Good morning. And welcome to Scotiabank’s 2014 Third Quarter Results Presentation. My name is Sean McGuckin, Chief Financial Officer of the Bank. Presenting to you this morning is also Brian Porter, President and Chief Executive Officer; and Stephen Hart, Chief Risk Officer. Following our 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, we have 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 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 will now turn the call over to Brian Porter.

Thank you, Sean, and good morning. Turning to slide four, we had good results across our businesses this quarter. Scotiabank earned net income of $2.4 billion or $1.8 billion excluding the CI gain. Adjusting for the gain in non-recurring items reported in Q3 2013, the Bank reported diluted earnings per share of $1.40, representing 9% growth from last year. Our third quarter performance is a result of our portfolio of diversified businesses and puts us in a strong position to deliver results within our medium-term objectives for the full year. Our topline growth of 9% year-over-year, excluding the gain in non-recurring items reflects both good asset growth, improved net interest margins and strong growth in non-interest revenue. Reported return on equity was 20.6%. Our capital is in a very strong position with the common equity Tier 1 ratio of 10.9%. This strong position has allowed us to repurchase 2 million shares during the quarter under our NCIB. Our confidence in earnings growth allowed us to declare a $0.02 increase in our quarterly dividend to $0.66 per common share. We are pleased with our results and remain focused on executing on our strategies. Now let me touch briefly on the priorities for each of the business lines. Firstly, in Canadian Banking, we had a good third quarter with higher margins, double-digit growth in credit card and automotive lending volumes, and strong growth in fee and commission revenues. Increases in loan losses and expenses were mainly from higher business volumes. We remain focused on executing on our strategy, further deepening relationships with our customers, improving their experience and increasing the value we provide to them. We had solid -- we have solid plans in place to drive growth in commercial banking, accelerate credit card growth, expand tangerine and make it easier for…

Thanks, Brian. Slide seven shows our key financial performance metrics for the quarter. Excluding the notable gain this quarter of $555 million, last year’s $90 million of non-recurring items. As Brian mentioned, diluted earnings per share were $1.40, up 9% year-over-year on good results across our businesses. Revenue growth continues to be strong at 9% year-over-year. With higher net interest income from both asset growth and improved net interest margins, probably reflecting maturity of higher cost funding. Stronger non-interest revenues, including higher underwriting, banking fees and security gains along with positive impact of foreign exchange also contributed to the increase. Expense growth was 7% year-over-year. However, adjusting for the impact of timing adjustments for stock-based compensation, tangerine renaming costs and FX translation, underlying expense growth was 4%. This increase was due mainly to higher volume-related expenses, higher business taxes and investment and growth initiatives. Expense management continues to be a major focus. Our productivity ratio in Q3 improved by 90 basis points from last year to 52.9% and on a year-to-date basis, the Bank has produced positive operating leverage of 2%. Moving to capital on slide eight, the Bank continued to improve it strong, high-quality capital position this quarter, which puts us well above regulatory minimum and positions us well for ongoing business expansion. Our Basel III common equity Tier 1 capital ratio was 10.9%, an increase of 110 basis points from the prior quarter. The CI transaction added 116 basis points to common equity Tier 1 during the quarter. Our common equity Tier 1 risk weighted assets were up $8 billion or 3% from last quarter to $3.8 billion, due mostly to growth in personal and business lending and the impact on the CI transaction. This increase was partially offset by lower FX. As Brian mentioned earlier, our very…

