Good morning. Welcome to Scotiabank's 2015 Third Quarter Results Presentation. My name is Jake Lawrence. I am the Senior Vice President of Investor Relations for the Bank. Presenting to you this morning is Brian Porter, Scotiabank's President and Chief Executive Officer; Sean McGuckin, our Chief Financial Officer and Stephen Hart, the Bank's Chief Risk Officer. Following our comments, we will be glad to take your questions. Also in the room with us to take questions are Scotiabank's Business Line Group heads, James O'Sullivan from Canadian Banking; Dieter Jentsch from International Banking; and Mike Durland from Global Banking and Markets. Before we start, on behalf of those speaking today I would like to refer you to Slide #2 of our presentation, which contains our caution regarding forward-looking statements. With that, I will now turn the call over to Brian Porter.

Thank you, Jake. Good morning, everyone. I will start on Slide 4. We are pleased with our solid Q3 results. We had strong earnings growth across our personal and commercial businesses in Canada and internationally. These results were partially offset by weaker results in Global Banking and Markets. Despite some challenging economic conditions, our well diversified businesses and our increased focus on customers contributed to the solid growth. Before I comment on the results this quarter, I want to highlight that we recently reached an agreement to acquire Citigroup's retail and commercial banking businesses in Panama and Costa Rica for U.S. $360 million, subject to regulatory approval. This transaction will make us a better bank in these markets. It will significantly increase our presence in the two countries by tripling our customer base and increasing our credit card market share to 18% in Panama and 15% in Costa Rica. While overall modest in size, these acquisitions are consistent with our strategy to increase scale within our existing footprint, leading to profitable market share gains, as well as cross-sell opportunities with new customers. Now, turning to our results this quarter, we earned of net $1.8 billion of net income and delivered diluted earnings per share of $1.45, up 4% from the same period last year. We had strong results in our personal and commercial banking businesses, which generates approximately 75% of our earnings. The very strong performance in Canadian Banking reflected growth in our commercial, auto and credit card businesses. Our wealth management business in Canada also performed very well. In international banking, we are seeing strong asset and deposit growth in our Pacific Alliance countries, as well as an improved contribution from Thanachart. In Global Banking and Markets this quarter, there were noticeable headwinds in investment banking and from the repositioning of our lending business in Asia. Our Common Equity Tier 1 ratio is 10.4% and the Bank's capital levels remained very strong. We are well positioned to continue growing the Bank, both organically and through acquisitions. Reflective of our solid earnings growth and strong capital position this quarter, we announced a 3% increase in the dividend to $0.70 per share. Overall, we remain confident that we have the right strategies in place to achieve our medium-term financial objectives. In a few moments, I will make some additional comments about this quarter's performance and our outlook for our businesses. For now, I will pass the call over to Sean to discuss the financial results.

Thanks, Brian. I will begin on Slide 6, which shows our key financial performance metrics for the current quarter and comparative periods. Q3 from last year excludes the impact from a notable gain on sale. As Brian mentioned, diluted earnings per share was $1.45, up 4% year-over-year. Revenue growth continues to be good at 5% year-over-year, with solid asset growth in Canadian Banking and International Banking. Revenues were also positively impacted by foreign currency translation, higher fee income and contribution from associated corporations. Partially offsetting this growth was lower net gains on investment security and lower underwriting and advisory fees. Our core banking margin was stable at 2.40%. Expenses were up 6% year-over-year. About half of this increase was driven by the negative impact of foreign currency translation and acquisitions. The balance was due to higher volume-related expenses, increases in technology and project spend, reflecting business investments and efficiency initiatives. Benefits from last year's restructuring charge have been tracking to plan and amounted to approximately $40 million year-to-date, with roughly another $20 million expected next quarter. These benefits, along with other initiatives, will drive a more efficient Bank and fund the increased investment we are making in technology. On a year-to-date basis, operating leverage was minus 1.1%. We expect to have flat to slightly negative operating leverage on a whole year basis for 2015. Moving to capital on Slide 7, as Brian mentioned, the Bank continues to have a strong capital position with a Common Equity Tier 1 ratio of 10.4%. The 20-basis point decline this quarter was primarily a result of our acquisition of Cencosud's financial services business in Chile, as well as the retail and commercial operations of Citibank in Peru. The internal capital generation was invested primarily in organic growth of risk-weighted assets from higher lending volumes…

