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 Scotiabank reports fourth quarter and 2018 results
   Tuesday, November 27, 2018 6:00:00 AM ET



 











Fiscal 2018 performance versus medium-term objectives:




TORONTO, Nov. 27, 2018 /CNW/ - Scotiabank reported net income of $8,724 million in 2018, compared with net income of $8,243 million in 2017. Diluted earnings per share (EPS) were $6.82, a 5% increase from last year. Return on equity was 14.5%, compared to 14.6% last year. Adjusting for the Acquisition-related costs of $420 million after tax ($591 million pre-tax), net income increased 11% to $9,144 million and EPS rose to $7.11, a 9% increase compared to last year.

Scotiabank (CNW Group/Scotiabank)

Reported net income for the fourth quarter ended October 31, 2018 was $2,271 million, compared to $2,070 million for the same period last year. EPS was $1.71, up 4% compared to $1.64 last year. Return on equity was 13.8%. Adjusting for the Acquisition-related costs of $74 million after tax ($102 million pre-tax), net income increased 13% to $2,345 million and EPS rose to $1.77, up 8% compared to last year. A quarterly dividend of 85 cents per common share was announced.

"During 2018, we delivered strong results and made important investments, which will be additive to the Bank for years to come," said Brian Porter, President and CEO. "The strategic acquisitions made this year strengthen the Bank's overall earnings quality and add important scale in our key markets. We had strong performance in our core P&C businesses and are strengthening our wholesale businesses.  We are also building momentum with our digital strategy, delivering a stronger customer experience and improving productivity.

"Canadian Banking reported strong earnings of $4.4 billion, up 7% from last year. Asset growth remained strong and we continued to build deposit momentum while increasing our net interest margin. The acquisition of Jarislowsky Fraser and MD Financial Management will enable the Bank to deliver on its strategic commitment to grow and diversify our global wealth management business.

"International Banking reported very strong results, with adjusted annual earnings growth of 18%, on a constant currency basis. This was driven by our operations in the countries that make up the Pacific AllianceMexico, Peru, Chile and Colombia - which experienced double digit loan and deposit growth, partly reflecting recent acquisitions, positive operating leverage and stable credit quality.

"The Bank's Common Equity Tier 1 capital ratio remains strong at 11.1% driven by strong internal capital generation and prudent management of risk weighted asset growth, which positions the Bank well to grow its business and improve shareholder returns.

"Looking ahead in 2019, the Bank is well-positioned for growth across our key markets, particularly in the Pacific Alliance countries where we are seeing strong earnings momentum and a stronger economic environment. We are proud of our considerable investment in technology and its positive impact on both the customer experience and on the safety and security of our customers' information and the Bank as a whole. We are confident in our ability to integrate recent acquisitions successfully, given our strong track record, and we maintain strong capital ratios. With our continued investment in our people and our focused effort in driving efficiencies across the Bank, we are well-placed to continue delivering strong results for years to come."

Non-GAAP Measures
The Bank uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS), are not defined by GAAP and do not have standardized meanings that would ensure consistency and comparability between companies using these or similar measures. The Bank believes that certain non-GAAP measures are useful in assessing business performance and provide readers with a better understanding of how management assesses business performance. These non-GAAP measures are used throughout this press release and are defined in the "Non-GAAP Measures" section of our 2018 Annual Report.

Adjusted results and diluted earnings per share
The following tables present reconciliations of GAAP Reported financial results to Non-GAAP Adjusted financial results.

During the fourth quarter, the Bank completed the acquisition of MD Financial.  In the third quarter, the Bank completed the acquisitions of Jarislowsky Fraser, BBVA Chile, and the retail operations of Citibank Colombia.

The financial results for fiscal 2018 and applicable quarters have been adjusted for the following, relating primarily to the above acquisitions completed in fiscal 2018.

Acquisition-related costs

  • Day 1 provision for credit losses on acquired performing financial instruments, as required by IFRS 9. The standard does not differentiate between originated and purchased performing loans and as such, requires the same accounting treatment for both.
  • Integration costs – These include costs that are incurred on the current year's acquisitions and related to integrating the acquired operations and will not form part of continuing operations once integration is complete.
  • Amortization of acquisition-related intangible assets, excluding software, relating to current and past acquisitions.

