Good morning. And welcome to Scotiabank’s 2014 Second Quarter Results Presentation. My name is Peter Slan, Senior Vice President of Investor Relations for the Bank. Presenting to you this morning are Brian Porter, President and Chief Executive Officer; Sean McGuckin, Chief Financial Officer; and Stephen Hart, Chief Risk Officer. Following their comments, we will then be glad to take your questions. Also in the room with us to take your questions are Scotiabank’s Business Line Group Heads, Anne O'Donovan from Canadian Banking; Dieter Jentsch from International Banking; Christ Hodgson from Global Wealth & Insurance; and Mike Durland from Global Banking & Markets. As with prior calls, we also have joining us Sabi Marwah, Vice Chairman and Chief Operating Officer; and Jeff Heath, our Group Treasurer. Before we start, I would like to refer you to slide #2 of our presentation which contains Scotiabank’s caution regarding forward-looking statements. I’ll now turn the call over to Brian Porter.

Thank you, Peter, and good morning, everyone. Before I get started, I would like to say a few words about our Vice Chairman and Chief Operating Officer, Sabi Marwah, who will be retiring at the end of May. Sabi has had an extraordinary 35-year career at Scotiabank where he has helped shape both the success and character of the Bank. He has been a trusted colleague and friend to many Scotiabankers and he is role model in the community giving generously of his time. Sabi, on behalf of all of us at Scotiabank, thank you, and we wish you all the best for a long healthy and happy retirement. Turning now to slide four, we had strong results across our businesses this quarter. Scotiabank earned net income of $1.8 billion or $1.39 per share, representing growth of 14% from last year. Our second quarter performance reflects particularly strong results in Canadian Banking and Global Wealth & Insurance, along with solid performances in International Banking and Global Banking & Markets. Our topline revenue growth of 10% reflects good asset growth and improved net interest margins, return on equity was 16.3%. Our capital position continues to be strong for the common equity Tier 1 ratio of 9.8%. Our ability to generate high levels of capital has allowed us to announce a share buyback program today for up to 1% of our outstanding common shares. We have also declared a quarterly dividend of $0.64 per common share. We are very pleased with our results and are focused on continuing to invest in our businesses, managing expense growth and delivering consistent and predictable earnings. Now, let me touch briefly on the priorities for each of the business lines. Firstly, Canadian Banking, as many of you heard at our Investor Day last month, Canadian Banking…

Thanks, Brian. Slide seven shows our key financial performance metrics for the quarter. Earnings per share were $1.39, up $14% year-over-year, a strong result across our businesses. Revenue growth continues to be strong at 10% year-over-year. But higher net interest income from both asset growth and improved net interest margins, stronger non-interest revenue, including gains on investment securities and the positive impact of foreign exchange also contributed to the increase. Expense growth was well-contained at 5% year-over-year, increase was across most operating expense categories and support planned growth initiatives, including the Tangerine brand transition. Remainder of the increase was primarily in compensation-related expenses that rose primarily due to annual merit increases, as well as increase technology costs. Our productivity ratio in Q2 improved by 230 basis points from last year to 51.6% and improved by 260 basis points from last quarter even with the increased Tangerine re-branding costs. Moving to capital on slide eight, the Bank continued to improve its strong high quality capital position this quarter. Our capital position puts us well above regulatory minimum and positions us well for continued business expansion. Our common equity Tier 1 capital ratio was 9.8%, an increase of 34 basis points from the prior quarter. Risk weighted assets were down $2 billion or 1% from last quarter to $300 billion due mostly to foreign currency translation. The growth in personal and business lending was offset by reduced exposure to securitizations and investment securities, and lower levels of undrawn balance sheet commitments. As Brian mentioned earlier, our strong capital position and the confidence in our ability to continue to generate solid sustainable earnings growth has allowed us to announce the share buyback up to 12 million shares. This represents approximately 1% the common shares outstanding. We also plan to continue to deploy capital…

