Good morning, and welcome to Scotiabank’s 2019 First Quarter Results Presentation. My name is Philip Smith, Senior Vice President of Investor Relations. Presenting to you this morning is Brian Porter, Scotiabank’s President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Daniel Moore, our Chief Risk Officer. Following our comments, we will be glad to take your questions. Also present to take questions are Scotiabank’s business line group heads: James O’Sullivan from Canadian Banking; Nacho Deschamps from International Banking; and Jake Lawrence and James Neate 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.

Thank you, Phil and good morning, everyone. I will be starting on slide 4. During the first quarter, we demonstrated continued progress in the execution of our strategy by achieving several important objectives, which position us for further growth, simplify our footprint and operations and de-risk the bank. This morning, we adapted the strategy even further by announcing that the Bank has signed a non-binding memorandum of understanding to combine Thanachart Bank with Thai Military Bank. This transaction, if completed, would allow us to monetize most of our investments in Thanachart Bank and increase our common equity tier 1 ratio, while retaining a smaller equity interest in a larger, stronger combined bank. In terms of our financial performance in the quarter, the bank delivered adjusted earnings of 2.3 billion and diluted earnings per share of $1.75. Our return on equity was 13.7%. Based on these results, we are increasing our quarterly dividend to shareholders by $0.02 to $0.87 per share. This represents a 6% increase over the prior year. While market volatility negatively impacted some of our businesses in the quarter, we still experienced strong growth in revenue, up 7%, assets up 12% and deposits up 9% on a year-over-year basis, while continuing to invest in our businesses. International banking delivered double digit earnings growth and positive operating leverage. Our capital ratios continue to be strong and our integration efforts are tracking very well. This growth allows the bank to reach $1 trillion in assets for the first time. I would like to thank our customers for their trust and loyalty and our employees for their dedication and hard work in achieving this important milestone. Higher expenses reflected the impact of acquisitions and continued investment in our businesses. We also demonstrated good progress, integrating previously announced acquisitions, BBVA Chile and…

Thanks, Brian. I'll begin on slide 6, which provides a brief progress update on integration and synergies associated with our recent material acquisitions of BBVA Chile and MD Financial. Client retention rates at MD financial are ahead of plan with 98% of both assets and clients so far which speaks to the continued high levels of client trust with MD Financial. Employee satisfaction also remains high and we've experienced minimal advisor attrition. We had over 1600 cross referrals between Scotiabank and MD Financial since September 2018. With regards to BBVA Chile, we've captured approximately 45% of our total target synergies to date and remain on track to achieve total pretax synergies of $1.150 million to $1.180 million per year by 2020. Our existing operations in Chile with BBVA Chile has resulted in increased loan market share of approximately 16 basis points year over year. Client attrition is tracking well below our expectations, which were 5% in retail and 10% in commercial. Overall, we remain on track to achieve our targeted attrition of $0.15 to adjusted diluted EPS in 2020 for acquisitions that we announced in 2018. Turning now to the Q1 19 key financial performance on slide seven. All my comments will be on an adjusted basis, which excludes acquisition related costs. We’re pleased with the bank’s solid start to 2019, particularly in light of the market volatility that negatively impacted our global banking and markets businesses. The bank delivered $2.3 billion in earnings and diluted EPS of $1.75 for the quarter, down 6% compared to last year. Excluding the impact of the re-measurement benefit of $150 million or $0.12 cents per share in Q1 2018, adjusted diluted EPS was in line year-over-year. Revenues increased 7% from last year, driven by solid growth in both net interest and non-interest income,…