Reconciliation of reported and adjusted results and diluted earnings per share




































































































































































































































 

Reconciliation of reported and adjusted results and diluted earnings per share by business line

























































































































































 

























































































































































 

Reconciliation of International Banking's reported and constant dollar results

International Banking business segment results are analyzed on a constant dollar basis. Under the constant dollar basis, prior period amounts are recalculated using current period average foreign currency rates. The following table presents the reconciliation between reported and constant dollar results for International Banking for prior periods.
































































































































































































































 

Core banking assets

Core banking assets are average earning assets excluding bankers' acceptances and average trading assets within Global Banking and Markets.

Core banking margin

This ratio represents net interest income divided by average core banking assets.

Financial Highlights


















































































































































































































































































































































































 

Impact of Foreign Currency Translation

The table below reflects the estimated impact of foreign currency translation on key income statement items.




































































































































































































































































































 

Group Financial Performance 

Net income
Q4 2018 vs Q4 2017

Net income was $2,271 million, an increase of $201 million or 10%. Adjusting for Acquisition-related costs, net income was higher by $261 million or 13%. Asset growth and an improved net interest margin, as well as higher non-interest income and the impact of acquisitions were partly offset by a higher provision for credit losses and increased non-interest expenses.

Q4 2018 vs Q3 2018

Net income was $2,271 million, an increase of $332 million or 17%. Adjusting for Acquisition-related costs, net income was higher by $86 million or 4%.  The increase was due primarily to the impact of acquisitions.

Net interest income
Q4 2018 vs Q4 2017

Net interest income was $4,220 million, an increase of $389 million or 10%. Acquisitions contributed 6% of the increase. The remaining increase was from broad-based lending growth across retail, commercial and corporate segments across our three business lines. 

The core banking margin improved three basis points to 2.47%. The change in business mix from the impact of International Banking acquisitions and higher margins in Canadian Banking were partly offset by lower margins in Global Banking and Markets and a lower contribution from asset/liability management activities.

Q4 2018 vs Q3 2018

Net interest income was $4,220 million, an increase of $135 million or 3%. This increase was due primarily to the impact of acquisitions, partially offset by lower contributions from asset/liability management activities, as well as Global Banking and Markets.

The core banking margin of 2.47% was up one basis point. The positive change in asset mix driven by acquisitions and lower volumes of treasury assets were partially offset by lower margins in Global Banking and Markets and Canadian Banking.

Non-interest income
Q4 2018 vs Q4 2017

Non-interest income grew $247 million or 8% to $3,228 million.  The impact of acquisitions, net of the gain on sale of HollisWealth ("Sale of Business") last year, contributed 2% to the growth. The remaining growth was due mainly to higher banking and credit card fees, trading revenues and income from associated corporations including the alignment of the reporting period with the Bank ("Alignment of reporting period"). Partly offsetting were lower gains on the sale of real estate and investment securities.

Q4 2018 vs Q3 2018

Non-interest income increased $132 million or 4%. Acquisitions accounted for approximately 3% of the growth. The remaining growth was primarily due to higher banking and credit card fees, trading revenues and income from associated corporations mostly from the Alignment of reporting period. These were partly offset by lower securities gains, wealth management fees, and the negative impact of foreign currency translation.

Provision for credit losses
Q4 2018 vs Q4 2017

The provision for credit losses was $590 million, an increase of $54 million or 10%, due to higher retail provision in line with acquisition-driven growth, partly offset by a decrease in commercial provision.

Provision on impaired financial assets (including loans and debt securities) was $637 million, up $101 million due primarily to higher retail provisions in International Banking. Higher provision relating to Barbados debt restructuring was offset by recoveries in International Banking and Global Banking and Markets. The provision for credit losses ratio on impaired loans remained unchanged at 42 basis points. Reduction in provision for performing loans of $47 million was due primarily to reversal of the provision previously recorded for the hurricanes in the Caribbean that is no longer required, and improvement in credit quality. The provision for credit losses ratio decreased three basis points to 39 basis points.

Q4 2018 vs Q3 2018

The provision for credit losses was $590 million, a decrease of $353 million.  Adjusting for Acquisition-related costs, the provision for credit losses increased $51 million or 9%, due to higher retail provision in line with acquisition-driven growth, partly offset by decrease in commercial provision.

