Fixed Income Investor Presentation. Fourth Quarter, 2014

Transcription

1 Fixed Income Investor Presentation Fourth Quarter, 2014

2 Caution Regarding Forward-Looking Statements 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. All such statements are made pursuant to the safe harbour 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 Management s Discussion and Analysis in the Bank s 2014 Annual Report under the headings Overview-Outlook, for Group Financial Performance Outlook, for each business segment Outlook and in other statements regarding the Bank s objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), 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, anticipate, intent, estimate, plan, may increase, may fluctuate, and similar expressions of future or conditional verbs, such as will, should, would and could. By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond our control, could cause actual results to differ materially from the estimates and intentions expressed in such forward looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and reputational risks; the risk that the Bank s risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank s ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank s ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and financial performance, including uncertainties associated with critical accounting assumptions and estimates (See Controls and Accounting Policies - Critical accounting estimates in the Bank s 2014 Annual Report, as updated by quarterly reports); the effect of applying future accounting changes (See Controls and Accounting Policies - Future accounting developments in the Bank s 2014 Annual Report, as updated by quarterly reports); global capital markets activity; the Bank s ability to attract and retain key executives; reliance on third parties to provide components of the Bank s business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; increasing cyber security risks which may include theft of assets, unauthorized access to sensitive information or operational disruption; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; 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. For more information, see the Risk Management section starting on page 65 of the Bank s 2014 Annual Report. Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2014 Annual Report under the heading Overview- Outlook, as updated by quarterly reports; and for each business segment Outlook. The Outlook sections in this document are based on the Bank s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. The preceding list of important factors is not exhaustive. 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. 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 and on the EDGAR section of the SEC s website at 1

3 Agenda Canadian Economy Scotiabank Overview Risk Mortgage Market Funding 2

4 Canadian Economy

5 Canada Well Positioned Among G7 Despite Slower Growth % of nominal GDP Annual % change Canada Real GDP Growth 11 th largest economy in the world with a growing 35 million population, driven mainly by immigration F-2016F Consistent record of meeting or exceeding average G7 GDP trends Manageable Canadian government deficits, strong fiscal position among G U.S. U.K. Canada Euro zone Japan Forecasts as at December 2, Source: Scotiabank Economics. General Government Net Financial Liabilities Government Financial Deficits as % of GDP Canada Germany U.K. France OECD U.S. Italy Japan Source: OECD (2013 estimates); Scotiabank Economics. As at December 2, Germany Canada Italy France United States United Kingdom -8.2 Japan Source: IMF (2013 estimates); Scotiabank Economics. As at December 2,

6 Strength of the Canadian Financial System % change Strengths Effective regulatory framework o o o Single regulator for major banks Conservative capital requirements Proactive policies and programs Relative bank share price performance 5 year 10 year 5 Risk management practices o o Few sub-prime mortgages Relatively little securitization 0-5 o Primarily originate to hold model -10 Canadian Banks Australian Banks Japanese Banks U.S. Banks Swiss Banks U.K. Banks Canadian banks well capitalized and profitable Source: Bloomberg; as at December 3, Canadian Banking System ranked World s Soundest by World Economic Forum for 7 th consecutive year Global Competitiveness Report ( ) 5

7 Scotiabank Overview

8 Scotiabank Canada s Most International Bank As at Q4, 2014 (C$) Scotiabank Total Assets $806B Risk-Weighted Assets $312B Market Capitalization $84B Q4/14 Net Income 1, 2, 3 $1.7B 2014 Net Income 1, 2, 3 $7.0B ($6.6B in full F2013) 2014 ROE 1, % Productivity Ratio 1, 2, % Capital Ratio % Geographic Footprint >55 countries Scotiabank Credit Ratings 5 # of Employees 86,932 Moody s Fitch DBRS S&P Senior Rating Aa2 AA- AA A+ Outstanding Covered Bonds Aaa AAA AAA Not Rated Outlook Negative Stable Stable Negative (1) Excludes notable CI gain in Q3/14 (2) Excludes restructuring/accounting charges in Q4/14 (3) Taxable Equivalent Basis (4) Basel III all-in Common Equity Tier 1 Ratio (5) A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revisions or withdrawals at any time 7

9 Four Diversified and Growing Platforms Business Line Diversification of earnings International Banking Focus on Lower Risk P&C Target: 70/30 24% Global Banking & Markets 22% 34% 20% Global Wealth & Insurance Wholesale 22% 78% Personal & Commercial Canadian Banking Strong Canadian Base Target: 50/50 Diversification creates stability and lowers risk Presence in High Growth Markets International 44% 56% Canada Central America Asia Latin America * All figures based on 2014 net income (excludes CI gain in Q3/14 and restructuring/accounting charges in Q4/14) 8

