TORONTO, Nov. 29, 2022 /CNW/ - Scotiabank reported net income of $10,174 million for the fiscal year 2022, compared with net income of $9,955 million in 2021. Diluted earnings per share (EPS) were $8.02, compared to $7.70 in the previous year. Return on equity was 14.8%, compared to 14.7% in the previous year.

Reported net income for the fourth quarter ended October 31, 2022 was $2,093 million compared to $2,559 million in the same period last year. Diluted earnings per share were $1.63, compared to $1.97 in the same period a year ago.

This quarter's net income included adjusting items of $504 million after tax. These consisted of a $66 million restructuring charge relating to the realignment of certain Global Banking and Markets businesses in Asia and an on-going technology modernization, $98 million of committed support costs relating to the expansion of our Scene+ loyalty program and a $340 million loss resulting from the sale of investment in associates in Venezuela and Thailand, as well as the wind down of operations in India and Malaysia mainly currency related.

Adjusted net income⁽²⁾ was $10,749 million, up from $10,169 million in the previous year, and adjusted EPS was $8.50 versus $7.87 in the previous year.

Adjusted net income⁽²⁾ for the fourth quarter ended October 31, 2022 was $2,615 million and adjusted EPS was $2.06, compared to $2.10 last year. Adjusted return on equity was 15.0% compared to 15.6% a year ago.

"This year, the Bank remained focused on leading through sound advice and delivering value to our customers, including launching the enhanced Scene+ loyalty program, which has since grown by more than one million new members and was further expanded with the addition of Empire Company Limited to the partnership. Our commitment to our customers has resulted in a number of prestigious recognitions, including Bank of the Year for Canada for the third year in a row from The Banker, Investment Bank of the Year for the Americas from The Banker, and Best Bank in Canada from Euromoney," said Brian Porter, President and CEO of Scotiabank.

Despite the uncertain and volatile operating environment, each of the four business lines contributed strongly to our consolidated fiscal year performance reflecting the diversified earnings power of the Bank.

Canadian Banking generated adjusted earnings of $4,779 million in 2022, an increase of 15% compared to the prior year. The increase was due primarily to higher revenues driven by strong growth of 14% in residential mortgages and a 21% increase in business banking loans, as well as lower provision for credit losses. Non-interest income grew 6%. 

Global Wealth Management reported adjusted earnings of $1,583 million in 2022. Challenging market conditions drove declines in assets under management, impacting fee income, partly offset by strong growth in the advisory business and continued prudent expense management.

Global Banking and Markets generated earnings of $1,911 million, reflecting solid business banking performance, including strong loan growth momentum, while capital markets faced challenging market conditions. Provision for credit losses rose this year due to lower reversals, and expenses grew to support continued business investment.

International Banking delivered a strong rebound in adjusted earnings in 2022. Adjusted earnings of $2,446 million represented a 32% increase compared to the prior year. This was driven by strong commercial and residential mortgage loan growth, prudent expense management and lower provision for credit losses.

For fiscal 2022, the Bank exceeded its medium-term profitability targets on an adjusted basis, in terms of earnings per share growth and return on equity metrics. With a Common Equity Tier 1 capital ratio of 11.5%, the Bank remains well capitalized to support its strategic growth plans and return capital to shareholders. The quarterly dividend remains unchanged at $1.03 per common share.

This year, the Bank released its inaugural Net-Zero Pathways Report, which includes sector-specific decarbonization baselines and targets. The Bank has made significant progress in achieving its climate-related financing target, having mobilized a total of $96 billion in climate-related finance, up from $58 billion last year. In 2022, the Bank released its inaugural ScotiaRISE Impact Report, which highlights the program's first-year results, from the Bank's $500 million, 10-year community investment commitment. Since the launch of ScotiaRISE, the Bank has partnered with more than 200 community organizations and invested more than $60 million in communities across Scotiabank's footprint.

"I am exceedingly proud of what our team of 90,000 Scotiabankers has accomplished over the past 10 years. We have made strategic investments to refocus and strengthen our footprint and position the Bank for continued success over the long term. The Bank is stronger, more diverse, and more inclusive than it has ever been. Simply put, our Bank is a different bank today—one well-placed to deliver consistent long-term growth, and to cultivate our world-class culture, now and into the future," continued Mr. Porter. "It has been the privilege of my life to serve as the CEO of this storied institution. At 190 years old, Scotiabank is older than the country of Canada itself and as we look ahead to 2023, I have every confidence that the Bank's best days are yet to come."

Financial Highlights

Impact of Foreign Currency Translation

Group Financial Performance

Net income

Q4 2022 vs Q4 2021

Net income was $2,093 million compared to $2,559 million, a decrease of 18%.

The impact on net income of adjusting items for the current quarter was $522 million after-tax ($603 million pre-tax) (refer to the Non-GAAP measures section starting on page 22 for a reconciliation). The Bank recorded a net loss of $340 million ($361 million pre-tax) in relation to the divesture of investments in associates in Venezuela and Thailand, and the wind-down of operations in India and Malaysia, mostly relating to the reclassification of cumulative foreign currency translation losses net of hedges, from accumulated other comprehensive income to non-interest income in the Consolidated Statement of Income. The Bank recognized costs of $98 million ($133 million pre-tax) to support the expansion of the Scene+ loyalty program to include Empire Company Limited as a partner. The Bank recorded a restructuring charge of $66 million ($85 million pre-tax) primarily related to the strategic decision to realign the Global Banking and Markets business in Asia Pacific to focus on select banking and capital markets activities in the region. The charge also included reductions in Canadian and international technology employees, driven by ongoing technology modernization and digital transformation. Other adjusting items in the current quarter included amortization of acquisition-related intangible assets of $18 million ($24 million pre-tax). The impact of the adjustments on diluted earnings per share was $0.43 and on Basel III Common Equity Tier 1 (CET1) ratio was two basis points.