Thanks Sean. The underlying fundamentals of the Bank's risk portfolios remained solid. Before discussing current credit metrics, I would like to discuss the condition of our retail, corporate and commercial credit portfolios. Starting with retail in Canada, our delinquency rates are at the lowest levels than the past decade. Furthermore, overall credit quality is stable, with recent [ph] of credit cards and auto loans performing better than prior. Utilization rates in Canadian retail are largely unchanged from last year and we have not seen any unusual or unexpected growth in either the secured or unsecured revolving credit. As a reminder, more than 90% of this portfolio is secured against real estate and autos. In international, the retail credit performance leading indicators are stable. We operate a diverse number of portfolios across different geographies. Some books are performing [indiscernible]. For example, improved credit performance in Peru has been offset by some deterioration in Colombia, which we expect to normalize next quarter. Overall delinquency rates are generally stable across international retail and utilization rates are largely unchanged. In both, Canada and international, we have made investments in our collection capabilities, which have strengthened our overall lending businesses. In Canada, these investments are showing good results, particularly in our higher growth portfolios of automotive and credit cards. Looking at our corporate and commercial loan books, the overall credit quality continues to be solid. Loss levels are near historic lows and formations continue to be reasonable. The energy sector continues to be one that we are monitoring closely and I will have more to say on our exposures in a moment. I also want to provide a brief comment on our Puerto Rican exposure, which is detailed in the appendix of our investor presentation. Our total lending exposure in Puerto Rico is small and…

Thanks, Stephen. I would like to comment briefly on each business line's performance this quarter and make some brief remarks on the outlook. Canadian Banking had a very strong quarter. All of our key business segments: retail, small business banking, commercial banking, and wealth management delivered very good growth. We had solid asset volume growth, with particular strength in commercial lending, automotive and credit cards. Our focus on these products is deliberate as they earn us a greater risk-adjusted return for our shareholders, while also deepening relationships with our customer base. As an example, much of our growth in credit cards has occurred with existing Scotiabank customers. Over the past year, we have increased the percentage of Scotiabank customers using our cards from 20% to 30%, and we have clear plans in place to take this number higher. We have also increased our focus on deposits with another quarter of core deposit growth. Wealth management in Canada continues to deliver strong earnings growth, driven this quarter by continued AUA and AUM growth, as well as higher brokerage fees. As we enter the final quarter, we have had a strong year-to-date, many of our businesses are performing very well and we expect to build on this strong performance in 2016. Looking at International Banking, we are pleased with our results. The business momentum that we had signaled earlier this year has in fact translated into solid bottom-line growth this quarter. We expect this trend to continue in Q4. We, again, had good volume growth in both, loans and deposits. For the division overall, loans increased 8% on a constant currency basis. Despite commodity and currency volatility, our Latin American operations continued to benefit from relatively robust growth, evidenced by loan volume growth of 12% locally. This quarter was the first to…

Thanks, Brian. That concludes our prepared remarks. We will 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?

Thank you. The first question comes from Robert Sedran of CIBC. Please go ahead.

Good morning. I just wanted to ask about that operating leverage in Canada. I know it has been strong for a while, but 500 basis points or so, I don't think, James, you are going to call that sustainable for foreseeable future. Can you just give some sense of what you think about the quarter, where you think it is going? Perhaps also, just because you are adding some higher margin lines, like credit card and auto, is the higher level of operating leverage sustainable for your business, maybe not 500, but more than we would otherwise assume?

Well, I would say this. We are certainly not done. I mean, let me back up a bit. We have, as you know, three all-Bank priorities. The first is being more customer-focused. The second is developing great leaders and the third is serving customers better by reducing structural costs, it is that third priority, reducing structural cost that I think is driving multiple initiatives right now across Canadian Banking and wealth. We have done a lot in Canadian Banking, we have done a lot in wealth and there is no question you see that in the operating leverage, but I feel very strongly that there is more to do. We had our Investor Day about 14 months ago, we laid out a target. I think it was $150 million of improvement in expense reduction and I think that's a number, Rob, that over the next couple of quarters we will revisit, and visit with a view to increasing it. When I look our productivity ratio excluding wealth at 47.7% and benchmark at, I think there is still room for improvement, so this is going to be a focus for several quarters and frankly for a few years ahead.

