All right, welcome back, and welcome to our next presenter, Aris Bogdaneris, Group Head, Canadian Banking for Scotiabank. Thank you for joining us in Montreal, your hometown. Mm-hmm. First question: Are you a Habs fan? I'm very much a Habs fan, and I was lucky enough to be at the right age in the '70s when they were winning their multiple Stanley Cups, and so I'm very lucky. Well, there you go. Got that one out of the way. So you joined the bank, Scotiabank, not too long ago. Nope. So, you know, my first question would be, you know, kind of an obvious one. Your previous experience, you ran the ING's global or European branch- Global, global ... global desk branch. Global retail, retail bank. And then, ING Direct in a few markets as well. Yeah, mm-hmm. Is there any... I mean, low-hanging fruit, I guess, is the tired phrase I would use. But- Mm-hmm ... but that you were successful with in your previous experience that could be applied to your, your new job and enterprise? So, spent nine years at ING, and in ING, globally in retail, they have two types of banks. They have equivalents of Tangerine. They have direct banks in Germany, Italy, France, Spain, and Australia, and they have brick-and-mortar banks across Europe. And for me, what I've seen over the last 10 years in Europe in terms of the direct banks or the equivalents of Tangerine at ING, and what they did over the last 10 years versus what I've seen as I've been in the bank now, several months, when I look at Tangerine, what are the opportunities? And I think what strikes you first and foremost is, in Europe, they've actually been able to scale, ING's been actually able to scale the equivalent of Tangerine's. So in case of Germany, Germany is a big country. It's around 80 million people, if not more. The bank in Germany, ING Direct, has over 11 million customers and generates probably 2.2 billion in profit. But it all started in the same way, like Tangerine today. If you go back 20 years, 10 years, they started with a very compelling deposit value proposition. High pricing attracted a lot of deposits, also in ING Direct Canada, previously, before Tangerine. But what they managed to do that hasn't yet materialized in Canada, for whatever reasons, is they were able to monetize the incredibly high customer satisfaction and the deposit base they gathered, and they became a full-fledged digital bank. I think the transformation that I see in front of us in Tangerine is actually taking their 2 million customers, their deposit-gathering skills, which they have, and actually making the leap to diversify into a full-fledged digital competitor to the big banks in Canada. We saw it in Spain. We saw it in Australia. We saw it in Italy. We saw it in Germany. It can happen. But what happened differently is they actually skipped the web. They went straight to mobile. And I think that also is something that we're going to try and actually engineer here in Canada, is go straight and be a mobile-first digital bank, but offer lending. The loan-to-deposit ratio in Tangerine is less than 20%. In Europe, the equivalents are loan-to-deposit ratios of 60%-70%. So they've managed to maintain that deposit-gathering power, but they also do consumer loans, personal mortgages, investment funds, brokerage, and they become a digital-first bank, but they become a primary bank. And I think consumers in Canada are not a lot different, at least a certain cohort, than their Spanish or Italian or French or German equivalents. I think people are actually moving into that direction. They're just looking for a full-fledged bank to do it, and that's really the challenge we have ahead of us in Tangerine. Have you identified any, I guess, fixable issues? I'm saying fixable, maybe not the right word- No, I know what you mean. ... but, to get that loan-to-deposit ratio up? Yeah, I think, I think first and foremost, if you're going to be a digital bank, you have to know how to do consumer lending, cards, and cash loans very efficiently on mobile. So that's one area. I wouldn't say... Nothing's a low-hanging fruit. Everything's hard. The second one is to get a savings and investment proposition, but more an investment proposition. But the key is not the products. The product's the easy part. It's how do you deliver it on mobile? That's the challenge, how you do. And again, so not easy, but again, if the whole organization has to reorient themselves to thinking mobile first. Yeah, but there's already relative scale there. You have, you have 2 million customers, so... Similar vein of questions, I guess, the Investor Day wasn't that long ago. No. Maybe, I mean, an early progress update on- Yeah ... on some of your key objectives, and how do you expect the- Sure ... you know, the progress to evolve over the rest of the year and into 2025? So everyone, I've been outside of the country for 30 years, so I've worked around the world, in Eastern Europe, Western Europe, Australia, Asia. I haven't worked in Canada. And in the three or four months I've been here, I've made a few observations, and when I think of strategy, and I think of the priorities, and I talked about it a bit at Investor Day, they fall in, I think, three categories. I think the first clear one for me, after a very short time in the bank, is this idea that we don't punch our weight at Scotia in a few categories, which is surprising. Because I think naturally, Scotia should be in the top three in everything, naturally, given its size. So what are those areas that we don't punch above our weight, at our weight, that we can just close the gap? Credit cards, small business lending, commercial lending, and selling mutual funds in our 965 branch network, okay? So priority number one is close the gap and punch our weight. Pretty straightforward. It requires a lot of execution and a few things. The second priority for me is taking the two, what I think, competitive advantage Scotia has, and accelerating them. First, I talked