The adjustments in the prior year were $157 million after-tax ($213 million pre-tax) which included restructuring and other provisions of $139 million after-tax ($188 million pre-tax), and amortization of acquisition-related intangible assets of $18 million ($25 million pre-tax).

Adjusted net income was $2,615 million compared to $2,716 million, a decrease of 4%, due mainly to lower non-interest income, higher non-interest expenses and higher provision for credit losses, partly offset by higher net interest income and lower provision for income taxes.

Q4 2022 vs Q3 2022

Net income was $2,093 million compared to $2,594 million, a decrease of 19%. This quarter included adjusting items of $522 million compared to $17 million in the prior quarter [refer to the Non-GAAP measures section on page 22]. Adjusted net income was $2,615 million compared to $2,611 million, an increase of $4 million. The increase was due mainly to higher non-interest income and lower provision for income taxes, partly offset by higher provision for credit losses and non-interest expenses.

Total revenue

Q4 2022 vs Q4 2021

Revenues were $7,626 million compared to $7,687 million, a decrease of 1%, including adjusting items of $361 million this quarter. Adjusted revenues were $7,987 million compared to $7,687 million, an increase of 4%, due mainly to higher net interest income, partly offset by lower non-interest income.

Q4 2022 vs Q3 2022

Revenues were $7,626 million compared to $7,799 million, a decrease of 2%, including adjusting items of $361 million this quarter. Adjusted revenues were $7,987 million compared to $7,799 million, an increase of 2%, due mainly to higher non-interest income, partly offset by lower net interest income.

Net interest income

Q4 2022 vs Q4 2021

Net interest income was $4,622 million, an increase of $405 million or 10%, due primarily to strong asset growth across all business lines. Net interest margin was up 1 basis point to 2.18%, driven primarily by higher margins across all business lines, which benefited from central bank rate increases, partly offset by a lower contribution from asset/liability management activities related to higher funding costs and increased levels of high quality, lower-margin liquid assets.

Q4 2022 vs Q3 2022

Net interest income decreased $54 million or 1%. Loan growth across all business lines was more than offset by lower net interest margins.

Net interest margin of 2.18% was down 4 basis points driven by a lower contribution from asset/liability management activities related to higher funding costs, as well as a lower Canadian Banking margin, partly offset by a higher International Banking margin, as well as decreased levels of high quality, lower-margin liquid assets.

Non-interest income

Q4 2022 vs Q4 2021

Non-interest income was $3,004 million, down $466 million or 13% including adjusting items of $361 million this quarter (refer to Non-GAAP Measures starting on page 22). Adjusted non-interest income was down $105 million or 3%. The decrease was due mainly to lower wealth management revenues, unrealized losses on non-trading derivatives, and lower income from associated corporations. These were partly offset by higher banking revenues, other fees and commission revenues, and non-trading foreign exchange fees.

Q4 2022 vs Q3 2022

Non-interest income was down $119 million or 4% including adjusting items of $361 million this quarter (refer to Non-GAAP Measures starting on page 22). Adjusted non-interest income was up $242 million or 8%, due primarily to higher trading revenues, banking revenues, other fees and commission revenues, as well as underwriting and advisory fees, partly offset by lower wealth management revenues.

Provision for credit losses

Q4 2022 vs Q4 2021

The provision for credit losses was $529 million, compared to $168 million, an increase of $361 million. The provision for credit losses ratio increased 18 basis points to 28 basis points.

The provision for credit losses on performing loans was $35 million, compared to a net reversal of $343 million. The provision this period was driven by portfolio growth and the less favourable macroeconomic forecast, partly offset by improved credit quality expectations mainly in Canadian retail and improved credit quality in Global Banking and Markets. Higher provision reversals last year were due mainly to the more favourable credit and macroeconomic outlook as well as credit migration to impaired loans across most markets.

The provision for credit losses on impaired loans was $494 million, compared to $511 million, a decrease of $17 million or 3% due primarily to lower provisions in the International retail portfolio driven by lower formations partly offset by higher formations in the Canadian retail portfolio. The provision for credit losses ratio on impaired loans was 26 basis points, a decrease of five basis points.

Q4 2022 vs Q3 2022

The provision for credit losses was $529 million, compared to $412 million, an increase of $117 million or 28%. The provision for credit losses ratio increased six basis points to 28 basis points.

The provision for credit losses on performing loans was $35 million, compared to $23 million last quarter, driven by the less favourable macroeconomic forecast and portfolio growth, partly offset by improved credit quality expectations mainly in Canadian retail.

The provision for credit losses on impaired loans was $494 million, compared to $389 million, an increase of $105 million or 27%, due to higher corporate and commercial provisions and retail formations across markets.

The provision for credit losses ratio on impaired loans was 26 basis points, an increase of five basis points.