Thanks Sean. The credit quality portfolios continues to be very strong. The overall loan loss ratio was up 2 basis points sequentially to 36 basis point and is in line with our plan. Canadian Banking loss rates were up due to higher provisions in their detailed portfolios reflecting our continued growth initiatives in credit cards and retail auto loans. International Banking’s loss rates were up due to modest increases in Caribbean mainly in Puerto Rico, partially offset by lower commercial provisions in Latin America. Global Banking and Markets’ credit performance continue to be very strong. Net formations of impaired loans in Q2 increased to $598 million, driven by higher formations in international retail and commercial, which reflected the higher asset growth and some seasonal timing in our Chilean retail market. On the balance sheet basis, our net impaired loans as a percentage of total outstanding were 45 basis points which is unchanged from a year ago, showing a portfolio of continuous strength. From a market risk basis, it continues to be very well controlled. Our average 1-day all- Bank VaR was $18.1 million, down from $19.8 million in the prior quarter with only two trading loss days shown. Slide 16 shows the trending provisions over the past five quarters for each of our business lines. As indicated before, Canadian banking provisions were up both quarter-over-quarter and year-over-year as higher provisions in retail were partially offset by lower provisions in the commercial portfolio. The Canadian banking portfolio quality still remains high and expressed in basis points, the loan losses are unchanged from last year at 21 basis points. Quarter-over-quarter international retail provisions increased as higher provisions in the Caribbean and Central American region, once again Puerto Rico, were partially offset by slightly lower provisions in Latin America. As noted, Global Banking & Markets, credit quality remains strong with low provisions of $5 million this quarter, compared to $3 in the prior quarter. Slide 17 shows our Canadian Banking residential mortgage portfolio. Our total portfolio of residential retail mortgages was $188 billion. Our portfolio continues to be approximately 90% freehold and 10% condo, with approximately 54% of the portfolio insured. The uninsured portfolio has an average loan-to-value ratio of approximately 55%, a modest improvement from the 57% of previous quarters. The loan-to-value and credit score mix of our condo portfolio continues to be in line with that as a portfolio at large. The credit quality and performance of the residential portfolio remains strong and has been stressed under many severe assumptions, confirming it is well within our risk tolerance. Our disciplined and consistent underwriting standards through all of our origination channels resulted in particularly low loan losses. And with that, I’ll now turn it back over to Sean.

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

Your first question comes from Steve Theriault from Bank of America Merrill Lynch. Please go ahead.

Thanks very much. For, Brian, please, so Brian, I’m wondering if you expect to be active with the 1% buyback rate out of the gates and also if you were to divest of the CI stake near term, is there chance you might envision a larger buyback to offset any EPS dilution, especially in light of higher capital ratios?

Well, in terms of the buyback traditionally, we’ve used the buyback to offset option exercise and as you know, historically we’ve been acquisitive as a Bank. We do have a pipeline of acquisitions that we are looking at periodically that are on strategy and if they fit our criteria, we want to have the ability to capitalize on those. So in terms of a larger buyback, I can envision one right now. We’ll have to see how things play out.

So it is more like an option exercise offset like it’s been traditionally for?

Exactly.

I will set a good example and just ask one. Thanks.

Thank you, Steve. Hope others will follow. Next question, please.

Your next question comes from John Aiken with Barclays. Please go ahead.

Brian, I guess a follow on to Steve’s question, maybe his second question. In terms of the capital levels that you are running at right now, 9.8%, the Canadian Tire is going to be 20 basis impact but we’ve still got another quarter before that rolls on. What is Scotia looking at, for a longer-term run rate that you would be comfortable with, because when we look at what’s going on, is that you have one of the highest ratios out of your peer group, the potential sale of CI is going to release significant amounts of capital and the share buyback is only going to offset option dilutions. So what are you comfortable with and what are your expectations for deployment over the next three to five years?

Okay, John. We are comfortable in this range of 9.5% to 9.75% in that range. And as I said to Steve’s question, we have a pipeline of acquisition alternatives that we continue to look at. I’ve in public forms stated that we want to continue to grow our credit card business both in Canada and internationally. We see that the international wealth business and the P&C business or countries I mentioned in my verbal comments of Mexico, Peru, Chile and Colombia, we want to continue to build our presence in those markets. So we see -- that's how we see things unfolding.

Great. Thanks, Brian, Sean. I will re-queue. Thank you.

Thank you. Next question, please.

Your next question comes from Gabriel Dechaine with Canaccord Genuity. Please go ahead.

Hey, good morning. Just on the international business there, it looked very impressive from a cost management standpoint and Canadian dollars looks slightly down. I’m wondering if, a, you can give me what the change in expenses year-over-year was on a constant currency basis and b, are we starting to see the benefits of the structural cost reductions that Brian and Dieter have been talking about for a while now? Or was there anything unusual, or does that translate into this result, if you could shed some light on that I would appreciate it?