We have generally been assuming those efficiency gains ends up getting reinvested into other growth initiatives whether it is on the technology side or the disrupter side, whatever it is. You are suggesting that more of it should flow through to the bottom-line like we should see the operating leverage flow through?

I think it's going to be a bit of both. When I think about within Canadian Bank, and we have - one of our areas of focus is customer experience. Associated with customer experience is going to be a very meaningful investment in technologies, so I view structural cost reductions as doing two things. One, funding a stepped up technology investment and, two, also driving positive operating leverage, so our goal would be to do both, step up investment in technology and continue to show a positive operating leverage story.

Thank you.

Next question, please.

Thank you. The next question comes from Mario Mendonca of TD Securities. Please go ahead.

Good afternoon or morning, rather, a question for Stephen and perhaps Sean. When you think about what is going on in domestic retail, the strong growth we are seeing in NII because of the strategic shift you are making. Is there any potential that the increase in credit losses could be more back-end loaded? Specifically, that as these books of business mature, you are getting the NII today, but you will see higher PCLs later?

Thanks, Mario. It is Stephen. I will take the first part. Certainly from a credit loss basis, actually it works the other way. In credit cards, as you will have noted over the last couple of quarters, our credit losses actually spike up, which we actually expect it is in the first 18 months as you have new campaigns and bring on new clients that you actually go through that wheeling [ph] process and then they tend to normalize, which is what you are starting to see this quarter with our credit card PCLs starting to come down, so it actually tends to be, at least on the unsecured area, an upfront basis. As I said with regard to new vintages, both in auto and in credit cards, because of the experiences we have had, we tightened up our scoring, got better in our credit analytics and we are actually seeing that show up in the vintages now, which are coming in much lower than previous years.

If I can just add to that, Mario, as Brian mentioned, a lot of the credit card growth is with their own customers, so we have very good sightlines on their credit paying ability. They would have other products with us, be it say, mortgage or day-to-day banking, wealth management, so we are growing this very thoughtfully, and we are doing it within our own risk appetite and we think that the losses will be contained. To your point, should these high growth levels come to a halt, then there would be some catch-up, but we are not projecting that at all.

Okay. A quick question for Mike Durland, so underwriting, advisory obviously weak, and what I am struggling with a little is to understand this all volume-based or whether this was something more of a mark-to-market in nature related to some kind of transaction that may have driven this or is it truly just all volume?

Yes. It is all volume-based.

Thank you.

Next question, please?

Thank you. The next question comes from John Aiken of Barclays Capital. Please go ahead.

Good morning. Sean, I wanted to ask a couple questions about Slide #18 in your appendix, which talks about the recent acquisitions. Obviously, we saw the contribution to PCLs, which ticked up the relative rank within international. Is the accounting for these acquisitions a little bit different from what we saw from the Colombia acquisitions? I guess, where I am going from this is are we going to see PCL increase just from accounting metrics or is this, all else being equal, this is the run rate that we should expect from these acquisitions?

We have not finalized, what we call the purchase price equation for this, but we would not expect the same phenomenon that we saw with Colombia. There will be some of that, but you will see more, the provisions we book on these transactions are generally more in line with what the local run rate is. You won't have the similar cliff effect like you had with the Colpatria.

Understood, and can you give us some sense as to what the size of the acquisition integration costs were? I mean, I know you do not like being specific, but those being absent would we have had a sizable increase in the net income contribution?

I think this quarter it was about $10 million or so. They will continue it on for the next quarter and a bit.

Great. Thank you.

Next question, please?

Thank you. The next question comes from Gabriel Dechaine of Canaccord Genuity. Please go ahead.

Good morning. A few questions about your international business macro, can you give me a breakdown, maybe country-by-country, some of the big ones anyway? The borrowing exposure that is denominated in U.S. dollars and then how those borrowers are managing the higher cost of servicing those debts, possibly? Then as global growth slows down, maybe there is another round of rate cuts coming in some of your key geographies. How are you positioning yourself for those potential outcomes?