Thank you, Raj and I’ll turn to slide 14. In summary, we continue to be comfortable with the risk fundamentals of our portfolio. That's because underlying credit quality trends are stable across our retail and across our commercial portfolios in Canada and indeed across the Pacific Alliance countries. For instance, in Canada, we continue to see improving delinquency rates in all geographies and products. We believe this performance is attributable to our focus on high quality A and B grade customers. The bank continues to make tangible investments across our collection capabilities and in our data analytics capabilities to better segment our customers for pre-approvals and credit limit increases as well as credit limit reductions where necessary. As well, we continue to perform ongoing stress testing, which considers factors of housing price declines, higher interest rates, unemployment, as well as the impact of higher trade tensions across global economies. These capabilities along with our diversified geographic and product footprint position us well for a variety of macroeconomic outcomes. Turning now to the quarter, our PCL ratio on impaired loans or what is referred to as stage 3 came in at 47 basis points, up 5 basis points compared to last quarter and 4 basis points relative to last year. This growth was in line with portfolio growth and changing business mix as international which has a higher PCL ratio than global banking markets and Canadian banking now comprises a larger portion of our total portfolio due to recent acquisitions. The total PCL ratio is up 8 basis points versus last quarter, reflecting higher performing and impaired PCL. The increase in performing loan PCLs this quarter was primarily due to higher provisions in international banking, which benefited last quarter from the reversal of Hurricane related provisions. The increase in impaired provisions…

Thank you, Daniel. Before we open the call for questions, I'd like to make a few comments on the bank’s strategic progress to date and where we are headed. Regarding the announcement today on Thanachart Bank, it marks a major step in the repositioning of the bank's geographic footprint that began five years ago. During this period, we have announced or completed the sale of our operations in 18 countries and sold five non-core businesses, while simultaneously gaining scale in our key markets and businesses, improving the quality of our earnings, building capital and greatly improving our technology and controls. The collective management actions result in a better lower risk bank with focused operations. We are better positioned to provide excellent products and services to our customers and a stronger return to our shareholders. As I discussed previously in 2019, we will be focused on the integration of our recent acquisitions. If completed, the sale of Thanachart Bank would provide the bank with greater optionality, which includes growing our key operations in the Americas. With that, I'll now turn the call back to Raj.

Thanks, Brian. That concludes our prepared remarks. We’ll now be pleased to take your questions. Please limit yourself to one question and then rejoin the queue to allow everyone the opportunity to participate in the call. Operator, can we have the first question on the phone please?

Yes, sir. We will first go to Robert Sedran with CIBC Capital Markets.

Hi, good morning. I wanted to ask about expenses and I guess both in Canada and in the global banking and markets segment, maybe start with James, just the operating leverage guidance for the year was better, I guess, than what we saw in Q1. Can you give us a bit of an update on what you're thinking? And then on the global banking side, a pretty big surge in expenses and the explanation is the same on both slides, the technology and regulatory spending, just curious if there's something abnormal in that global banking end markets number this quarter? James O’Sullivan: Alright, well I'll start with domestic banking, Rob and good morning. So expense growth in domestic banking was 2% year-over-year. There is an IFRS15 impact there. So adjusted for IFRS 15, expense growth was 6%. We do expect it to moderate from here. We had what I would describe as a bit of a tough comp from this time last year. So our perspective on expenses is that expense growth will take their cue from revenue growth and that's how we're thinking about the balance of the year. In terms of operating leverage, we did have negative operating leverage for the quarter, but I think with a productivity ratio of 46% for the quarter in our domestic banking business, I think we pretty clearly have our medium term target of 45% or better insight and that's what we're gunning for.

I’ll start on GBM, Rob, it’s Raj. Year-over-year, yes, expense growth was off, as a percentage, 13%, but as you can see, it's off of a small base and GBM has got a lot of regulatory and technology investment ongoing, simply because of the markets that we operate in, the fact that we need to predict the perimeter of the bank and lot of those relating to either regulatory changes or AMN related. Jake, I don't know if you want to add some more on that?

Yeah. Rob, quarter-over-quarter, we also had some seasonality and performance related compensation, but we're more confident in the revenue outlook from here, which will drive a better operating leverage picture as we go over the course of 2019.

And I think specifically on the expense, Rob, for GBM, we expect it to moderate towards the second half of the year. It's a lot of investments in the early part of the year, frankly starting from the second half of last year, but expected to moderate in the second half of this year.

Just when I look at the sub pack Raj, I see it almost 100 million higher than in Q3 and Q4 of last year. I understand it's off of a smaller base, but $100 million is still a fair bit of a move. So I appreciate the comments around seasonality, but I was just curious if there's something that I'm missing on that front, but I guess I will move on.

