	$	67,715	(1)	$	85,910	(1)	$	86,323	(1)

(1)

Net of allowances of $3 (April 30, 2022 – $2; October 31, 2021 – $1).

The Bank is required to maintain balances with central banks, other regulatory authorities and certain counterparties and these amounted to $5,308 million (April 30, 2022 – $5,634 million; October 31, 2021 – $5,719 million) and are included above.

7.	Investment securities

The following table presents the carrying amounts of the Bank’s investment securities per measurement category.


	As at
($ millions)	July 31 2022		April 30 2022		October 31 2021
Debt investment securities measured at FVOCI	$	81,120	$	78,343	$	52,611
Debt investment securities measured at amortized cost		21,548		16,699		18,157
Equity investment securities designated at FVOCI		3,832		3,797		3,178
Equity investment securities measured at FVTPL		1,656		1,576		1,223
Debt investment securities measured at FVTPL		66		72		30
Total investment securities	$	108,222	$	100,487	$	75,199

(a) Debt investment securities measured at fair value through other comprehensive income

(

FVOCI)


As at July 31, 2022 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Canadian federal government issued or guaranteed debt	$	10,877	$	5	$	202	$	10,680
Canadian provincial and municipal debt		4,999		4		258		4,745
U.S. treasury and other U.S. agency debt		37,494		22		892		36,624
Other foreign government debt		28,414		102		956		27,560
Other debt		1,540		1		30		1,511
Total	$	83,324	$	134	$	2,338	$	81,120

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


As at April 30, 2022 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Canadian federal government issued or guaranteed debt	$	9,913	$	3	$	205	$	9,711
Canadian provincial and municipal debt		5,494		2		295		5,201
U.S. treasury and other U.S. agency debt		36,576		17		1,059		35,534
Other foreign government debt		27,329		31		911		26,449
Other debt		1,477		1		30		1,448
Total	$	80,789	$	54	$	2,500	$	78,343

As at October 31, 2021 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Canadian federal government issued or guaranteed debt	$	5,694	$	135	$	25	$	5,804
Canadian provincial and municipal debt		5,202		12		59		5,155
U.S. treasury and other U.S. agency debt		13,528		188		79		13,637
Other foreign government debt		27,126		60		515		26,671
Other debt		1,339		9		4		1,344
Total	$	52,889	$	404	$	682	$	52,611

(b) Debt investment securities measured at amortized cost


	As at
	July 31, 2022				April 30, 2022				October 31, 2021
($ millions)	Fair value		Carrying value (1)		Fair value		Carrying value		Fair value		Carrying value
Canadian federal and provincial government issued or guaranteed debt	$	9,333	$	9,572	$	10,437	$	10,713	$	12,310	$	12,372
U.S. treasury and other U.S. agency debt		10,545		10,748		4,536		4,863		4,712		4,687
Other foreign government debt		1,149		1,148		1,013		1,013		970		960
Corporate debt		90		80		121		110		141		138
Total	$	21,117	$	21,548	$	16,107	$	16,699	$	18,133	$	18,157

(1)

Balances are net of allowances, which are $1.

The Bank has designated certain instruments at FVOCI shown in the following table as these equity securities are held for strategic

purposes.


As at July 31, 2022 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Preferred equity instruments	$	–	$	–	$	–	$	–
Common shares		3,450		541		159		3,832
Total	$	3,450	$	541	$	159	$	3,832

As at April 30, 2022 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Preferred equity instruments	$	–	$	–	$	–	$	–
Common shares		3,209		676		88		3,797
Total	$	3,209	$	676	$	88	$	3,797

As at October 31, 2021 ($ millions)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Preferred equity instruments	$	27	$	4	$	3	$	28
Common shares		2,710		528		88		3,150
Total	$	2,737	$	532	$	91	$	3,178

Dividend income earned on equity securities designated at FVOCI of $43 million for the three months ended July 31, 2022 (April 30, 2022 – $42 million; July 31, 2021 – $27 million) and for the nine months ended July 31, 2022 – $123 million (July 31, 2021 – $79 million) has been recognized in interest income.

During the three months ended July 31, 2022, the Bank has disposed of certain equity securities designated at FVOCI with a fair value of $80 million (April 30, 2022 – $196 million; July 31, 2021 – $348 million) and for the nine months ended July 31, 2022 – $657 million (July 31, 2021 – $1,052 million). This has resulted in a realized gain of $30 million in the three months ended July 31, 2022 (April 30, 2022 – $43 million; July 31, 2021 – $58 million) and for the nine months ended a realized gain of $109 million (July 31, 2021 – $169 million).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8.	Loans, impaired loans and allowance for credit losses

(a) Loans at amortized cost


	As at
	July 31, 2022
($ millions)	Gross carrying amount		Allowance for credit losses		Net carrying amount

Residential mortgages	$	343,965	$	843	$	343,122
Personal loans		96,561		2,113		94,448
Credit cards		13,871		1,049		12,822
Business and government		264,128		1,142		262,986
Total	$	718,525	$	5,147	$	713,378


	As at
	April 30, 2022						October 31, 2021
($ millions)	Gross carrying amount		Allowance for credit losses		Net carrying amount		Gross carrying amount		Allowance for credit losses		Net carrying amount
Residential mortgages	$	337,714	$	834	$	336,880	$	319,678	$	802	$	318,876
Personal loans		94,437		2,171		92,266		91,540		2,341		89,199
Credit cards		13,622		1,107		12,515		12,450		1,211		11,239
Business and government		249,223		1,182		248,041		218,944		1,272		217,672
Total	$	694,996	$	5,294	$	689,702	$	642,612	$	5,626	$	636,986

(b) Impaired loans

(1)(2)


	As at
	July 31, 2022
($ millions)	Gross impaired loans		Allowance for credit losses		Net carrying amount
Residential mortgages	$	1,281	$	375	$	906
Personal loans		778		559		219
Credit cards		–		–		–
Business and government		2,193		623		1,570
Total	$	4,252	$	1,557	$	2,695
By geography:
Canada	$	893	$	425	$	468
United States		–		–		–
Mexico		817		255		562
Peru		724		343		381
Chile		606		187		419
Colombia		336		75		261
Other international		876		272		604
Total	$	4,252	$	1,557	$	2,695


	As at
	April 30, 2022						October 31, 2021
($ millions)	Gross impaired loans		Allowance for credit losses		Net carrying amount		Gross impaired loans		Allowance for credit losses		Net carrying amount
Residential mortgages	$	1,273	$	393	$	880	$	1,331	$	374	$	957
Personal loans		767		566		201		833		626		207
Credit cards		–		–		–		–		–		–
Business and government		2,224		645		1,579		2,292		655		1,637
Total	$	4,264	$	1,604	$	2,660	$	4,456	$	1,655	$	2,801
By geography:
Canada	$	968	$	412	$	556	$	1,090	$	446	$	644
United States		–		–		–		24		4		20
Mexico		795		289		506		758		269		489
Peru		676		353		323		699		350		349
Chile		543		189		354		512		180		332
Colombia		377		78		299		418		88		330
Other international		905		283		622		955		318		637
Total	$	4,264	$	1,604	$	2,660	$	4,456	$	1,655	$	2,801

(1)

Interest income recognized on impaired loans during the three months ended July 31, 2022 was $9 (April 30, 2022 – $11; October 31, 2021 – $12).

(2)

Additional interest income of approximately $69 would have been recorded if the above loans had not been classified as impaired (April 30, 2022 - $63; October 31, 2021 – $58).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(c)

Allowance for credit losses

(i)

Key inputs and assumptions

The Bank’s allowance for credit losses is measured using a three-stage approach based on the extent of credit deterioration since origination. The calculation of the Bank’s allowance for credit losses is an output of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Some of the key drivers include the following:

•

Changes in risk ratings of the borrower or instrument reflecting changes in their credit quality;

•

Changes in the volumes of transactions;

•

Changes in the forward-looking macroeconomic environment reflected in the variables used in the models such as GDP growth, unemployment rates, commodity prices, and house price indices, which are most closely related with credit losses in the relevant portfolio;

•

Changes in macroeconomic scenarios and the probability weights assigned to each scenario; and

•

Borrower migration between the three stages.

The Bank determines its allowance for credit losses using four probability-weighted forward-looking scenarios (base case, optimistic, pessimistic and very pessimistic).

The Bank considers both internal and external sources of information and data to achieve unbiased projections and forecasts in determining the allowance for credit losses. The Bank prepares the scenarios using forecasts generated by Scotiabank Economics (SE). The forecasts are generated using models whose outputs are modified by SE as necessary to formulate a ‘base case’ view of the most probable future direction of economic developments. The development of the base case and alternative scenarios is overseen by a governance committee that consists of internal stakeholders from across the Bank. The final base case and alternative scenarios reflect significant review and oversight, and incorporate judgment both in the determination of the scenarios’ forecasts and the probability weights that are assigned to them.

(ii)

Key macroeconomic variables

The inputs and models used for calculating expected credit losses may not always capture all characteristics of the market at the date of the financial statements. Qualitative adjustments or overlays may be made for certain portfolios or geographies as temporary adjustments in circumstances where, in the Bank’s view, the inputs, assumptions, and/or modelling techniques do not capture all relevant risk factors, including the emergence of economic or geopolitical events up to the date of financial statements.

The Bank has applied expert credit judgement in the assessment of underlying credit deterioration and migration of balances to progressive stages. The Bank considered both quantitative and qualitative information in the assessment of significant increase in credit risk.

The Bank’s models are calibrated to consider past performance and macroeconomic forward-looking variables as inputs. The Bank has generated a forward-looking base case scenario and three alternate forward-looking scenarios (one optimistic and two pessimistic) as key inputs into the expected credit loss provisioning models. The base case is less favourable this quarter, with the growth outlook revised lower due to higher inflationary pressures and rising rate environment. Relative to the base case, the optimistic scenario features somewhat stronger economic activity. The two pessimistic scenarios were updated this quarter around the potential risk of stagflation and recession.

In light of current economic uncertainty, the pessimistic scenarios feature a protracted period of high commodity prices, elevated financial market uncertainty and a further disruption to supply chains. All these elements lead to much higher inflation compared to the base case scenario resulting in a rapid deceleration of growth. In the pessimistic scenario, stagflation is short-lived, while in the very pessimistic scenario, the stagflation shock is strong and persists for a longer period of time.

This quarter, the Bank increased the weight of the pessimistic scenarios in calculating the allowance for credit losses on performing loans to capture the elevated downside risk and uncertainty to the outlook.

The following tables show certain key macroeconomic variables used to calculate the modelled estimate for the allowance for credit losses. Further deterioration in these variables up to the date of the financial statements is incorporated through expert credit judgment. For the base case, optimistic and pessimistic scenarios, the projections are provided for the next 12 months and for the remaining forecast period, which represents a medium-term view.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	Base Case Scenario				Alternative Scenario - Optimistic				Alternative Scenario - Pessimistic				Alternative Scenario - Very Pessimistic
As at July 31, 2022	Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period