Thanks, Sean. Credit quality of our portfolios remained strong quarter. Quarter-over-quarter the overall loan loss ratio was up 1 basis point sequentially to 37 basis points. This is well within our risk appetite and our expectations for the quarter. Canadian Banking loss rates were largely unchanged with slightly higher retail losses reflecting the growth in the higher margin credit cards and our loan portfolios, which we’ve mentioned in previous quarters. International Banking loss rates were up from Q2 2014, reflecting higher loan losses in retail and commercial in both Latin America and the Caribbean. Global Banking & Markets’ credit quality continues to be strong with the loss rate of only 1 basis point. Net formations of impaired loans in Q3 decreased to $477 million, driven largely by lower formations across all the business lines. Market risk remains well-controlled. Our average one day all-bank VAR was $21.5 million, up from $18.1 million in the prior quarter, with only one trading loss day reported. Turning the slide 16, shows the trend in loss rates over the past five quarters for each of our businesses. As indicated, Canadian Banking loss rates were up 1 basis point quarter-over-quarter and 6 basis points year-over-year. The increase from Q3 ‘13 reflects growth in the higher margin credit cards and retail auto balances, as well as, increased commercial provisions from an unusually low level last year. The Canadian Banking portfolio credit quality continues to be strong. Loss rates in international were up 4 basis points quarter-over-quarter and 11 basis points year-over-year, with the increase attributable to both retail and commercial portfolios. The increase in Q3 ‘13 was driven by higher retail provisions in Latin America, as well as, the Caribbean and Central American. Commercial provisions increased from an unusually low level last year mainly in Latin America, most notably in Mexico, as well as in Colombia. Further there are lower acquisition-related benefits in Colombia, which we expect will be full utilized by the end of this year. This will result in an expected higher reported loss experience in 2015 for International Banking. In Global Banking & Markets credit quality remains strong with 1 basis point loss experience, lower both quarter-over-quarter and year-over-year. Slide 17 shows our Canadian Banking Residential Mortgage Portfolio. Our total portfolio of residential retail mortgage is $189 billion. As of July 31st our portfolio was 89% freehold and 11% condo, 52% of the portfolio insured and 48% uninsured. The uninsured portfolio has an average loan-to-value ratio of 55%, which is unchanged from last quarter. The loan-to-value and credit score mix on our condo portfolio continues to be in line with the 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 our origination channels have resulted in particularly low loan losses. With that, I’ll now turn it back 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?

Our first question comes from the line of Gabriel Dechaine of Canaccord Genuity. Please go ahead.

Hi. Thanks. Good morning. Just now that the CI stake has been sold and that capital has been fully reflected in your updated capital target ratios? Just wondering if you can give us a sense of where you're comfortable with the capital level being? It seems like the kind of the minimum target that the Bank have been having as a moving target keeps going higher? I'm just wondering where Scotia stands?

Gabriel, its Brian Porter. We’ve -- I have been asked the question before and we said that as the Bank we’d be comfortable with a base of 9 with a buffer on top of that. As you know, we’re running at 10.9 now, we've got two transactions that are close -- going to close Canadian Tire Financial transaction will probably close in Q4 and Cencosud will close sometime in Q1. That's 800 million plus of acquisitions. And you know, we continue as the Bank well as we continue to be opportunistic and look for transactions that are within our footprint and on strategy. So that's where we are.

Okay. And just in the International business, Dieter, the NIM was up 4 or 5 basis points quarter-over-quarter, which is a bit surprising. I had anticipated a bit of weakness, because of the rate cut in Mexico? So it's a pleasant surprise? What -- I guess to highlight some flexibility you have to manage the NIM? Are you going to be replacing those lower yielding assets that you got rid of and what's the time line there and I'm looking -- thinking specifically of something like the Banco -- the micro finance one in Mexico?

Certainly, we have been talking about a NIM range of 3.90 to 4 and there is always quarterly variability in that number and we feel comfortable in that range.

And then the replacement assets?

That’s an ongoing business mix as we go forward but you don't see a significant change going forward.

Okay. What's the outlook for that Credito Familiar?

Credito Familiar is performing well. The integration went well. But overall it’s not significant in the overall results of International.

Okay. Thanks.

Our next question is from Robert Sedran of CIBC. Please go ahead.

Hi. Good morning. Just, I guess, to continue along the International theme for a moment. If I look at the average balance sheet quarter-on-quarter, everything was more or less flat. So is some of that, Dieter, just related to this move from trade finance assets into more corporate business or is there something else going on there, perhaps even currency?