Non-interest expenses

Q4 2022 vs Q4 2021

Non-interest expenses were $4,529 million, up $258 million or 6%, including adjusting items of $242 million versus $213 million in the prior year (refer to Non-GAAP Measures starting on page 22). Adjusted non-interest expenses were $4,287 million, up $229 million or 6%, driven by higher personnel costs, performance-based compensation, advertising and technology-related costs, business and capital taxes and the negative impact of foreign currency translation.

The productivity ratio was 59.4% compared to 55.6%. The adjusted productivity ratio was 53.7% compared to 52.8%.

Q4 2022 vs Q3 2022

Non-interest expenses were up $338 million or 8% including adjusting items of $242 million versus $24 million in the prior quarter (refer to Non-GAAP Measures starting on page 22).  Adjusted non-interest expenses were up $120 million or 3%. The increase was due to higher professional fees, performance-based compensation, advertising and technology-related costs, and the negative impact of foreign currency translation. Partly offsetting were other employee benefits and share-based compensation expenses.

The productivity ratio was 59.4% compared to 53.7%. The adjusted productivity ratio was 53.7% compared to 53.4%.

Provision for income taxes

Q4 2022 vs Q4 2021

The effective tax rate was 18.5% compared to 21.2%. The adjusted effective tax rate was 17.6% compared to 21.5% due primarily to higher income from lower tax rate jurisdictions and higher tax-exempt income in the quarter.

Q4 2022 vs Q3 2022

The effective tax rate was 18.5% compared to 18.8% in the previous quarter. The adjusted effective tax rate was 17.6% compared to 18.8% in the previous quarter due primarily to higher tax-exempt income.

Capital Ratios

The Bank continues to maintain strong, high quality capital levels which position it well for future business growth and opportunities. The CET1 ratio as at October 31, 2022 was 11.5%, a decrease of approximately 80 basis points from the prior year as solid internal capital generation during the year was more than offset by strong organic growth in risk-weighted assets across all business lines, common share buybacks under the Bank's Normal Course Issuer Bid, changes in the valuation of investment securities, and the Bank's increased ownership in Scotiabank Chile.

The Bank's Tier 1 capital ratio was 13.2% as at October 31, 2022, a decrease of approximately 70 basis points from the prior year, due primarily to the above noted impacts to the CET1 ratio, the phase-out impact of approximately $650 million of non-qualifying additional tier 1 instruments, and the Bank's redemption of $500 million of NVCC preferred shares, partly offset by issuances of $1.5 billion and USD $750 million of Limited Recourse Capital Notes (LRCNs).

The Bank's Total capital ratio was 15.3% as at October 31, 2022, a decrease of approximately 60 basis points from 2021, due primarily to the above noted impacts to the Tier 1 capital ratio, the redemption of $1.25 billion of NVCC subordinated debentures, amortization of approximately $325 million of NVCC Tier 2 instruments and the phase-out impact of approximately $250 million of non-qualifying subordinated debentures, partly offset by issuances of $1.75 billion and USD $1.25 billion of NVCC subordinated debentures.

The TLAC ratio was 27.4% as at October 31, 2022, a decrease of 40 basis points from the prior year, mainly from strong growth in risk-weighted assets during the year.

The Leverage ratio was 4.2%, a decrease of approximately 60 basis points from the prior year due primarily to OSFI's discontinuance of the temporary exclusion of sovereign-issued securities from its leverage exposures measure, combined with strong growth in the Bank's on and off-balance sheet assets.

The TLAC Leverage ratio was 8.8%, a decrease of approximately 80 basis points from 2021, due primarily to strong growth in the Bank's on and off-balance sheet assets.

The Bank's capital ratios continue to be in excess of OSFI's minimum capital ratio requirements for 2022 for CET1, Tier 1 and Total Capital. The Bank was well above the OSFI minimum Leverage ratio as at October 31, 2022.

Business Segment Review

Canadian Banking

 

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was $1,170 million, compared to $1,238 million. Adjusted net income attributable to equity holders was $1,174 million, a decrease of $68 million or 5%. The decline was due primarily to higher provision for credit losses.

Q4 2022 vs Q3 2022

Net income attributable to equity holders declined $43 million or 4%. The decline was due primarily to higher provision for credit losses.

Total revenue

Q4 2022 vs Q4 2021

Revenues were $3,134 million, up $303 million or 11%, due to higher net interest income and non-interest income.

Q4 2022 vs Q3 2022

Revenues increased $15 million due primarily to higher non-interest income.

Net interest income

Q4 2022 vs Q4 2021

Net interest income of $2,363 million increased $281 million or 13%, due primarily to strong loan and deposit growth, as well as margin expansion. The net interest margin increased six basis points to 2.26%, due primarily to higher deposit spreads and the impact of the Bank of Canada rate increases, partly offset by lower loan spreads.

Q4 2022 vs Q3 2022

Net interest income was in line with prior quarter. Strong loan and deposit growth were offset by margin compression.  The net interest margin decreased three basis points to 2.26%, due primarily to lower mortgage prepayment fees and lower spreads on variable rate mortgages, partly offset by higher deposit spreads.

Non-interest income

Q4 2022 vs Q4 2021

Non-interest income of $771 million increased $22 million or 3%. The increase was due primarily to higher banking revenue and foreign exchange fees, partly offset by lower mutual fund distribution fees.

Q4 2022 vs Q3 2022

Non-interest income increased $13 million or 2%. The increase was due primarily to higher banking revenue and income from associated corporations.