Gabriel, it is Dieter. How are you doing? Overall exposures on the lending side, we had about 30% linked to the U.S. dollar and that will be predominate to the large corporate who borrow in international markets, investment-grade borrowers and they are holding up well. They have offsetting U.S. revenues to deal with the U.S. expenses, so we feel very comfortable with the quality of the U.S. dollar book and we see no deterioration in that quality going forward. As to the interest rate cuts, you know, it really depends what is happening in the inflation environment in Chile and in Peru. At this point, we would hold the rate structure relatively flat, but if inflation starts to creep up, we will see the central banks moving perhaps increase the rates a little bit, but I would not include it in our forecast. In Mexico, we largely see that following the U.S. trends, depending on what happens to the Fed. Overall, we see a fairly balanced rate environment, again, depending on inflationary pressures and what happens in the U.S.

Thanks. I assume the corporates, you have probably worked at hedging their exposures as well, selling them hedging products?

We sell them the full range of products to build their hedging and these corporates are large corporate, they are sophisticated borrowers. They have either internal hedging processes or we involve VARs [ph] or swaps to help them manage their exposures.

Just a quick one on the Citi acquisition, the Panama one, what is the profitability of that business?

We see it being incremental when it closes sometime in January, adding between 10 and 15 on a run rate basis, but we will close that sometime between January and March of next year.

Okay. That's annual?

That's annual.

Okay. Thank you.

Next question, please?

Thank you. The next question comes from Steve Theriault of Bank of America Merrill Lynch. Please go ahead.

Thanks very much. Just if I could quickly just follow up to Gabriel's question, Dieter, the 30% linked to U.S. dollars, how much of that is retail or did you say and maybe I missed it?

The majority of that would be business banking.

5% to 10% retail?

Yes. That's correct.

Okay. Then just wanted to follow up with Stephen, I was also noticing the same. You added a slide on Puerto Rico, added a risk statement in the report to shareholders, so I was just thinking are you flagging an increased concern that we may see some charges coming in the next little while or are you just being ultra conservative in giving us some additional information?

Quite frankly, we are looking to give you some context about how it relates to our total portfolio. As you know, we have always indicated that Puerto Rico is probably the weak link in the Caribbean, and one that we have been watching the most carefully. There was a formation that we took this quarter in Puerto Rico with regard to a real estate project, but it really is to the latter point that we just want to show in context where it is and it is quite [ph].

Okay. If I could just finish asking Sean, I maybe did not see it in the disclosures, but can you tell us how much FX added to international in terms of earnings year-on-year?

That is on Page, I think, 5 of our MD&A. Year-over-year it was $30 million, but down $8 million from Q2.

Okay. Thanks for that.

Next question, please?

Thank you. The next question comes from Stefan Nedialkov of Citigroup. Please go ahead.

Hi, it's Stefan from Citi. I had a question on hedging. If you can just, again, maybe briefly overview your hedging policy and how should we think about the rollover of the hedges as of the end of the year? Thank you.

Yes. I will take that. We have chatted a bit about this in the past. You have to separate our foreign operating subsidiaries from our U.S. earnings that we earn throughout our main Bank, mostly in GBM and that. On that one, we have ongoing discussions of how much we want to hedge. On that one, we are kind of exposed to the spot rate at the end of the quarter, so we do various levels of hedging on that piece of the book. We have had a view all along that the Canadian dollar will weaken this year against the U.S. dollar, so we have not hedged as much as we have had in the past, take advantage of that view. In terms of our international operations, the Mexicos, the Colombias, Chiles of the world, we would hedge a small portion of that on an ongoing basis, anywhere between 20% and 30%, so those would just keep rolling over on a regular basis.

Do you expect?

Go ahead.

Do you expect any sort of cliff event in terms of hedging cost as you approach the end of the existing hedges?

No. When we do decide how much we want to hedge, we do look a t the cost of the hedges versus our view of what the markets may depreciate by, but at this point we don't see any cliff effects as we rollover hedges.

Okay. Thank you.

Next question, please?

Thank you. The next question comes from Peter Routledge of National Bank Financial. Please go ahead.

Good morning. I guess first question for either Dieter or Steve. What percent of your commercial borrowers in the International Banking segment borrow in U.S. dollars?

What we said earlier on the question from one of your colleagues was 30% would be accessing the U.S. markets and are more in U.S. dollars.

Is that like Peru, mainly, or?