Yeah. What you see in this quarter, our overall assets, if you take constant currency would be flat Q-over-Q and on a year-over-year basis, you would assume that being 8% year-over-year and the key drivers on that is Latin America continues to perform well with 14% year-over-year and 2% Q-over-Q. But we also see a reflection of continuing softness in what I see the Central America and the Caribbean region and that’s being down -- it was down this quarter and it was down year-over-year. And I would see the Asia repositioning of our book as temporary, we see continued good growth in Asia high single-digit with some temporary repositioning of our book in Asia.

Is it just, Dieter, that the trade finance business doesn't have enough margin in it to make it worthwhile or is there something else that would…

Well, there is a combination. We’ll see that business is having high -- lots of variability in terms of consistent performance. We see there is the lower margin business but also what you are seeing is some movement of our risk appetite on some of our counterparties.

Thank you.

Your next question comes from the line of John Aiken of Barclays. Please go ahead.

Good morning. Stephen, the acquisition benefits in Colombia? Can you let us know roughly what the impact was on the PCL ratios, I guess, what I'm getting at is, how much of an impact should this have on the ratios going forward in 2015 all else being equal? And in terms of, Dieter's commentary on Rob's question softness in Central America, while that's impacting loan volumes? Is that having any impact on the credit quality that you're seeing going forward?

On the first question as with Colombia's purchase price adjustment winding down. We expect on a go-forward basis that the NIAD per quarter will be affected by both $10 million to $15 million in 2015 and on. With regard to Central America, while the volumes are soft, we are not really seeing any increase in loan losses in Central America and the Caribbean. Actually in some of the -- it is a mixed bag because there's a lot of islands, some are doing better than others, some have stabilized and others continue to show some weakness, especially, probably, Puerto Rico would be the one island right now, obviously, that’s in the news.

Yeah, Stephen, we’re not seeing the impact on impairments and provisions but has there -- have you increased your watch list or is there any heightened concern? Not that it is necessarily going to translate into additional losses but is there -- is that rippling through in terms of the credit?

Certainly, in Puerto Rico, we’ve -- because of the situation there with government and potential knock-off consequences, we’re looking specifically there. On the overall portfolio basis, our watch list is actually reducing year-over-year.

Okay.

I’ll also add, it’s Dieter here. Our retail provisions are within our plan and within strategy.

Great. Thank you guys.

Next question from the line of Peter Routledge of National Bank Financial. Please go ahead.

I’m going to stick with the international banking. Thanks for the color on the Asian trade financing issues in the Caribbean. I’m kind of surprise we didn’t see an offset elsewhere in Peru, Colombia, Chile and Mexico. Why were commercial -- why wasn’t the growth in elsewhere in that footprint enough to offset the headwinds you’re getting in Asia. Was it weak growth, say, in South America or was it the Asian falloff was just so dramatic that it obscured stronger growth in those regions?

Let me just put the portfolio again in some perspective. The LATAM assets are approximately 55% and with Asia being -- Asia and Central America and Caribbeans evenly through the next remaining portion. What you saw this quarter was, again, a continuing softness in the Caribbean and in Puerto Rico in the English Caribbean. You also some moderation in the Latin American economy. That’s been well in the media, well-scripted in the media. You see some softening in terms of moderation in the economy in Chile, some softening in terms of the GDP numbers in Peru. And you saw continuing, let’s say, moderation performance in Mexico with Colombia being the standout. What’s happening is what we view is different by country. What you saw in Chile is continued reluctance by the customer to spend and companies to invest while Michelle Bachelet brings in the various reforms in place. With that coming to a close, we see some uptick and the economy continued to have a huge significant input or export to China in terms of copper. We see that continue to being such a low-cost producer. In Peru, you had some softening in the economy as mining investment curtailed back a little bit, impact of the weather and government wasn’t spending. What we see there going forward quite frankly and you saw an article in the financial times today, where Peru will become the second largest copper producer in the world as some of the large mines come on place and the government starts to spend in 2015, prospects for Peru looks good. Colombia was a shining light this quarter, grew over 6%. So that’s a good new story as the election issues and the standoff with investment and the consumer stopped this quarter. And in Mexico, quite frankly, it’s continued waiting for the reforms to take place and put in place. We saw the energy platforms being put into legislation this quarter and then the prospects for Mexico continue to look very strong as the telecom, energy and its closeness to the U.S. offer some good prospects in Q1 and Q2 of next year.