10 Canadian Banking Strong Canadian Base As at Q In C$ Total Assets (avg.) $284B Total Deposits (avg.) $190B Q4/14 Net Income 1, 2 $556MM Productivity Ratio % Branches 1,040 # of Employees 19,485 Total Revenue (2014) International Banking Presence in Higher Growth Markets As at Q In C$ Total Assets (avg.) $138B Total Deposits (avg.) $70B Q4/14 Net Income 1, 2 $344MM Productivity Ratio % Branches 3 1,955 # of Employees 3 47,332 Total Revenue (2014) Asia 10% Retail & Small Business Banking 77% 23% Commercial Banking Latin America 2, 4 64% 26% Caribbean & Central America C$ millions Net Income 1, 2 $1,798 $2,151 $2,261 C$ millions Net Income 1, 2 $1,558 $1,726 $1, (1) Attributable to equity holders (2) Excludes restructuring/accounting charges in Q4/14 (3) Excludes affiliates (4) Includes Mexico

11 Global Wealth & Insurance Significant Growth in GWI As at Q In C$ AUM $165B AUA $368B Q4/14 Net Income 1, 2 $321MM Productivity Ratio % # of Employees 7,570 Total Revenue 2 (2014) Global Banking & Markets Niche Focus in GBM As at Q In C$ Total Assets (avg.) $292B Total Deposits (avg.) $51B Q4/14 Net Income 1, 2 $370MM Productivity Ratio % # of Employees 1,996 Total Revenue 2 (2014) Wealth Management 83% 17% Insurance Global Capital Markets 49% 51% Global Corporate & Investment Banking C$ millions Net Income 1, 2 $1,305 C$ millions Net Income 1, 2 $1,443 $1,455 $1,481 $1,207 $1, (1) Attributable to equity holders (2) Excludes CI gain in Q3/14 and restructuring/accounting charges in Q4/

12 Risk

13 Strong Focus on Risk Management Strengths Loans & Acceptances by Borrower as at October 31, 2014 Business model is to originate and hold assets Minimal off-balance sheet assets Business & Government 32% 49% Residential Mortgages High proportion of on-balance sheet assets are low risk residential mortgages Corporate loan book is diversified with a focus on Investment Grade clients 0.60% Personal & Credit Cards 19% PCL Ratio as a % of Average Loans & BAs 0.54% 0.48% 0.45% 0.30% 0.34% 0.36% 0.32% 0.39% 0.15% 0.00%

14 Mortgage Market

15 Canadian Mortgage Market Strengths Canadians have a significant and stable amount of equity in their homes Mortgage interest is not tax deductible thus reducing the incentive to borrow Residential mortgages in arrears remain low 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Mortgage Debt Service Ratio % of disposable income Mortgage Interest Payments 0.0% Source:Statistics Canada. High Percentage of Equity Canadian Residential Mortgages in Arrears Real estate equity as % of Total Real estate assets Canada % United States Source: Statistics Canada & Federal Reserve Source:CBA. 14

16 Scotiabank s Mortgage Strategy Mortgages are a core banking product and are integral to the Canadian Banking group s profitability and customer acquisition capability With intense competition in a moderating housing market, managing profitability and maintaining a high level of quality originations is key Build customer relationships for retention and cross-sell additional products and services. All customers are serviced by domestic branches. Current mortgage retention is 94% Business model is originate to hold Total portfolio: $189B at Q4/14 $20 B Average LTV of uninsured mortgages is 54% $ 169 B Insured 52% Uninsured 48% Freehold Condominium 15

17 Funding

18 Scotiabank Funding Strategy and Programs Short-Term Funding USD 25 billion Bank CP program USD 3 billion Subsidiary CP program Diversified Funding Programs CD Programs (Yankee/USD, EUR, GBP, AUD, HKD) Term Funding & Capital CAD 7 billion ABS shelf (unsecured lines of credit) CAD 10 billion shelf (preferred shares, subordinated debt, common equity) Canada Mortgage Bonds and Mortgage Back Securities USD 1 billion Singapore MTN program AUD 4 billion Australian MTN program Funding Strategy Build core deposits in all of our key markets Diversification of funding by currency, program, tenor and markets Maintain pricing relative to peers USD 15 billion global registered covered bond program (uninsured mortgages) USD 25 billion shelf (preferred shares, subordinated debt, common equity) USD 20 billion global public covered bond shelf (in run-off, CMHC insured mortgages) USD 20 billion EMTN shelf (includes subordinated debt) 17

19 Contact Information Michael Lomas Managing Director, Treasury Sales & Market Development, Group Treasury Mark Michalski Director, Strategy & Market Development, Group Treasury Peter Slan Senior Vice President & Head, Investor Relations For additional public information, including our Annual Report and Quarterly Results please visit: 18