Provision for credit losses

Q4 2022 vs Q4 2021

The provision for credit losses was $163 million, compared to a net reversal of $96 million.  The provision for credit losses ratio increased 25 basis points to 15 basis points.

Provision for credit losses on performing loans was $10 million, compared to a net reversal of $195 million. The provision this period was driven primarily by the less favourable macroeconomic forecast and portfolio growth partly offset by improved retail portfolio credit quality.

Provision for credit losses on impaired loans was $153 million, compared to $99 million, an increase of $54 million due primarily to higher retail provisions driven by higher formations. The provision for credit losses ratio on impaired loans was 14 basis points, an increase of four basis points.

Q4 2022 vs Q3 2022

The provision for credit losses was $163 million, compared to $93 million, an increase of $70 million. The provision for credit losses ratio increased six basis points to 15 basis points.

Provision for credit losses on performing loans was $10 million, compared to a net reversal of $50 million last quarter. The provision this period was driven primarily by the less favourable macroeconomic forecast and portfolio growth, partly offset by improved retail portfolio credit quality expectations.

Provision for credit losses on impaired loans was $153 million, compared to $143 million, an increase of $10 million or 7% due primarily to higher commercial provisions driven by higher formations, partly offset by lower retail provisions. The provision for credit losses ratio on impaired loans was 14 basis points, an increase of one basis point.

Non-interest expenses

Q4 2022 vs Q4 2021

Non-interest expenses were $1,397 million, up $146 million or 12%, due primarily to higher technology and personnel costs to support business growth.

Q4 2022 vs Q3 2022

Non-interest expenses were up $12 million or 1%, due primarily to higher technology costs to support business growth.

Provision for income taxes

The effective tax rate was 25.7% for the quarter, compared to 26.2% in the prior year and 26.1% in the prior quarter.

Average assets

Q4 2022 vs Q4 2021

Average assets increased $48 billion or 12% to $446 billion. The growth included $27 billion or 11% in residential mortgages, $16 billion or 25% in business loans and acceptances, $3 billion or 4% in personal loans, and $1 billion or 11% in credit card loans.

Q4 2022 vs Q3 2022

Average assets increased $9 billion or 2%. The growth included $4 billion or 1% in residential mortgages, $3 billion or 4% in business loans and acceptances, and $1 billion or 1% in personal loans.

Average liabilities

Q4 2022 vs Q4 2021

Average liabilities increased $29 billion or 9% to $347 billion. The growth included $15 billion or 8% in personal deposits and $6 billion or 6% in non-personal deposits.

Q4 2022 vs Q3 2022

Average liabilities increased $10 billion or 3%. The growth included $8 billion or 4% in personal deposits and $1 billion or 1% in non-personal deposits.

International Banking

 

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was $643 million, compared to $528 million, up $115 million or 22%. Adjusted net income attributable to equity holders was $650 million, an increase of $115 million or 21%. This increase was driven by higher net interest income and lower provision for income taxes, partly offset by higher non-interest expenses, higher provision for credit losses and lower non-interest income.  

Q4 2022 vs Q3 2022

Net income attributable to equity holders increased by $18 million or 3% from $625 million. Adjusted net income attributable to equity holders increased by $19 million or 3%, compared to $631 million last quarter. This increase was driven by higher net interest income, and non-interest income and lower provision for income taxes, partly offset by higher non-interest expenses and higher provision for credit losses.

Financial Performance on a Constant Dollar Basis

International Banking business segment results are analyzed on a constant dollar basis which is a non-GAAP measure (refer to Non-GAAP Measures starting on page 22). 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, adjusted and constant dollar results for International Banking for prior periods. The Bank believes that constant dollar is useful for readers to understand business performance without the impact of foreign currency translation and is used by management to assess the performance of the business segment. The tables below are computed on a basis that is different than the "Impact of foreign currency translation" table on page 4. Ratios are on a reported basis.

The discussion below on the results of operations is on a constant dollar basis.

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was $643 million, compared to $515 million. Adjusted net income attributable to equity holders was $650 million, an increase of $129 million or 22%. This increase was driven by higher net interest income and lower provision for income taxes, partly offset by higher non-interest expenses, and higher provision for credit losses.  

Q4 2022 vs Q3 2022

Net income attributable to equity holders increased by $22 million or 4% from $621 million. Adjusted net income attributable to equity holders increased by $22 million or 4%, compared to $628 million last quarter. This increase was driven by higher non-interest income, net interest income, and lower provision for income taxes.  This was partly offset by higher non-interest expenses and higher provision for credit losses.

Total revenue

Q4 2022 vs Q4 2021

Revenues were $2,504 million, an increase of $182 million or 8%, driven by higher net interest income.

Q4 2022 vs Q3 2022

Revenues increased by $78 million, or 3%, driven by higher non-interest income and net interest income.

Net interest income

Q4 2022 vs Q4 2021

Net interest income of $1,806 million was up 11%, driven by growth in commercial loans and residential mortgages, as well as margin expansion. Net interest margin increased by 30 basis points to 4.08%, due mainly to higher central bank rates, and inflationary adjustments, partly offset by higher funding costs and changes in deposits mix.

Q4 2022 vs Q3 2022

Net interest income increased by $20 million, or 1%, driven by growth in commercial loans and residential mortgages, and margin expansion. Net interest margin increased by 13 basis points to 4.08%. 

