Mr. Scott Thomson reports

SCOTIABANK REPORTS FOURTH QUARTER AND 2023 RESULTS

Bank of Nova Scotia had net income of $7,528-million for the fiscal year 2023, compared with net income of $10,174-million in 2022. Diluted earnings per share (EPS) were $5.78, compared with $8.02 in the previous year. Return on equity was 10.4 per cent, compared with 14.8 per cent in the previous year.

Reported net income for the fourth quarter ended Oct. 31, 2023, was $1,385-million compared with $2,093-million in the same period last year. Diluted EPS was $1.02, compared with $1.63 in the same period a year ago. Return on equity was 7.2 per cent compared with 11.9 per cent a year ago.

This quarter's net income included adjusting items of $289-million after-tax. These consisted of restructuring charges of $258-million related to continuing efforts to streamline operational processes, costs of $63-million related to the exit of certain real estate premises and service contracts, impairment charges of $273-million related to the writedown of the bank's investment in associate with Bank of Xi'an Co Ltd. in China, and certain intangible assets and a gain of $319-million related to the sale of the bank's equity interest in Canadian Tire's Financial Services business (CTFS).

Adjusted net income was $8,441-million for the fiscal year 2023, down from $10,749-million in the previous year, mainly as a result of higher provision for credit losses in fiscal 2023, and adjusted diluted EPS was $6.54 versus $8.50 in the previous year. Adjusted return on equity was 11.7 per cent compared with 15.7 per cent in the previous year.

Adjusted net income for the fourth quarter ended Oct. 31, 2023, was $1,674-million and adjusted diluted EPS was $1.26, compared with $2.06 last year. Adjusted return on equity was 8.9 per cent compared with 15 per cent a year ago.

"I am encouraged by the results of our focused efforts on strengthening the bank's balance sheet as we prepare to manage through heightened macroeconomic uncertainty. Strong capital and liquidity ratios, improving loan-to-deposit ratios, and increased allowance for credit losses coverage ratios position us well as we enter the next phase of our growth strategy," said Scott Thomson, president and chief executive officer of Scotiabank.

Canadian banking generated adjusted earnings of $4,022-million in 2023. Strong net interest income from volume growth and margin expansion drove a year-over-year increase in pretax pre-provision earnings. The bank built performing allowances given the uncertain macroeconomic operating environment resulting in higher provision for credit losses compared with the prior year.

International banking delivered $2,516-million of adjusted income after non-controlling interests in 2023, a year-over-year increase of 3 per cent. The business had double-digit revenue growth and continued to show strong cost discipline, delivering positive operating leverage.

Global wealth management adjusted earnings were $1,466-million in 2023. Challenging market conditions drove declines in average assets under management, impacting fee income across the bank's Canadian businesses, partly offset by double-digit growth in international wealth management and continued prudent expense management.

Global banking and markets reported earnings of $1,768-million in 2023. Revenue from both capital markets and business banking increased, despite a challenging capital markets environment, and partly offset the impact of higher provision for credit losses.

The bank reported an increased common equity Tier 1 (CET1) capital ratio of 13 per cent, up from 11.5 per cent last year. The liquidity coverage ratio (LCR) was strong at 136 per cent, up from 119 per cent in the prior year.

"I would like to personally thank Scotiabankers globally who came together again this year to deliver the advice and service that our clients have come to expect from us. It is this unwavering commitment of our team to delivering for our clients that gives me great confidence in the future growth potential of the bank," said Mr. Thomson.

Group financial performance

Net income

Q4 2023 versus Q4 2022

Net income was $1,385-million compared with $2,093-million, a decrease of 34 per cent. This quarter included adjusting items impacting net income of $289-million compared with $522-million in the prior year. Adjusted net income was $1,674-million compared with $2,615-million, a decrease of 36 per cent, due mainly to higher provision for credit losses and non-interest expenses and lower non-interest income, partly offset by lower provision for income taxes.

Q4 2023 versus Q3 2023

Net income was $1,385-million compared with $2,212-million, a decrease of 37 per cent. This quarter included adjusting items impacting net income of $289-million compared with $15-million in the prior quarter. Adjusted net income was $1,674-million compared with $2,227-million, a decrease of 25 per cent. The decrease was due mainly to higher provision for credit losses and non-interest expenses and lower non-interest income, partly offset by lower provision for income taxes.

Total revenue

Q4 2023 versus Q4 2022

Revenues were $8,308-million compared with $7,626-million, an increase of 9 per cent. Adjusted revenues were $7,941-million compared with $7,987-million, a decrease of 1 per cent.

Net interest income was $4,672-million, an increase of $50-million or 1 per cent, due primarily to loan growth across all business lines, and the positive impact of foreign currency translation, largely offset by a lower contribution from asset/liability management activities related to higher financing costs. Net interest margin was down two basis points to 2.16 per cent, driven primarily by a lower contribution from asset/liability management activities related to higher financing costs, and increased levels of high-quality, lower-margin liquid assets. The decrease was partly offset by higher margins in international banking and Canadian banking.