You had some -- you made some progress as you pointed out on expenses in the international banking. What sort of -- if we get more headwinds in South America and Central America than we anticipate, how much quicker, how much more aggressive can you be in expenses?

Peter, you’ve seen us we were able to dial up and dial down on our variable expenses as the economy moves up or down. And we don't operate our expense budgets on a quarterly basis. There's timing in our numbers. So this quarter you would've seen some lumpiness pertaining to stock-based comp and timing on some of the pension adjustments in Uruguay and vacation accruals in Chile. So quite frankly, our underlying expenses are operating approximately the inflation rate and are other initiatives we have taken place in terms of consolidating our data centers, consolidating contact centers. Those are longer -- medium to longer-term initiatives that have taken place on the structural side. But if you would see -- to answer your question clearly and directly, if you were to see continued dial back, we would dial back our variable expenses, both from advertising and salaries to take place to be consistent with our loan volumes and our deposit volumes.

Thanks. Very helpful. Thank you.

Our next question comes from the line of Mario Mendonca of TD Securities. Please go ahead.

Those questions. You covered most of what we were going to. Brian, if we could go back to the capital question. So we saw the normal course of share bid activated this quarter. How do you view that? Is this sort of an ongoing thing now or -- because it was a little uncharacteristic for Scotia, do you view this as an ongoing tool or was it more of one-off?

No, look, it’s something you want to have in the tool box, Mario. And we have a buyback of up 12 million shares. We’ve executed on 2 million of those. So I would view it as something in the tool kit.

And if we go to stock-based comp, a more specific question. So $64 million this quarter, $20 million last year in the same quarter, when you look at that, that’s sort of seasonality in stock-based comp. You would normally expect it to be fairly high in the first quarter and then taper off. So I guess, two parts of this question, why so high this quarter and do you expect it to sort of follow the normal pattern going forward?

Yeah, we would view this quarter, Mario, a bit unusually high. What happened this quarter is because of the stronger run-up in our stock price over the last quarter on our bid that increased our performance factor on those PSUs whereas last year, we reduced the performance factor. So you have a year-over-year swing. Last year was negative, this year is positive as well as more units continue to come on in divested period with the run-up in the stock price. You’ve got a higher, kind of, catch-up with the new invested amounts. So this would be more of an unusual quarter compared to last year.

And assuming just a normal performance in the stock price, you’d still expect going forward the Q1 to be the high watermark and then decline from there?

Absolutely.

Thank you.

The next question comes from the line of Darko Mihelic of RBC Capital Markets. Please go ahead. Mr. Miehelic, your line is live.

Hi. Sorry about that, question on the Canadian banking, the Tangerine branch transition costs, were they material and is the transition over?

Two things. So the first part in terms of the third quarter, total charge in the quarter was about $10 million that we put through. And it’s mostly over, there is still a small amount that we got in Q4 that’s the tail end of the rebranding.

Thank you. And another question on card revenues, could you guys give me an indication of how much of those revenues are annual fees and how much of that would be related to interchange?

Yeah. Annual fees are relatively low. The income that we have is interchange fees associated with the cards but not so much the annual fees. Much of the growth that we've had over the course of the last year has been where the first year’s fee has been waived. So the annual fees is a relatively small amount here.

Okay. That’s helpful. Thank you.