Non-interest income

Q4 2022 vs Q4 2021

Non-interest income was $698 million, in line with previous year, with net fees and commissions growing 6%.  This was offset by lower capital market revenues and gains on investment securities compared to last year.

Q4 2022 vs Q3 2022

Non-interest income increased by $58 million or 9%, driven by net fees and commissions and capital markets revenues.

Provision for credit losses

Q4 2022 vs Q4 2021

The provision for credit losses was $355 million, compared to $323 million, an increase of $32 million or 10%. The provision for credit losses ratio decreased two basis points to 89 basis points.

Provision for credit losses on performing loans was $35 million, compared to a net reversal of $97 million. The increase this period related to higher retail and commercial provisions, due mainly to the less favourable macroeconomic forecast, as well as growth in the retail portfolio.

Provision for credit losses on impaired loans was $320 million compared to $420 million, a decrease of $100 million or 24%.  This was due mainly to lower retail provisions driven by lower formations primarily in Peru and Colombia. The provision for credit losses ratio on impaired loans was 81 basis points, a decrease of 37 basis points.

Q4 2022 vs Q3 2022

The provision for credit losses was $355 million, compared to $328 million, an increase of $27 million or 8%. The provision for credit losses ratio increased five basis points to 89 basis points.

Provision for credit losses on performing loans was $35 million, compared to $62 million last quarter, a decrease of $27 million due primarily to lower retail provisions as prior period included a higher impact of the unfavourable macroeconomic forecast.

Provision for credit losses on impaired loans was $320 million compared to $266 million, an increase of $54 million or 21% due primarily to higher retail provisions driven by higher formations across markets. The provision for credit losses ratio on impaired loans increased 13 basis points to 81 basis points.

Non-interest expenses

Q4 2022 vs Q4 2021

Non-interest expenses were $1,364 million, up 7%. Adjusted non-interest expenses were $1,355 million, up 7%, driven by business growth and inflationary impacts, partly offset by the benefit of efficiency initiatives.

Q4 2022 vs Q3 2022

Non-interest expenses were $1,364 million compared to $1,311 million, an increase of 4%. Adjusted non-interest expenses increased by $53 million or 4% from $1,302 million last quarter, driven by business growth, inflationary impacts, partly offset by the benefit of efficiency initiatives.

Provision for income taxes

Q4 2022 vs Q4 2021

The effective tax rate was 13.5%, compared to 18.4%. On an adjusted basis, the effective tax rate was 13.6% compared to 18.6%, primarily due to higher inflationary adjustments in Mexico and Chile, and changes in the earnings mix.

Q4 2022 vs Q3 2022

The effective tax rate was 13.5%, compared to 15.4%. On an adjusted basis, the effective tax rate was 13.6% compared to 15.5% due primarily to a prior period tax recovery and higher inflationary adjustments in Mexico and Chile.

Average assets

Q4 2022 vs Q4 2021

Average assets were $217 billion, an increase of $22 billion. Total loan growth of 12% was driven by a 16% increase in residential mortgages, a 12% increase in commercial loans, and a 9% increase in personal loans and credit card balances.

Q4 2022 vs Q3 2022

Average assets increased by $4 billion. Loans grew by 2%, driven by a 4% increase in residential mortgages, a 2% increase in commercial loans and a 2% increase in personal loans and credit card balances.

Average liabilities

Q4 2022 vs Q4 2021

Average liabilities of $160 billion were up $13 billion. Total deposits increased 8%, driven by a 12% increase in non-personal deposits and a 1% increase in personal deposits.

Q4 2022 vs Q3 2022

Average liabilities were up $2 billion. Total deposits increased by 2%, driven by a 2% increase in non-personal deposits and a 1% increase in personal deposits.

Global Wealth Management

 

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was $361 million, a decrease of $24 million or 6%, due primarily to lower fee income, partly offset by higher net interest income and lower volume-related expenses.

Q4 2022 vs Q3 2022

Net income attributable to equity holders decreased $15 million or 4%, from lower fee income, partly offset by higher net interest income.

Total revenue

Q4 2022 vs Q4 2021

Revenues were $1,289 million, down $58 million or 4% due primarily to lower fee income driven by lower AUM and trading volumes, partly offset by higher net interest income driven by strong loan growth and improved margins.

Q4 2022 vs Q3 2022

Revenues were down $23 million or 2% due primarily to lower fee income driven by lower AUM reflecting current market conditions.

Provision for credit losses

Q4 2022 vs Q4 2021

The provision for credit losses was $1 million, unchanged from last year.

Q4 2022 vs Q3 2022

The provision for credit losses was $1 million, a decrease of $4 million. The provision for credit losses ratio was two basis points.

Non-interest expenses

Q4 2022 vs Q4 2021

Non-interest expenses of $798 million were down $26 million or 3%, driven largely by lower volume-related expenses.

Q4 2022 vs Q3 2022

Non-interest expenses were in line with last quarter as lower volume-related expenses were largely offset by technology costs to support business initiatives.

Provision for income taxes

The effective tax rate was 25.8% compared to 25.9% in the prior year and 26.1% in the prior quarter.

Assets under management (AUM) and assets under administration (AUA)

Q4 2022 vs Q4 2021

Assets under management of $311 billion decreased $35 billion or 10% driven by market depreciation. Assets under administration of $580 billion decreased $17 billion or 3% due primarily to market depreciation, partly offset by higher net sales.