Provision on impaired financial assets (including loans and debt securities) was $637 million, an increase of $78 million or 14%, due primarily to higher retail provision in International Banking, which also included the full quarter impact of acquisitions. Higher provision relating to Barbados debt restructuring was offset by recoveries in International Banking and Global Banking and Markets. The provision for credit losses ratio on impaired loans was 42 basis points, an increase of one basis point. Reduction in provision for performing loans of $27 million was due primarily to reversal of the provision previously recorded for the hurricanes in the Caribbean that is no longer required, and improvement in credit quality. The provision for credit losses ratio decreased one basis point to 39 basis points.

Non-interest expenses
Q4 2018 vs Q4 2017

Non-interest expenses were $4,064 million, up $396 million or 11%. Adjusting for Acquisition-related costs, non-interest expenses were up $311 million or 9%, of which 6% related to the impact of acquisitions. The remaining 3% increase was due primarily to increased investments in technology and regulatory initiatives, other business growth-related expenses, and the negative impact of foreign currency translation. Partly offsetting were the impact of further savings from cost-reduction initiatives.

The productivity ratio was 54.6% compared to 53.8%. Adjusting for Acquisition-related costs, the productivity ratio was 53.2% compared to 53.6%.

Q4 2018 vs Q3 2018

Non-interest expenses were up $294 million or 8%.  Adjusting for Acquisition-related costs, non-interest expenses were up $240 million or 7%, of which 5% related to the impact of acquisitions. The remaining 2% increase was due largely to higher advertising and business development and other expenses supporting the business, partly offset by the positive impact of foreign currency translation.

The productivity ratio was 54.6% compared to 52.5%. Adjusting for Acquisition-related costs, the productivity ratio was 53.2% compared to 51.8%.

Income taxes
Q4 2018 vs Q4 2017

The effective tax rate was 18.7%, or 19.0% adjusting for Acquisition-related costs, this quarter, down from 20.6% due primarily to lower taxes in certain foreign jurisdictions in 2018. The prior year benefitted from higher tax-exempt dividends related to client driven equity trading activities.

Q4 2018 vs Q3 2018

The effective tax rate decreased to 18.7%, or 19.0% adjusting for Acquisition-related costs, from 21.5%, due primarily to lower taxes in certain foreign jurisdictions.

Common Dividend

The Board of Directors at its meeting approved the quarterly dividend of 85 cents per common share. This quarterly dividend applies to shareholders of record as of January 2, 2019 and is payable January 29, 2019.

Capital Ratios

The Basel III Common Equity Tier 1 (CET1) ratio as at October 31, 2018 remained strong at 11.1%. The CET1 ratio reduced by approximately 40 basis points in 2018 due primarily to the impact of acquisitions that closed during the year, share buybacks and the Bank's adoption of IFRS 9, partly offset by strong internal capital generation and the benefit from moving to the Basel II regulatory capital floor.

The Bank's Basel III Tier 1 and Total capital ratios were 12.5% and 14.3%, respectively, as at October 31, 2018, down from 2017 due primarily to the same factors described above impacting the CET1 ratio. In addition, the Leverage ratio declined by approximately 20 basis points in 2018 primarily due to the Bank's acquisitions and organic asset growth.

Business Segment Review

Canadian Banking























































































































































































































































 

Net income
Q4 2018 vs Q4 2017

Net income attributable to equity holders was $1,115 million, an increase of 4%. Adjusting for Acquisition-related costs, net income was $1,146 million compared to $1,073 million, up 7%. This was driven by solid asset and deposit growth, margin expansion, higher non-interest income and lower provision for credit losses, partly offset by higher non-interest expenses. Lower real estate gains and the gain on Sale of Business last year, reduced earnings growth by 7%.

Q4 2018 vs Q3 2018

Net income attributable to equity holders was $1,115 million, a decrease of 1%. Adjusting for Acquisition-related costs, net income was in line with last quarter. Income from asset and deposit growth, higher non-interest income and higher income from investments in associated corporations was partly offset by higher provision for credit losses and higher non-interest expenses.