Your next question comes from the line of Sohrab Movahedi of BMO Capital Markets. Please go ahead.

Dieter, I just -- sorry, if you go back to but maybe the best way I wanted to ask you the question on international is, are you happy with the progress, the bank has been making so far this year in international relative to what you had set out for us as the outlook for international. For example, year-to-date operating leverages is a minor negative. Are we going to get positive operating leverage this year and margins are little bit better. But volumes are slowing a little bit. I’m just trying to get a sense of where you think we are on the continuum relative to the expectations you had set out for us?

I take it you are talking about the expense side generally.

Sure.

Maybe I’ll start with that. We look at -- compared to last year, we generated positive operating leverage of 0.8% when you exclude the Q3 2013 notable items and that relates to the TBank life gain that we recorded in a social corp. revenue line and the charge we took on Uruguay and Puerto Rico. If you look at really over year-over-year our leverage continues to -- operating leverage continues to improve. We improved 70 basis points from a slightly negative. Going next year in anticipation of your question by the end of the year, we would be flat to slightly negative. So underlying what we’re doing, we’re continuing to realign our distribution network in Mexico, Chile and in the Caribbean. We continue to work on what I consider to be near-term expense initiatives that we want to see take hold and our expenses quite frankly were generating at or below the inflation rate. There is more work to be done and there is a framework and a program in place to do that that takes place of all the geographies across the country. In terms of operating -- in terms of volumes overall, if you look at the underlying volumes in Asia, we continue to see high-single digit growth in Asia on a year-over-year basis and continue to see that continuing going forward. We also see continuing volumes in Latin America on a medium to longer-term and we see this temporary, let say, moderation is just that as temporary. We have fundamentally very sound economy, sound demographics and a good business environment to take advantage of an uptick. And so we are very confident that we have our investment thesis correct. And look at the Caribbean continues to be a challenge. I mean, we had significant paydowns of some structural loans. Our infrastructure loans in Panama and El Salvador, the normal course of business that they are all good, that’s what we set out there that their paydown time that we expected. But Puerto Rico will continue to be a challenge for us as well as the English Caribbean. And we’re going to get some lumpiness on some of our -- in terms of our asset formations there.

And just -- I mean, credit costs are going to start catching up with you there a little bit as well, no in LATAM?

What you’re going to see is some of the benefit we had of the PPE adjustments we had on Colpatria. You are going to see some catch-up going forward or some impact as Stephen Hart mentioned in his earlier comment in 2015.

But aside from that the underlying credit quality -- I mean just a volume growth is going to start hitting it from behind us.

You’re going to see -- what you’re going too see is some natural increase in your retail PCLs and in commercial as our volumes continue to increase at double-digit levels in the LATAM markets.

Okay. Thank you.

Our next question comes from Doug Young of Desjardins Capital Market. Please go ahead.

Good morning. Just a first question on the global wealth and insurance, I think you mentioned in your prepared remarks, if you exclude the gain from CI, your earnings were 312, which sequentially was down which was surprising. So I’m just wondering and I think you mentioned it was more on the insurance side than on the wealth side. And can you break out your earnings between the two and can you talk a bit about what driver of the weakness at that division?

Doug, it’s Christ Hodgson. I think it’s important. When you look at the wealth numbers, we had a stated number of 312. But on a normalized basis, where we’ve been showing our CI contributions in the past, that would have puts us at 338 million on the quarter, which is entirely in line with all the estimates on the street. I think in terms of business overall, expenses were little bit higher on the quarter. We are 13% with some one-time items that takes us down to about 11% and that is spread between volume related performance-based and initiatives. We have revenue growth of around 10% in the business line. The most important thing to think about, I think, for this business going forward though is the growth in assets under management and assets under administration and the growth in those areas which include acquisitions are 22% in AUM and 17% in AUA. So strong mutual fund revenues largely coming from ScotiaFunds. We have moderated the redemption side on dynamic. So that should translate well into the future. Our brokerage revenue and private client revenues were higher. On insurance, the insurance business in international has been performing well in some of the key growth markets, particular Peru, Colombia and Mexico and in the Canadian insurance market that has slowed down a bit with the slowdown in mortgage volumes. And as indicated in some of Sean’s comment, there were some claims on the insurance side. In the international side, there was $6.5 million in U.S. that was claimed in the international. But we only allow for $2.5 million and that’s because we actually then reinsure that and push that back into the reinsurers. So I think from a GWI perspective the results were in line and the growth into the futures, certainly going to come from the asset management side certainly.