It could be Colombia, Mexico. It is a diversified corporates who do have regional and global operations that would be commodity-linked and would actually be paid in U.S. dollars, they would generally borrow in U.S. dollars.

Do you sell them like currency hedge as well as a matter of standard?

As a matter of course they would have a wide range of capital markets' products, swaps, hedges, forwards, whatever they would require to mitigate the market influences and these are well managed investment-grade operations that are world-class operations and very sophisticate borrowers.

You are not worried about the currency movement?

We monitor it. It is part of our part of our credit exercise and due diligence as we put the credits on, on an ongoing basis. We feel very comfortable with how the risk is being managed. Peter, I think you should think more about it as a market access. The large corporations in Latin America have access to the U.S. market and they will go to the U.S. market for liquidity purposes, but they all have access to the hedge market, so they are looking forward to best cost of funds, the best liquidity and they are able to do that on a hedge basis.

Peru's partially dollarized, but you are not doing anything with small players or small companies in U.S. dollars?

As you appreciate, 40% of the U.S. economy in Peru is in U.S. dollars. There is a very strong policy direction to move to more of a local currency solace and the smaller borrowers that do have U.S. dollar exposures, we know who they are. We are actively moving in line with policy to move into local currency. At this point, the quality of those books is good. We see no significant deterioration in any of those borrowings and you can see it in our PCL numbers overall. I mean, you go flat Q-over-Q on a ratio basis and we are actually down from last year, year over year by seven basis points if you take out our credit mark and acquisitions. Our book overall is very stable and we see no significant deterioration in any of our portfolios, with the exception of some isolated pockets whether it would be Colombia or in the Bahamas.

Thanks very much. I will re-queue.

Next question, please?

Thank you. The next question comes from Meny Grauman of Cormark Securities. Please go ahead.

Hi, good morning. Just wanted to know your view, which unit you think is more exposed to low oil prices? Is it Canada or international? When you do your stress testing, in what unit do you see a higher increase in the loan loss ratio under a stressed oil scenario for an extended period of time?

Hey, Meny. It is Stephen. I will take that. As it relates to units, it is not so much a geographic basis. We see, as we mentioned before, that the oilfield services, which is one of our smallest sectors, is probably the one that is going to be hit earliest and through a long cycle, the hardest. In fact, our watch list has gone up marginally in this entire sector and it is really just due to the oilfield services part of it, so that is what we see from a sector viewpoint. Geographically, we are not seeing much difference between Canada and the U.S. As I said, we did not really have any formations whatsoever the last two quarters. I would say the Canada is more of a gas play than an oil play. Quite frankly, the gas prices have not been as volatile as you have seen in oil.

Next question, please?

Thank you. The next question comes from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Thank you. Stephen, can I just clarify one thing? The stress testing that you do, you mentioned there is not much difference between Canada and the U.S. as far as the direct lending is concerned, but in the losses that transpire in your most severe scenarios, what percentage would be attributable to your non-North American lending?

Okay. We have our portfolios, as you know, fairly diverse. About 55% of it across the entire energy spectrum is North American, so 45% is between Asia, Europe and Latin America. Quite frankly, a lot of that is in the refinery and pipeline areas where we don't see any real potential for loan losses.

Okay. Thank you very much.

Next question?

Thank you. The next question comes from Mario Mendonca of TD Securities. Please go ahead.

Just one thing to clarify, you said that 58% of the exposure is investment grade that was withdrawn. Did you provide an undrawn number?

No. I did not, but it is actually about 73%.

Thank you very much.

Next question?

Thank you. The next question comes from John Aiken of Barclays Capital. Please go ahead.

Good morning. Just taking a look at your exposure to China, to trade financing, down significantly in the quarter and this has been an ongoing trend. Was there any cost to reducing that portfolio and was that one of the negative factors on capital markets' revenues in the quarter?

Yes. Definitely with volumes down fairly significantly that did have a negative bottom-line impact to GBM, but it is just a pure volume.

No actual losses on reducing the positions?

There is no PCLs. It just lower volumes and lower net interest income contribution.

Great. Thanks.

Next question, please?

Thank you. The next question comes from Darko Mihelic from RBC Capital Markets. Please go ahead.