Canada
Real GDP growth, y/y % change		3.2		1.9		5.0		2.7		-2.8		3.5		-3.9		2.4
Consumer price index, y/y %		5.5		1.9		5.9		2.6		9.7		2.5		11.8		9.3
Unemployment rate, average %		5.1		6.0		4.3		4.7		9.1		6.8		9.6		8.6
Bank of Canada overnight rate target, average %		2.9		2.5		3.3		3.4		4.2		3.0		4.2		3.5
HPI - Housing Price Index, y/y % change		1.2		-3.2		6.4		-2.2		-4.2		-3.3		-6.3		-4.3
USD/CAD exchange rate, average		1.21		1.25		1.20		1.24		1.21		1.25		1.22		1.26
U.S.
Real GDP growth, y/y % change		2.4		2.0		3.3		2.7		-3.4		3.5		-4.7		3.0
Consumer price index, y/y %		6.5		2.5		6.8		3.0		10.4		3.0		12.7		10.1
Target federal funds rate, upper limit, average %		2.9		2.3		3.8		3.1		4.2		2.9		4.2		3.4
Unemployment rate, average %		3.9		4.9		3.7		4.6		7.5		5.7		7.9		6.7
Mexico
Real GDP growth, y/y % change		1.9		2.1		2.4		2.9		-3.5		3.5		-4.6		2.1
Unemployment rate, average %		4.0		3.8		3.9		3.1		7.4		4.7		7.7		6.3
Chile
Real GDP growth, y/y % change		0.0		1.4		1.6		2.3		-5.4		2.9		-6.4		1.9
Unemployment rate, average %		8.3		7.5		7.8		6.8		11.9		8.1		12.6		8.9
Peru
Real GDP growth, y/y % change		2.5		2.2		4.0		3.2		-0.8		3.3		-2.4		2.4
Unemployment rate, average %		7.9		7.0		6.9		4.9		10.8		8.0		11.5		9.6
Colombia
Real GDP growth, y/y % change		4.6		2.4		6.8		3.3		1.3		3.5		-0.3		2.7
Unemployment rate, average %		10.8		10.2		9.5		7.7		13.7		11.2		14.4		12.8
Caribbean
Real GDP growth, y/y % change		4.7		4.0		5.2		4.8		1.6		5.1		0.1		3.8
Global
WTI oil price, average USD/bbl		106		81		111		100		133		85		142		121
Copper price, average USD/lb		4.06		4.11		4.23		4.60		4.46		4.16		4.58		4.41
Global GDP, y/y % change		3.40		2.55		4.66		3.49		-1.67		3.96		-2.76		3.51
	Base Case Scenario				Alternative Scenario - Optimistic				Alternative Scenario - Pessimistic				Alternative Scenario - Very Pessimistic
As at April 30, 2022	Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period
Canada
Real GDP growth, y/y % change		4.6		2.0		6.6		2.9		-0.8		3.8		-2.2		2.7
Consumer price index, y/y %		5.6		2.0		6.1		3.1		8.1		2.4		9.5		7.3
Unemployment rate, average %		5.0		6.1		4.2		4.5		9.1		6.9		9.6		8.5
Bank of Canada overnight rate target, average %		2.2		2.4		2.8		3.4		3.5		3.0		3.5		3.4
HPI - Housing Price Index, y/y % change		16.6		-0.7		19.5		0.9		11.4		0.5		9.8		-0.5
USD/CAD exchange rate, average		1.21		1.23		1.20		1.22		1.21		1.22		1.21		1.22
U . S .
Real GDP growth, y/y % change		3.9		1.9		5.3		2.6		-1.9		3.6		-3.5		2.9
Consumer price index, y/y %		7.1		2.6		7.5		3.2		9.9		3.1		11.5		8.6
Target federal funds rate, upper limit, average %		1.9		2.4		2.5		3.3		3.2		2.9		3.2		3.4
Unemployment rate, average %		3.8		4.2		3.5		3.8		7.4		4.8		7.8		6.2
Mexico
Real GDP growth, y/y % change		1.7		1.8		2.9		2.5		-3.7		3.2		-4.7		1.8
Unemployment rate, average %		4.0		3.9		3.6		3.0		7.4		4.9		7.7		6.5
Chile
Real GDP growth, y/y % change		1.8		2.1		3.6		3.5		-3.2		3.6		-4.1		2.9
Unemployment rate, average %		6.2		5.9		5.7		5.2		9.9		6.4		10.7		7.0
Peru
Real GDP growth, y/y % change		2.6		3.0		4.5		4.7		-1.2		4.1		-2.7		1.1
Unemployment rate, average %		7.8		7.0		6.9		4.2		10.5		8.0		11.7		12.0
Colombia
Real GDP growth, y/y % change		4.3		3.5		5.8		5.1		0.5		4.7		-0.2		2.9
Unemployment rate, average %		10.8		10.3		10.1		7.9		13.3		11.2		13.6		13.6
Caribbean
Real GDP growth, y/y % change		4.6		4.0		5.7		4.8		0.8		5.2		-0.6		3.9
Global
WTI oil price, average USD/bbl		96		77		102		95		129		81		140		117
Copper price, average USD/lb		4.18		4.20		4.33		4.75		4.63		4.23		4.77		4.57
Global GDP, y/y % change		3.91		2.72		5.27		3.61		-1.35		4.27		-2.78		3.76

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	Base Case Scenario				Alternative Scenario - Optimistic				Alternative Scenario - Pessimistic				Alternative Scenario - Very Pessimistic
As at October 31, 2021	Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period
Canada
Real GDP growth, y/y % change		3.4		1.9		5.3		2.8		-1.3		3.1		-7.4		4.3
Consumer price index, y/y %		3.0		2.4		3.4		3.5		2.0		1.8		1.6		1.2
Unemployment rate, average %		6.3		5.7		5.6		4.1		8.8		6.3		11.7		8.2
Bank of Canada overnight rate target, average %		0.3		2.0		0.9		3.6		0.3		1.2		0.3		0.5
HPI - Housing Price Index, y/y % change		11.1		2.1		13.2		3.9		3.9		3.3		-2.7		3.9
USD/CAD exchange rate, average		1.24		1.21		1.23		1.20		1.28		1.21		1.30		1.24
U . S .
Real GDP growth, y/y % change		5.7		1.6		7.3		2.1		2.4		2.4		-1.4		3.5
Consumer price index, y/y %		4.0		2.5		4.5		3.1		3.3		2.3		2.6		1.9
Target federal funds rate, upper limit, average %		0.3		1.8		0.8		2.8		0.3		1.1		0.3		0.9
Unemployment rate, average %		3.8		3.5		3.4		3.2		5.6		4.1		6.8		5.6
Mexico
Real GDP growth, y/y % change		2.8		1.9		4.3		2.7		-0.4		2.7		-4.2		3.8
Unemployment rate, average %		4.0		4.0		3.6		3.1		6.5		4.5		9.4		6.4
Chile
Real GDP growth, y/y % change		6.7		2.2		8.8		3.1		3.4		3.1		-0.5		4.2
Unemployment rate, average %		6.5		6.2		5.9		5.6		9.0		6.7		12.0		8.6
Peru
Real GDP growth, y/y % change		5.0		3.2		7.7		4.3		3.6		3.7		0.0		4.7
Unemployment rate, average %		8.8		7.5		6.0		3.4		10.8		8.1		13.8		10.0
Colombia
Real GDP growth, y/y % change		5.0		3.5		6.8		4.8		3.6		4.0		0.0		5.0
Unemployment rate, average %		13.7		11.2		12.0		8.2		15.6		11.8		18.6		13.7
Caribbean
Real GDP growth, y/y % change		4.9		4.1		6.2		4.9		3.9		4.6		0.3		5.6
Global
WTI oil price, average USD/bbl		69		70		75		86		61		67		57		57
Copper price, average USD/lb		4.20		4.20		4.36		4.78		3.93		4.05		3.81		3.62
Global GDP, y/y % change		5.07		3.02		6.54		3.90		2.44		3.68		-0.69		4.48

(iii)

Sensitivity

Relative to

the

base case scenario, the weighting of these multiple scenarios increased

the

reported allowance for credit losses for financial assets in Stage 1 and Stage 2 to $3,720 million (April 30, 2022 – $3,771 million; October 31, 2021 – $4,076 million) from $3,537 million (April 30, 2022 – $3,698 million; October 31, 2021 – $3,998 million).

If the Bank was to only use the very

pessimistic scenario for the measurement of allowance for credit losses for such assets,

the

allowance for credit losses on performing financial instruments would be $889 million (April 30, 2022 – $679 million; October 31, 2021 – $866 million) higher than the reported allowance for credit losses as at July 31, 2022. Actual results will differ as this does not consider the migration of exposures or incorporate changes that would occur in the portfolio due to risk mitigation actions and other factors.

Under the current probability-weighted scenarios, if all performing financial assets were in Stage 1, reflecting a 12 month expected loss period, the allowance for credit losses would be

$417 million (April 30, 2022 – $391 million; October 31, 2021 – $407 million) lower than the reported allowance for credit losses on performing financial assets.

(iv)

Allowance for credit losses


Allowance for credit losses
($ millions)	Balance as at November 1, 2021		Provision for credit losses		Net write-offs			Other, including foreign currency adjustment			Balance as at July 31, 2022

Residential mortgages	$	802	$	64	$	(33	)	$	10		$	843
Personal loans		2,341		403		(643	)		12			2,113
Credit cards		1,211		288		(439	)		(11	)		1,049
Business and government		1,374		98		(149	)		(45	)		1,278
	$	5,728	$	853	$	(1,264	)	$	(34	)	$	5,283
Presented as:
Allowance for credit losses on loans	$	5,626									$	5,147
Allowance for credit losses on acceptances (1)		37										27
Allowance for credit losses on off-balance sheet exposures (2)		65										109

(1)

Allowance for credit losses on acceptances are recorded against the financial asset in the Consolidated Statement of Financial Position.

(2)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.

Scotiabank Third Quarter Report 2022

Table of Contents

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


($ millions)	Balance as at November 1, 2020		Provision for credit losses		Net write-offs			Other, including foreign currency adjustment			Balance as at July 31, 2021
Residential mortgages	$	884	$	74	$	(61	)	$	(59	)	$	838
Personal loans		3,155		810		(1,256	)		(159	)		2,550
Credit cards		1,886		672		(1,164	)		(88	)		1,306
Business and government		1,892		84		(317	)		(125	)		1,534
	$	7,817	$	1,640	$	(2,798)		$	(431)		$	6,228
Presented as:
Allowance for credit losses on loans	$	7,639									$	6,079
Allowance for credit losses on acceptances (1)		77										62
Allowance for credit losses on off-balance sheet exposures (2)		101										87

(1)

Allowance for credit losses on acceptances are recorded against the financial asset in the Consolidated Statement of Financial Position.

(2)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.


Allowance for credit losses on loans	As at July 31, 2022
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	184	$	284	$	375	$	843
Personal loans		658		896		559		2,113
Credit cards		432		617		–		1,049
Business and government		238		281		623		1,142
Total (1)	$	1,512	$	2,078	$	1,557	$	5,147

(1)

Excludes allowance for credit losses of

$148

for other financial assets including acceptances, investment securities, deposits with banks,

off-balance

sheet credit risks and reverse repos.


	As at October 31, 2021
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	152	$	276	$	374	$	802
Personal loans		644		1,071		626		2,341
Credit cards		352		859		–		1,211
Business and government		186		431		655		1,272
Total (1)	$	1,334	$	2,637	$	1,655	$	5,626

(1)

Excludes allowance for credit losses of $105 for other financial assets including acceptances, investment securities, deposits with banks and

off-balance

sheet credit risks.


	As at July 31, 2021
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	153	$	282	$	403	$	838
Personal loans		659		1,176		715		2,550
Credit cards		334		972		–		1,306
Business and government		265		479		641		1,385
Total (1)	$	1,411	$	2,909	$	1,759	$	6,079

(1)

Excludes allowance for credit losses of $153 for other financial assets including acceptances, investment securities, deposits with banks and

off-balance

sheet credit risks.

Scotiabank Third Quarter Report 2022

Table of Contents

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes to the allowance for credit losses on loans.


	As at and for the three months ended
	July 31, 2022												July 31, 2021
($ millions)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Retail loans:
Residential mortgages
Balance at beginning of period	$	168		$	273		$	393		$	834		$	151		$	280		$	410		$	841
Provision for credit losses
Remeasurement (1)		1			20			7			28			(29	)		15			27			13
Newly originated or purchased financial assets		8			–			–			8			18			–			–			18
Derecognition of financial assets and maturities		(1	)		(3	)		–			(4	)		(2	)		(6	)		–			(8	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		13			(10	)		(3	)		–			17			(14	)		(3	)		–
Stage 2		(2	)		13			(11	)		–			(3	)		13			(10	)		–
Stage 3		–			(5	)		5			–			–			(6	)		6			–
Gross write-offs		–			–			(17	)		(17	)		–			–			(23	)		(23	)
Recoveries		–			–			7			7			–			–			11			11
Foreign exchange and other movements		(3	)		(4	)		(6	)		(13	)		1			–			(15	)		(14	)
Balance at end of period (2)	$	184		$	284		$	375		$	843		$	153		$	282		$	403		$	838
Personal loans
Balance at beginning of period	$	655		$	950		$	566		$	2,171		$	699		$	1,286		$	821		$	2,806
Provision for credit losses
Remeasurement (1)		(129	)		107			151			129			(265	)		231			230			196
Newly originated or purchased financial assets		92			–			–			92			185			–			–			185
Derecognition of financial assets and maturities		(21	)		(32	)		–			(53	)		(55	)		(127	)		–			(182	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		108			(106	)		(2	)		–			148			(145	)		(3	)		–
Stage 2		(32	)		48			(16	)		–			(41	)		58			(17	)		–
Stage 3		(1	)		(58	)		59			–			(3	)		(111	)		114			–
Gross write-offs		–			–			(251	)		(251	)		–			–			(508	)		(508	)
Recoveries		–			–			59			59			–			–			78			78
Foreign exchange and other movements		(14	)		(13	)		(7	)		(34	)		(9	)		(16	)		–			(25	)
Balance at end of period (2)	$	658		$	896		$	559		$	2,113		$	659		$	1,176		$	715		$	2,550
Credit cards
Balance at beginning of period	$	419		$	688		$	–		$	1,107		$	319		$	1,226		$	–		$	1,545
Provision for credit losses
Remeasurement (1)		(33	)		34			112			113			(88	)		(78	)		350			184
Newly originated or purchased financial assets		43			–			–			43			27			–			–			27
Derecognition of financial assets and maturities		(15	)		(12	)		–			(27	)		(16	)		(27	)		–			(43	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		50			(50	)		–			–			109			(109	)		–			–
Stage 2		(22	)		22			–			–			(16	)		16			–			–
Stage 3		–			(43	)		43			–			–			(56	)		56			–
Gross write-offs		–			–			(202	)		(202	)		–			–			(462	)		(462	)
Recoveries		–			–			40			40			–			–			59			59
Foreign exchange and other movements		(10	)		(22	)		7			(25	)		(1	)		–			(3	)		(4	)
Balance at end of period (2)	$	432		$	617		$	–		$	1,049		$	334		$	972		$	–		$	1,306
Total retail loans
Balance at beginning of period	$	1,242		$	1,911		$	959		$	4,112		$	1,169		$	2,792		$	1,231		$	5,192
Provision for credit losses
Remeasurement (1)		(161	)		161			270			270			(382	)		168			607			393
Newly originated or purchased financial assets		143			–			–			143			230			–			–			230
Derecognition of financial assets and maturities		(37	)		(47	)		–			(84	)		(73	)		(160	)		–			(233	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		171			(166	)		(5	)		–			274			(268	)		(6	)		–
Stage 2		(56	)		83			(27	)		–			(60	)		87			(27	)		–
Stage 3		(1	)		(106	)		107			–			(3	)		(173	)		176			–
Gross write-offs		–			–			(470	)		(470	)		–			–			(993	)		(993	)
Recoveries		–			–			106			106			–			–			148			148
Foreign exchange and other movements		(27	)		(39	)		(6	)		(72	)		(9	)		(16	)		(18	)		(43	)
Balance at end of period (2)	$	1,274		$	1,797		$	934		$	4,005		$	1,146		$	2,430		$	1,118		$	4,694
Non-retail loans:
Business and government
Balance at beginning of period	$	234		$	352		$	645		$	1,231		$	353		$	564		$	707		$	1,624
Provision for credit losses
Remeasurement (1)		(1	)		(51	)		48			(4	)		(67	)		(8	)		96			21
Newly originated or purchased financial assets		74			–			–			74			71			–			–			71
Derecognition of financial assets and maturities		(58	)		(17	)		(6	)		(81	)		(66	)		(20	)		(6	)		(92	)
Changes in models and methodologies		31			55			–			86			–			–			–			–
Transfer to (from):
Stage 1		24			(24	)		–			–			22			(22	)		–			–
Stage 2		(6	)		6			–			–			(4	)		4			–			–
Stage 3		–			(2	)		2			–			–			(1	)		1			–
Gross write-offs		–			–			(107	)		(107	)		–			–			(151	)		(151	)
Recoveries		–			–			86			86			–			–			13			13
Foreign exchange and other movements		(1	)		(6	)		(27	)		(34	)		2			3			(19	)		(14	)
Balance at end of period including off-balance sheet exposures (2)	$	297		$	313		$	641		$	1,251		$	311		$	520		$	641		$	1,472
Less: Allowance for credit losses on off-balance sheet exposures (3)		(59	)		(32	)		(18	)		(109	)		(46	)		(41	)		–			(87	)
Balance at end of period (2)	$	238		$	281		$	623		$	1,142		$	265		$	479		$	641		$	1,385

