Good morning, and welcome to Scotiabank's 2023 Second Quarter Results Presentation. My name is John McCartney and I'm Head of Investor Relations, here at Scotiabank. Presenting to you this morning are Scott Thomson, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Phil Thomas, our Chief Risk Officer. Following our comments, we'll be glad to take your questions. Also present to take questions are the following Scotiabank executives: Dan Rees from Canadian Banking; Glen Gowland from Global Wealth Management; Francisco Aristeguieta from International Banking; and Jake Lawrence from Global Banking and Markets. Before we start, and on behalf of those speaking today, I'll refer you to slide two of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to Scott.

Thank you, John, and good morning, everyone. We appreciate you joining us today. Before I begin, I want to take a moment to acknowledge the ongoing impact of the wildfires in Western Canada. The bank has made a donation to the Canadian Red Cross to support the relief efforts, and we have initiatives and branches across Canada to raise additional funds. I would like to thank our teams for supporting our customers and the communities that have been impacted. As the situation evolves, our top priority is the safety of our employees and ensuring we continue to support customers as they recover from these fires. Despite the challenging market conditions this quarter, the bank delivered resilient operating performance, reflecting the stability of our business model, while absorbing the impact of elevated funding costs and higher operating expenses. Our Common Equity Tier 1 capital ratio strengthened in the quarter to 12.3%. The capital build this quarter brings us above our 12% target sooner than expected and we will aim to remain at 12% or above until we have more conviction on the macroeconomic outlook and regulatory expectations. This morning, we also announced a 3% increase to our quarterly dividend, bringing it to $1.06 per share. The bank also made progress in strengthening its liquidity position, with deposits outpacing loan growth quarter-over-quarter. Our liquidity coverage ratio was a healthy 131% at quarter end, up from 122% in the prior quarter. The events in March in the U.S. regional banking sector, and in Europe, highlighted the stability and security of the Canadian banking system. Throughout our Americas footprint, customer confidence in Scotiabank was reflected through deposit balance stability during this time of dislocation. Our diversified global business model is a competitive advantage for our business. I was particularly pleased to see the improvement…

Thank you.

I will now turn the call over to Raj for a more detail presentation on the financial results.

Thank you, Scott, and good morning, everyone. All my comments that follow will be on an adjusted basis with the usual acquisition-related cost. I'll begin with a review of the performance of the quarter on slide five. The bank reported quarterly adjusted earnings of $2.2 billion and diluted earnings per share of $1.70. The return on equity was 12.4%. All bank pre-tax pre-provision profit decreased 11% year-over-year driven mainly by higher expenses relating to personnel cost and relating to business development initiatives. Net interest income was in line as growth in mortgages and business banking balances as well as the benefit from foreign exchange was offset by margin compression due to a significant increase in cost of funds year-over-year. Net interest margin declined 10 basis points year-over-year mostly from higher funding cost. Quarter-over-quarter net interest margin improved by 2 basis points from higher margins in both international banking and Canadian banking that expanded 12 basis points and 4 basis points respectively. Non-interest income was $3.5 billion in Q2, in line with last year as high banking revenues and other fee and commission were offset by lower wealth management revenues which were down 4%. The PCL ratio was 37 basis points for the quarter. The performing PCL ratio was 4 basis points as the bank continues to prudently build allowances, reflecting the uncertain macroeconomic environment. Expenses increased by 10% year-over-year or 7% excluding the unfavorable impact of foreign currency translation, reflecting the continued investment for business growth and inflationary impact across most expense categories. Quarter-over-quarter expenses were up 2.5% or a modest 1.3% excluding the impact of unfavorable foreign exchange. The productivity ratio was 57.5% this quarter, resulting in a year-to-date negative operating leverage of 8.5%. Effective tax rate for the bank was 18.4% this quarter compared to 22.9% a year…