Sorry, just to clarify, that you said $6.5 million in claims in international related to?

That was Chile.

Okay.

And we -- but we didn’t -- there were $6.5 million in claims made against that business in the U.S. We have a $2.5 million cap and then the balance of that going to reinsurers.

Okay. And then just on the regulatory capital ratio, I think there were some -- correct me if I’m wrong and I skimmed through this quickly. But there were some model refinements in quarter and I think that had an impact on your risk weighted assets of $1.3 billion. If I'm correct, what was that related to specifically, from a business book perspective?

That was primarily our retail portfolio. On our ongoing regular basis, we updated our risk parameters in this quarter. It was the time to update the risk parameters on the retail. But we’re not expecting anything significant in terms of model enhancements going forward.

Okay. Great. Thank you.

Your next question comes from the line of Meny Grauman of Cormark Securities. Please go ahead.

Hi. Good morning. Question on Canadian Banking, when you look at the mortgage growth on a year-over-year basis, excluding Tangerine, is that a number that concerns you or is it the case that when you look out into the future, is that a number that you'd expect to remain fairly stable or is it on the low side this quarter?

Meny, Anatol here. The 3% growth that we’ve had in the mortgage business is in line with where the market is growing. We had hoped that the market would grow a little bit faster than what it has. As you know, it started slow and in last couple of months, it’s picked up. But I think, looking forward, we can expect this type of growth. All three of our channels are doing very well in terms of distribution. So I think, in the slower growth mortgage market that will be facing this year, most likely also next year. I think that’s a type of growth we can expect. Having said that where you see that we picked up in terms of growth is on other personal loans, both secured and unsecured and then as Brian mentioned in his comments and I think Sean did as well, in the auto business and the credit card. So what we’re seeing is some good growth in other areas of the retail bank that are picking up.

And then just turning to the international side, you talked about the regulatory changes in Mexico and quite wide sweeping. I’m wondering when you analyze those changes, are there any facets of those changes that are particularly relevant for your operations in Mexico and any changes that present a risk or are concerning for you?

On the overall reforms, on balance they are more positive than negative for us as an organization. Generally, it relates to some of the reforms related to the energy business and reforms relate to the telecom business. There were some temporary setbacks as on the tax reform that sort of negated spending and investments in some reforms on the way government deals with some of its expenditures but on the balance, they tend to have a positive impact, not a negative.

Thank you very much.

Your next question comes from the line of Derek De Vries from UBS. Please go ahead.

Thanks. It’s Derek from UBS here. I just want to follow-up a little bit on couple things that have been touched on. On the capital side, you talked about the five basis points from model refinements on the retail side. And I guess, one of your competitors reported the update from their corporate, it was a much, much larger adjustment. Do you have a similar adjustment on your corporate book coming or nothing on the corporate side?

Again, there is nothing special on the corporate side, but as I mentioned, every year we update our parameters, updating the historical profile of our parameters for every New Year that we add. But there is nothing significant coming on our sidelines at this point.

Okay. So just a roll forward, and then there was also the adjustment on the capital ratio related to the Aussies capital adequacy requirements and apologies if I should know this, but the 15 basis points that came off there. Can you just explain what that was related to?

I’m not sure what the 15 basis points you’re referring to.

Well, that was -- I think, you’ve mentioned, you gave a $500 million figure coming off of the capital. You said revisions of Aussies capital adequacy requirements guideline for the collective allowance affected this quarter reduced total capital by $500 million?