about Tangerine. It's a unique franchise, unique brand, very high recognition. How do we monetize it? That's one. Second, Scene+, our loyalty program. We have 50 million members. It's one of the fastest-growing loyalty programs in Canada. How do you start tapping into that base? We've already started, but how do you go harder, faster, and actually enlarge the ecosystem with new members? So that's the second. The third, I would say, is more on the investment side, and in the Investor Day, I talked about how we're bringing in much more capital into Canada from LATAM and other parts of the group to invest in Canada. And here, that CAD 500 million that we plan to invest over 18 months, for me, the key will be to actually deploy that investment in what I call changing the business model or optimizing the business model, primarily the channels: branch, contact center, mobile. How do we reorient those channels and invest particularly in mobile and in digital, and in our sales force, in our network? How do we actually invest literally in digital end-to-end in the value chain? I found that in Canada, unlike what I saw in Europe, don't know why, the banks are organized very vertically. It's very vertically organized. What I saw in Europe was the opposite. The banks were organized, at least the P&C business, very horizontally, and the value chain is really connected. Part of the investment I want to make is not only organizationally, how we change the organization to become more horizontal, but how do we actually put money and investment closer to where our customers are sitting? That's the other aspect, the investment aspect. Close the gap, accelerate, and invest intelligently in our channels and in digital, which I think every bank is trying to do, of course, but we want to actually accelerate that part of it. So, the investment angle brings up an obvious question, and I go back, again, early stages, but Q1, you had low single-digit expense growth in the Canadian bank. As you know, execute on some of these investment strategies, adding bells and whistles to Tangerine- Yeah, yeah. - hiring commercial bankers, all sorts of things like that- Mm-hmm. Does that expense growth tick up in any material way? Right, I think... I mean, expenses, I think the jaw or the operating leverage in the first quarter was, I think, the highest in I don't know how many quarters, or I think it was 3.7%, but that's just a point in time. The first thing I'd say is costs are not all created equal. So you can have 3% cost growth, 5% cost growth, so what's in the cost? And so I think part of the challenge I have, obviously, to drive positive operating leverage, I think that's everyone's goal, but that's over a longer cycle. It's the quality of the cost. There's good costs, I would say, and bad costs. There's good costs. Good costs are investment that help you transform the bank. Bad costs, for lack of a better word, is how do you start to take costs out of your run, the run costs, and start to shift them into change? Change to do more digital, change to add more advisors at the front, wealth advisors, particularly. More investment in data, more invest in AI. So getting the mix is equally important for me than the absolute number of 3% cost growth, 4% cost growth. It's the quality of the cost, right? And that, to me, is super important. The other aspect on the cost side, of course, half your costs in any bank, including in Canada, is people, FTEs. So, for me, the other transformation that has to take place in Scotia is: how are those people in the Canadian bank allocated? How far are they from the front, from the customer facing? How far are they from where you really drive value? When you do the FTE Mapping, at least in my business, what I see is very different from what I'm used to. There has to be a bit of that reallocation. Then over time, if you're investing in the right things that are driving revenues, customers, primacy, you should get that operating leverage naturally falling 'cause you're driving more revenues with that cost. The problem is, the run cost is what you have to tackle, and that CAD 500 million, which sounds like a big number, when you take it as a proportion of your running costs of your bank, it's not that much, yeah, from what I'm used to. So you brought up the word, primacy, which- Yeah Heard a lot about at the Investor Day. I'll do a dotted line to the mortgage business. One of the- Yes ... you know, notable trends at Scotia has been, a deliberate, decline in, in mortgage balances, and because you're shedding non-primacy- Yes clients or however you describe them. Are we nearing an end in that process? And I believe you were, or had mentioned mortgage growth should resume this year. Yes. So how's the evolution gonna look like in 2024? ... So of course, you know, mortgages is a big, Scotia is very big in mortgages, has been traditionally in mortgages, and the portfolio has shrunk over the last 15 months as we're being much more careful in how we allocate capital. But more importantly than being careful, we're now taking the view that we need to drive value with our customers versus volume. What do I mean by that? I mean, today, 75%, or close to that number, of new mortgage origination is coming with three-plus products. So, when we work with our brokers today, the brokers we want to work with are those that will work with us to drive primacy right at the front. So today, and it's been now almost for three months, we're maintaining this three-plus product on our mortgage origination. Of course, we give a slight discount on the mortgage to drive that, and that has to continue. The days are gone where we're going to do single mortgage to make a revenue, and then in three years or five years, that customer leaves us. I've paid the acquisition cost. That's not primacy. So, we're trying to work that angle. Now, going back to your question, in the last two months, starting in January, we're starting