Okay.

We’ll next go to Meny Grauman with Cormark Securities.

Just wanted to dig a little bit deeper into revenue growth in Canadian banking, especially if you look excluding wealth management, flat year-over-year and down sequentially. So just wondering if there's anything unusual there that you'd highlight and then if you look forward, what do you expect to improve for the rest of the -- or do you expect this picture to improve for the rest of the year? James O’Sullivan: Sure. Thanks, Meny. So again, if you adjust for the impact of IFRS 15 and the impact of reduced one times because we did have an interacting this time last year and meaningful real estate gains as well, if you adjust for those two, revenue growth is about 4%. And I’d say the balance, the difference between that and what we might have expected for Q1, I would describe as business conditions, including volumes and spreads. Volumes were lower than planned and margins were tighter than planned, but we have a positive outlook, Meny. November and December I think were months of peak volatility and markets. Clearly, markets have recovered. We think normalcy is returning to the business environment as well and that really forms the basis of our outlook, job creation is going to continue and that's going to drive consumer borrowing. So for revenue growth, we expect it to improve from here, particularly I would say in the second half of the year, and again, I think it's improving macro and the reduced impact of one-times are going to drive that revenue growth.

Just on a related question, I know there's reports that the federal budget is going to include some easing of mortgage rules, where do you stand on that issue? And you factor that into your outlook in terms of maybe seeing even an acceleration in mortgage business related to that? James O’Sullivan: Yeah, so residential mortgage growth came in at 3% on a year over year basis, as it did last quarter. I think there's some really important information for all of us, just around the corner. And that information is going to come to us in the spring housing market, which should start in the coming weeks and we're positioning ourselves, Meny, for that market, we want to be a strong participant in it. So as we sit here today, our goal would continue to be 4% or so mortgage growth for the full year. And as we said before, we feel much better about Canada's housing markets today than we did 24 months ago. We continue to believe that we're getting the soft landing that many of us have encouraged. And I think if you look at the latest data from the Canadian Real Estate Association or the MLS data, I think it's consistent with that view. Home sales are down 4% year over year, but the home price index is up 1%. So we look at the market and we see strong housing demand fundamentals. So that's low unemployment, tight labor markets pretty much across the country, aging millennials and strong immigration. So we think fundamentals can and will drive the market forward and we were particularly impressed with the January employment data. So, look, just around the corner is a spring housing market, we think that's a very important data point for everyone associated with this industry.

Next, we'll go to Doug Young with Desjardins Capital Markets.

I guess maybe just a two part question on the international banking side, but it should be fairly quick. Just one, if I do the back of the envelope, looks like crew earnings actually declined year over year, correct me if I'm wrong and if that's the case, just wanted a little bit more detail and then in the past, you've given what BBVA Chile contributed earnings wise, just wanted to know if you would be willing to give that number for Q1?

Sure. Well, let me – this is Nacho, let me tell you first about Peru. Peru has required these Q1, but let’s remember Peru growth was 15% of earnings last year and we continue to, Peru certainly looks to be positive. They had a very positive loan growth. Retail loans grew 4% and we expect the economy to grow in Peru 4% in 2019. So overall, we see stronger revenue growth, stronger loan growth and activity going forward. And I would say the reason for the year over year comparison, we had a significant capital on market gains last year and treasury results. In terms of Chile, we are very pleased with the integration of Chile and I would say the most important data point there is that the combined entity, which is 14% grew 16 bps market share by the end of last year. We have captured $30 million in pre-tax synergies, which is 70 million run rate. I mentioned that during the first year, we expected to pick up between $50 million and $70 million. I can tell you that I'm confident now we will be above $70 million during the first year, and the integration from a technology perspective, if we're on track and on budget, we expect to conclude it by the end of this year.

Next question comes from Gabriel Dechaine with National Bank.