Q4 2022 vs Q3 2022

Assets under management decreased $9 billion or 3%, and assets under administration decreased by $1 billion, due primarily to market depreciation.

Global Banking and Markets

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was $484 million, a decrease of $18 million or 4%, due mainly to higher non-interest expenses and higher provision for credit losses, partly offset by higher net interest income, non-interest income, and the positive impact of foreign currency translation.

Q4 2022 vs Q3 2022

Net income attributable to equity holders increased by $106 million or 28%. This was due to higher net interest income, non-interest income, and the positive impact of foreign currency translation, partly offset by higher non-interest expenses and provision for credit losses.

Total revenue

Q4 2022 vs Q4 2021

Revenues were $1,354 million, an increase of $177 million or 15% due to higher net interest income, non-interest income and the positive impact of foreign currency translation.

Q4 2022 vs Q3 2022

Revenues increased by $202 million or 18% due to higher non-interest income, net interest income, and the positive impact of foreign currency translation.

Net interest income

Q4 2022 vs Q4 2021

Net interest income was $492 million, an increase of $127 million or 35% due to higher deposit and lending volumes, increased deposit margins, and the positive impact of foreign currency translation, partly offset by higher trading-related funding costs.

Q4 2022 vs Q3 2022

Net interest income increased by $87 million or 21% due mainly to increased lending margins, higher deposit and lending volumes, and the positive impact of foreign currency translation.

Non-interest income

Q4 2022 vs Q4 2021

Non-interest income was $862 million, an increase of $50 million or 6% due to higher banking revenues and the positive impact of foreign currency translation, partly offset by lower trading revenues, mainly in the Equities business, and underwriting and advisory fees.

Q4 2022 vs Q3 2022

Non-interest income increased by $115 million or 15%, due mainly to higher banking revenues, underwriting and advisory fees, the positive impact of foreign currency translation, partly offset by lower trading revenues mainly in the Equities business. 

Provision for credit losses

Q4 2022 vs Q4 2021

The provision for credit losses was $11 million, compared to a net reversal of $50 million. The provision for credit losses ratio was three basis points, an increase of 21 basis points.

Provision for credit losses on performing loans was a net reversal of $11 million compared to a net reversal of $52 million. The reversal this period was due primarily to improved portfolio credit quality partly offset by portfolio growth and less favourable macroeconomic forecast.

Provision for credit losses on impaired loans was $22 million compared to $2 million, an increase of $20 million due primarily to higher provisions driven by higher formations in this period. The provision for credit losses ratio on impaired loans was six basis points, an increase of five basis points.

Q4 2022 vs Q3 2022

The provision for credit losses was $11 million, compared to a net reversal of $15 million last quarter. The provision for credit losses ratio was three basis points, an increase of eight basis points.

Provision for credit losses on performing loans was a net reversal of $11 million compared to $3 million last quarter. The reversal this period was due primarily to continued strong portfolio credit quality partly offset by portfolio growth and less favourable macroeconomic forecast.

Provision for credit losses on impaired loans was $22 million, an increase of $40 million due primarily to higher provisions driven by higher formations. The provision for credit losses ratio on impaired loans was six basis points, an increase of 12 basis points.

Non-interest expenses

Q4 2022 vs Q4 2021

Non-interest expenses of $696 million, were up $105 million or 18%, due mainly to increases in personnel costs, and technology costs to support business development, and the negative impact of foreign currency translation.

Q4 2022 vs Q3 2022

Non-interest expenses increased $41 million or 6% due mainly to higher personnel costs and the negative impact of foreign currency translation.

Provision for income taxes

Q4 2022 vs Q4 2021

The effective tax rate for the quarter was 25.2% compared to 21.0% in the prior year. The changes were due mainly to prior year recoveries and the change in earnings mix across jurisdictions.

Q4 2022 vs Q3 2022

The effective tax rate for the quarter was 25.2% compared to 26.1%.

Average assets

Q4 2022 vs Q4 2021

Average assets were $461 billion, an increase of $52 billion or 13% due mainly to increases in loans and securities purchased under resale agreements, and the impact of foreign currency translation, partly offset by lower trading securities. Loan balances increased 31% or $29 billion, reflecting growth in most regions, with the largest contribution from the U.S. 

Q4 2022 vs Q3 2022

Average assets increased $18 billion or 4% due mainly to increases in loans, securities purchased under resale agreements and the impact of foreign currency translation. Loan balances increased 10% or $11 billion, primarily in the U.S. and Canada.

Average liabilities

Q4 2022 vs Q4 2021

Average liabilities were $430 billion, an increase of $48 billion or 13% due mainly to increases in deposits of $20 billion, securities sold under repurchase agreements, derivative-related liabilities, and the impact of foreign currency translation.

Q4 2022 vs Q3 2022

Average liabilities increased $11 billion or 3% due mainly to increases in deposits and the impact of foreign currency translation.

Other

 

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

Net income

Q4 2022 vs Q4 2021

Net income attributable to equity holders was a net loss of $603 million, which includes adjusting items of $503 million compared to a net loss of $164 million. This quarter's results include adjusting items of $503 million (refer to Non-GAAP Measures starting on page 22 for details). Adjusted net income attributable to equity holders was a net loss of $100 million compared to a net loss of $35 million. The decrease of $65 million was due mainly to a higher funding costs resulting from higher interest rates and asset/liability management activities, partly offset by lower income taxes and lower non-interest expenses.