Net interest income
Q4 2018 vs Q4 2017

Net interest income of $2,029 million was up $114 million or 6%. This was driven by strong growth in assets and deposits, and an increase in net interest margin. The margin improved four basis points to 2.45% due primarily to the Bank of Canada interest rate increases.

Q4 2018 vs Q3 2018

Net interest income was in line with last quarter as asset and deposit growth was offset by lower net interest margin.

Non-interest income
Q4 2018 vs Q4 2017

Non-interest income of $1,414 million increased $64 million or 5%.  Non-interest income from acquisitions was offset by the gain on Sale of Business last year. The increases in credit card revenues and credit fees were partly offset by lower real estate gains.

Q4 2018 vs Q3 2018

Non-interest income increased $65 million or 5% due primarily to the impact of acquisitions, increases in credit card revenues and higher income from investments in associated corporations.

Non-interest expenses
Q4 2018 vs Q4 2017

Non-interest expenses were $1,747 million, up $118 million or 7%. Adjusting for Acquisition-related costs, non-interest expenses were up 5%, approximately half of which relate to operating costs from the acquisitions. Higher investments in technology and regulatory initiatives were partly offset by benefits realized from cost-reduction initiatives.

Q4 2018 vs Q3 2018

Non-interest expenses increased $86 million or 5%. Adjusting for Acquisition-related costs, non-interest expenses were up 4%, about one-third relating to operating costs from the acquisitions. Higher marketing costs and higher investments in technology were partly offset by benefits realized from cost-reduction initiatives.

Provision for credit losses
Q4 2018 vs Q4 2017

The provision for credit losses was $198 million, compared to $218 million due to lower retail provision on impaired loans. The provision on performing loans was up $10 million primarily relating to commercial loans. The provision for credit losses ratio was 23 basis points, a decrease of four basis points.

Q4 2018 vs Q3 2018

The provision for credit losses was $198 million, compared to $181 million. Provision on impaired loans was $188 million, up 8% due primarily to higher commercial provisions. The provision for credit losses ratio on impaired loans was 22 basis points, an increase of one basis point. Provision on performing loans increased by $3 million due to higher retail provision. The provision for credit losses ratio was 23 basis points, an increase of two basis points.

Income taxes
Q4 2018 vs Q4 2017

The effective tax rate was 25.6%, higher than the previous year of 24.8%, due largely to lower gains on sale of real estate.

Q4 2018 vs Q3 2018

The effective tax rate was 25.6%, slightly lower than the previous quarter of 26.2%.

Average assets
Q4 2018 vs Q4 2017

Average assets grew $17 billion or 5% to $349 billion, primarily driven by growth in business loans and acceptances which grew $6 billion or 13%. Residential mortgages grew $6 billion or 3%, while personal loans grew $2 billion or 3%.

Q4 2018 vs Q3 2018

Average assets rose $5 billion or 2%. The growth included $1 billion or 1% in business loans and acceptances. Personal loans grew $1 billion or 1%, while residential mortgages grew $1 billion. The remaining increase was reflected in other asset categories, relating primarily to the impact of the acquisition this quarter.

Average liabilities
Q4 2018 vs Q4 2017

Average liabilities increased $17 billion or 7%. This was driven by strong growth in personal GICs of $6 billion or 12%, $1 billion or 1% in retail chequing and savings deposits, and of $5 billion or 7% in non-personal deposits.

Q4 2018 vs Q3 2018

Average liabilities increased $9 billion or 3%, primarily driven by growth of $3 billion or 5% in personal GICs and of $4 billion or 6% in non-personal deposits.

Assets under administration (AUA) and assets under management (AUM)
Q4 2018 vs Q4 2017

AUM of $225 billion increased $70 billion or 45% driven by the impact of acquisitions. AUA of $355 billion increased $40 billion or 12%, primarily driven by the impact of acquisitions.

Q4 2018 vs Q3 2018

AUM of $225 billion increased $28 billion or 14% driven by the acquisition of MD Financial, partly offset by market depreciation. AUA of $355 billion increased $34 billion or 11%, primarily driven by the acquisition of MD Financial, partly offset by market depreciation.