Yeah. That just the way -- that doesn’t affect common equity Tier 1. Just affects the total capital.

And then just back to the Mexico, you talked about the changes there, but there was also like a competition paper that came out few months ago but it was only published in Spanish, if I'm not mistaken. And I was just wondering, does that create an opportunity for you? Is there going to be some restrictions put on the two big players in Mexico, so that you could perhaps take market share in the cards business? So if you’d comment on that.

Well, there is always government and the general view there is they want more granularity in local ownership and of shareholding within the banks. And as that plays itself out, there will be opportunity for us to expand our footprint.

Okay. That’s great. Helpful, appreciate it.

Our next question comes from the line of John Aiken of Barclays. Please go ahead.

Great. Thank you. My follow-up has been asked and answered.

Our next question comes from the line of Peter Routledge of National Bank Financial. Please go ahead.

Yeah. Question for Steve Hart. Steve, you mentioned Puerto Rico as an area of focus leaving aside the whole issue with PREPA and the public corporations. You’ve got, I think about $2.9 billion real estate secured portfolio. How concerned should we be for that given, it looks to me anyway like unemployment arising in Puerto Rico right now?

Well, more -- as you know almost half of that portfolio came to us from RG and is covered by the FDIC insurance.

Okay.

And we’ve been working down on the corporate real estate side. We've been working that down over the last few years, so we actually have that down to a fairly small position now. The mortgage book in Puerto Rico, actually most of the mortgages that we put on in the book in Puerto Rico, we then similar to what’s done in the states. We ended up selling them off to Fannie and Freddie. So we don’t actually hold much of the mortgage portfolio in the book at a retail level.

I see. And you’re reserving, you are not anticipating your real uptick in provisions?

We’ve had a couple -- we had some long-term workout in Puerto Rico for a couple of hotels and couple of real estate positions for a long time. It does get lumpy but we have actually written off and sold a couple of properties recently, so we are seeing some. Now withstanding the economy is off, people are looking at as an opportunity to invest at the same time. So we are seeing new money come into the country.

Okay. Thank you.

(Operator Instructions) Your next question comes from the line of Darko Mihelic of RBC Capital Markets. Please go ahead.

Hi. Thank you for the opportunity to ask another question. Question for Sean. Maybe you can help me with the modeling here of the other segment. As I see on page 13 and also on the supplemental, you mentioned or you highlight that you have higher revenues from asset liability management as well as higher net gains on investment securities. So a couple of questions come to mind. With respect to higher revenues from asset liability, I'm assuming that's in the net interest income line. That's been relatively stable for the last two quarters. So the question is, is that about an appropriate run rate and then what would be an appropriate run rate for the gains on investment securities?

Yeah. That’s hard to give run rate for securities, as we’ve had a good strong year. This year the equity markets have been quite strong. Though securities going forward this quarter we had a large portion of the old bank security gains on the other segment this quarter versus some of the other segments. So run rate, I’m loathe to give run rate on security gains. They were elevated this year and we’ll have to see how the markets continue to be strong next year than we’ll see continued strong gains next year. In terms of the net interest income, you’re right. The last couple of quarters, it has moderated, maybe slightly elevated but these levels is what we generally expect to see at least since the next quarter.

And so maybe just then to wrap it up, it's now making money and it's consistently made money over the last four quarters. Is that the expectation going forward and/or would you be tempted to perhaps alter some of…

Transfer pricing?

Yeah, some of the transfer pricing or allocations?

Yeah. We will look at that. We had some higher GAAP profits. We want to make sure, we’re allocating that properly. But this segment again, as a few ins and outs are going to this segment, it’s really hard to get a number. But it would generally run, maybe slightly positive to flat to slightly negative going forward.

Okay. Appreciate the commentary. Thank you.

Our next question comes from the line of Robert Sedran of CIBC. Please go ahead.