Q4 2022 vs Q3 2022

Net income attributable to equity holders decreased $551 million from the prior quarter. On an adjusted basis, net income attributable to equity holders decreased $48 million due mainly to higher funding costs resulting from higher interest rates and asset/liability management activities, partly offset by higher investment gains and lower income 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

Non-GAAP Measures

The Bank uses a number of financial measures and ratios to assess its performance, as well as the performance of its operating segments. Some of these financial measures and ratios are presented on a non-GAAP basis and are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), are not defined by GAAP and do not have standardized meanings and therefore might not be comparable to similar financial measures and ratios disclosed by other issuers. The Bank believes that non-GAAP measures and ratios are useful as they provide readers with a better understanding of how management assesses performance. These non-GAAP measures and ratios are used throughout this report and defined below.

Adjusted results and adjusted diluted earnings per share

The following table presents a reconciliation of GAAP reported financial results to non-GAAP adjusted financial results. Management considers both reported and adjusted results and measures useful in assessing underlying ongoing business performance.  Adjusted results and measures remove certain specified items from revenue, non-interest expenses, income taxes and non-controlling interest. Presenting results on both a reported basis and adjusted basis allows readers to assess the impact of certain items on results for the periods presented, and to better assess results and trends excluding those items that may not be reflective of ongoing business performance.  Net income and diluted earnings per share have been adjusted for the following:

1.  Amortization of acquisition-related intangible assets:

Costs of $18 million ($24 million pre-tax) for the quarter ended October 31, 2022 and $71 million ($97 million pre-tax) for the year ended October 31, 2022, relate to the amortization of intangible assets recognized upon the acquisition of businesses, excluding software, and are recorded in the Canadian Banking, International Banking and Global Wealth Management operating segments.

2.  Restructuring and other provisions:

In Q4 2022, the Bank recorded a restructuring charge of $66 million ($85 million pre-tax) primarily related to the strategic decision to realign the Global Banking and Market businesses in Asia Pacific to focus on select banking and capital markets activities in the region. The charge also included reductions in Canadian and international technology employees, driven by ongoing technology modernization and digital transformation.

In the prior year, the Bank recorded a restructuring charge of $93 million ($126 million pre-tax), substantially related to International Banking for the cost of reducing branches and full-time employees, driven by the accelerated customer adoption of digital channels and process automation. The Bank also recorded settlement and litigation provisions in the amount of $46 million ($62 million pre-tax) in connection with the Bank's former metals business.

These charges were recorded in the Other operating segment.

3.  Support costs for the Scene+ loyalty program:

The Bank recorded costs of $98 million ($133 million pre-tax) to support the expansion of the Scene+ loyalty program to include Empire Company Limited as a partner. These committed costs relate to operational support, transition marketing and technology initiatives and were recognized as an expense in Q4 2022 in the Other operating segment.

4.  Net loss on divestitures and wind-down of operations:

In Q4 2022, the Bank sold its investments in associates in Venezuela and Thailand. Additionally, the Bank wound down its operations in India and Malaysia in relation to its realignment of the business in the Asia Pacific region.  Collectively, the sale and wind-down of these entities resulted in a net loss of $340 million ($361 million pre-tax), of which $294 million ($315 million pre-tax) related to the reclassification of cumulative foreign currency translation losses net of hedges, from accumulated other comprehensive income to non-interest income in the Consolidated Statement of Income. This net loss was recorded in the Other operating segment. For further details on these transactions, please refer to Note 36 of the consolidated financial statements in the 2022 Annual Report to Shareholders.

Reconciliation of reported and adjusted results and diluted earnings per share

 

Reconciliation of reported and adjusted results by business line⁽¹⁾

Reconciliation of reported and adjusted results by business line⁽¹⁾

Reconciliation of International Banking's reported and adjusted results and constant dollar results

International Banking business segment results are analyzed on a constant dollar basis which is a non-GAAP measure. 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, adjusted and constant dollar results for International Banking for prior periods. The Bank believes that constant dollar is useful for readers to understand business performance without the impact of foreign currency translation and is used by management to assess the performance of the business segment. The tables below are computed on a basis that is different than the table "Impact of foreign currency translation" on page 4.

 

Reconciliation of average total assets, core earning assets and core net interest income

Earning assets

Earning assets are defined as income generating assets which include deposits with financial institutions, trading assets, investment securities, investments in associates, securities borrowed or purchased under resale agreements, loans net of allowances, and customers' liability under acceptances.

Non-earning assets

Non-earning assets are defined as cash, precious metals, derivative financial instruments, property and equipment, goodwill and other intangible assets, deferred tax assets and other assets.

Core earning assets

Core earning assets are defined as interest-bearing deposits with financial institutions, investment securities and loans net of allowances. This is a non-GAAP measure. The Bank believes that this measure is useful for readers as it presents the main interest-generating assets of the personal and commercial businesses, and eliminates the impact of trading businesses.

Core net interest income

Core net interest income is defined as net interest income earned from core earning assets. This is a non-GAAP measure.

Net interest margin

Net interest margin is calculated as core net interest income for the business line divided by average core earning assets. Net interest margin is a non-GAAP ratio.

Average earning assets, average core earning assets and net interest margin by business line

Consolidated Bank

Canadian Banking

International Banking 

Return on equity

Return on equity is a profitability measure that presents the net income attributable to common shareholders as a percentage of average common shareholders' equity.