Scotiabank Third Quarter Report 2022

Table of Contents

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	As at and for the nine months ended
	July 31, 2022												July 31, 2021
($ millions)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Retail loans:
Residential mortgages
Balance at beginning of period	$	152		$	276		$	374		$	802		$	190		$	302		$	392		$	884
Provision for credit losses
Remeasurement (1)		(33	)		38			45			50			(124	)		51			134			61
Newly originated or purchased financial assets		28			–			–			28			39			–			–			39
Derecognition of financial assets and maturities		(4	)		(10	)		–			(14	)		(7	)		(19	)		–			(26	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		46			(39	)		(7	)		–			68			(56	)		(12	)		–
Stage 2		(6	)		29			(23	)		–			(9	)		50			(41	)		–
Stage 3		–			(11	)		11			–			–			(29	)		29			–
Gross write-offs		–			–			(54	)		(54	)		–			–			(82	)		(82	)
Recoveries		–			–			21			21			–			–			21			21
Foreign exchange and other movements		1			1			8			10			(4	)		(17	)		(38	)		(59	)
Balance at end of period (2)	$	184		$	284		$	375		$	843		$	153		$	282		$	403		$	838
Personal loans
Balance at beginning of period	$	644		$	1,071		$	626		$	2,341		$	864		$	1,471		$	820		$	3,155
Provision for credit losses
Remeasurement (1)		(447	)		296			456			305			(951	)		943			809			801
Newly originated or purchased financial assets		242			–			–			242			438			–			–			438
Derecognition of financial assets and maturities		(56	)		(88	)		–			(144	)		(150	)		(279	)		–			(429	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		365			(358	)		(7	)		–			753			(743	)		(10	)		–
Stage 2		(88	)		131			(43	)		–			(218	)		273			(55	)		–
Stage 3		(3	)		(157	)		160			–			(42	)		(421	)		463			–
Gross write-offs		–			–			(833	)		(833	)		–			–			(1,461	)		(1,461	)
Recoveries		–			–			190			190			–			–			205			205
Foreign exchange and other movements		1			1			10			12			(35	)		(68	)		(56	)		(159	)
Balance at end of period (2)	$	658		$	896		$	559		$	2,113		$	659		$	1,176		$	715		$	2,550
Credit cards
Balance at beginning of period	$	352		$	859		$	–		$	1,211		$	501		$	1,385		$	–		$	1,886
Provision for credit losses
Remeasurement (1)		(122	)		42			327			247			(398	)		299			824			725
Newly originated or purchased financial assets		103			–			–			103			75			–			–			75
Derecognition of financial assets and maturities		(35	)		(27	)		–			(62	)		(48	)		(80	)		–			(128	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		189			(189	)		–			–			313			(313	)		–			–
Stage 2		(48	)		48			–			–			(91	)		91			–			–
Stage 3		–			(104	)		104			–			–			(354	)		354			–
Gross write-offs		–			–			(580	)		(580	)		–			–			(1,309	)		(1,309	)
Recoveries		–			–			141			141			–			–			145			145
Foreign exchange and other movements		(7	)		(12	)		8			(11	)		(18	)		(56	)		(14	)		(88	)
Balance at end of period (2)	$	432		$	617		$	–		$	1,049		$	334		$	972		$	–		$	1,306
Total retail loans
Balance at beginning of period	$	1,148		$	2,206		$	1,000		$	4,354		$	1,555		$	3,158		$	1,212		$	5,925
Provision for credit losses
Remeasurement (1)		(602	)		376			828			602			(1,473	)		1,293			1,767			1,587
Newly originated or purchased financial assets		373			–			–			373			552			–			–			552
Derecognition of financial assets and maturities		(95	)		(125	)		–			(220	)		(205	)		(378	)		–			(583	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		600			(586	)		(14	)		–			1,134			(1,112	)		(22	)		–
Stage 2		(142	)		208			(66	)		–			(318	)		414			(96	)		–
Stage 3		(3	)		(272	)		275			–			(42	)		(804	)		846			–
Gross write-offs		–			–			(1,467	)		(1,467	)		–			–			(2,852	)		(2,852	)
Recoveries		–			–			352			352			–			–			371			371
Foreign exchange and other movements		(5	)		(10	)		26			11			(57	)		(141	)		(108	)		(306	)
Balance at end of period (2)	$	1,274		$	1,797		$	934		$	4,005		$	1,146		$	2,430		$	1,118		$	4,694
Non-retail loans:
Business and government
Balance at beginning of period	$	212		$	470		$	655		$	1,337		$	478		$	592		$	745		$	1,815
Provision for credit losses
Remeasurement (1)		(54	)		(74	)		196			68			(156	)		13			305			162
Newly originated or purchased financial assets		195			–			–			195			239			–			–			239
Derecognition of financial assets and maturities		(154	)		(73	)		(24	)		(251	)		(234	)		(45	)		(9	)		(288	)
Changes in models and methodologies		30			57			–			87			(4	)		(11	)		–			(15	)
Transfer to (from):
Stage 1		85			(85	)		–			–			50			(50	)		–			–
Stage 2		(18	)		18			–			–			(46	)		47			(1	)		–
Stage 3		–			(5	)		5			–			–			(5	)		5			–
Gross write-offs		–			–			(253	)		(253	)		–			–			(343	)		(343	)
Recoveries		–			–			104			104			–			–			26			26
Foreign exchange and other movements		1			5			(42	)		(36	)		(16	)		(21	)		(87	)		(124	)
Balance at end of period including off-balance sheet exposures (2)	$	297		$	313		$	641		$	1,251		$	311		$	520		$	641		$	1,472
Less: Allowance for credit losses on off-balance sheet exposures (3)		(59	)		(32	)		(18	)		(109	)		(46	)		(41	)		–			(87	)
Balance at end of period (2)	$	238		$	281		$	623		$	1,142		$	265		$	479		$	641		$	1,385

(1)

Includes credit risk changes as a result of significant increases in credit risk, changes in credit risk that did not result in a transfer between stages, changes in model inputs and assumptions and changes due to drawdowns of undrawn commitments.

(2)

Interest income on impaired loans for residential mortgages, personal and credit cards, and business and government loans for the three months ended July 31, 2022 totaled $69

(July 31, 2021 – $61) and for the nine months ended July 31, 2022 totaled $193

(July 31, 2021 – $212).

(3)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(d)

Carrying value of exposures by risk rating


Residential mortgages	As at July 31, 2022								As at October 31, 2021
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Very low	$	208,768	$	730	$	–	$	209,498	$	187,163	$	5,610	$	–	$	192,773
Low		79,111		820		–		79,931		69,306		1,768		–		71,074
Medium		16,426		295		–		16,721		9,170		3,690		–		12,860
High		2,412		1,197		–		3,609		904		2,284		–		3,188
Very high		56		1,215		–		1,271		16		643		–		659
Loans not graded (2)		29,161		2,493		–		31,654		34,122		3,671		–		37,793
Default		–		–		1,281		1,281		–		–		1,331		1,331
Total	$	335,934	$	6,750	$	1,281	$	343,965	$	300,681	$	17,666	$	1,331	$	319,678
Allowance for credit losses		184		284		375		843		152		276		374		802
Carrying value	$	335,750	$	6,466	$	906	$	343,122	$	300,529	$	17,390	$	957	$	318,876

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Personal loans	As at July 31, 2022								As at October 31, 2021
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Very low	$	30,856	$	158	$	–	$	31,014	$	30,085	$	168	$	–	$	30,253
Low		27,090		437		–		27,527		25,719		574		–		26,293
Medium		8,381		1,142		–		9,523		8,290		1,127		–		9,417
High		6,896		1,991		–		8,887		5,686		2,307		–		7,993
Very high		65		1,305		–		1,370		82		1,157		–		1,239
Loans not graded (2)		16,186		1,276		–		17,462		14,159		1,353		–		15,512
Default		–		–		778		778		–		–		833		833
Total	$	89,474	$	6,309	$	778	$	96,561	$	84,021	$	6,686	$	833	$	91,540
Allowance for credit losses		658		896		559		2,113		644		1,071		626		2,341
Carrying value	$	88,816	$	5,413	$	219	$	94,448	$	83,377	$	5,615	$	207	$	89,199

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Credit cards	As at July 31, 2022								As at October 31, 2021
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Very low	$	1,757	$	33	$	–	$	1,790	$	1,517	$	76	$	–	$	1,593
Low		2,679		131		–		2,810		2,288		135		–		2,423
Medium		3,351		123		–		3,474		2,666		166		–		2,832
High		3,086		836		–		3,922		2,237		1,225		–		3,462
Very high		43		525		–		568		21		509		–		530
Loans not graded (1)		923		384		–		1,307		1,158		452		–		1,610
Default		–		–		–		–		–		–		–		–
Total	$	11,839	$	2,032	$	–	$	13,871	$	9,887	$	2,563	$	–	$	12,450
Allowance for credit losses		432		617		–		1,049		352		859		–		1,211
Carrying value	$	11,407	$	1,415	$	–	$	12,822	$	9,535	$	1,704	$	–	$	11,239

(1)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Undrawn loan commitments – Retail	As at July 31, 2022								As at October 31, 2021
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Very low	$	96,614	$	4	$	–	$	96,618	$	88,308	$	14	$	–	$	88,322
Low		20,350		7		–		20,357		17,880		12		–		17,892
Medium		7,745		33		–		7,778		6,858		36		–		6,894
High		3,707		285		–		3,992		3,103		745		–		3,848
Very high		40		322		–		362		24		212		–		236
Loans not graded (1)		8,118		1,344		–		9,462		9,126		2,204		–		11,330
Default		–		–		–		–		–		–		–		–
Carrying value	$	136,574	$	1,995	$	–	$	138,569	$	125,299	$	3,223	$	–	$	128,522

(1)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


Total retail loans	As at July 31, 2022								As at October 31, 2021
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Very low	$	337,995	$	925	$	–	$	338,920	$	307,073	$	5,868	$	–	$	312,941
Low		129,230		1,395		–		130,625		115,193		2,489		–		117,682
Medium		35,903		1,593		–		37,496		26,984		5,019		–		32,003
High		16,101		4,309		–		20,410		11,930		6,561		–		18,491
Very high		204		3,367		–		3,571		143		2,521		–		2,664
Loans not graded (2)		54,388		5,497		–		59,885		58,565		7,680		–		66,245
Default		–		–		2,059		2,059		–		–		2,164		2,164
Total	$	573,821	$	17,086	$	2,059	$	592,966	$	519,888	$	30,138	$	2,164	$	552,190
Allowance for credit losses		1,274		1,797		934		4,005		1,148		2,206		1,000		4,354
Carrying value	$	572,547	$	15,289	$	1,125	$	588,961	$	518,740	$	27,932	$	1,164	$	547,836

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Business and government loans	As at July 31, 2022								As at October 31, 2021
Grade ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Investment grade	$	145,900	$	1,903	$	–	$	147,803	$	110,786	$	892	$	–	$	111,678
Non-investment grade		100,304		8,476		–		108,780		91,945		7,570		–		99,515
Watch list		23		3,031		–		3,054		31		3,266		–		3,297
Loans not graded (2)		2,289		9		–		2,298		2,151		11		–		2,162
Default		–		–		2,193		2,193		–		–		2,292		2,292
Total	$	248,516	$	13,419	$	2,193	$	264,128	$	204,913	$	11,739	$	2,292	$	218,944
Allowance for credit losses		238		281		623		1,142		186		431		655		1,272
Carrying value	$	248,278	$	13,138	$	1,570	$	262,986	$	204,727	$	11,308	$	1,637	$	217,672

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Undrawn loan commitments – Business and government	As at July 31, 2022								As at October 31, 2021
Grade ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Investment grade	$	212,787	$	1,164	$	–	$	213,951	$	186,056	$	1,266	$	–	$	187,322
Non-investment grade		60,940		3,730		–		64,670		66,009		3,786		–		69,795
Watch list		5		901		–		906		12		2,160		–		2,172
Loans not graded (2)		4,278		–		–		4,278		4,155		–		–		4,155
Default		–		–		109		109		–		–		102		102
Total	$	278,010	$	5,795	$	109	$	283,914	$	256,232	$	7,212	$	102	$	263,546
Allowance for credit losses		59		32		18		109		26		39		–		65
Carrying value	$	277,951	$	5,763	$	91	$	283,805	$	256,206	$	7,173	$	102	$	263,481

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.