International Banking












































































































































 




























































































































 

Net income
Q4 2018 vs Q4 2017

Net income attributable to equity holders of $712 million was up $107 million or 18%. Adjusting for Acquisition-related costs, net income increased $133 million or 22% to $746 million, of which 7% related to the incremental impact of the business combinations and the Alignment of reporting period in Thailand. This growth was driven largely by strong loan and deposit growth in the Pacific Alliance, higher non-interest income including higher income from associated corporations, a lower effective tax rate, partly offset by higher non-interest expenses and provision for credit losses.

Q4 2018 vs Q3 2018

Net income attributable to equity holders increased by $193 million or 37%. Adjusting for Acquisition-related costs, net income increased by $31 million or 4%, relating primarily to the incremental impact of the business combinations and the Alignment of reporting period with the Bank. Growth was largely driven by higher fee income and a lower effective tax rate.

Financial performance on Constant Dollar Basis

The discussion below on the results of operations is on a constant dollar basis that excludes the impact of foreign currency translation, and is a non-GAAP financial measure (refer to Non-GAAP Measures). The Bank believes that reporting in constant dollars is useful for readers in assessing ongoing business performance. Ratios are on a reported basis.















































































































































































































































 

Net income
Q4 2018 vs Q4 2017

Net income attributable to equity holders of $712 million was up $106 million or 18%. Adjusting for Acquisition-related costs, net income increased by $132 million or 22% to $746 million, of which 7% related to the incremental impact of the business combinations and the Alignment of the reporting period in Thailand. This growth was largely driven by strong loan and deposit growth in the Pacific Alliance, higher non-interest income including higher income from associated corporations  and lower taxes, partly offset by higher non-interest expenses.   

Q4 2018 vs Q3 2018

Net income attributable to equity holders increased by $188 million or 36%. Adjusting for Acquisition-related costs, net income increased by $40 million or 6%, of which 4% related to the incremental impact of the business combinations and the Alignment of the reporting period with the Bank. Growth was largely driven by higher fee income and a lower effective tax rate. 

Net interest income
Q4 2018 vs Q4 2017

Net interest income was $2,030 million, up 20% of which 13% related to the impact of acquisitions. The remaining 7% increase was driven by strong retail and commercial loan growth. The net interest margin decreased 15 basis points to 4.52% mostly driven by the business mix impact of acquisitions.

Q4 2018 vs Q3 2018

Net interest income increased $224 million or 12%, mainly due to the impact of acquisitions. Strong retail and commercial loan growth was partly offset by a lower net interest margin. The net interest margin declined 18 basis points to 4.52% largely due to the business mix impact of acquisitions. 

Non-interest income
Q4 2018 vs Q4 2017

Non-interest income was $1,104 million, up $215 million or 24%, of which 8% related to the impact of acquisitions. The remaining increase was due primarily to higher banking and credit card fees in the Pacific Alliance, and an increased contribution from associated corporations, mostly from the Alignment of reporting period.

Q4 2018 vs Q3 2018

Non-interest income increased $97 million or 10%, of which 6% was due to the impact of acquisitions. Higher banking and credit card fees in Latin America, and an increased contribution from associated corporations, mostly from the Alignment of reporting period, were partly offset by lower trading revenues and commercial loan fees.

Non-interest expenses
Q4 2018 vs Q4 2017

Non-interest expenses increased $319 million or 23% to $1,721 million. Adjusting for Acquisition-related costs, non-interest expenses grew 19%, of which 12% related to the impact of acquisitions. The remaining 7% was due primarily to business volume driven growth, inflation, and higher technology costs. 

Q4 2018 vs Q3 2018

Non-interest expenses increased $230 million or 15%. Adjusting for Acquisition-related costs, non-interest expenses grew 14%, mostly due to acquisitions.

Provision for credit losses
Q4 2018 vs Q4 2017

The provision for credit losses was $412 million, compared to $313 million. Provision on impaired loans was up $153 million due primarily to higher provisions in the retail portfolio, due to volume growth including acquisitions and the benefit of the credit mark last year. Higher provision relating to Barbados debt restructuring was offset by recoveries in Puerto Rico and Latin America. Provision on performing loans reduced $54 million as the impact of portfolio growth was more than offset by improved credit quality. The provision for credit losses ratio was 105 basis points, a decrease of nine basis points.