Thanks, Raj, and good morning, everyone. The Bank's balance sheet continues to be well-diversified across business lines, customer segments, and geographies. As we adapt to the evolving landscape, we remain proactive in building our allowances. As such, our PCL this quarter was $709 million or 37 basis points, including performing PCL of $88 million or four basis points. The higher provisions quarter-over-quarter is due to a more unfavorable macroeconomic outlook and provisioning scenarios that reflect more pessimistic GDT forecasts in our key markets compared to the prior quarter. This is driven by our assumptions around the following potential headwinds, increased risk of a recession and a potentially more challenging credit cycle, sustained elevated inflation causing a higher for longer rate environment which may impact retail consumers and commercial operating budgets. While the quality of our book and our risk appetite remains stable, the recent market turmoil in the U.S. has added an element of financial uncertainty. Starting with our Canadian Retail Portfolio, customer delinquency of 20 basis points in the quarter remained stable within expectations and well below pre-pandemic delinquency of approximately 30 basis points. Our Canadian Mortgage book remains solid with stable performance despite 36% of balances being from our variable rate portfolio. As you would recall, our variable rate mortgages reprice with monthly payment increases tied to policy rate changes. This gives us confidence in understanding our customers' ability to stay current with mortgage payments while maintaining the contractual amortization period. Our variable rate portfolio continues to be of high credit quality, with customers FICO scores of approximately 800. We continuously monitor the deposit balances of these customers, which on average remain higher than our fixed rate portfolio. Our customers are managing through this period of heightened interest rates by making trade-offs. For example, discretionary spending such as…

Thank you, Phil. 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. Our first question is from Ebrahim Poonawala from Bank of America. Please go ahead.

Good morning. So, I guess maybe just for the one question on capital. So, Raj, maybe for you, and maybe if Scott wants to add anything, but one, the impact from Basel III adoption was greater than you expected last quarter. What drove that? And then talk to us the give-back from the phasing over the next few years, how you think about the 56 reversals itself over time? And second, you still have, I believe, the DRIP on, do you end that now? And then just talk to us in terms of the appetite to buy back stock in the near-term, I know Scott mentioned you all want to be above 12 CET1, you're at 12.3. So, I'm wondering does the CET1 ratio drift higher or what your expectations are as we move into the back-half of the year. Thank you.

Sure, Ebrahim. Thanks for your question. I'll start on the Basel implementation benefit and how we think it'll progress. And then I'll pass it on to Scott to talk about DRIP and buybacks, and those kinds of things. The 56 basis points benefit was slightly higher than what we thought. We had indicated 20-30 on the previous call. Part of it was there's lots of data changes that is going through as part of the implementation of Basel III. And some of it, I thought, would not be implemented in time for this quarter. We obviously got it done earlier, so that benefit is higher simply because of that, which would have anyway flowed through, likely in Q3 or Q4. So, it's pure timing more than anything else. On the specifics of the 56 basis points benefit, Ebrahim, I'd probably categorize it in three particular buckets. And you can see all of it in our regulatory capital disclosure. So, one is Basel III previously had a 6% scale-out on all ARB exposures. Through Basel III, the reforms implementation, they've eliminiated the scale out. That's about $14 billion of RWA benefits. So, that's going to stay, right, so that's not going to reverse at all. The second thing I would say is there is a requirement to adopt, what they call, the foundational IRB approach for certain exposures, specifically in the non-retail book. And that results in couple of benefits for us. It requires us to put up lower LGDs, and it also requires us to have lower credit conversion factors. So, that's going to stay too, that's not reversing. The third one is operational risk-weighted assets. We had a $2 billion RWA benefit. You can see it on page 80 in the sub-pack all these disclosures. And that is obviously…

Yes, a couple of things. Thanks, Raj. So, Ebrahim, I was pleased with the capital generation this quarter. And I think it puts us in good stead as we go through the end of the year and to 2024. I do think there's a lot of uncertainty out there from a macro perspective, and then also from what OSFI is going to do, and so that would keep us inclined to stay around these levels of 12%, as Raj has highlighted. It doesn't feel good to have the DRIP on in raising equity at these levels, so that's not something that we would continue to do over time, once we get some certainty. And from a share buyback perspective, that's not in the cards. So, hopefully that answers your questions.

And just on that, Scott, in terms of what the OSFI is going to do, is it implied within there that you think that there might be a chance that they increase the DSB buffer again later this year?

I don't know, Ebrahim. Honestly, I think they're -- we'll wait to see in June. And that's another reason to run at a little bit of higher capital levels right now until we get some certainty on that front.

Got it. I'll re-queue. Thank you.

Thank you. The following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Hi. A couple questions here. One, the NII drag in corporate that keeps getting bigger, and it sounds like you took some actions this quarter to maybe nullify that a little bit in the coming quarter. And if you can maybe walk me through that? And then on expenses, we've back-to-back quarters of big expense growth, pretty atypical from Scotia. I'm just wondering as the bank, I don't what you're calling it, but you're engaging in some sort of transformation plan or a strategic direction. Should we expect this type of expense growth to continue as you may need to invest in how you want the back to look and perform in the future? Thanks.