Good morning. Couple of quick ones here. Corporate loan book, you had the big growth number, I'm just wondering what the visibility or timing of ancillary fee revenue generation from that balance sheet growth. Then on the card fees, the expense -- card expenses, I guess they moved up higher. We also saw balances move higher, is there a relationship there and when do you expect the expenses to maybe moderate as maybe some promotions fade?

Gabe, it’s Jake. I'll tackle the first piece. We did have strong corporate loan growth, as Raj noted in his comments. 90% of the growth was investment grade, so we're not compromising credit quality. Some of the transactions that led to the growth were with existing customers and some was M&A related and we would expect the ancillary and capital markets related to show up likely in the second half of this year is the expectation.

On credit cards, average balances are up about 7% year over year. I think purchase volumes are up about 9%. Our Tangerine’s card balances by the way are up a very strong 39% year over year. In terms of movements in revenue and expenses, we would have to adjust for the impact of IFRS 15, that's where the bulk of the IFRS 15 impact resides.

But the expense line there, it's up quite a bit year over year. The card expenses, so -- but I don't think that's an IFRS 15 item that’s what you incurred on promotional and loyalty costs, is it not?

Yeah. I think card expenses have been slightly elevated, but it also includes our international bank card offerings. I think Gabe the number you're referring to, which is not so bad and I wouldn't say anything unusual over there. It's primarily volume driven over there and specific promotions that you’ve had in multiple parts of our operations, but I wouldn't call it anything specific.

Will it be timing promotion?

Yeah. Expect it to moderate for sure.

We’ll next go to Ebrahim Poonawala with Bank of America Merrill Lynch.

I was wondering if you can talk to just in terms of your margin outlook, both in Canada and international banking and tied to that, just in terms of -- speak to what are the pluses and minuses when you think about balance sheet growth, the rate environment across these markets that we should be thinking through when you think about your margin guidance.

Sure. Ebrahim, it’s James, I’ll start with Canadian perspective. So the margin this quarter at 2.39% was down 1 basis point sequentially and up 4 basis points year-over-year. I would describe it as one of those kind of unusual quarters where, which again on the swings, you lose on the roundabout, because if you peel it back, we picked up 6 points in deposit margin sequentially. We lost 7 basis points in asset margin and the bulk of that would have been in the mortgage book. Q1 was a highly unusual quarter in the mortgage market. There were a bunch of things going on associated with those months of December -- November and December that we've described as months of peak volatility. You had the five year Government of Canada rates declining 70, 80 basis points from kind of 250 to 180, you had what I would describe as a persistently high kind of cost of funds in the face of that and you had very competitive market, given that the comp for last year included a lot of B20 pull forward. So it was an unusual quarter when you look underneath, but it netted out to down 1 basis point sequentially. So going forward, I think when you look in particular at our strong deposit growth, which we expect to continue and our rates outlook, which now would include say one hike in the back half of the year, so we've moderated that view, you're going to get a basis point, maybe to, let's call it a basis point or so of improvement from here for the balance of the year.

In the case of international banking for the past 16 quarters, we have had stable with a variation of plus minus 10 bps. Q over Q, you see our NIM is flat at 4.50. The year over year comparison difference is due to the acquisition of Chile. We have incorporated around 20 billion in assets with lower margin, lower risk too, but we expect our NIM is flat Q over Q and we expect it to remain at that level of around 4.50 with some variation plus minus 10 going forward.

And if I can just follow very quickly on both those, one, just to clarify James, the basis point improvement from 1Q levels, is that for the rest of the year, or is it a basis points expansion you expect for every quarter going forward and? James O’Sullivan: Yeah. Finish your question.

Yeah. And just Nacho, just quickly in terms of the 10 basis points, plus or minus, my understanding is we are looking to grow our unsecured consumer book in these markets where we should see higher yields. So why should margins not actually move higher, like what’s mitigating that? James O’Sullivan: So for Canada, it would be a basis point or so per quarter for the balance of the year.

I mean international, more than the securities and longer term impact, the variation of these plus or minus 10 bps is really due to the growth – relative growth of wholesale and retail business

We’ll go to Mario Mendonca with TD Securities.