Total non-retail loans	As at July 31, 2022								As at October 31, 2021
Grade ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Investment grade	$	358,687	$	3,067	$	–	$	361,754	$	296,842	$	2,158	$	–	$	299,000
Non-investment grade		161,244		12,206		–		173,450		157,954		11,356		–		169,310
Watch list		28		3,932		–		3,960		43		5,426		–		5,469
Loans not graded (2)		6,567		9		–		6,576		6,306		11		–		6,317
Default		–		–		2,302		2,302		–		–		2,394		2,394
Total	$	526,526	$	19,214	$	2,302	$	548,042	$	461,145	$	18,951	$	2,394	$	482,490
Allowance for credit losses		297		313		641		1,251		212		470		655		1,337
Carrying value	$	526,229	$	18,901	$	1,661	$	546,791	$	460,933	$	18,481	$	1,739	$	481,153

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)

Portfolios where the customer account level ‘Probability of Default’ has not been determined have been included in the ‘Loans not graded’ category.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(e)

Loans past due but not impaired

(1)

A loan is considered past due when a counterparty has not made a payment by the contractual due date. The following table presents the carrying value of loans that are contractually past due but not classified as impaired because they are either less than 90 days past due or fully secured and collection efforts are reasonably expected to result in repayment, or restoring it to a current status in accordance with the Bank’s policy.



	As at July 31, 2022 (2)
($ millions)	31-60 days		61-90 days		91 days and greater (3)		Total
Residential mortgages	$	890	$	406	$	–	$	1,296
Personal loans		435		221		–		656
Credit cards		166		107		207		480
Business and government		131		22		–		153
Total	$	1,622	$	756	$	207	$	2,585

	As at April 30, 2022 (2)
($ millions)	31-60 days		61-90 days		91 days and greater (3)		Total
Residential mortgages	$	797	$	360	$	–	$	1,157
Personal loans		387		218		–		605
Credit cards		133		91		184		408
Business and government		111		87		–		198
Total	$	1,428	$	756	$	184	$	2,368

	As at October 31, 2021 (2)
($ millions)	31-60 days		61-90 days		91 days and greater (3)		Total
Residential mortgages	$	732	$	327	$	–	$	1,059
Personal loans		411		210		–		621
Credit cards		125		83		201		409
Business and government		124		24		–		148
Total	$	1,392	$	644	$	201	$	2,237

(1)

Loans past due 30 days or less are not presented in this analysis as they are not administratively considered past due.

(2)

For loans where payment deferrals were granted, deferred payments are not considered past due and such loans are not aged further during the deferral period. Regular ageing of the loans resumes, after the end of the deferral period.

(3)

All loans that are over 90 days past due are considered impaired with the exception of credit card receivables which are considered impaired when 180 days past due.

(f)

Purchased credit-impaired loans

Certain financial assets including loans are credit-impaired on initial recognition. The following table provides details of such assets:


	As at
($ millions)	July 31 2022			April 30 2022			October 31 2021
Unpaid principal balance (1)	$	302		$	308		$	303
Credit related fair value adjustments		(68	)		(69	)		(68	)
Carrying value		234			239			235
Stage 3 allowance		(1	)		(1	)		(1	)
Carrying value net related allowance	$	233		$	238		$	234

(1)

Represents principal amount owed net of write-offs.

9.	Derecognition of financial assets

Securitization of residential mortgage loans

The Bank securitizes fully insured residential mortgage loans, Bank originated and others, through the creation of mortgage-backed securities (MBS) under the National Housing Act (NHA) MBS program, sponsored by Canada Mortgage and Housing Corporation (CMHC). MBS created under the program are sold to Canada Housing Trust (the Trust), a government sponsored entity under the Canada Mortgage Bond (CMB) program. The Trust issues securities to third-party investors. The CMHC also purchased insured mortgage pools from the Bank under the Insured Mortgage Purchase Program (IMPP).

The sale of mortgages under the above programs do not meet the derecognition requirements, where the Bank retains the

pre-payment

and interest rate risks associated with the mortgages, which represent substantially all the risks and rewards associated with the transferred assets.

The transferred mortgages continue to be recognized on the Consolidated Statement of Financial Position as residential mortgage loans. Cash proceeds from the transfer are treated as secured borrowings and included in Deposits – Business and government on the Consolidated Statement of Financial Position.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the carrying amount of transferred assets that do not qualify for derecognition and the associated liabilities:


	As at
($ millions)	July 31 2022 (1)		April 30 2022 (1)		October 31 2021 (1)
Assets
Carrying value of residential mortgage loans	$	15,185	$	15,880	$	17,145
Other related assets (2)		9,854		9,225		9,787
Liabilities
Carrying value of associated liabilities	$	24,154	$	24,510	$	25,833

(1)

The fair value of the transferred assets is $23,854 (April 30, 2022 – $23,769; October 31, 2021 – $25,761) and the fair value of the associated liabilities is $23,502 (April 30, 2022 – $23,882; October 31, 2021 – $26,021) for a net position of $352 (April 30, 2022 – $(113); October 31, 2021 – $(260)).

(2)

These include cash held in trust and trust permitted investment assets acquired as part of the principal reinvestment account that the Bank is required to maintain in order to participate in the programs.

Securitization of personal lines of credit, credit cards and auto loans

The Bank securitizes a portion of its credit card and auto loan receivables through consolidated structured entities. These receivables continue to be recognized on the Consolidated Statement of Financial Position as personal loans and credit card loans. During the quarter, the Bank did not enter into any new securitization arrangements.

Securities sold under repurchase agreements and securities lent

The Bank enters into transactions, such as repurchase agreements and securities lending agreements, where the Bank transfers assets under agreements to repurchase them on a future date and retains all the substantial risks and rewards associated with the assets. The transferred securities remain on the Consolidated Statement of Financial Position.

The following table provides the carrying amount of the transferred assets and the associated

liabilities:


	As at
($ millions)	July 31 2022 (1)		April 30 2022 (1)		October 31 2021 (1)
Carrying value of securities associated with:
Repurchase agreements (2)	$	113,151	$	106,452	$	100,083
Securities lending agreements		49,185		59,667		59,506
Total		162,336		166,119		159,589
Carrying value of associated liabilities (3)	$	128,145	$	131,978	$	123,469

(1)

The fair value of transferred assets is $162,336 (April 30, 2022 – $166,119; October 31, 2021 – $159,589) and the fair value of the associated liabilities is $128,145 (April 30, 2022 – $131,978; October 31, 2021 – $123,469) for a net position of $34,191 (April 30, 2022 – $34,141; October 31, 2021 – $36,120).

(2)

Does not include over-collateralization of assets pledged.

(3)

Liabilities for securities lending arrangements only include amounts related to cash collateral received. In most cases, securities are received as collateral.

10.	Investments in associates

The Bank had significant investments in the following associates:


										As at
										July 31 2022		April 30 2022		October 31 2021
($ millions)	Country of incorporation		Nature of business		Ownership percentage			Date of financial statements (1)		Carrying value		Carrying value		Carrying value

Canadian Tire Financial Services business (CTFS) (2)		Canada		Financial Services		20.00	%		June 30, 2022	$	562	$	546	$	549
Bank of Xi’an Co. Ltd. (3)		China		Banking		18.11	%		June 30, 2022		1,005		1,033		968
Maduro & Curiel’s Bank N.V. (4)		Curacao		Banking		48.10	%		June 30, 2022		404		402		366

(1)

Represents the date of the most recent financial statements made available to the Bank by the associates’ management.

(2)

Canadian Tire has an option to sell to the Bank up to an additional 29% equity interest until the end of the 10th anniversary (October 1, 2024) at the then fair value, that can be settled, at the Bank’s discretion, by issuance of common shares or cash. After October 1, 2024 for a period of six months, the Bank has the option to sell its equity interest back to Canadian Tire at the then fair value.

(3)

Based on the quoted price on the Shanghai Stock Exchange, the Bank’s Investment in Bank of Xi’an Co. Ltd. was $542 (April 30, 2022 – $579; October 31, 2021 – $671). The ownership percentage for Bank of Xi’an Co. was 18.11

% (April 30, 2022 –

18.11

%; October 31, 2021 – 17.99%).

(4)

The local regulator requires financial institutions to set aside reserves for general banking risks. These reserves are not required under IFRS, and represent undistributed retained earnings related to a foreign associated corporation, which are subject to local regulatory restrictions. As of July 31, 2022, these reserves amounted to $63

(April 30, 2022 – $62; October 31, 2021 - $60).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

11.

Deposits


								As at
	July 31, 2022											April 30 2022		October 31 2021
	Payable on demand (1)				Payable after notice (2)
($ millions)	Interest- bearing		Non-interest- bearing		Payable after notice (2)			Payable on a fixed date (3)		Total		Total		Total
Personal	$	8,267	$	10,060	$	162,460		$	78,716	$	259,503	$	252,847	$	243,551
Business and government		163,970		35,515		42,897			324,584		566,966		569,268		511,348
Financial institutions		11,693		1,694		1,887			37,839		53,113		54,439		42,360
	$	183,930	$	47,269	$	207,244	(4)	$	441,139	$	879,582	$	876,554	$	797,259
Recorded in:
Canada	$	129,989	$	28,550	$	174,613		$	289,910	$	623,062	$	622,887	$	571,254
United States		42,619		135		793			53,122		96,669		94,811		87,626
United Kingdom		–		–		459			22,978		23,437		22,772		17,232
Mexico		–		6,147		8,029			13,438		27,614		26,960		24,259
Peru		5,136		100		5,505			4,734		15,475		15,630		14,520
Chile		1,292		5,090		152			15,199		21,733		20,702		20,631
Colombia		60		607		4,790			3,889		9,346		9,886		9,184
Other International		4,834		6,640		12,903			37,869		62,246		62,906		52,553
Total (5)	$	183,930	$	47,269	$	207,244		$	441,139	$	879,582	$	876,554	$	797,259

(1)

Deposits payable on demand include all deposits for which we do not have the right to notice of withdrawal, generally chequing accounts.

(2)

Deposits payable after notice include all deposits for which we require notice of withdrawal, generally savings accounts.

(3)

All deposits that mature on a specified date, generally term deposits, guaranteed investments certificates and similar instruments.

(4)

Includes $151 (April 30, 2022 – $157; October 31, 2021 – $193) of

non-interest-bearing

deposits.

(5)

Deposits denominated in U.S. dollars amount to $302,109 (April 30, 2022 – $306,726; October 31, 2021 – $259,027), deposits denominated in Chilean pesos amount to $18,089 (April 30, 2022 – $17,298; October 31, 2021 – $17,841), deposits denominated in Mexican pesos amount to $25,470 (April 30, 2022 – $24,912; October 31, 2021 – $22,032) and deposits denominated in other foreign currencies amount to $100,889 (April 30, 2022 – $104,324; October 31, 2021 – $82,871).

The following table presents the maturity schedule for term deposits in Canada greater than $100,000

(1)


($ millions)	Within three months		Three to six months		Six to twelve months		One to five years		Over five years		Total
As at July 31, 2022	$	45,372	$	23,523	$	57,173	$	111,406	$	20,996	$	258,470
As at April 30, 2022	$	46,662	$	23,001	$	50,159	$	112,031	$	22,406	$	254,259
As at October 31, 2021	$	34,829	$	24,372	$	30,918	$	90,433	$	20,688	$	201,240

(1)

The majority of foreign term deposits are in excess of $100,000.