Q4 2018 vs Q3 2018

The provision for credit losses was $412 million, compared to $746 million. Adjusted for day 1 provision on acquired performing loans that were recorded in the previous quarter, the provision for credit losses increased $52 million or 14%. Provision on impaired loans was up $77 million due primarily to higher provisions in the retail portfolio and also driven by impact of full quarter of acquisitions while commercial provision was lower due to recoveries in Puerto Rico and Latin America partly offset by higher provisions in Barbados relating to the debt restructuring. The provision for credit losses ratio on impaired loans decreased 13 basis points to 120 basis points. Provision on performing loans decreased $25 million, due primarily to the reversal of the provision previously recorded for the hurricanes in the Caribbean that are no longer required. The provision for credit losses ratio was 105 basis points, a decrease of 18 basis points.

Income taxes
Q4 2018 vs Q4 2017

The effective tax rate was 19.7% compared to 23.2% last year, due primarily to higher tax benefits in Mexico and lower taxes in certain foreign jurisdictions.

Q4 2018 vs Q3 2018

Adjusting for Acquisition-related costs, the effective tax rate was 20.2% compared to 22.3% due primarily to tax benefits in Mexico and lower taxes in certain foreign jurisdictions.

Average assets
Q4 2018 vs Q4 2017

Average assets of $193 billion increased $48 billion or 33%, driven by strong loan growth in the Pacific Alliance, largely due to acquisitions. Retail and commercial loan growth were 31% and 26%, respectively.

Q4 2018 vs Q3 2018

Average assets increased 18%, driven by strong loan growth in the Pacific Alliance, largely due to acquisitions. Retail loan growth was 23% and commercial loan growth was 17%.

Average liabilities
Q4 2018 vs Q4 2017

Average liabilities of $153 billion increased $34 billion with deposit growth of 17%, primarily in Pacific Alliance, partly due to acquisitions. Commercial deposit growth was 18% and retail deposit growth was 17%.

Q4 2018 vs Q3 2018

Average liabilities increased $25 billion with deposit growth of 14%, primarily in Pacific Alliance, partly due to acquisitions. Commercial deposit growth was 15% and retail deposit growth was 13%.

Global Banking and Markets
























































































































 

Net income
Q4 2018 vs Q4 2017

Net income attributable to equity holders was $416 million, an increase of $25 million or 6%. The benefit of lower provision for credit losses, reductions in non-interest expenses, and the favourable impact of foreign currency translation were partially offset by lower net interest income.

Q4 2018 vs Q3 2018

Net income attributable to equity holders decreased by $25 million or 6%. This was due mainly to lower net interest income and non-interest income, as well as increased non-interest expenses, partly offset by the benefit of lower provision for credit losses and taxes.

Net interest income
Q4 2018 vs Q4 2017

Net interest income of $337 million was down $14 million or 4%. This was due to lower loan fees, and decreased deposit and lending margins. The net interest margin decreased 16 basis points to 1.72%.

Q4 2018 vs Q3 2018

Net interest income was down $28 million or 8%. This was due mainly to decreased deposit margins and lower loan origination fees, partly offset by higher lending margins in most regions. The net interest margin was lower by 10 basis points from the prior quarter.

Non-interest income
Q4 2018 vs Q4 2017

Non-interest income was $736 million, a decrease of $2 million. Stronger trading revenues were more than offset by lower underwriting and advisory fees. 

Q4 2018 vs Q3 2018

Non-interest income was down $9 million or 1%. This was due mainly to lower underwriting fees and credit fees, partly offset by higher trading income from the equities business. 

Non-interest expenses
Q4 2018 vs Q4 2017

Non-interest expenses of $553 million decreased $16 million or 3%. This was due to lower performance-related compensation, partly offset by higher regulatory and technology investments.

Q4 2018 vs Q3 2018

Non-interest expenses increased $10 million or 2%. This was mainly driven by higher regulatory and technology investments, partly offset by lower performance-related compensation.

Provision for credit losses
Q4 2018 vs Q4 2017

The provision for credit losses decreased $28 million due primarily to impaired loan provision reversals in Europe partially offset by new provisions in the U.S. The provision for credit losses ratio was negative nine basis points, a decrease of 13 basis points.