to see now the build-up of more origination in our, in our channels. You're starting to see pent-up demand, not only in Scotia, I'm sure in all banks in Canada, and we're starting to see that accelerating. The originations we're seeing now in our business are particularly in the three-year bucket. So, they're not in the five-year bucket, they're in the three-year bucket, and they're in the variable, as customers are expecting rates to come down, so they're positioning themselves. We're seeing that very clearly. In terms of turning the corner and growing the mortgage balances in Scotia, that we originally planned sometime in the summer, but it looks like now, given what we're seeing out there, it's coming sooner. It's going to come sooner. So again, we want to grow our mortgage business, but we want to grow the products that come with it. That's the difference of how we're going to operate it today, because capital is very important to us, returns are very important, but we want to instill this in with everybody, that single mortgages are no longer the strategy for us to pursue just to get market share. And you're going to ask me about market share. Market share will- I wasn't actually. No, but everyone does, in this country, so the market share will settle where it settles for me. So what we do, if we do the right business, our market share will naturally fall, probably in the top three again, like in most products that I want. Well, that, you know, dovetails into a few different areas. One, I you know, boring margin question, but if you- Mm-hmm ... start seeing your mortgage balances grow again- Yes ... is that, does that translate to flat margin performance? It's an interesting question because mortgage margins, at least as I look at them now, there's three things happening, and where it will end up, probably, will probably end up slightly higher, but let's see. So you have one is, as we see more competition now, as the spring season comes and the mortgage, you're going to see pressure on new originations. That's clear as everyone starts competing. What we're seeing in Scotia is that we're getting low margin of our book is falling off, and the new stuff is higher margin than the old, so you're getting a positive. And then what we anticipate in the second half is as rates slowly come down, there's a lag between we reprice our mortgages and the cost of funds, so we'll get a benefit there. Okay. What I expect is a slight improvement over time, but settling by year-end in a steady state, what we've seen in the past. And then, another related question: you did mention that a lot of your customers are favoring three-year rates? Yeah. I mean, two-year rates are also pretty popular these days. Exactly, you know, because people expect rates to be lower. Now, just to, you know, how do you think about the credit risk that's- Yeah ... being pushed out there if we don't... You know, and inflation stays stubbornly high, and we don't get rate cuts, and then you've got 35%. This is the industry, about 35% of mortgages repricing in 2026- Right ... are we just kicking the can down the road? Yeah. So what we've seen with our variable book and, you know, with our variable product, you see the price effect and the cost right away. We've seen our customers with a 50% increase in their payments, our variable rate customers, 50% increase. Their coverage, their payment coverage, we like to say, is around two times. So they have two times as much savings to make the payment, but it's come down. But it's held up, that 2.1x coverage, or we call it a buffer. But they've had a 50% increase. As we look at our 2025 cohort that will come off, or 2026, we see roughly for our fixed-rate customers, roughly a 26% increase in their monthly payment. The portfolio has held up well. The delinquencies have held up well. Of course, if something happens with unemployment or if rates don't come down, there's going to be added stress. But of course, what are people doing? They're reducing their expenditures, we see. I mean, the mortgage has held up relatively strong, right? So I don't see the risk yet, but again, assuming the forecast we have for rates and unemployment hold up, we're pretty comfortable. Again, we have very high prime customers in our mortgage book, we're relatively conservative. Loan-to-deposit, I mean, LTVs are in the 50s, I mean, of our new book, so we're pretty comfortable. ... You did the Freudian slip loan to deposits. Yeah. Actually, that was my next- It was Freudian. It segues to my next question, actually. Uh-huh. Have you hit your target? Because that's, you know, been a big trend at Scotia for the past year-plus, consolidated and in the- Right ... Canadian Bank. Are you, are you comfortably positioned now, or do you want to lower that even more? Well, it's interesting you ask that, because I don't have a loan-to-deposit target. I have a primacy target, but more importantly, a deposit, primary deposit target that I'm driving in the bank. And at the end of the day, between trying to be a primary bank... You cannot be a primary bank if you don't get the day-to-day banking, it's clear. And across the different channels we have in our customer groups, we're gonna drive deposit gathering. Equally, and we talked about it, I'm going to be managing my mortgage book much more for value than volume, different from the past. So that's the loan side. That will probably not have the growth you saw in the past, but it will be a different type of trajectory, although we want to grow that business, of course, but we want to grow primary. So whatever... On those two strategic levers, when I talk about mortgage and savings and deposits, we'll see where we land. But as I said in Investor Day, we want to grow deposits and investments 7% over five years and lending around 5%. So naturally, quarter- by- quarter, things might change, but longer term, we want to be driven by deposit gathering and primacy first, lending