First thing, how would you care – and this is probably best, this is really directed at capital markets. How would you characterize the changes expected in capital markets going forward? Is this like a complete overhaul of the capital markets business, or are you just sort of retooling things at the edges? And then following on that, like what do you really expect this to cost, this retooling or rejigging of capital markets? And when do you think it'll be complete? That's -- there's a lot there, but I’m trying to understand that business better?

The repositioning of the business is completed. That had been done over the past few years, whether it was around the metals business, some of our portfolios overseas. We're now focused on growth as we look forward. We've got a lot of strength in the business. It shows up in corporate lending this quarter. What we need to do is broaden out our capabilities in some areas. So as we can tap into those corporate relationships and better drive fee income as we move forward. We'll see some of that showing up in Q2 and on through the balance of the year. In terms of the costs, we don't expect there to be a material increase, this is a people based business and we're going to make investments in our existing people and some new people and that will drive a better result.

Now, the increase in the expenses that you refer to, is that essentially just adding a bunch of new people, is that like comp associated with adding, like broadening out your capabilities as you said?

No, it's not Mario. A lot of it is projects than regulatory related to AML and as Raj alluded to, we expect that to be winding down over the second half of this year. There is obviously also some seasonality we noted quarter over quarter, which won't occur again in Q2, so we're not expecting a big investment required from here. We've got a lot of great pieces in place in our business. We need to get them further aligned, working better together and we expect that’s going to start to deliver improved results, beginning with Q2.

And then just finally a quick question for Brian Porter, the pace of change at this bank over the last few years whether it's 2, 3, 4 years has been greater than I've seen at any bank, whether it's personnel, acquisitions, divestitures, digital transformation, how do you see it over the next three or four years? Will the pace of change slow materially going forward?

Yeah, thank you for the question, Mario. The pace of change will slow as I said in my comments that we’ve dealt with our geographic footprint. We were able to dispose of the businesses that we felt were non-core, we're comfortable with the work we've done in terms of aligning our footprint. The acquisitions we did last year were critically important to get scale in Chile, which is a key market. We basically reworked our whole wealth management business in Canada and we're very pleased with the end result. So anything you see from here on in will be what I would classify as tinkering the major transactions are done and announced. The Thanachart bank transaction, we're very pleased with, this has been on and off for the better part of four years and it's taken -- it's been heavily negotiated, the transaction will probably close late in calendar ’19, so Q1 2020, if you will. And so we're pleased to have that behind us and we're focusing on the optionality we have within our footprint and continuing to grow our business.

Next question comes from Sohrab Movahedi with BMO capital markets.

Quickly Jake or James? Since, I don't know Q1 ‘14, let's say quarterly -- 20 quarters, there's only been six or seven quarters where your earnings out of capital markets has had a free handle on it, you've had lower quarters, but this is amongst the lowest one. So what would you think -- how did you read, Jake? What do you see the earnings potential, call it, on a quarterly basis out of that segment?

Thanks, Rob for the question. And yeah, the business has largely been focused on not being a volatile contributor to the overall bank earnings, it is driven around our corporate customers and e built around those customers. So as we look forward, I'm not going to give you specific quarterly guidance, but we do see a material uptick from here in qQ2 and we want to see strengthening over the course of the year. So as I noted in my earlier answer, the repositioning is done. The focus is now on growth, investing to drive a better result. We're about 15% of earnings this quarter. That's not where we want to be as a division. We want to be generating better returns on the capital that our shareholders are providing us and we will view this as a bottom point.

And Brian, on the Thanachart, I mean, obviously there's some earnings that will be disposed of I assume if the transaction transpires, where do you see that earnings kind of being backfilled and then can you maybe give a bit of a color as to how you see the mix of earnings then three years down the road, two years down the road, between Canada, international and I guess GBM and wealth as well?