I'll start, Gabe, and Scott might have a thought on expenses as we look forward. As far as the interest rate NII, what you're seeing in the other segment is simply the increase in the term funding cost. There was administered rate increases last quarter; we're seeing the full quarter impact of it. So, few moving parts NII. Term funding cost was definitely a headwind quarter-over-quarter. The returns from our, what we call, high-quality liquid asset, so liquidity purposes was actually a tailwind because we're earning more on those liquid assets. And then the hedges are, frankly, neutral. What we did during the quarter, yes, we reduced the sensitivity to approximately $50 million. You can see in the 100 basis points, the increase in the sensitivity that we disclosed, because we now believe that rates are likely to remain higher for longer. So, with inflation being elevated, and all we did was adjusted the risk profile of the bank accordingly. So, it sets us up more towards being neutral to the rate curve movements and avoiding any negative NII impact due to short term rate increases. So, that's what we're positioned from an interest rate risk perspective, and typically this shows up in the other segment like you pointed out.

Got it.

As far as expenses goes, Gabe, I think what you're seeing is the inflation impact year-over-year. I think I talked about excluding FX, it's a little over 7%. It is high for this bank, as you point out. A lot of it comes back to all the increases, the base salary increases that we have had across the footprint along with other banks we did interim increases last year and then there is the annual increase, the full quarter impact, what you see in Q2 because these things go into effect in January and there's a general impact of inflation on all expense lines. So, that's what you're seeing year-over-year, quarter-over-quarter, what we should expect to see going forward is a modest growth in the expense line in absolute terms, low single-digits probably a good number to start with from our perspective. And that's what we are targeting. We try to manage expenses as prudently as possible. We prioritize and we try to manage it in line with the income or revenue growth. This will be one of those years where inflation has an outsized impact, not just in Canada. You got to remember in international banking, we operate in a highly inflationary environment and they're having 9% growth year-over-year I think is very credible considering the level of inflation and quarter-over-quarter, the expense in IB is actually lower by 1%. So, a lot of good things, but definitely challenges form an expense perspective. Not to say that we don't try to manage it as best as we can, but some inflation related impacts are tough to manage.

Yes, just a couple of comments to add on. I mean, I think the expense growth is we would all recognize it's too high relative to the revenue growth. I think the encouraging things as Raj says the deceleration quarter-over-quarter, which is encouraging, and we'll try to keep a control of expenses going forward. As you think about the strategic refresh, I wouldn't necessarily assume that results in higher expense levels. I think there will be areas that we'll want to invest in, but there will also be areas that we won't invest in as much. And so, I think this management team recognizes over the medium term, we need to get the positive operating leverage, and that will continue to be a hallmark of the bank and what we try to do going forward.

Strategic refresh, I'll get my terminology. Have a good one.

Thanks, Gabe.

Thank you. The following question is from Paul Holden from CIBC. Please go ahead.

Thank you. Good morning. So, with respect to the change in your macro views for the higher rates for longer and more persistent inflation, you've addressed the implications for NIM on that, I think talked a little bit about your PCL expectations, but maybe you can just tie it all together like what does that change in macro view mean more broadly for things like loan growth again for your view on credit or some other items maybe we haven't talked about? Just wondering what's changing in terms of your plan, I guess overall with that change macro view.

Sure, Paul. It's Raj, I'll start, I think as far as loan growth is concerned, Canadian Bank, International Bank we know that sequentially quarter-over-quarter, there'll be modest loan growth with the exception like perhaps on the Canadian mortgage book, which we think will be around the levels you've seen now. It all depends on how the housing market evolves, rate situation, those kind of things, as much as we can forecast over here, so that should be reasonable loan growth quarter-over-quarter across both these businesses. GBM will likely be in line with what you've seen in the loan balances this quarter where I think the uplift will come in the NII line is as you saw this quarter, you're going to see margin expansion modestly but certainly margin expanding as assets reprice and our funding costs remain fairly stable as I talked about little earlier in my prepared remarks. So, that's how we see the macro impacting our NII line and benefiting through the expansion in NIM with loan growth being reasonably modest. From a PCL perspective, I think Phil indicated talking about likely elevated PCL ratio on the 37 basis points what you saw this quarter compared to an earlier outlook where we thought we might be mid-30s and that relates mostly to how we want to build our performing loans, allowances across the various books that we have. Phil, you might want to comment about it? But the expense question, I addressed it. Hopefully that helps you with how we think about the macro impact on our expense line for the bank.