12.	Capital and financing transactions

Preferred shares and other equity instruments

Issuance

On June 16, 2022, the Bank issued

$1.5 billion

7.023%

Limited Recourse Capital Notes Series 3 (NVCC) (“LRCN Series 3”) due July 27, 2082, which form part of the Bank’s Additional Tier 1 Capital. Non-deferable interest is payable quarterly at a fixed rate of 7.023% per annum until July 27, 2027; and thereafter, the non-deferable interest will reset every fifth year until July 27, 2077, at a rate equal to the 5-year Government of Canada yield plus 3.95%. In connection with the issuance of LRCN Series 3, the Bank issued $1.5 billion of 7.023% Fixed Rates Resetting Perpetual Subordinated Additional Tier 1 Capital Notes (NVCC) (“the Series 3 AT1 Notes”) to Scotiabank LRCN Trust, a consolidated entity

to be held as trust assets in connection with LRCN structure. As the Series 3 AT1 Notes eliminate on consolidation, they do not currently form part of the Bank’s Additional Tier 1 capital.

Upon the occurrence of a recourse event, the noteholder’s sole recourse will be limited to their proportionate share of the assets held in the Scotiabank LRCN Trust. A recourse event occurs if (a) there is non-payment in cash by the Bank of the principal amount, together with any accrued and unpaid interest, on the maturity date, (b) there is non-payment in cash of interest which is not cured within 5 business days, (c) there is non-payment in cash of the redemption price in connection with the redemption of LRCN Series 3, (d) an event of default occurs (bankruptcy, insolvency, or liquidation of the Bank), or (e) there is an NVCC Trigger Event.

Subject to regulatory consent and approval, the LRCN Series 3 are redeemable, in whole or in part, every five years during the period from June 27 to and including July 27, commencing in 2027.

The LRCN Series 3 and Series 3 AT1 Notes are the Bank’s direct unsecured obligations, ranking subordinate to the Bank’s Subordinated debentures and ranking equally with the Bank’s existing NVCC subordinated additional Tier 1 capital securities.

The LRCN Series 3 and the Series 3 AT1 Notes include NVCC provisions necessary for them to qualify as Tier 1 regulatory capital under Basel III. NVCC provisions require the conversion of the AT1 Notes into a variable number of common shares if OSFI announces that the Bank has ceased, or is about to cease, to be viable, or if a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection, or equivalent support, from the federal government or any provincial government or political subdivision or agent thereof without which the Bank would have been determined by OSFI to be non-viable. Upon an NVCC Trigger Event, LRCN Series 3 will cease to

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

be outstanding following delivery to the noteholders of their proportionate share of the trust assets comprised of common shares of the Bank received by the trust upon automatic conversion of the Series 3 AT1 Notes.

The LRCN Series 3 are compound instruments with both equity and liability features. On the date of issuance, the Bank has assigned an insignificant value to the liability component of LRCN Series

and, as a result, the full proceeds received have been presented as equity.

Common shares

Normal Course Issuer Bid

million to

million.

Purchases under the 2022 NCIB commenced on December 2, 2021, and will terminate upon earlier of: (i) the Bank purchasing the maximum number of common shares under the 2022 NCIB Amendment, (ii) the Bank providing a notice of termination, or (iii) December 1, 2022. On a quarterly basis, the Bank will notify OSFI prior to making purchases

During the nine months ended July 31, 2022, the Bank repurchased and cancelled approximately 31.3 million common shares at an average price of $87.68 per share for a total amount of $2,745

million. In Q3 2022, the Bank repurchased and cancel

ed approximately 5 million common shares for a total amount of $409 mill

ion.

No repurchases

of common shares were made during the three and nine months ended July 31, 2021.

13.	Capital management

The Bank’s regulatory capital, total loss absorbing capacity and leverage measures were as follows:


	As at
($ millions)	July 31 2022			April 30 2022			October 31 2021
Capital (1)

Common Equity Tier 1 capital	$	51,639		$	51,547		$	51,010
Net Tier 1 capital		58,801			57,201			57,915
Total regulatory capital		68,086			66,628			66,101
Total loss absorbing capacity (2)		128,800			133,841			115,681
Risk-weighted assets/exposures used in calculation of capital ratios
Risk-weighted assets (1)(3)	$	452,800		$	445,273		$	416,105
Leverage exposures (4)		1,388,823			1,360,184			1,201,766
Regulatory ratios (1)
Common Equity Tier 1 capital ratio		11.4	%		11.6	%		12.3	%
Tier 1 capital ratio		13.0	%		12.8	%		13.9	%
Total capital ratio		15.0	%		15.0	%		15.9	%
Total loss absorbing capacity ratio (2)		28.4	%		30.1	%		27.8	%
Leverage ratio (4)		4.2	%		4.2	%		4.8	%
Total loss absorbing capacity leverage ratio (2)		9.3	%		9.8	%		9.6	%

(1)

This measure has been disclosed in this document in accordance with OSFI Guideline – Capital Adequacy Requirements (November 2018).

(2)

This measure has been disclosed in this document in accordance with OSFI Guideline – Total Loss Absorbing Capacity (September 2018). Results for October 31, 2021 are shown for comparative purposes and were not a regulatory requirement.

(3)

As at July 31, 2022, April 30, 2022 and October 31, 2021, the Bank did not have a regulatory capital floor

add-on

for CET1, Tier 1, Total capital and TLAC RWA.

(4)

This measure has been disclosed in this document in accordance with OSFI Guideline – Leverage Requirements (November 2018).

The Bank substantially exceeded the OSFI minimum regulatory capital and total loss absorbing capacity (TLAC) ratios as at July 31, 2022, including the Domestic Stability Buffer requirement. In addition, the Bank substantially exceeded OSFI minimum leverage and TLAC leverage ratios as at July 31, 2022.

14.	Share-based payments

During the first quarter, the Bank granted 1,716,536 options with an exercise price of $85.46 per option and a weighted average fair value of $7.54 to select employees, under the terms of the Employee Stock Option Plan. These stock options vest 50% at the end of the third year and 50% at the end of the fourth year. Options granted prior to December 2014 vest evenly over a four-year period.

The Bank recorded an increase to equity – other reserves of $1 million and $9 million for the three months and nine months ended July 31, 2022 (July 31, 2021 – $1 million and $6 million), respectively, as a result of equity-classified share-based payment expense.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

15.	Employee benefits

Employee benefits include pensions, other post-retirement benefits, and post-employment benefits. The following table summarizes the expenses for the Bank’s principal plans

(1)


	For the three months ended
	Pension plans									Other benefit plans
($ millions)	July 31 2022			April 30 2022			July 31 2021			July 31 2022			April 30 2022			July 31 2021
Defined benefit service cost	$	97		$	78		$	106		$	6		$	6		$	6
Interest on net defined benefit (asset) liability		(8	)		(2	)		4			12			11			10
Other		4			4			3			2			(5	)		–
Defined benefit expense	$	93		$	80		$	113		$	20		$	12		$	16
Defined contribution expense	$	32		$	31		$	26		$	–		$	–		$	–
Increase (decrease) in other comprehensive income related to employee benefits (2)	$	(207	)	$	936		$	(76	)	$	(24	)	$	119		$	(35)


	For the nine months ended
	Pension plans					Other benefit plans
($ millions)	July 31 2022			July 31 2021		July 31 2022			July 31 2021
Defined benefit service cost	$	254		$	296	$	17		$	18
Interest on net defined benefit (asset) liability		(11	)		23		35			33
Other		12			9		(5	)		(4	)
Defined benefit expense	$	255		$	328	$	47		$	47
Defined contribution expense	$	93		$	75	$	–		$	–
Increase (decrease) in other comprehensive income related to employee benefits (2)	$	838		$	1,375	$	134		$	42

(1)

Other plans operated by certain subsidiaries of the Bank are not considered material and are not included in this note.

(2)

Changes in discount rates and return on plan assets are reviewed and updated on a quarterly basis. In the absence of legislated changes, all other assumptions are updated annually.

16.	Operating segments

Scotiabank is a diversified financial services institution that provides a wide range of financial products and services to retail, commercial and corporate customers around the world. The Bank’s businesses are grouped into four business lines: Canadian Banking, International Banking, Global Wealth Management and Global Banking and Markets. Other smaller business segments are included in the Other segment. The results of these business segments are based upon the internal financial reporting systems of the Bank. The accounting policies used in these segments are generally consistent with those followed in the preparation of the consolidated financial statements as disclosed in Note 3 of the Bank’s audited consolidated financial statements in the 2021 Annual Report. Notable accounting measurement differences are:

•

tax normalization adjustments related to the

gross-up

of income from associated corporations. This adjustment normalizes the effective tax rate in the divisions to better present the contribution of the associated companies to the divisional results.

•

the grossing up of

tax-exempt

net interest income and

non-interest

income to an equivalent

before-tax

basis for those affected segments. This change in measurement enables comparison of net interest income and

non-interest

income arising from taxable and

tax-exempt

sources.


	For the three months ended July 31, 2022
Taxable equivalent basis ($ millions)	Canadian Banking		International Banking		Global Wealth Management		Global Banking and Markets			Other (1)			Total
Net interest income (2)	$	2,361	$	1,759	$	200	$	405		$	(49	)	$	4,676
Non-interest income (3)(4)		758		660		1,112		747			(154	)		3,123
Total revenues		3,119		2,419		1,312		1,152			(203	)		7,799
Provision for credit losses		93		325		5		(15	)		4			412
Non-interest expenses		1,385		1,295		796		655			60			4,191
Provision for income taxes		428		122		133		134			(215	)		602
Net income	$	1,213	$	677	$	378	$	378		$	(52	)	$	2,594
Net income attributable to non-controlling interests in subsidiaries	$	–	$	52	$	2	$	–		$	–		$	54
Net income attributable to equity holders of the Bank	$	1,213	$	625	$	376	$	378		$	(52	)	$	2,540
Average assets ($ billions)	$	437	$	209	$	33	$	443		$	173		$	1,295
Average liabilities ($ billions)	$	337	$	155	$	48	$	419		$	263		$	1,222

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income and

non-interest

income and provision for income taxes of $92 to arrive at the amounts reported in the Consolidated Statement of Income, differences in the actual amount of costs incurred and charged to the operating segments.

(2)

Interest income is reported net of interest expense as management relies primarily on net interest income as a performance measure.

(3)

Card revenues and Banking services fees are mainly earned in Canadian and International Banking. Mutual fund, Brokerage fees and Investment management and trust fees are primarily earned in Global Wealth Management. Underwriting and other advisory fees are predominantly earned in Global Banking and Markets.

(4)

Includes income (on a taxable equivalent basis) from associated corporations for Canadian Banking – $15, International Banking – $54, Global Wealth Management – $3, and Other – $(28).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	For the three months ended April 30, 2022
Taxable equivalent basis ($ millions)	Canadian Banking			International Banking		Global Wealth Management		Global Banking and Markets			Other (1)			Total
Net interest income (2)	$	2,144		$	1,687	$	184	$	360		$	98		$	4,473
Non-interest income (3)(4)		759			720		1,174		902			(86	)		3,469
Total revenues		2,903			2,407		1,358		1,262			12			7,942
Provision for credit losses		(12	)		276		1		(46	)		–			219
Non-interest expenses		1,324			1,268		803		653			111			4,159
Provision for income taxes		412			182		145		167			(89	)		817
Net income	$	1,179		$	681	$	409	$	488		$	(10	)	$	2,747
Net income attributable to non-controlling interests in subsidiaries	$	–		$	76	$	2	$	–		$	–		$	78
Net income attributable to equity holders of the Bank	$	1,179		$	605	$	407	$	488		$	(10	)	$	2,669
Average assets ($ billions)	$	423		$	204	$	32	$	431		$	174		$	1,264
Average liabilities ($ billions)	$	326		$	149	$	48	$	400		$	269		$	1,192

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income and

non-interest

(2)

Interest income is reported net of interest expense as management relies primarily on net interest income as a performance measure.

(3)

(4)

Includes income (on a taxable equivalent basis) from associated corporations for Canadian Banking – $

18, International Banking – $77, Global Wealth Management – $5, and Other – $(16).


	For the three months ended July 31, 2021
Taxable equivalent basis ($ millions)	Canadian Banking		International Banking		Global Wealth Management			Global Banking and Markets			Other (1)			Total
Net interest income (2)	$	2,030	$	1,586	$	160		$	363		$	78		$	4,217
Non-interest income (3)(4)		765		776		1,175			890			(66	)		3,540
Total revenues		2,795		2,362		1,335			1,253			12			7,757
Provision for credit losses		69		339		(1	)		(27	)		–			380
Non-interest expenses		1,267		1,299		812			620			99			4,097
Provision for income taxes		380		160		132			147			(81	)		738
Net income	$	1,079	$	564	$	392		$	513		$	(6	)	$	2,542
Net income attributable to non-controlling interests in subsidiaries	$	–	$	78	$	2		$	–		$	1		$	81
Net income attributable to equity holders of the Bank	$	1,079	$	486	$	390		$	513		$	(7	)	$	2,461
Average assets ($ billions)	$	384	$	191	$	29		$	401		$	143		$	1,148
Average liabilities ($ billions)	$	317	$	146	$	46		$	373		$	194		$	1,076

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income and

non-interest

income and provision for income taxes of $74 to arrive at the amounts reported in the Consolidated Statement of Income, differences in the actual amount of costs incurred and charged to the operating segments.