Q4 2018 vs Q3 2018

The provision for credit losses was a net reversal of $20 million, compared to net reversal of $10 million last quarter. Provision on impaired loans had a net reversal of $17 million due primarily to higher recoveries in Europe, partially offset by new provisions in the U.S. The provision for credit losses ratio on impaired loans was negative seven basis points, a decrease of one basis point. Provision on performing loans was a net reversal of $3 million due primarily to improvement in credit quality. The provision for credit losses ratio was negative nine basis points, a decrease of four basis points.

Income taxes
Q4 2018 vs Q4 2017

The effective tax rate for the quarter was 22.9%, compared to 23.8% due mainly to lower income in certain foreign jurisdictions.

Q4 2018 vs Q3 2018

The effective tax rate for the quarter was 22.9%, compared to 23.6%. The lower tax rate was mainly due to lower income in certain foreign jurisdictions.

Average assets
Q4 2018 vs Q4 2017

Average assets were $318 billion, a decrease of $4 billion or 1%. This was due mainly to reductions in deposits with banks and trading securities as well as the impact of foreign currency translation.

Q4 2018 vs Q3 2018

Average assets increased $7 billion or 2% due primarily to increase in securities purchased under resale agreements. 

Average liabilities

Q4 2018 vs Q4 2017

Average liabilities of $259 billion were lower by $9 billion or 3% due to lower securities sold under repurchase agreements, and impact of foreign currency translation, partly offset by higher deposits. 

Q4 2018 vs Q3 2018

Average liabilities increased $1 billion mainly due to higher deposits offset by lower derivative-related liabilities.

Other



















































































































 

The Other segment includes Group Treasury, smaller operating segments, business line elimination items and other corporate items which are not allocated to a business line.

Net interest income, other operating income, and the provision for income taxes in each period include the elimination of tax-exempt income gross-up. This amount is included in the operating segments, which are reported on a taxable equivalent basis. The elimination was $31 million in the fourth quarter, compared to $81 million in the same period last year and $28 million last quarter. Net income from investments in associated corporations and the provision for income taxes in each period include the tax normalization adjustments related to the gross-up of income from associated companies. This adjustment normalizes the effective tax rate in the divisions to better present the contribution of the associated companies to the divisional results.

Q4 2018 vs Q4 2017

Net loss attributable to equity holders was $64 million compared to a net loss of $48 million in the prior year. A lower net gain on investment securities as well as lower revenues from asset and liability management activities were partly offset by a decrease in non-interest expenses.

Q4 2018 vs Q3 2018

Net loss attributable to equity holders was $64 million compared to a net loss of $107 million last quarter. The improvement was partly due to lower non-interest expenses as well as lower taxes. 

Consolidated Statement of Financial Position




















































































































































































































































































































































 

Consolidated Statement of Income








































































































































































































































































































































































































































































































































































 

Consolidated Statement of Comprehensive Income






















































































































































































































































































































































































































































































































































































































 

Consolidated Statement of Changes in Equity






























































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































 

Consolidated Statement of Cash Flows
























































































































































































































































































































































































































 

Basis of preparation
These unaudited consolidated financial statements were prepared in accordance with IFRS as issued by International Accounting Standards Board (IASB) and accounting requirements of OSFI in accordance with Section 308 of the Bank Act, except for certain required disclosures. Therefore, these unaudited consolidated financial statements should be read in conjunction with the Bank's audited consolidated financial statements for the year ended October 31, 2018 which will be available today at Scotiabank.com .

Forward looking statements

From time to time, our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. In addition, representatives of the Bank may include forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this document, the Management's Discussion and Analysis in the Bank's 2018 Annual Report under the headings "Outlook" and in other statements regarding the Bank's objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results, and the outlook for the Bank's businesses and for the Canadian, U.S. and global economies. Such statements are typically identified by words or phrases such as "believe," "expect," "foresee," "forecast," "anticipate," "intend," "estimate," "plan," "goal," "project," and similar expressions of future or conditional verbs, such as "will," "may," "should," "would" and "could."

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved.