Sure. Thanks, Raj. As we look at our PCLs, we are expecting to be elevated for the remainder of the year as I said in my prepared remarks, and we're going to be focused on building particularly on performing allowances. If I look at the underlying portfolios, though, we've got no indications of fallen angels in GBM. I'm very confident on the business that Dan is running in Canadian Banking. In fact, if you look at that business, we actually are seeing pay down rates on credit cards continuing to be higher than pre-pandemic levels, FICO scores continue to be higher than pre-pandemic levels, and our customers are weathering the increase in interest rates quite well. If I look at international banking, I'm very confident in terms of the lending we've been doing in Mexico, Peru and the Caribbean. The strategy that we put in place there is working, but I'm very mindful of the sort of pockets of weakness, particularly in Colombia and in Chile. We have those two markets that are in recession, and we're building allowances accordingly. And we're bringing the full weight of the Bank's collections activities and data and analytics work to those markets today. So, that would be sort of my summary from a credit perspective.

That's great. Thank you.

Thank you. A following question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Hi, thank you. Phil, I appreciate the details on some of the credit quality metrics you mentioned, but I wanted to just talk a little bit or just dig into a little bit more the variable rate mortgage portfolio. And I'm not interested in averages. I'm actually more interested in a cohort or a vintage where they may have originally underwritten the mortgage with, say, a 2% rate or lower. I want to understand how that group of customers is performing with presumably much higher rate and much higher payment. So, I wonder if you can dig into that vintage or that cohort, how are they coping and how you think they will cope if rates stay higher for longer? And are you currently deferring payments or giving them some holidays to help them cope? Thank you.

It's a good question and I appreciate it. Thanks, Darko. So, if we look at that cohort and those customers have had a payment increase, given interest rates of about 46%, and so we have to be mindful about how those customers are sort of weathering these increases. And I think one of the great things about our portfolio is we see it upfront and we have probably the lowest amortization not probably, we do have the lowest amortization rates on the street. So, right now, what we've been seeing through the cycle is our customers had a very large payment buffer coming out of the pandemic. They've been drawing down on that payment buffer. They still have more deposits in their account than they did pre-pandemic, but we're starting to see those deposits run-off as payment levels increase. One of the things that's interesting as we dig into the data behind how these customers are performing, and I touched on it in my prepared remarks, but we are seeing them make trade-offs. So, the spend patterns, particularly for variable rate customers have changed and they're making decisions on not spending money, on discretionary spending or discretionary retail spending, like entertainment, as an example. And so, we're seeing customers the interesting paradigm, we're seeing customers making choices as they're moving through the cycle. As a Risk Manager, the area that I focus most on is our tail risk. And at this point, we haven't seen major increases in tail risk in these portfolios. And if I look at tail risk, just to give you a sense, we have about 950,000 mortgage customers in the bank and I'm looking at maybe around probably a little bit less than 2,000 customers. Just to give you some perspective over our entire mortgage book and with these customers we're looking at treatments like pre-delinquency activities through our collection center and our branches. We're looking at how we can leverage machine learning to identify consumer behaviors to identify customers before they go delinquent. And all of these things are being working hand in hand with Dan Rees, and his team as well as our collections and operations team. So, there's a really good monitoring in progress on these customers and we're just trying to be as proactive as possible. But again, if you look, our delinquency rates in these books are still below pre-pandemic, but we are going to work with customers if we see further stress in the portfolio, we'll be proactive in helping us to manage that.

Okay, thank you. So, there are deferrals happening. Do you have any statistics on that?

No, we're not doing deferrals, no.

Okay, great. Thank you.

Thank you. A following question is from John Aiken from Barclays. Please go ahead.

Good morning, Scott. I think that the market is anxiously waiting the update on your strategic outlook. And even if it's not the market, I know that I am. I know that you're not likely to give us any state secrets on this call, but are you able to give us a timeline as to when you may have been able to wrap up your strategic overview and give us some idea in terms of what your thoughts are moving forward?