on top, not the other way around. Back to the credit topic, and this was, Yeah ... you know, a bit of a surprise, auto delinquency rates popping up- Yeah ... you know, quite noticeably. Phil had given, your Chief Risk Officer, some ex- He's sitting over there, Phil. Oh, there he is. Hey, Phil. Had given some description of what was behind the trend, and there was- Yeah ... like, the used auto... Yeah ... loans were- Mm-hmm ...exhibiting the most delinquency, if I understood that correctly. A, you know, maybe clarify some of the trends you're seeing, and B, is there any moderation of the formation activity that we saw last quarter? We have a very important auto business. It's a leading auto business in Canada. It drives over CAD 1 billion in revenues. It has an extremely low cost to income, almost below 30%, so it's almost like a cash cow. We have very strong relationships with OEMs. We have 11 or 12 relationships, eight exclusive, so it's a very important business for us. But what's interesting is that during the COVID period, as you know, the supply of new cars diminished dramatically. The supply chains got broken. So what happened in that period, people who needed cars were going after used cars, and so we saw quite a big, almost an inverse, new and used, were now used predominating in the 2020, 2021 period. Now, as over time, as support for COVID was kind of removed from consumers, as rates started to go up, this used car COVID cohort is coming through the system, and that's where we're seeing the delinquencies. However, now we're starting to see the thing reverse itself. Now, new cars are coming much more on stream supply, so now it's reversing back. We're seeing the delinquencies now, early delinquencies, moderating, coming down, actually. Okay. But we're seeing now this going through the system, and it will go through the system for another two quarters, probably until year-end, assuming everything goes. And as rates comes down, then we'll start to see the thing normalize. So that was really an idiosyncratic event that we went through with our auto business, but as we start to see, it's starting to normalize again as new cars come on stream. All right, and then, well, I got a couple more questions left, and we'll time it perfectly, I think. Wealth, you know, the message I got from you earlier, you're working to sell more mutual funds through the branches, and I've, I've heard that message a number of times over the years. You know, what, you know, what is the impediment, and what are you doing differently, I guess, to- Okay ... to increase that penetration rate? Right. So fair question, and I, and I talked about it in Investor Day. If you have a physical channel, like branches, like we have, and it's extensive, you have to maximize the throughput in that channel as much as possible. You're paying for that fixed cost. It's a fixed cost, so you have to get the most out of it. So what have we done in this regard for investment products? I think three things. Like, you know, you have to change incentive. So in the branch, in your scorecards, how do you evaluate your branch staff in your front line? You've got to pivot and make that incentive from lending or whatever it is. We've actually changed the scorecard for investments. That's one. Two, you have to hire and train investment specialists. This has been a big focus of ours over the last six-nine months, and that is different from the past. If you just look at the number of investors, specialists who can sit with the client and go through their, their situation and offer them the right product, investment product or savings or whatever, that makes a difference. And the third is technology, of course. We're working with a Silicon Valley based company to what we call Smart Investor. It's a tool that we use that makes that interchange between client and our advisors, who we're adding, much more impactful. And what I can tell you clearly, when we look year-on-year, and again, I look at the gross flows, not the valuation, because the markets move, but when you look at the widgets, we call them widgets, how much we're getting, it's up 30%-40% year-on-year, broadly speaking, across Canada. But again, because you're working on the inputs, and it's not, you know, just one moment. It's got to be sustained in terms of just trying to drive... Again, this is fee income. You talk about ROE and Capital. I need my fair share in my branch network. We have a wonderful wealth business. It's one of the leading wealth businesses in Canada, but we just haven't been leveraging our branch channel, and this is what's going to change. Well, I'd wrap- Look at that! ... wrap up quickly on credit cards. Uh-huh. Growing in the double digits, are we? You know, is that just the markets going that way because people are spending more because of an inflationary environment? Or is there something else going on? I think I mentioned before, when you're small, you can grow 18% per annum, quarter on or whatever. We're growing annually 18%. It's, I think, one of the leading growth balances in the market because we start from a small base. One thing is important, credit cards is positioned in Scotia as an integrated product. It's not a standalone business where we're going after monoline. That's not what we do. 90% of our balance growth is actually coming from existing customers, Scene+ and our existing base. I want to continue this trajectory. Obviously, we're managing our risk. Our risk costs and PCLs are actually still below pre-COVID, 30% below still, because we have a higher... I mean, they're prime customers, and they're coming from our base, and this is a business I want to grow. We're really small. We're really small, and there's no reason why we shouldn't be punching our weight, going back to what I said. All right. Well, we always allow for a bit of overtime. Thanks for taking the questions today. Thanks, Gabe ... and enjoy the rest of your day. Thank you.