The Bank of Nova Scotia (NYSE:BNS) Q2 2018 Earnings Conference Call - Preliminary Transcript

May 29, 2018 • 08:00 am ET

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The Bank of Nova Scotia (NYSE:BNS) Q2 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Adam Borgatti

Good morning, and welcome to Scotiabank's 2018 second quarter results presentation. My name is Adam Borgatti, Vice President of Investor Relations. Presenting to you this morning is Brian Porter, Scotiabank's President and Chief Executive Officer; Sean McGuckin, our Chief Financial Officer; and Daniel Moore, our Chief Risk Officer. Following our comments, we will be glad to take your questions. Also, in the room with us to take questions are Scotiabank's business line group heads, James O'Sullivan from Canadian Banking, Nacho Deschamps from International Banking, and Dieter Jentsch from Global Banking and Markets. Before we start, and on behalf of those speaking today, I will refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to Brian Porter.

Executive
Brian Porter

Thank you, Adam and good morning, everyone. I'll start on Slide 4. We're pleased to report our second quarter results to our shareholders. In Q2, Scotiabank delivered $2.2 billion of earnings up 6% compared to last year. Diluted earnings per share of $1.70 was up 5%, while return on equity was strong at 14.9%. Turning to the business lines, for the fourth straight quarter, Canadian Banking delivered earnings in excess of $1 billion. The division performed well and results were driven by solid asset growth, led by commercial and small business, auto and mortgages, margin expansion, and improving credit quality. Higher year-over-year levels of investment in regulatory and technology will support stronger controls, enhance digital capabilities, and an improved omnichannel experience for our customers.

International Banking delivered another strong quarter, driven by double-digit loan growth in the Pacific Alliance, positive operating leverage, and solid credit quality. Overall, our personal and commercial banking businesses, which generate roughly 80% of Scotiabank's earnings, continued to deliver strong earnings growth and improving return on equity. Global Banking and Markets performance was marked by increases in net interest income and improving credit quality. This was against a very strong comparable quarter last year that was driven by unusually high levels of client equity trading activity. At the enterprise level, I'm pleased to report that our structural cost reduction initiatives are one year ahead of schedule. For the first half of the year, the Bank generated positive operating leverage of 3.3%, adjusted for the benefits of the remeasurement credit in the first quarter. The Bank remains very well capitalized with a Common Equity Tier 1 ration of 12%.

Our strong financial position provides us with optionality to invest in our businesses organically, grow through acquisitions and return capital to our shareholders. This quarter's strong performance reflects the ongoing execution of our strategy, to build a superior experience for our customers, harness the Bank's untapped potential across our footprint, and strengthen the core of the Bank by enhancing our capabilities and controls. I'll now turn the call over to Sean to discuss our financial performance.

Executive
Sean McGuckin

Thanks, Brian. Good morning. I will begin on Slide 6, which shows our key financial performance metrics for Q2 2018. The Bank