Sure. Yes, thanks, John. We'll come back to the market by the end of the calendar year with some more insights. But I think even this quarter you're starting to see some of the things that I said in January start to play out right. Strengthening the foundation here on capital and liquidity to give us some optionality, improved profitability from a NIM perspective, repositioning the balance sheet in terms of interest rate positioning, I think these are all consistent with what I talked about in January. Even through my comments today, you heard me talk about capital light businesses and wealth. And you see the International Wealth business up 19%. You heard me talk about Tangerine. Here's an asset that is a fantastic asset that we need to accelerate. Talking here my comments around scene right, in terms of areas in Canada where we're under penetrated but making progress. And then, some of the segments like Jake's business and advisory, I think the improvement in our DCM and ECM positioning over the last three, six, nine months has been really impressive. So, you'll hear more. But I think through my comments and through our performance, you're starting to see some of the actions that you can expect going forward.

Thanks, Scott. I appreciate the hints.

Thank you. A following question is from Mario Mendonca from TD Securities. Please go ahead.

Good morning. I took notice of that meaningful increase in the liquidity coverage ratio. It's clear the bank is, as you said, Scott is building up liquidity and maybe changing the funding profile a little bit. What I want to get at now is, is this a lasting change, this increase in liquidity coverage ratio, or is it mostly just a reaction to what happened with U.S. regional banks and you could sort of drift back down to something lower in the near-term? And a related question is, do you expect any changes from regulators around the world as it relates to liquidity requirements and funding requirements?

Great. Thanks, Mario. Listen, I think the U.S. dislocation was meaningful for all of us. I think the Canadian banks did really well through that period. And I think the fact that we had deposit stability and actually deposit inflow should give us all comfort about our indiversified business model. I think it also highlights though the importance of running capital kind of at similar levels to where we are and a little bit more heightened liquidity. And that's why we took the liquidity from 121 to 130. I think those liquidity levels are actually pretty relevant for us. I think that's the kind of liquidity levels that we should be running at going forward. So, I don't think you see us going back to the 120 levels. I think 130 is appropriate, and we can adjust over time once we get more clarity on the macro and the regulatory environment. So, I actually think there was some obviously, we're on a journey. The results weren't exactly as we'd like them from a P&L perspective, revenues and expenses. But I think there was a lot of progress in this quarter when you look at capital, when you look at liquidity, when you look at interest rate positioning, and when you look at profitability. So, I actually was pleased with the progress this quarter recognizing more work to do.

You think the regulators are going to have a say in this in the next little while?

I think in the U.S. right now, there's a lot of discussion. I'm not sure it's exactly clear, but increased regulation, particularly in that regional banking sector is probably part of the equation. And I suspect higher capital levels and liquidity will be front and center for people.

Okay. And then, sort of a different question, you talked about, I think it was Phil, you talked about wanting to be a little more proactive in building outperforming loan reserves. I'm trying to understand what that means, in any given quarter four or five basis points to me is just your normal level. It's consistent with the overall balance sheet growth. So, when you say you want to start building performing loan reserves, are you talking about something north of that basic four to five basis points?

No, no, we usually run it around one to two basis points increasing. What we're talking about is getting back more to sort of four-ish every quarter. But again, listen, we want to be guided by what the macro is telling us. And so, I don't want to commit to a certain percentage build every quarter, we'll watch to see how the economy performs. We've already made some changes to our macroeconomic scenarios to reflect some more pessimism, but that's nothing more substantial than what we're already putting forward this quarter.

Thank you very much.

Thank you. Following question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Good morning. On International Banking NIM 4.2%, I think, Raj, you talked a bit about more upside from here. Just wanted to get a little bit more color of what drives that. And then, maybe attached to this, in International Banking, Colombia continues to struggle, when we look at the underlying results, I mean what are the issues there? What are you doing to address these and any discussions with the other entity that owns a good chunk of that around the put option on the Colombia business? Thanks.

Sure. I think, Doug, I'll start on the NIM and I'll probably pass it on to Francisco to talk about Colombia and at least as early thoughts on what we're doing in Colombia. The net interest margin of International Banking, as I said before has got too many moving parts down. Right, a lot of it changes because of inflation. We have so many countries. Each one has a different rate situation depending on how we are positioned as well. For example, some we benefit by declining rates. Balance sheet positioning, while in the Caribbean we benefit from increasing rates. So, lots of puts and takes over there. What I think I would say with reasonable confidence is the 412 basis points is a really good number for us across that footprint, and we think there'll be some modest expansion. I don't think it's going to be 12 basis points quarter-over-quarter. That much I can say with certainty, looking forward, but it's something that will be around these levels for the remainder of this year, and then we'll see how the rate situation evolves on Colombia.