Hi, good morning. Two lines of questioning, the first is with respect to the global, the investment banking operations. You mentioned Asia will be done by the end of second half 2016, and it is going to create some headwinds. Presumably, there must be some loans there that are running off. Is the impact or the headwind going to come in the form of a PCL or is it just going to come in the form of lower revenues from Asia?

Yes. It is a revenue issue, so we are pivoting that portfolio. We started about this time last year. We probably have another couple of quarters left to go. Most of it is actually done, so within the next couple of quarters you will start to see that number stabilize and start to grow again.

Start to grow again, so the concept is you are not actually exiting Asia, per se, it is just as you mentioned, pivoting? Is that the best guess?

Yes. It is more of a repositioning, so less trade finance, fewer accounts, more focused on our ability to cross-sell more of a corporate banking focus.

Okay. I guess, along those lines then, the end result, is it going to be smaller and will there be any changes in the expense line?

It with be smaller and the expenses probably will come down accordingly. A lot of that, again, has been initiated, and again we think that will be completed within the next couple of quarters.

Okay. Thanks for that. Then with respect to the credit quality, just a question with respect to the oil and gas portfolio, have you seen any change in the watch list so far? What can you tell us about what you are expecting when you go through redeterminations?

Sure. With regard to the watch list, as I mentioned, the watch lists for the oil and actually watch list overall for the Bank has come down on the corporate commercial side, so we have actually had an improvement in the overall portfolio. As it relates to the oil and gas sectors, as I indicated it has moved up to about maybe 2.5% of the total portfolio and this has been solely due to the oilfield services area, which as we mentioned before is the one that we consider the most vulnerable on a long-term basis.

I guess where I am coming from is, I am wondering, is that taking into account in the watch list that what has moved to the watch list is oilfield services, I get it, but with respect to the borrowing basis declining, should we expect that next quarter we see a large move in the watch list? If that's the case, why not move them now?

We are at the point now where just as you have discussed with the other banks, the next borrowing base determination is coming up in October. We are setting our price deck now in anticipation of that. As you would expect, they are going to be coming down vis-à-vis, where they were back in March, so we do expect there will be a lot of discussions with various companies. As I indicated, some of that has already been handled, because they have gone to the capital markets and beefed up their liquidity. We do expect going forward that they will have to look at some asset sales going forward. You have already seen some M&A activity that has started in that sector, so we view those as all positive.

Okay. Just one last question, and I apologize for drilling into this a little bit, but your book is actually only up because of currency?

That's right.

As we roll forward, should we expect to see that go down in a more meaningful way or is it just not that important and we should expect that this exposure will more or less remain around this size?

I mean, we have been managing exposure, so while the dollar amounts are effectively the same as they were last quarter, the actual names, I mean, we have called some names, some names have left because they have been able to refinance or because they have had capital markets. We have actually entered in some new relationships with some high IG investment-grade clients, who we think will do well in this cycle, so there is always going to be a movement of names in and out of the portfolio, but quite frankly I do not actually see it dropping significantly over the next two quarters.

Okay. I guess that is what I was getting, I just want to make sure that the risk appetite is more or less the same irrespective of the oil and gas.

Exactly. We are a long-term lender and we have gone through a number of these cycles before.

Okay. That is great. Thank you very much.

Next question, please?

Thank you. The next question comes from Peter Routledge of National Bank Financial. Please go ahead.

Hi. Thanks. Steve, I think in your prepared remarks you had a comment regarding Canadian retail that recent vintages are performing better than prior vintages. Did I hear that right? If so, can you give us some color as to what is happening there?

Sure. As I indicated earlier, our credit card initiative that we started two years ago on a very strong growth plan, as indicated we went out, we have almost doubled the portfolio. That has given us more experience in taking a look and we brought the American Express card on, so we have had some good data that we have been a able to sit there and start mining over the last 1.5 years. From that, we have been able to better reflect our data analytics as it relates to our scoring going forward. As well we beefed up, as I indicated, our collection activity, which is actually very critical in the retail side. Origination is key, but the collection, you have to have the lifecycle effect, so we have improved both, our analytics and the resources we put into the collection side and that has really shown in an improvement with the vintages, so what we are seeing now is that the delinquencies 90 days into the loan, into the credit card or the auto loan are below those of a year ago.

Just in terms of core operating discipline analytics plus

Block and tackle.