Hi. Sean, just a quick follow-up on that securities gain question, so if and when any action is taken once you're off restriction on the rest of the CI stake, will it flow through the securities gain line or will it show somewhere else?

Yeah. We’ve recorded the bulk of the value of that unsold portion due to the accounting requirements. So any remaining piece would flow through the securities gain line.

Okay. Thank you.

Our next question comes from the line of Mario Mendonca of TD Securities. Please go ahead.

Sean, I have a follow-up question on the ALM. That statement asset liability management, that’s fairly broad. Is there anyway you could narrow that down like what specifically, what activity specifically would have been driven -- would have driven the better results this quarter?

Again, we’ve signaled throughout the year that because the way we do our transfer pricing, some of the older long-term maturity, sorry, long-term debt that is maturing this year at a higher cost that residue stays on the other segment. So that’s what causing the high year-over-year comparison. But compared to Q2, our net interest income is up $3 million in that category. So again, a large part of it, the better performance compared to what we’ve seen in the past is again the run off of this higher cost funding where the benefits stays on the other segment.

So absent any change in transfer funding, there's no reason why that should decline --sorry transfer pricing, there's no reason why that would decline?

True. There’s always other cost that may hit that line. If our liquidity costs go up for some reason, that resides there. Overall GAAP profits depending on how we GAAP the balance sheet some of that stays there. So again, it will move around, Mario, its not a really fix number.

Okay. Then just a follow-up for Stephen Hart, you referred to higher PCLs in the international segment, driving NAIA lower by $10 million to $15 million relative -- in 2015, relative to 2014. Is that the right way to interpret that, like if you just gross that $10 million to $15 million up to a pretax number that would be the extent to which you would expect PCLs to go up absent any growth in the portfolio?

As it relates to the Columbia, yes.

And don’t forget, would be own 51%, so you have to -- once you get to the topline, provision for credit loss it’s 100% but our share is only 51% from a bottom-line standpoint.

Thank you.

Our next question comes from the line of Sohrab Movahedi of BMO Capital Markets. Please go ahead.

Just a quick one for Anatol, I mean, the productivity ratio in your segment has been tracking well, but the mix of business is changing now, with more of that higher risk or arguably higher risks stuff coming through, but higher margins. So any thought, Anatol, as to what the right productivity ratio is for your segment, given the mix shift that’s happening in the next year?

Yeah. We -- you recall when we talked that the investor conference that we had a number of months ago. We’re now in the low 50s and we hope to get into the high 40s over the next three years. That’s very much in line. We've got a number of initiatives, one, on the cost reduction and becoming more effective, more efficient in serving our customers better, well, at the same time investing. So you should see us in terms of productivity coming down by 200 basis points or so.

Okay. Thank you.

And that’s over a three-year period.

Our next question comes from the line of Steve Theriault of Bank of America. Please go ahead.

Thanks so much. First question for Mike Durland, equity underwriting look very strong, looks like a record quarter, but didn’t look like a record quarter in the league tables to me, particularly equity underwriting of highest margin of the three buckets that tend to look at was down year-on-year? So were there any timing issues or anything clouding that number, any color you can give me that will be appreciated?

It was very robust quarter, and obviously, we had CI transaction was in the quarter, and but it was also spread across some of the energy names, I would try to back to the lead tables but it was a strong underwriting quarter.

Okay. I may come back then and if I can just ask a follow-up on the buyback, the regulatory disclosure that I look at, didn’t actually flag that 2 million shares for the quarter? So I was just wondering if there was anything unusual, maybe using derivatives in the quarter as an alternative way to buyback stock, anything unusual there you could say for us?

No. Just the old-fashioned buyback here in the markets, I think, starting late June buying back a small amount everyday.

Okay. Okay. Thank you.

Gentlemen, there are no further questions at this time. I would like to hand the call back over to Mr. McGuckin for closing remarks.

All right. Well, thank you everyone for participating in our conference call today and we do look forward to talking to you next quarter. Have a great day.

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.