(2)

Interest income is reported net of interest expense as management relies primarily on net interest income as a performance measure.

(3)

(4)

Includes income (on a taxable equivalent basis) from associated corporations for Canadian Banking – $

23, International Banking – $52, Global Wealth Management – $3, and Other – $(5).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	For the nine months ended July 31, 2022
Taxable equivalent basis ($ millions)	Canadian Banking		International Banking		Global Wealth Management		Global Banking and Markets			Other (1)			Total
Net interest income (2)	$	6,638	$	5,094	$	558	$	1,138		$	65		$	13,493
Non-interest income (3)(4)		2,258		2,129		3,534		2,680			(304	)		10,297
Total revenues		8,896		7,223		4,092		3,818			(239	)		23,790
Provision for credit losses		46		875		5		(77	)		4			853
Non-interest expenses		3,991		3,848		2,461		1,978			295			12,573
Provision for income taxes		1,266		512		424		490			(409	)		2,283
Net income	$	3,593	$	1,988	$	1,202	$	1,427		$	(129	)	$	8,081
Net income attributable to non-controlling interests in subsidiaries	$	–	$	213	$	7	$	–		$	–		$	220
Net income attributable to equity holders of the Bank	$	3,593	$	1,775	$	1,195	$	1,427		$	(129	)	$	7,861
Average assets ($ billions)	$	424	$	203	$	32	$	440		$	166		$	1,265
Average liabilities ($ billions)	$	328	$	149	$	48	$	409		$	258		$	1,192

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income and

non-interest

income and provision for income taxes of $276 to arrive at the amounts reported in the Consolidated Statement of Income, differences in the actual amount of costs incurred and charged to the operating segments.

(2)

Interest income is reported net of interest expense as management relies primarily on net interest income as a performance measure.

(3)

(4)

Includes income (on a taxable equivalent basis) from associated corporations for Canadian Banking – $

41, International Banking – $199, Global Wealth Management – $9, and Other – $(30).


	For the nine months ended July 31, 2021
Taxable equivalent basis ($ millions)	Canadian Banking		International Banking		Global Wealth Management		Global Banking and Markets			Other (1)			Total
Net interest income (2)	$	5,948	$	5,036	$	467	$	1,071		$	222		$	12,744
Non-interest income (3)(4)		2,119		2,265		3,566		2,775			96			10,821
Total revenues		8,067		7,301		4,033		3,846			318			23,565
Provision for credit losses		429		1,260		1		(50	)		–			1,640
Non-interest expenses		3,700		3,995		2,431		1,867			354			12,347
Provision for income taxes		1,021		498		414		456			(207	)		2,182
Net income	$	2,917	$	1,548	$	1,187	$	1,573		$	171		$	7,396
Net income attributable to non-controlling interests in subsidiaries	$	–	$	253	$	7	$	–		$	1		$	261
Net income attributable to equity holders of the Bank	$	2,917	$	1,295	$	1,180	$	1,573		$	170		$	7,135
Average assets ($ billions)	$	375	$	195	$	28	$	398		$	156		$	1,152
Average liabilities ($ billions)	$	311	$	149	$	44	$	386		$	191		$	1,081

(1)

Includes all other smaller operating segments and corporate adjustments, such as the elimination of the

tax-exempt

income

gross-up

reported in net interest income and

non-interest

income and provision for income taxes of $219 to arrive at the amounts reported in the Consolidated Statement of Income, differences in the actual amount of costs incurred and charged to the operating segments.

(2)

Interest income is reported net of interest expense as management relies primarily on net interest income as a performance measure.

(3)

(4)

Includes income (on a taxable equivalent basis) from associated corporations for Canadian Banking – $

69, International Banking – $154, Global Wealth Management – $10, and Other – $10.

17.	Interest income and expense


	For the three months ended																		For the nine months ended
	July 31, 2022						April 30, 2022						July 31, 2021						July 31, 2022						July 31, 2021
($ millions)	Interest income			Interest expense			Interest income			Interest expense			Interest income			Interest expense			Interest income			Interest expense			Interest income			Interest expense
Measured at amortized cost (1)	$	8,174		$	4,169		$	6,654		$	2,581		$	5,818		$	1,828		$	20,978		$	8,819		$	17,927		$	5,916
Measured at FVOCI (1)		450			–			261			–			171			–			892			–			540			–
		8,624			4,169			6,915			2,581			5,989			1,828			21,870			8,819			18,467			5,916
Other		261	(2)		40	(3)		177	(2)		38	(3)		112	(2)		56	(3)		570	(2)		128	(3)		333	(2)		140	(3)
Total	$	8,885		$	4,209		$	7,092		$	2,619		$	6,101		$	1,884		$	22,440		$	8,947		$	18,800		$	6,056

(1)

The interest income/expense on financial assets/liabilities are calculated using the effective interest method.

(2)

Includes dividend income on equity securities.

(3)

Includes interest on lease liabilities for the three months ended July 31, 2022 – $27 (April 30, 2022 – $26; July 31, 2021 – $26) and for the nine months ended July 31, 2022 – $80 (July 31, 2021 – $80).

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

18.	Earnings per share


	For the three months ended						For the nine months ended
($ millions)	July 31 2022		April 30 2022		July 31 2021		July 31 2022		July 31 2021
Basic earnings per common share
Net income attributable to common shareholders	$	2,504	$	2,595	$	2,426	$	7,707	$	6,980
Weighted average number of common shares outstanding (millions)		1,195		1,199		1,215		1,201		1,213
Basic earnings per common share (1) (in dollars)	$	2.10	$	2.16	$	2.00	$	6.41	$	5.75
Diluted earnings per common share
Net income attributable to common shareholders	$	2,504	$	2,595	$	2,426	$	7,707	$	6,980
Dilutive impact of share-based payment options and others (2)		6		–		9		91		41
Net income attributable to common shareholders (diluted)	$	2,510	$	2,595	$	2,435	$	7,798	$	7,021
Weighted average number of common shares outstanding (millions)		1,195		1,199		1,215		1,201		1,213
Dilutive impact of share-based payment options and others (2) (millions)		8		2		8		20		12
Weighted average number of diluted common shares outstanding (millions)		1,203		1,201		1,223		1,221		1,225
Diluted earnings per common share (1) (in dollars)	$	2.09	$	2.16	$	1.99	$	6.39	$	5.73

(1)

Earnings per share calculations are based on full dollar and share amounts.

(2)

Certain options as well as acquisition-related put/call options that the Bank may settle at its own discretion by issuing common shares were not included in the calculation of diluted earnings per share as they were anti-dilutive.

19.	Financial instruments

(a) Risk management

The Bank’s principal business activities result in a balance sheet that consists primarily of financial instruments. In addition, the Bank uses derivative financial instruments for both trading and hedging purposes. The principal financial risks that arise from transacting financial instruments include credit risk, liquidity risk and market risk. The Bank’s framework to monitor, evaluate and manage these risks is consistent with that in place as at October 31, 2021.

(i) Credit risk

Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to honour its financial or contractual obligations to the Bank.

Credit risk exposures disclosed below are presented based on the Basel framework utilized by the Bank. The Bank uses the Advanced Internal Ratings-Based approach (AIRB) for all material Canadian, U.S. and European portfolios, and for a significant portion of the international corporate and commercial portfolios. The remaining portfolios, including other international portfolios, are treated under the standardized approach. Under the AIRB approach, the Bank uses internal risk parameter estimates, based on historical experience.

Under the standardized approach, credit risk is estimated using the risk weights as prescribed by the Basel framework, either based on credit assessments by external rating agencies or based on the counterparty type for

non-retail

exposures and product type for retail exposures.


Exposure at default (1)	As at
	July 31, 2022						April 30 2022		October 31 2021
($ millions)	AIRB		Standardized		Total		Total		Total
By exposure sub-type
Non-retail (2)
Drawn ( 3 )( 4 )	$	451,781	$	59,753	$	511,534	$	512,917	$	459,902
Undrawn commitments		122,200		2,964		125,164		120,701		117,213
Other exposures ( 5 )		116,926		7,813		124,739		118,282		119,923
Total non-retail	$	690,907	$	70,530	$	761,437	$	751,900	$	697,038
Retail ( 2 )
Drawn (6)	$	278,686	$	105,831	$	384,517	$	371,078	$	345,947
Undrawn commitments and other exposures		55,530		821		56,351		54,321		51,020
Total retail	$	334,216	$	106,652	$	440,868	$	425,399	$	396,967
Total	$	1,025,123	$	177,182	$	1,202,305	$	1,177,299	$	1,094,005

(1)

After credit risk mitigation and excludes equity securities and other assets.

(2)

Commencing this quarter, certain small business loans have been reclassified from non-retail to retail based on regulatory definitions. Prior periods have not been restated.

(3)

Non-retail

AIRB drawn exposures include government guaranteed and privately insured mortgages.

(4)

Non-retail

drawn includes loans, bankers’ acceptances, deposits with financial institutions and FVOCI debt securities.

(5)

Includes

off-balance

sheet lending instruments such as letters of credit, letters of guarantee, securitizations,

over-the-counter

derivatives and repo-style transactions net of related collateral.

(6)

Retail drawn includes residential mortgages, credit cards, lines of credit and other personal loans.

Credit quality of

non-retail

exposures

The Bank’s

non-retail

portfolio is well diversified by industry. A significant portion of the authorized corporate and commercial lending portfolio was internally assessed at a grade that would generally equate to an investment grade rating by external rating agencies. There has not been a significant change in concentrations of credit risk since October 31, 2021.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Credit quality of retail exposures

The Bank’s retail portfolios consist of a number of relatively small loans to a large number of borrowers. The portfolios are distributed across Canada and a wide range of countries. As such, the portfolios inherently have a high degree of diversification. In addition, as of July 31, 2022, 28% (April 30, 2022 – 28%; October 31, 2021 – 31%) of the Canadian residential mortgage portfolio is insured. The average

loan-to-value

ratio of the uninsured portion of the Canadian residential mortgage portfolio is 46% (April 30, 2022 – 47%; October 31, 2021 – 49%).

Retail standardized portfolio

The retail standardized portfolio of $107 billion as at July 31, 2022 (April 30, 2022 – $99 billion; October 31, 2021 – $91

billion) was comprised of residential mortgages, personal loans, credit cards and lines of credit to individuals, mainly in Latin America and the Caribbean. Of the total retail standardized exposures,

$60 billion (April 30, 2022 – $60 billion; October 31, 2021 – $55 billion) was represented by mortgages and loans secured by residential real estate, mostly with a

loan-to-value

ratio of below 80%.

(ii) Liquidity risk

Liquidity risk is the risk that the Bank is unable to meet its financial obligations in a timely manner at reasonable prices. The Bank’s liquidity risk is subject to extensive risk management controls and is managed within the framework of policies and limits approved by the Board. The Board receives reports on risk exposures and performance against approved limits. The Asset/Liability Committee (ALCO) provides senior management oversight of liquidity risk.

The key elements of the Bank’s liquidity risk management framework include:

•

liquidity risk measurement and management limits, including limits on maximum net cash outflow by currency over specified short-term horizons;

•

prudent diversification of its wholesale funding activities by using a number of different funding programs to access the global financial markets and manage its maturity profile, as appropriate;

•

large holdings of liquid assets to support its operations, which can generally be sold or pledged to meet the Bank’s obligations;

•

liquidity stress testing, including Bank-specific, global-systemic, and combination systemic/specific scenarios; and

•

liquidity contingency planning.

The Bank’s foreign operations have liquidity management frameworks that are similar to the Bank’s framework. Local deposits are managed from a liquidity risk perspective based on the local management frameworks and regulatory requirements.

(iii) Market risk

Market risk arises from changes in market prices and rates (including interest rates, credit spreads, equity prices, foreign exchange rates and commodity prices), the correlations among them, and their levels of volatility.

Interest rate risk

Interest rate risk is the risk of loss due to the following: changes in the level, slope and curvature of the yield curve; the volatility of interest rates and changes in customers’ preferences (e.g. mortgage prepayment rates).

Non-trading

foreign currency risk

Foreign currency risk is the risk of loss due to changes in spot and forward rates.

As at July 31, 2022, a one per cent increase (decrease) in the Canadian dollar against all currencies in which the Bank operates decreases (increases) the Bank’s

before-tax

annual earnings by approximately $43 million due primarily from exposure to U.S. dollars (April 30, 2022 – $39 million; July 31, 2021 – $44 million) and the effect of which is not hedged.