On a constant FX basis, expense rose 2%, which is still half of the sort of average inflation rate that we see in our operating environments. So we are seeing the impact of our longer-term structural costs as well as some of our shorter-term initiatives. We had no one-time, what I will say, significant expense savings. It was part of our ongoing management rate expenses. We’ve continued to target positive operating leverage for the full year. So it is an outcome of an ongoing program that’s been in place for the last 18 months.

So there are structural cost reductions that are starting to come through and is there additional upside from there?

We will see the latter half, so first of all, the question is to structure -- yes, we are seeing some impact I would say is marginal to date and we see some more coming through going forward. The latter half of the year is traditionally where we see some expense pickup, as we gear up for the Christmas and fall campaigns in Latin America. It would be fair to say that you are going to see some uptick in our expenses in Q3 and Q4 but again, targeting positive operating leverage for the year end.

Okay. And then, just a quick one for Brian on the capital deployment, assuming the CI transaction that consummated. What I’m hearing from you, is that investors shouldn’t be too concerned about dilution from selling that CI stake where it might be temporary because you have a pretty active M&A pipelines, so capital deployment subsequent to any transaction would be fairly quick I guess?

Well, just if you -- some comments about CI generally is once we made the decision to monetize our stake, we certainly advised CI management of that and we felt it was appropriate to issue a press release to the broader market to notify them of our intentions. And we don't know how this is going to hold, whether it is done in one transaction or a series of transactions and the timing of the disposition is uncertain to date. We've hired Scotia Capital and Goldman Sachs to advise us. Our primary objective here is to monetize our stake in an orderly fashion at a reasonable valuations. So we will see how that unfolds.

All right. Thank you.

Next question, please.

Your next question comes from Jason Bilodeau with Macquarie Capital Markets. Please go ahead.

Hey. Good morning, guys. Just following up with Dieter on the credit performance international. A little bit of color around what’s going on in some of the retail portfolios in Mexico and some of your other regions in particular, but also what's the trend at Colpatria? My sense is that’s starting to peak and should start to become less of an issue in the coming quarters, can you update us on that?

I will talk about the overall business volumes and the trends and Steve made comments on other retail credit risk. Overall, we continue to see strong volumes in all our LatAm sites, Chile, Peru and Mexico with meaningful market share gains. We have continued pressures on our credit card portfolio in Peru, but we have offset that with growth in some of the other asset classes. In Colpatria, our retail platform is performing well and we are seeing our restructuring corporate platforms starting to make some decent headwinds or gains partly in the market. And in Mexico, as I mentioned, the overall market, our commercial and/or retail platforms are performing well and our retail formations are in line with our retail growth. We’ve seen significant market share gains both on a commercial year-over-year as well as retail, and we continue to see some good growth prospects in LatAm segment. Stephen, do you want to talk to if we see anything in terms of…

Yes, I mean, the uptick has really only been fairly muted quite frankly. Colombia, the retail portfolio, as Dieter says, has actually started to improve. Mexico, we had some issues with term loans. We are working our way through those right now. And the rest of the portfolios, as shown by slide 30, is fairly consistent quarter-over-quarter. Slight uptick in the Caribbean and Central America as we said mainly due to the some issues with our acquisition of R-G back few years ago.

And then -- sorry just remind me, maybe I should know this, but when the Colpatria credit mark run off, how does that look in the numbers, is that just -- do we sort of flat line or is there actually something to come out of the PCL line for that?

So what you will see is the PCL ratio being higher into next year. So next year, we will have exhausted all of the benefit of the credit mark running off the last couple of years. And then into 2016, you will then start getting their run rate more in line with the actual loan loss rate in Colpatria.

Okay. Makes sense. Thanks guys.

Next question please.

Your next question comes from Robert Sedran with CIBC. Please go ahead.

Hi, good morning, Sean. Just on the topic of taxes, I know the rate was a bit elevated this quarter. And I saw on one of the slides you had kind of linked it to the securities gains at least in the capital markets business. Is that the right way to look at the tax rate this quarter? And then as the securities gains settle back down, so will the taxes, or is there something else going on in that line?

As we said, the tax rate this quarter was unusually high. A lot of that was in our Global Banking and Markets division as you their tax rate. If you look at the net security gain in Global Banking and Markets and when you offset the higher tax rate, there is still a small marginal benefit from the two of those, but we would expect the tax rate to come down to what we’ve seen in the last couple of quarters.

And is the same true of the securities gains line?

Yes. Securities gains this quarter will likely not be the rate you see next quarter.