We caution readers not to place undue reliance on these statements as a number of risk factors, many of which are beyond our control and effects of which can be difficult to predict, could cause our actual results to differ materially from the expectations, targets, estimates or intentions expressed in such forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; changes in currency and interest rates; increased funding costs and market volatility due to market illiquidity and competition for funding; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary, fiscal, or economic policy and tax legislation and interpretation;  changes in laws and regulations or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; changes to our credit ratings; operational and infrastructure risks; reputational risks; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services; our ability to execute our strategic plans, including the successful completion of acquisitions and dispositions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; global capital markets activity; the Bank's ability to attract, develop and retain key executives; the evolution of various types of fraud or other criminal behaviour to which the Bank is exposed; disruptions in or attacks (including cyber-attacks) on the Bank's information technology, internet, network access, or other voice or data communications systems or services; increased competition in the geographic and in business areas in which we operate, including through internet and mobile banking and non-traditional competitors; exposure related to significant litigation and regulatory matters; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; and the Bank's anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank's results, for more information, please see the "Risk Management" section of the Bank's 2018 Annual Report, as may be updated by quarterly reports. 

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2018 Annual Report under the headings "Outlook", as updated by quarterly reports. The "Outlook" sections are based on the Bank's views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events.

Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank's shareholders and analysts in understanding the Bank's financial position, objectives and priorities, and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf.

Additional information relating to the Bank, including the Bank's Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov .

November 27, 2018

Shareholder and investor information

Direct deposit service
Shareholders may have dividends deposited directly into accounts held at financial institutions which are members of the Canadian Payments Association. To arrange direct deposit service, please write to the transfer agent.

Dividend and Share Purchase Plan
Scotiabank's dividend reinvestment and share purchase plan allows common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage or administrative fees. As well, eligible shareholders may invest up to $20,000 each fiscal year to purchase additional common shares of the Bank. All administrative costs of the plan are paid by the Bank. For more information on participation in the plan, please contact the transfer agent.

Dividend dates for 2019
Record and payment dates for common and preferred shares, subject to approval by the Board of Directors.






 

Annual Meeting date for fiscal 2018
Shareholders are invited to attend the 187th Annual Meeting of Holders of Common Shares, to be held on April 9, 2019, at Scotiabank Centre, Scotia Plaza, 40 King Street West, 2nd Floor, Toronto, Ontario beginning at 9:00 a.m. local time. The record date for determining shareholders entitled to receive notice of and to vote at the meeting will be the close of business on February 12, 2019.

Duplicated communication
If your shareholdings are registered under more than one name or address, multiple mailings will result. To eliminate this duplication, please write to the transfer agent to combine the accounts.

Normal Course Issuer Bid
A copy of the Notice of Intention to commence the Normal Course Issuer Bid is available without charge by contacting the Investor Relations Department at (416) 775-0798 or investor.relations@scotiabank.com .

Annual Financial Statements
Shareholders may obtain a hard copy of Scotiabank's 2018 audited annual consolidated financial statements and accompanying Management's Discussion & Analysis on request and without charge by contacting the Investor Relations Department at (416) 775-0798 or investor.relations@scotiabank.com .

Website
For information relating to Scotiabank and its services, visit us at our website: www.scotiabank.com .

Conference call and Web broadcast
The quarterly results conference call will take place on November 27, 2018, at 8:00 a.m. EST and is expected to last approximately one hour. Interested parties are invited to access the call live, in listen-only mode, by telephone, at (416) 849-3997 or 1 (800) 289-0462 (North America toll-free) using access code 950939# (please call five to 15 minutes in advance). In addition, an audio webcast, with accompanying slide presentation, may be accessed via the Investor Relations page of www.scotiabank.com . Following discussion of the results by Scotiabank executives, there will be a question and answer session.

A telephone replay of the conference call will be available from November 27, 2018, to December 12, 2018, by calling (647) 436-0148 or 1 (888) 203-1112 (North America toll-free) and using access code 6751615#. The archived audio webcast will be available on the Bank's website for three months.

Contact information





















 

Rapport trimestriel disponible en français
Le Rapport annuel et les états financiers de la Banque sont publiés en français et en anglais et distribués aux actionnaires dans la version de leur choix. Si vous préférez que la documentation vous concernant vous soit adressée en français, veuillez en informer Relations publiques, Affaires de la société et Affaires gouvernementales, La Banque de Nouvelle-Écosse, Scotia Plaza, 44, rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si possible, l'étiquette d'adresse, afin que nous puissions prendre note du changement.

SOURCE Scotiabank



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