A similar change in the Canadian dollar as at July 31, 2022, would increase (decrease) the unrealized foreign currency translation losses in the accumulated other comprehensive income section of shareholders’ equity by approximately $297 million (April 30, 2022 – $331 million; July 31, 2021 – $324 million), net of hedging.

Non-trading

equity risk

Equity risk is the risk of loss due to adverse movements in equity prices. The Bank is exposed to equity risk through its investment equity portfolios. The fair value of investment equity securities is shown in Note

Scotiabank Third Quarter Report 2022

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Trading portfolio risk management

The table below shows the Bank’s VaR by risk factor along with Stressed VaR:


	For the three months ended							As at			As at
	July 31, 2022							July 31			April 30			July 31
($ millions)	Average			High		Low		2022			2022			2021
Credit spread plus interest rate	$	13.5		$	16.6	$	10.4	$	16.2		$	10.2		$	9.1
Credit spread		5.8			7.8		4.5		5.3			5.5			4.1
Interest rate		12.5			15.0		9.6		15.0			9.6			9.7
Equities		4.5			6.0		3.2		4.6			5.1			3.2
Foreign exchange		2.5			5.3		1.3		2.3			1.8			1.8
Commodities		4.5			5.8		2.7		3.4			5.6			1.4
Debt specific		2.2			2.5		1.8		2.1			2.0			2.3
Diversification effect		(11.7	)		–		–		(11.5	)		(12.0	)		(7.2	)
Total VaR	$	15.5		$	18.3	$	11.5	$	17.1		$	12.7		$	10.6
Total Stressed VaR	$	28.6		$	39.1	$	19.3	$	31.4		$	25.7		$	39.4

(b) Financial instruments designated at fair value through profit or loss

In accordance with its risk management strategy, the Bank has elected to designate certain senior note liabilities at fair value through profit or loss to reduce an accounting mismatch between fair value changes in these instruments and fair value changes in related derivatives, and where a hybrid financial liability contains one or more embedded derivatives that are not closely related to the host contract. Changes in fair value of financial liabilities arising from the Bank’s own credit risk are recognized in other comprehensive income, without subsequent reclassification to net income.

The cumulative fair value adjustment due to own credit risk is determined at a point in time by comparing the present value of expected future cash flows over the term of these liabilities discounted at the Bank’s effective funding rate, and the present value of expected future cash flows discounted under a benchmark rate.

The following table presents the fair value of liabilities designated at fair value through profit or loss and their changes in fair value.


	Fair value						Change in fair value							Cumulative change in fair value (1)
	As at						For the three months ended									As at
($ millions)	July 31 2022		April 30 2022		July 31 2021		July 31 2022		April 30 2022		July 31 2021			July 31 2022		April 30 2022		July 31 2021
Liabilities
Senior note liabilities (2)	$	22,876	$	21,927	$	21,961	$	302	$	3,913	$	(554	)	$	4,410	$	4,108	$	(904	)

(1)

The cumulative change in fair value is measured from the instruments’ date of initial recognition.

(2)

Changes in fair value attributable to changes in the Bank’s own credit risk are recorded in other comprehensive income. Other changes in fair value are recorded in

non-interest

income – trading revenues. The offsetting fair value changes from associated derivatives is also recorded in

non-interest

income – trading revenues.

The following table presents the changes in fair value attributable to changes in the Bank’s own credit risk for financial liabilities designated at fair value through profit or loss as well as their contractual maturity and carrying amounts.


	Senior note liabilities
($ millions)		Contractual maturity amount		Carrying value		Difference between carrying value and contractual maturity amount	Change in fair value for the three month period attributable to change in own credit risk recorded in other comprehensive income		Cumulative change in fair value due to change in own credit risk (1)
As at July 31, 2022	$	27,286	$	22,876	$	4,410	$ 567	$	856
As at April 30, 2022	$	26,035	$	21,927	$	4,108	$ 787	$	289
As at July 31, 2021	$	21,057	$	21,961	$	(904)	$ 72	$	(705	)

(1)

The cumulative change in fair value is measured from the instruments’ date of initial recognition.

Fair value of financial instruments

The calculation of fair value is based on market conditions at a specific point in time and therefore may not be reflective of future fair values. The Bank has controls and processes in place to ensure that the valuation of financial instruments is appropriately determined.

Refer to Note 7 of the Bank’s audited consolidated financial statements in the 2021 Annual Report for the valuation techniques used to fair value its significant financial assets and liabilities.

Scotiabank Third Quarter Report 2022

Table of Contents

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table sets out the fair values of financial instruments of the Bank and excludes

non-financial

assets, such as property and equipment, investments in associates, precious metals, goodwill and other intangible assets.


	As at
	July 31, 2022				April 30, 2022				October 31, 2021
($ millions)	Total fair value		Total carrying value		Total fair value		Total carrying value		Total fair value		Total carrying value
Assets:
Cash and deposits with financial institutions	$	67,715	$	67,715	$	85,910	$	85,910	$	86,323	$	86,323
Trading assets		118,605		118,605		133,644		133,644		146,312		146,312
Securities purchased under resale agreements and securities borrowed		155,217		155,217		148,706		148,706		127,739		127,739
Derivative financial instruments		47,139		47,139		54,608		54,608		42,302		42,302
Investment securities – fair value		86,674		86,674		83,788		83,788		57,042		57,042
Investment securities – amortized cost		21,117		21,548		16,107		16,699		18,133		18,157
Loans		704,332		713,378		684,215		689,702		641,964		636,986
Customers’ liability under acceptances		19,817		19,817		19,043		19,043		20,404		20,404
Other financial assets		25,795		25,795		19,349		19,349		14,256		14,256
Liabilities:
Deposits		872,181		879,582		869,308		876,554		798,335		797,259
Financial instruments designated at fair value through profit or loss		22,876		22,876		21,927		21,927		22,493		22,493
Acceptances		19,844		19,844		19,070		19,070		20,441		20,441
Obligations related to securities sold short		44,220		44,220		44,620		44,620		40,954		40,954
Derivative financial instruments		56,880		56,880		57,123		57,123		42,203		42,203
Obligations related to securities sold under repurchase agreements and securities lent		128,145		128,145		131,978		131,978		123,469		123,469
Subordinated debentures		8,273		8,413		8,360		8,447		6,733		6,334
Other financial liabilities		43,281		43,830		41,679		41,949		39,802		40,254

(d) Fair value hierarchy

The best evidence of fair value for a financial instrument is the quoted price in an active market. Unadjusted quoted market prices for identical instruments represent a Level 1 valuation. Where possible, valuations are based on quoted prices or observable inputs obtained from active markets.

Quoted prices are not always available for

over-the-counter

transactions, as well as transactions in inactive or illiquid markets. In these instances, internal models that maximize the use of observable inputs are used to estimate fair value. The chosen valuation technique incorporates all the factors that market participants would take into account in pricing a transaction. When all significant inputs to models are observable, the valuation is classified as Level 2. Financial instruments traded in a less active market are valued using indicative market prices or other valuation techniques. Fair value estimates do not consider forced or liquidation sales.

Where financial instruments trade in inactive markets, illiquid markets or when using models where observable parameters do not exist, greater management judgment is required for valuation purposes. Valuations that require the significant use of unobservable inputs are classified as Level 3.

Scotiabank Third Quarter Report 2022

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table outlines the fair value hierarchy and instruments carried at fair value on a recurring basis.


							As at
	July 31, 2022								April 30, 2022
($ millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Instruments carried at fair value on a recurring basis:
Assets:
Precious metals (1)	$	–	$	837	$	–	$	837	$	–	$	1,056	$	–	$	1,056
Trading assets
Loans		–		8,295		–		8,295		–		8,483		–		8,483
Canadian federal government and government guaranteed debt		2,388		12,734		–		15,122		7,630		3,716		–		11,346
Canadian provincial and municipal debt		201		9,845		–		10,046		4,000		4,608		–		8,608
U.S. treasury and other U.S. agencies’ debt		7,667		196		–		7,863		7,552		100		–		7,652
Other foreign governments’ debt		131		8,376		–		8,507		76		9,106		–		9,182
Corporate and other debt		2,170		8,729		2		10,901		2,667		9,070		1		11,738
Equity securities		55,565		493		41		56,099		74,813		71		3		74,887
Other		–		1,772		–		1,772		–		1,748		–		1,748
	$	68,122	$	50,440	$	43	$	118,605	$	96,738	$	36,902	$	4	$	133,644
Investment securities (2)
Canadian federal government and government guaranteed debt	$	649	$	10,031	$	–	$	10,680	$	5,011	$	4,700	$	–	$	9,711
Canadian provincial and municipal debt		–		4,745		–		4,745		1,711		3,490		–		5,201
U.S. treasury and other U.S. agencies’ debt		34,681		1,943		–		36,624		33,515		2,019		–		35,534
Other foreign governments’ debt		2,425		25,031		120		27,576		189		26,261		17		26,467
Corporate and other debt		56		1,449		56		1,561		36		1,406		60		1,502
Equity securities		3,702		227		1,559		5,488		3,659		233		1,481		5,373
	$	41,513	$	43,426	$	1,735	$	86,674	$	44,121	$	38,109	$	1,558	$	83,788
Derivative financial instruments
Interest rate contracts	$	4	$	12,641	$	10	$	12,655	$	–	$	9,923	$	8	$	9,931
Foreign exchange and gold contracts		–		22,820		–		22,820		–		26,027		–		26,027
Equity contracts		262		2,444		30		2,736		251		8,273		26		8,550
Credit contracts		–		573		–		573		–		487		–		487
Commodity contracts		–		8,344		11		8,355		–		9,602		11		9,613
	$	266	$	46,822	$	51	$	47,139	$	251	$	54,312	$	45	$	54,608
Liabilities:
Deposits	$	–	$	131	$	–	$	131	$	–	$	106	$	–	$	106
Financial liabilities designated at fair value through profit or loss		–		22,864		12		22,876		–		21,840		87		21,927
Obligations related to securities sold short		30,835		13,382		3		44,220		38,131		6,487		2		44,620

Derivative financial instruments
Interest rate contracts		6		17,571		7		17,584		–		17,835		7		17,842
Foreign exchange and gold contracts		–		28,235		–		28,235		–		27,261		–		27,261
Equity contracts		538		3,681		13		4,232		524		2,904		6		3,434
Credit contracts		–		23		–		23		–		27		–		27
Commodity contracts		–		6,800		6		6,806		–		8,553		6		8,559
	$	544	$	56,310	$	26	$	56,880	$	524	$	56,580	$	19	$	57,123

(1)

The fair value of precious metals is determined based on quoted market prices and forward spot prices, where applicable, less the cost to sell.

(2)

Excludes debt investment securities measured at amortized cost of $21,548

(April 30, 2022 – $16,699).

Scotiabank Third Quarter Report 2022

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	As at October 31, 2021
($ millions)	Level 1		Level 2		Level 3		Total
Instruments carried at fair value on a recurring basis:
Assets:
Precious metals (1)	$	–	$	755	$	–	$	755
Trading assets
Loans		–		8,113		–		8,113
Canadian federal government and government guaranteed debt		9,272		3,842		–		13,114
Canadian provincial and municipal debt		5,556		4,298		–		9,854
U.S. treasury and other U.S. agencies’ debt		6,760		63		–		6,823
Other foreign governments’ debt		129		9,559		–		9,688
Corporate and other debt		2,595		9,185		40		11,820
Equity securities		85,688		160		1		85,849
Other		–		1,051		–		1,051
	$	110,000	$	36,271	$	41	$	146,312
Investment securities (2)
Canadian federal government and government guaranteed debt	$	1,125	$	4,679	$	–	$	5,804
Canadian provincial and municipal debt		1,937		3,218		–		5,155
U.S. treasury and other U.S. agencies’ debt		11,462		2,175		–		13,637
Other foreign governments’ debt		67		26,605		17		26,689
Corporate and other debt		10		1,319		27		1,356
Equity securities		2,879		218		1,304		4,401
	$	17,480	$	38,214	$	1,348	$	57,042
Derivative financial instruments
Interest rate contracts	$	–	$	13,124	$	1	$	13,125
Foreign exchange and gold contracts		–		18,293		–		18,293
Equity contracts		184		3,513		21		3,718
Credit contracts		–		245		–		245
Commodity contracts		–		6,921		–		6,921
	$	184	$	42,096	$	22	$	42,302
Liabilities:
Deposits	$	–	$	175	$	–	$	175
Financial liabilities designated at fair value through profit or loss		–		22,354		139		22,493
Obligations related to securities sold short		35,487		5,467		–		40,954

Derivative financial instruments
Interest rate contracts		–		13,148		15		13,163
Foreign exchange and gold contracts		–		18,171		–		18,171
Equity contracts		307		4,737		6		5,050
Credit contracts		–		30		–		30
Commodity contracts		–		5,789		–		5,789
	$	307	$	41,875	$	21	$	42,203

(1)

The fair value of precious metals is determined based on quoted market prices and forward spot prices, where applicable

, less the cost to sell.

(2)

Excludes debt investment securities measured at amortized cost of $18,157.