Thank you, Raj. Let me first and foremost, welcome everybody to the call. Thank you for joining, and I look forward to meeting you in person soon. It's been just a few weeks since I joined the organization, but during that time I've traveled extensively to all the important markets where we have a presence, including Colombia. Colombia is a market I know well. I operated there personally over three years, so I know the country well. I'm half Colombian, as a matter of fact. I don't know if that counts for anything, but that's a fact, and I was there recently. The view that I have on who we are in Colombia is first and foremost, we have scale, we have an envial brand and an envial client base, and we're recognized in the market as a strong player, so we have a strong foundation to build upon. I was able to review the plan that we have in place. It's a recently built plan to turn around the operation, and it's a sound plan and a plan that I will continue to review and adjust as I see and track performance. I also had the opportunity to meet with our partners in Colombia, who I know well from my time there, and they have the full support of the plan and the management team, and we've made recent changes to that management team in Colombia. So, we have to see that plan through. I'm confident that we're going to execute it well, and over time we'll keep updating this group in terms of our performance.

Great. Thanks, Francisco. And just one to Scott, just one thing on the put, the put window, we've gone through that. So, there's no ability of our partner to exercise that put for another two years. So, we'll work closely arm in arm with our partner to improve the performance of Colombia recognizing the current performance is not acceptable.

Appreciate the comment. Thanks.

Thank you. Our last question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Okay, thank you. Maybe just for clarification, Raj, I think you covered quite a bit of it. So, when you put it all together in the corporate segments with some of the repositioning, do you expect the drag to lessen in the coming quarters and into next year, or are we still in this $250 to $300 million per quarter range?

Yes, I think directionally, you saw some improvement this quarter, Sohrab. As we had indicated, we thought it'll be likely in line with last quarter or maybe even higher. I thought the loss might be it came in better simply because of all the actions. Some of the investment gains we took as well, which you know is not predictable, really. I would say for the rest of this year, I won't get into 2024 because the rate situation has such a big impact on the other segments results. I think somewhere around these levels, maybe a little better than this, as we see the interest rate situation evolve today, I think will likely be the way it is going to be. I don't think it will get down meaningfully for the remainder of this year, but that might be a different story in 2024, which we can talk about at the end of the year.

Okay. And very quickly, just when I look at the capital situation, obviously lots of good news on the numerator in particular. But when you look at the RWA growth, obviously that was also a tailwind, very kind of very minimal overall RWA growth. What do you think that RWA growth is going to do, Raj, given all the excellent business plans that the business has put in front of you over the next, I don't know, four quarters?

I'll talk about the next two quarters, which is probably a little more certain as we think about the macroeconomic environment. I think I talked about loan growth being modest quarter-over-quarter improvements with the exception of perhaps the Canadian mortgage book. And that's a modest growth compared to some of the growth we saw, for example, in 2022, Sohrab. So, there's going to be strong internal capital generation. This quarter, we saw 14 basis points on frankly, a lower EPS than what we would expect to generate going forward. So, that should be a tailwind to growing the capital and absorbing any additional RWA growth. But I do think RWA growth will be fairly muted, similar to what you saw this quarter for the rest of this year, and that should help with capital accretion, and that's just simply a factor of how loan growth is expected to evolve. Considering the macro as we see it today, across the footprint, 2024 might be a different story. Like I said, we can talk about it towards the end of the year.

Okay, but just for crystal clarity, Raj, the more moderate loan growth is not you pulling back on risk taking, it's just a function of the environment you're operating in?

It's mostly a function of the environment. There's no changes in risk appetite of any significance that we'll talk about, but from time-to-time, right, I mean, we're trying to focus more on the customer. You've heard Scott talk about it. So, some of those do drive certain outcomes, but it's generally the macro. The demand is a little lower particularly we get to the International Banking segment and we're going to react appropriately. So, I wouldn't say one is greater than the other, but it's mostly relating to the macro, if you want to pick one.

Okay. Thank you for taking my questions.

Thank you, Sohrab.

Thank you. That's all the time we had for questions. I would now like to turn the meeting over to Raj.

Thank you. On behalf of the entire management team, I want to thank everyone for participating in our call today and we look forward to speaking with you again at our Q3 call in August. This concludes our second quarter results call. Have a great day.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.