Thank you.

Yes. Next question please.

Your next question comes from Doug Young with Desjardins Bank Capital Markets. Please go ahead.

Hi, good, morning. Just first on a Colpatria mark, have you -- sorry it’s in the release, I haven’t seen it, but have you quantified what that impact was?

Yes. We go into great detail on that in our MD&A. The benefit of the mark this quarter is about $4 million, Q2 last year was about $18 million, so we had less of a benefit of that credit mark running off.

Okay, great. Thanks. And then just -- sorry on the corporate side, it seems to be bouncing around quite a bit, and I am just trying to get a sense of, was there anything unusual going through this quarter and what -- how should we think about a normalized run rate for earnings at a corporate, if you can help me with that please?

It’s always a difficult question to answer, I will be honest, but the run rate closer to slightly positive to slightly negative. What’s benefiting this quarter as we talked a bit before is, as we have some higher cost, wholesale funding, that’s running off that was put on four, five years ago, we are getting the benefit of that, that kind of peaked this quarter. So the year-over-year change in the following couple of quarters won’t be as high as it was this quarter, so that’s partly driving it. And we’ve had higher securities gains this year versus last year which is also driving a more positive number than the run rate of plus or minus around zero.

And have you quantified the securities gains?

In that division?

Yes.

No, we haven’t no.

Thank you.

Next question please.

Your next question comes from Sohrab Movahedi with BMO Capital Markets. Please go ahead.

Hey, couple of more detailed ones. One, you said that the [RWAs] (ph) were down primarily or in part due to lower loan commitments, is that something that is -- is that a new theme that we should be worried about or was there something unique this quarter?

No, it’s kind of broad-based. There is a few larger ones that’s matured or rolled off. Some of that was funded on to the balance sheet. So, nothing too unusual.

Okay. And then I think you noted in the margins the benefit from the cards businesses, but presumably there will be the lag effect if you will of the higher loan losses associated with that in the periods to come?

We are starting to see some of that. We are starting to build up as you know with the role rate models. You start building some of that in today as the portfolio grows. Stephen, if you want to add anything else?

Yes, I mean, that really is what we’re doing right now and why you’re seeing the provisions going up is we are setting up the reserves under the role rate model in anticipation what the higher levels will be.

So I know we don’t usually think about it this way, but if you were going to try and think about your gross margins adjusted for PCLs a year out, would it be more or less in line with this year or would it be lower or higher?

I think on the Canadian banking side, you will see a slight improvement as the higher yield on credit cards margin exceeds the growth in the PCL, but again credit cards is a small component of our Canadian Banking’s loan portfolio as you know. So we are talking a basis point -- few basis points, not going to be in the tens of basis points.

Okay. Thank you very much.

Next question please.

Your next question comes from Meny Grauman with Cormark Securities. Please go ahead.

Hi, good morning. And just looking for little bit more color on developments in Thailand and your interest in TBANK considering the social unrest and the coup and how your business is being impacted there, and if you have any visibility for the future of things settling down there? Thank you.

Well, there is an article on today’s Financial Times that most of you had read and came over the weekend where the King has endorsed the General who is the head of the Council for Peace and Order. So everything is quite in Thailand. There is a curfew, but the General has committed to do a couple of things. The first thing is to maintain a peace and order and he has been very open about that, and quite frankly, the underlying sentiment of the people is very positive or three quarters endorse was going on. But he also is being very clear upfront that he wants to bring the economy back after it’s taken a bit of set back given some of the turmoil. He is committed to have a $3 billion of rice payments that are overdue be paid by the end of this month. And more importantly, he’s also promised to bring the budget process fast forward to make sure the timelines are met by October and so that’s been received very positively. And as I said, the market was up today. The currency is being relatively stable. So at this point, we are cautiously optimistic. It is fair to say that our originations and our underlying business has been set back a little bit and you’ve seen it in this quarter’s earnings. Our loan losses so far have been relatively in line with expectations and we’ve maintained our margins with expense control of our asset and liability. Our Bank there is highly liquid, it’s well managed, and it has a very high liquid. And we’re in good shape to weather out what’s going forward.

Thank you.

Next question please.

Your next question comes from Darko Mihelic with RBC Capital Markets. Please go ahead.