Level 3 instrument fair value changes

Financial instruments categorized as Level 3 as at July 31, 2022, in the fair value hierarchy comprise certain foreign government bonds, structured corporate bonds, equity securities, complex derivatives, financial liabilities designated at fair value through profit or loss and obligations related to securities sold short.

The following table summarizes the changes in Level 3 instruments carried at fair value for the three months ended July 31, 2022.

Scotiabank Third Quarter Report 2022

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

All positive balances represent assets and negative balances represent liabilities. Consequently, positive amounts indicate purchases of assets or settlements of liabilities and negative amounts indicate sales of assets or issuances of liabilities.


	As at July 31, 2022
($ millions)		Fair value, beginning of the quarter			Gains/ (losses) recorded in income			Gains/ (losses) recorded in OCI			Purchases/ Issuances			Sales/ Settlements			Transfers into/out of Level 3			Fair value, end of the quarter			Changes in unrealized gains/(losses) recorded in income for instruments still held (1)
Trading assets

Corporate and other debt	$	1		$	1		$	–		$	–		$	–		$	–		$	2		$	1
Equity securities		3			–			–			1			–			37			41			–
		4			1			–			1			–			37			43			1
Investment securities
Other foreign governments’ debt		17			–			–			60			–			43			120			n/a
Corporate and other debt		60			1			–			–			(5	)		–			56			–
Equity securities		1,481			83			(3	)		29			(31	)		–			1,559			83
		1,558			84			(3	)		89			(36	)		43			1,735			83
Derivative financial instruments – assets
Interest rate contracts		8			–			–			2			–			–			10			–
Equity contracts		26			2			–			–			–			2			30			2	(2)
Commodity contracts		11			–			–			–			–			–			11			–

Derivative financial instruments – liabilities
Interest rate contracts		(7	)		–			–			–			–			–			(7	)		–	( 3 )
Equity contracts		(6	)		1			–			(1	)		–			(7	)		(13	)		1	(2)
Commodity contracts		(6	)		–			–			–			–			–			(6	)		–
		26			3			–			1			–			(5	)		25			3

Financial liabilities designated at fair value through profit or loss		(87	)		(4	)		–			–			–			79			(12	)		–

Obligations related to securities sold short		(2	)		–			–			–			–			(1	)		(3	)		–
Total	$	1,499		$	84		$	(3	)	$	91		$	(36	)	$	153		$	1,788		$	87

(1)

These amounts represent the gains and losses from fair value changes of Level 3 instruments still held at the end of the period that are recorded in the Consolidated Statement of Income.

(2)

Certain unrealized gains and losses on derivative assets and liabilities are largely offset by

mark-to-market

changes on other instruments included in trading revenues in the Consolidated Statement of Income, since these instruments act as an economic hedge to certain derivative assets and liabilities.

(3)

Certain unrealized losses on interest rate derivative contracts are largely offset by

mark-to-market

changes on embedded derivatives on certain deposit liabilities in the Consolidated Statement of Income.

The following tables summarize the changes in Level 3 instruments carried at fair value for the three months ended April 30, 2022 and October 31, 2021.


	As at April 30, 2022
($ millions)	Fair value, beginning of the quarter			Gains/ (losses) recorded in income (1)			Gains/ (losses) recorded in OCI		Purchases/ Issuances		Sales/ Settlements		Transfers into/ out of Level 3			Fair value, end of the quarter
Trading assets	$	5		$	(2	)	$	–	$	2	$	–	$	(1	)	$	4
Investment securities		1,495			58			(3)		116		(103)		(5	)		1,558
Derivative financial instruments		–			10			–		–		–		16			26
Financial liabilities designated at fair value through profit or loss		(137	)		25			–		(22)		–		47			(87	)
Obligations related to securities sold short		(2	)		–			–		–		–		–			(2	)

(1)

Gains or losses for items in Level 3 may be offset with losses or gains on related hedges in Level 1 or Level 2.

Scotiabank Third Quarter Report 2022

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


	As at October 31, 2021
($ millions)	Fair value, beginning of the quarter			Gains/ (losses) recorded in income (1)			Gains/ (losses) recorded in OCI		Purchases/ Issuances			Sales/ Settlements		Transfers into/ out of Level 3			Fair value, end of the quarter
Trading assets	$	4		$	(1	)	$	–	$	28		$	–	$	10		$	41
Investment securities		1,190			83			28		78			(32)		1			1,348
Derivative financial instruments		(35	)		4			–		(12)			51		(7	)		1
Financial liabilities designated at fair value through profit or loss		(119	)		–			–		(20	)		–		–			(139	)

(1)

Gains or losses for items in Level 3 may be offset with losses or gains on related hedges in Level 1 or Level 2.

Significant transfers

Significant transfers can occur between the fair value hierarchy levels when additional or new information regarding valuation inputs and their refinement and observability become available. The Bank recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

The following significant transfers made between Level 1 and 2, were based on whether the fair value was determined using quoted market prices from an active market.

During the three months ended July 31, 2022:

•

Trading assets of $513

million, investment securities of $435

million and obligations related to securities sold short of $33 million were transferred out of Level 2 into Level 1.

•

Trading assets of $10,161 million, investment securities of $6,225

million and obligations related to securities sold short of $5,517 million were transferred out of Level 1 into Level 2.

During the three months ended April 30, 2022:

•

Trading assets of $1,191 million, investment securities of $475 million and obligations related to securities sold short of $624 million were transferred out of Level 2 into Level 1.

•

Trading assets of $1,306 million, investment securities of $463 million and obligations related to securities sold short of $361 million were transferred out of Level 1 into Level 2.

During the three months ended October 31, 2021:

•

Trading assets of $9,455 million, investment securities of $3,407 million and obligations related to securities sold short of $2,550 million were transferred out of Level 2 into Level 1.

•

Trading assets of $9,972 million, investment securities of $13,474 million and obligations related to securities sold short of $2,235 million were transferred out of Level 1 into Level 2.

There were no significant transfers into and out of Level 3 during the three months ended July 31, 2022, April 30, 2022 and October 31, 2021.

Level 3 sensitivity

The Bank applies judgment in determining unobservable inputs used to calculate the fair value of Level 3 instruments.

Refer to Note 7 of the Bank’s audited consolidated financial statements for the year ended October 31, 2021 for a description of the significant unobservable inputs for Level 3 instruments and the potential effect that a change in each unobservable input may have on the fair value measurement. There have been no significant changes to the Level 3 sensitivities during the quarter.

20.	Corporate income taxes

Tax Assessments

Prior to the third quarter of 2022, the Bank received reassessments totaling $

1,206

million of tax and interest as a result of the Canada Revenue Agency (the “CRA”) and the Alberta Tax and Revenue Administration denying the tax deductibility of certain Canadian dividends received during the 2011-2016 taxation years and from Revenu Quebec in respect of the 2011-2015 taxation years regarding the same matters. In the third quarter of 2022, the Bank received a reassessment of $

303

million of tax and interest from the CRA in respect of its 2017 taxation year and a reassessment of $4 million of tax and interest from Revenu Quebec in respect of its 2016 taxation year. The circumstances of the dividends subject to these reassessments are similar to those prospectively addressed by rules introduced in 2015 and 2018.

In 2021, a subsidiary of the Bank received withholding tax assessments from the CRA in respect of certain of its securities lending transactions for its 2014 and 2015 taxation years totaling $173 million of tax, penalties and interest. In the first quarter of 2022, assessments totaling $297 million were received in respect of similar securities lending transactions in 2016 and 2017.

In respect of both matters, the Bank is confident that its tax filing position was appropriate and in accordance with the relevant provisions of the Income Tax Act (Canada) and intends to vigorously defend its position.

2022 Proposed Canadian Federal Tax Measures

15%

tax on “taxable income” in excess of

billion, as well as an increase of

1.5%

to the Bank’s corporate income tax rate on its future taxable income above $100

million. The draft legislation provided more detail on the basis for the CRD, including that “taxable income” will be based on the average taxable income for the 2020 and 2021 taxation years. The proposed tax measures will be recorded for financial statement purposes in the taxation year when substantively enacted, and the CRD will be payable in equal amounts

over

five years.

The public comment period is open until September 30, 2022 before the legislation moves into legislative readings.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

21.	Acquisition and Divestiture

Acquisition

Acquisition that closed during the prior period

Scotiabank Chile

In Q2 2022,

the Bank completed the acquisition of an additional 16.8% stake in Scotiabank Chile for $1.2 billion from the

non-controlling

interest shareholder, increasing its ownership to 99.8%. The purchase consideration was comprised of cash of $650 million and the issuance of 7 million common shares valued at $569 million. The increase in ownership was effective February 27, 2022. This transaction was accounted for as a capital transaction through shareholders’ equity and did not result in a change to the carrying value of the assets and liabilities of the subsidiary, or the Bank’s associated goodwill.

Scotiabank Chile forms part of the International Banking business segment.

Divestiture

Divestiture previously announced not impacting the Bank’s financial results

Operations in Guyana

On June 9, the Bank announced that the agreement for the sale of its banking operations in Guyana to First Citizens Bank Limited, initially signed on March 3, 2021, has expired and has therefore been terminated in accordance with its terms.

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SHAREHOLDER INFORMATION

Direct Deposit Service

Shareholders may have dividends deposited directly into accounts held at financial institutions which are members of the Canadian Payments Association. To arrange direct deposit service, please write to the transfer agent.

Dividend and Share Purchase Plan

Scotiabank’s dividend reinvestment and share purchase plan allows common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage or administrative fees.

As well, eligible shareholders may invest up to $20,000 each fiscal year to purchase additional common shares of the Bank. All administrative costs of the plan are paid by the Bank.

For more information on participation in the plan, please contact the transfer agent.

Dividend Dates for 2022

Record and payment dates for common and preferred shares, subject to approval by the Board of Directors.


Record Date		Payment Date
January 4, 2022		January 27, 2022
April 5, 2022		April 27, 2022
July 5, 2022		July 27, 2022
October 4, 2022		October 27, 2022

Annual Meeting

The Annual Meeting for fiscal year 2022 is scheduled for April 4, 2023.

Website

For information relating to Scotiabank and its services, visit us at our website: www.scotiabank.com.

Conference Call and Web Broadcast

The quarterly results conference call will take place on August 23, 2022, at 8:00 am EDT and is expected to last approximately one hour. Interested parties are invited to access the call live, in listen-only mode, by telephone at

416-641-6104

or toll-free, at

1-800-952-5114

using ID 2921392# (please call shortly before 8:00 am EDT). In addition, an audio webcast, with accompanying slide presentation, may be accessed via the Investor Relations page of www.scotiabank.com.

Following discussion of the results by Scotiabank executives, there will be a question and answer session. A telephone replay of the conference call will be available from August 23, 2022, to September 29, 2022, by calling

905-694-9451

1-800-408-3053

(North America toll-free) and entering the access code 1127377#. The archived audio webcast will be available on the Bank’s website for three months.

Contact Information

Investors:

Financial Analysts, Portfolio Managers and other Institutional Investors requiring financial information, please contact Investor Relations, Finance Department:

Scotiabank

Scotia Plaza, 44 King Street West

Toronto, Ontario, Canada M5H 1H1

Telephone:

(416) 775-0798

E-mail:

investor.relations@scotiabank.com

Global Communications:

Scotiabank

44 King Street West, Toronto, Ontario

Canada M5H 1H1

E-mail:

corporate.communications@scotiabank.com

Shareholders:

For enquiries related to changes in share registration or address, dividend information, lost share certificates, estate transfers, or to advise of duplicate mailings, please contact the Bank’s transfer agent:

Computershare Trust Company of Canada

100 University Avenue, 8th Floor

Toronto, Ontario, Canada M5J 2Y1

Telephone:

1-877-982-8767

E-mail:

service@computershare.com

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SHAREHOLDER INFORMATION

Co-Transfer

Agent (U.S.A.)

Computershare Trust Company, N.A.

Overnight Mail Delivery:

Computershare C/O: Shareholder Services

462 South 4th Street, Suite 1600

Louisville, KY 40202

First Class, Registered or Certified Mail Delivery:

Computershare C/O: Shareholder Services

P.O. Box 505000, Louisville, KY 40233-5000

Tel:

1-800-962-4284

E-mail:

service@computershare.com

For other shareholder enquiries, please contact the Corporate Secretary’s Department:

Scotiabank

Scotia Plaza, 44 King Street West

Toronto, Ontario, Canada M5H 1H1

Telephone:

(416) 866-3672

E-mail:

corporate.secretary@scotiabank.com

Rapport trimestriel disponible en français

Le Rapport annuel et les états financiers de la Banque sont publiés en français et en anglais et distribués aux actionnaires dans la version de leur choix. Si vous préférez que la documentation vous concernant vous soit adressée en français, veuillez en informer Relations publiques, Affaires de la société et Affaires gouvernementales, La Banque de Nouvelle-Écosse, Scotia Plaza, 44, rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si possible, l’étiquette d’adresse, afin que nous puissions prendre note du changement.

Scotiabank Third Quarter Report 2022

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		The Bank of Nova Scotia is incorporated in Canada with limited liability.