Yes. I guess the next follow-on would be, when I hear Scotia is growing its unsecured retail and indirect auto share at this stage of the credit cycle, I think the vintages are going to be a lot worse, with the losses in loans you are making today, and the loss content is much higher. I mean, how would you respond to that?

I have to go by what we have been seeing in the book so far. What we have noticed, we have actually signed on the indirect auto and I could leave it to James, but we signed on with a number of good OEM dealers, so our market share has picked up through that aspect of it because of our service capabilities. Quite frankly, we have an award-winning market position in indirect auto and it has been very good for us.

Yes. I would just add to that just as a reminder, our credit card initiative, I mean, it really has to be viewed as a part of our strategy to be much more relevant in payments generally whether that is credit card, debit card, checks, e-transfer, we want to be there. I would remind you that 85% of the marginal sales are to existing customers and I think it is important also to point out that credit card balances of $5 billion currently, I mean, that is in the context of an $850 billion balance sheet. It is hard work and it is not easy, but we actually think it is a goal on the credit card side that has been quite prudently laid out. As for the auto side, that business is performing well overall. It is an important business for us. It is true that loan growth is moderating somewhat due to economic conditions. Frankly, margins are under some pressure, but the overall portfolio continues to perform quite well and that is a commitment we made at Investor Day. We are not looking to grow every portfolio at strong double-digit rate, but commercial, auto and credit cards are three that we very much are.

There is news in the mortgage broker market about a small number of productive brokers and the veracity of their income verification procedures. You guys are big in that mortgage broker market. Have you or are you going back and double or triple-checking you are doing random testing in reaction to that news?

Yes. I mean, obviously, the issue that happened there, quite frankly their broker channel fraud was mainly related to non-prime mortgages, which is a business that we do not do. In our own mortgage channel, I should indicate that through all three channels that we use, all of it comes through my own central adjudication group, so it does not matter which point of touch the client hits. It is the same process once it comes into the risk area. We do require independent verification of income and we need two different sources for that. That can include pay stubs, employment letters, tax returns and occasionally verbal employee confirmation. We also are probably unique that we also have a prefunding independent group that reviews all the documentation for compliance and fraud prior to any funding.

Okay. Thank you.

Next question, please?

Thank you. The next question comes from Gabriel Dechaine of Canaccord Genuity. Please go ahead.

Hi. Just a quick follow-up for Dieter, and then one for Brian. The Citi profitability contribution you quantified, is that inclusive of integration charges you expect next year?

No. The answer to the question was, what would be our annual run rate and once we - caveat and that was the answer to that one.

Okay. Brian, just from a capital perspective, I need something from a capital section in my note. How important is it for Scotiabank to have capital ratios in the upper echelons of the peer group? It was not always the case, but post the CI stake sale, you have been consistently at the upper end of the group range. Is it important to the Board and to Management to be at the upper end of that range?

Good morning. We have been very clear in terms of how we deploy capital in this Bank, and we generate about 60 basis points of capital organically through earnings. We divested of the CI stake a year ago, as you mentioned. We have thoughtfully made some acquisitions, whether it's Canadian Tire Financial, Cencosud, the purchases from Citi, so we are incrementally adding to expand our market share in these important markets. If we saw the right acquisition, we could go below the peer group average and earn our way back or if it is something significant, we think is on strategy and very important for the Bank going forward, we might access the capital market. It depends on the acquisition, how appealing it is. Things are coming to us. As bank valuations around the world readjust, given what is gone on in markets and valuations in all the Pacific Alliance countries have come down, we like optionality and we are poised and ready for any opportunities that come our way.

I was asking more, maybe not so much in the M&A sphere, but if the bar was raised for one of your peers because of a global standard of some sort that may not directly impact you, but would you or the Board feel compelled to move up in that direction as well?

No. The answer is no.

Okay. Thank you. Have a good weekend.

Same to you.

Thanks.

Thank you for all your questions. I will now pass it back to Brian for some brief closing comments.

Well, thank you everybody for participating on our call today. Despite challenging capital market conditions and a negative market tone for banks, we believe we have delivered very solid results for our shareholders this quarter and increased our dividend by 3%. Thank you again for your participation. We look forward to hearing from you in Q4.

This does conclude the conference call for today. You may now disconnect your line and have a great day.