Thank you. A question with respect to the net interest margin in the international division. I wonder one of the thing -- one of the remarks in your report to shareholders is that it’s settled into a range that’s more or less expected. Can you speak to why that we should use the margin as a stable? Is there less competitive pressures? Is it loan mix? Is it yield curves? Perhaps if you can provide some color on that. And real quickly, for Brian as well, if you do sell CI position and make some acquisition internationally, how do you feel though the earnings mix of international versus Canadian and balance sheet usage? Is any of that actually come into your thinking or at this point are you going to be the CEO that takes us into the direction of making the international division eventually larger than the Canadian division?

Well, I’ll answer that question first and then Dieter can take first part of your question. But in terms of we spend a lot of time as a management team and a Board going through strategically what the Bank should look like in three to five years, what’s the appropriate balance between international and Canadian in terms of earnings and asset mix. And that’s obviously a key concerned to rating agencies and shareholders and other stakeholders. This quarter as our mix is 57/43. I think that we could grow the international piece to something over time in a thoughtful deliberate way of 50/50. Beyond that, I think we’ve got to think about what the appropriate balance is.

With regard to the margin question and just to go back a little bit, we signaled that we would see a stable to a biased upward increase in our margin but within the range of 390 to 400. This quarter, we’re at the end. We're bound to see some variability from quarter-to-quarter. And this quarter, we had some asset liability gains in Chile and Colombia which brought us to the higher end of the range. Our core margin to your point has stabilized because some of the impact of central Bank rate cuts and some of the asset mix changes that we saw in our Asia business and our LatAm business are working itself through. So at this point, we’re comfortable on a go forward basis to be in the range that we indicated in previous quarters.

Thank you.

Next question please.

Your next question comes from Sumit Malhotra with Scotiabank GBM. Please go ahead.

Good morning. First question is for Stephen Hart. You talked a little bit about the trends on the provision side, but if we go one step back into the gross impaired loans and more specifically the formations. It was the larger number than we’ve seen in the few years for the Bank and at least half of it was coming from the international segment. You’ve talked a lot about the Colpatria mark, but just wanted to maybe take a step back and get a little bit of flavor on what exactly is happening on that level of formations, whether that’s Colpatria or whether it’s other areas of the portfolio that are showing some signs of weakening?

The Delta quarter-over-quarter, about half of that was sitting in the retail side. And as I indicated, that was due to some student loans in Chile, a large batch that we buy on a annual basis. Usually they come up, they finish their grace interest period and pop up as non-accruals today. These are once that are about 90% guaranteed. And therefore we’ll have in a couple of quarters as we realized that from the government, the payables will come down. So that’s a seasonal aspect that’s happened. On the commercial side, we had three loans commercially that went non-accrual on us. One in Brazil and Colpatria, all connected to the agricultural sector but we think we got them profitably provisioned than we’re working their way through. But they were a couple of ones that popped up that we have been looking at but we don’t view it as anything that’s going to be systemic going forward.

So I think that explains your confidence from the provisional line, 90% guarantee on the retail formations that they came through. And then I think you said, you’re properly provisioned for the commercial loans?

(Indiscernible) right now.

And then lastly for Anatol, the advertising expenses for Tangerine didn't seem to have too much of an impact on operating leverage. A couple of points of interest, just looking into the second half of the year, some of your counterparts last week seem to be a bit cautious, at least in my view on the prospect of the seasonal bounce back in consumer loan growth. I think we usually see things start to look better as we get into the spring and summer months. Wanted to maybe get an update from you on what you're seeing as far as the consumer loan growth outlook is concerned looking into the second half of the year?

If you look at -- firstly on the mortgage side, which is the largest single item on all our balance sheets. I think we’re right in the midst of what would be the spring sale period. I think it's fair to say that we are seeing it bounce back but we won't see the mortgage market at growth in the spring and forward as we’ve had in previous years. Though it will be a lot better than what we’ve seen in the first six months of the year. If we look at other segment, the auto industry being one, credit cards another which we’ve talked about earlier in some of the comments. Both of those are going very well. So part of the lack of growth we going to see in the mortgage side, we’re making up with growth in other consumer areas.

Is your NIM improvement sequentially all due to the ING runoff or is there other components?

Yes, both the credit card business as we talked about which is coming on, the growth in the auto industry, the mortgage renewals that are taking place. We've got still some of the lower margin mortgage business that is running off and coming back on in the renewal process at a higher margin. So it’s a combination. It’s not just the Tangerine portfolio runoff.

Thanks for your time.

Okay. Thank you.

And ladies and gentlemen, as there are no further questions, this will conclude the conference call for today. Thanks for participating and you may now disconnect your lines.