The Bank attributes capital to its business lines on a basis that approximates 10.5% of Basel III common equity capital requirements which includes credit, market and operational risks and leverage inherent within each business segment.

Return on equity for the business segments is calculated as a ratio of net income attributable to common shareholders of the business segment and the capital attributed.

Adjusted return on equity is a non-GAAP ratio which represents adjusted net income attributable to common shareholders as a percentage of adjusted average common shareholders' equity.

Return on equity by operating segment

 

 

Return on tangible common equity

Return on tangible common equity is a profitability measure that is calculated by dividing the net income attributable to common shareholders, adjusted for the amortization of intangibles (excluding software), by average tangible common equity. Tangible common equity is defined as common shareholders' equity adjusted for goodwill and intangible assets (excluding software), net of deferred taxes. This is a non-GAAP ratio.

Adjusted return on tangible common equity is a non-GAAP ratio which represents adjusted net income attributable to common shareholders as a percentage of adjusted average tangible common equity. This is a non-GAAP ratio.

Adjusted productivity ratio

Adjusted productivity ratio represents adjusted non-interest expenses as a percentage of adjusted total revenue. This is a non-GAAP ratio. 

Management uses the productivity ratio as a measure of the Bank's efficiency. A lower ratio indicates improved productivity.

Adjusted operating leverage

This financial metric measures the rate of growth in adjusted total revenue less the rate of growth in adjusted non-interest expenses. This is a non-GAAP ratio.

Management uses operating leverage as a way to assess the degree to which the Bank can increase operating income by increasing revenue.

Adjusted effective tax rate

The adjusted effective tax rate is calculated by dividing adjusted income tax expense by adjusted income before taxes. This is a non-GAAP ratio.

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, 2022 which will be available today at www.scotiabank.com.

Forward-looking statements 

From time to time, our public communications 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 (SEC), 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 2022 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," "target," "project," "commit," "objective," and similar expressions of future or conditional verbs, such as "will," "may," "should," "would," "might", "can" and "could" and positive and negative variations thereof.

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; the possible effects on our business of war or terrorist actions and unforeseen consequences arising from such actions; 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, and the extent to which products or services previously sold by the Bank require the Bank to incur liabilities or absorb losses not contemplated at their origination; 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; climate change and other environmental and social risks, including sustainability that may arise, including from the Bank's business activities; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; inflationary pressures;  Canadian housing and household indebtedness; the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on the global economy, financial market conditions and the Bank's business, results of operations, financial condition and prospects; 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 2022 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 2022 Annual Report under the headings "Outlook", as updated by quarterly reports. The "Outlook" and "2023 Priorities" 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 29, 2022

Shareholders 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 2023

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

 Annual Meeting Date for Fiscal 2022

Shareholders are invited to attend the 191^st Annual Meeting of Holders of Common Shares, to be held on April 4, 2023, at Scotiabank Centre, Scotia Plaza, 40 King Street West, 2^nd Floor, Toronto, Ontario beginning at 9:00 a.m. Eastern. 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 7, 2023. Please visit our website at https://www.scotiabank.com/annualmeeting for updates concerning the meeting. 

Duplicated Communication

Some registered holders of The Bank of Nova Scotia shares might receive more than one copy of shareholder mailings. Every effort is made to avoid duplication; however, if you are registered with different names and/or addresses, multiple mailings may result. If you receive, but do not require, more than one mailing for the same ownership, please contact the transfer agent to combine the accounts.

Annual Financial Statements

Shareholders may obtain a hard copy of Scotiabank's 2022 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 Tuesday, November 29, 2022, 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 416-641-6104 or 1-800-952-5114 (North America toll-free) using access code 1317931# (please call shortly before 8:00 am EST). 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 Tuesday, November 29, 2022 to Thursday January 5, 2023, by calling 905-694-9451 or 1-800-408-3053 (North America toll-free). The access code is 1127377#. The archived audio webcast will be available on the Bank's website for three months.

Additional Information

Investors:

Financial Analysts, Portfolio Managers and other Institutional Investors:

Scotiabank
40 Temperance Street, Toronto, Ontario
Canada M5H 0B4
Telephone: (416) 775-0798
E-mail: investor.relations@scotiabank.com

Global Communications:

Scotiabank
40 Temperance Street, Toronto, Ontario
Canada M5H 0B4
E-mail: corporate.communications@scotiabank.com

Shareholders:

For enquiries related to changes in share registration or address, dividend information, lost share certificates, estate transfers, or to advise of duplicate mailings, please contact the Bank's transfer agent:

Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario, Canada M5J 2Y1
Telephone: 1-877-982-8767
E-mail: service@computershare.com

Co-Transfer Agent (U.S.A.)
Computershare Trust Company, N.A.

WHEN SENDING OVERNIGHT:
Computershare
C/O: Shareholder Services
462 South 4th Street, Suite 1600
Louisville, KY 40202

WHEN SENDING FIRST CLASS, REGISTERED, OR CERTIFIED MAIL:
Computershare
C/O: Shareholder Services
PO Box 505000
Louisville, KY 40233-5000

Tel: 1-800-962-4284
E-mail: service@computershare.com

For other shareholder enquiries, please contact the Corporate Secretary's Department:
Scotiabank
40 Temperance Street, Toronto, Ontario
Canada M5H 0B4
Telephone: (416) 866-3672
E-mail: corporate.secretary@scotiabank.com

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