Good question. Thanachart contributes about $250 million of earnings today. The acquisitions we announced last year, so Chile and MD largely along with Jarislowsky, Fraser and the purchase in Columbia contribute about $300 million of earnings. So there's a nice match there. And, this provides us optionality to further invest in our business throughout our footprint in the Americas, whether it's Canada or one of the Pacific Alliance countries or a wealth business and we like optionality of the bank. We also have the option of repurchasing shares, which we like to have that in our toolbox. So, there isn't going to be anything that's off strategy here, we're going to be continued to focus on our operations. The other point I'd make is, and I know that there's concern about technology spend up there, I would go back to the BBT SunTrust announcement, and the major impetus for that transaction as spoken by the two CEOs involved was the investment, the importance of investment in technology, and that's what we're doing here at this bank. We're focused on the long term positioning of this franchise. And if you're not investing in technology, if you're not digitizing your bank, if you're not investing in cyber and AML, you're going to be left behind. So that's our primary focus, we're unrelenting on that, we're going to stay very focused and that's a key point.

So international -- and I mean, just Brian not to belabor the point, but how do you see the mix of business here? I mean, is the mix of business going to continue to be as is or do you see Canada becoming a smaller portion of the overall buy?

No, I think you’re not going to see Canada go below 50% of earnings for the bank. We like balance. We like diversification, something happens in one country that we've got that balance. And one thing that I think is misunderstood about the bank is that over the last five years, we’ve had the least volatility in our quarterly earnings of our peer group, so diversification matters. So we take balance into account. That's why we felt the wealth management acquisitions here in Canada were critically important diversification away from RWA, consistent predictability in terms of fee income. That type of thing is very important for us. So that doesn't mean we're not going to invest outside the country. But it's all about balance.

We’ll next go to Darko Mihelic with RBC Capital Markets.

I was looking at slide 6, where you provide a bit of an integration update and I wanted to maybe better understand the MD Financial’s statistics that are on this page. Maybe it's just me and I, we have a fundamental misunderstanding of how things work. I would have thought that there would have been a great, big welcome package sent out to all the MD Financial’s positions and so on. So when I look at these numbers, I see 1600 cross referrals and 775 new banking customers, that's on a base of 110,000 clients. So, it doesn't look like a big number to me. And I'm wondering, does this sort of accelerate as you go forward? Is that a slow start or -- and I guess the 98% client retention, that means 2% less, that's actually 2200 clients, actually more than what you brought on. So I'm just -- maybe you can better conceptualize this for me and does it sort of speed up over time? And will that have a meaningful impact on the Canadian results for the back half of the year?

Sure. Well, Darko, it’s James. Let me be very clear here. We couldn't be more pleased with how MD is going so far. We could not be more pleased. The retention is 98.4% based on assets and to your opening comment, everyone got a welcome package, a great big welcome package. And there's more to come to be sure. But let me give you a bit of color on what MD accomplished over the quarter. AUM and AU were up in Q1, notwithstanding fairly volatile markets. MD added seven new strategic partnerships with national medical associations over the course of the quarter. So examples of that would be the Canadian Association of General Surgeons. But let me just take a moment to really kind of re-emphasize our core strategy and why we're confident in this business. This business, MD has been in business now for 50 years. That's an unparalleled 50 years serving the unique needs of the physician community across this country and the physician community has unique needs. They navigate substantial student debt, they have to transition into practice. If they run their own businesses, they have to decide whether to incorporate, they have to wind down businesses at the end of their career. This is not the kind of business that is built by anyone overnight, we're going to leverage 50 years of unique experience plus capital plus talent. And we're going to take this business to even greater heights, and it's off to an amazing start.

I guess the question is, so does it accelerate from here? What is it that you do to accelerate the referrals and the new customers?

Absolutely, it accelerates from here and so the, where you're going to see the greatest opportunity or where we're going to see the greatest opportunity is in private banking. It'll be in insurance consulting and it'll be in our estate and wealth business, which we have already sort of combined with this. So this was primarily a wealth management shop that was doing a great job of managing the investments of physicians. Now, we have an opportunity to approach this way more holistically and bring just much, much more to the physician community and that's well underway.

So we apologize that we have run out of time and we won't be able to take any more additional questions, given the next bank’s call is almost time to start. For the analyst questions we did not get to, we will follow up and give you individual calls to ensure that we answer your questions. Thanks everybody for participating in today's call and see you next quarter. Thanks again.