Non-interest income was $3,636-million, an increase of $632-million or 21 per cent. Adjusted non-interest income was $3,269-million, down $96-million or 3 per cent. The decrease was due mainly to lower trading revenues, investment gains and income from associated corporations, partly offset by higher fees and commissions, banking revenues, wealth management revenues, and the positive impact of foreign currency translation.

Q4 2023 versus Q3 2023

Revenues were $8,308-million compared with $8,090-million, an increase of 3 per cent. Adjusted revenues were $7,941-million compared with $8,090-million, a decrease of 2 per cent.

Net interest income increased $92-million or 2 per cent driven by a higher net interest margin, partly offset by lower loan volumes. Net interest margin increased by six basis points, driven by higher margins across all business lines, partly offset by lower contribution from asset/liability management activities.

Non-interest income increased by $126-million or 4 per cent. Adjusted non-interest income was down $241-million or 7 per cent. The decrease was due mainly to lower trading revenues, lower unrealized gains on non-trading derivatives and income from associated corporations, partly offset by higher fees and commissions, higher banking revenues, and the positive impact of foreign currency translation.

Provision for credit losses

Q4 2023 versus Q4 2022

The provision for credit losses was $1,256-million, compared with $529-million, an increase of $727-million. The provision for credit losses ratio increased 37 basis points to 65 basis points.

The provision for credit losses on performing loans was $454-million, compared with $35-million. Retail provisions were $224-million and commercial provisions were $230-million this quarter, mostly in Canadian banking. The increased provision this quarter was driven primarily by the unfavourable macroeconomic outlook and uncertainty around the impacts of higher interest rates, resulting from policy tightening to address inflation, on certain sectors in the North American non-retail portfolios, and the resulting migration in the Canadian retail portfolios. In addition, retail portfolio growth across markets increased the provision for credit losses. Prior-year provisions benefited from improved credit quality expectations mainly in Canadian retail, and improved credit quality in global banking and markets. The provision for credit losses ratio on performing loans increased 21 basis points to 23 basis points.

The provision for credit losses on impaired loans was $802-million, compared with $494-million, an increase of $308-million due primarily to higher formations in Canadian and international banking retail portfolios. The provision for credit losses ratio on impaired loans was 42 basis points, an increase of 16 basis points.

Q4 2023 versus Q3 2023

The provision for credit losses was $1,256-million, compared with $819-million, an increase of $437-million or 53 per cent. The provision for credit losses ratio increased 23 basis points to 65 basis points.

The provision for credit losses on performing loans was $454-million, compared with $81-million, an increase of $373-million. The higher provision this quarter was driven primarily by the unfavourable macroeconomic outlook and uncertainty around the impacts of higher interest rates, resulting from policy tightening to address inflation, on certain sectors in the North American non-retail portfolios, and the resulting migration in the Canadian retail portfolios. Higher provisions were mainly in Canadian banking and global banking and markets. The provision for credit losses ratio on performing loans increased 19 basis points to 23 basis points.

The provision for credit losses on impaired loans was $802-million, compared with $738-million, an increase of $64-million or 9 per cent due primarily to higher retail formations, and higher corporate and commercial provisions. The provision for credit losses ratio on impaired loans was 42 basis points, an increase of four basis points.

Non-interest expenses

Q4 2023 versus Q4 2022

Non-interest expenses were $5,529-million, an increase of 22 per cent. Adjusted non-interest expenses were $4,723-million, an increase of $436-million or 10 per cent, driven by higher personnel costs, technology-related costs, performance-based compensation, business and capital taxes, share-based compensation, advertising, and the unfavourable impact of foreign currency translation. This was partly offset by lower professional fees.

The productivity ratio was 66.6 per cent compared with 59.4 per cent. The adjusted productivity ratio was 59.5 per cent compared with 53.7 per cent.

Q4 2023 versus Q3 2023

Non-interest expenses increased by $967-million or 21 per cent. Adjusted non-interest expenses increased by $181-million or 4 per cent. The increase was due to higher technology-related costs, performance-based compensation, professional fees and advertising. Partly offsetting were lower other employee benefits.

The productivity ratio was 66.6 per cent compared with 56.4 per cent. The adjusted productivity ratio was 59.5 per cent compared with 56.1 per cent.

Provision for income taxes

Q4 2023 versus Q4 2022

The effective tax rate was 9 per cent compared with 18.5 per cent due primarily to proportionally higher tax savings from higher tax-exempt income and higher income from lower-tax-rate jurisdictions, as well as the benefit of divestitures. This was partly offset by the increase in the Canadian statutory tax rate and lower inflationary adjustments. On an adjusted basis, the effective rate was 14.7 per cent compared with 17.6 per cent due primarily to proportionally higher tax savings from higher tax-exempt income and higher income from lower-tax-rate jurisdictions, partly offset by the increase in the Canadian statutory tax rate and lower inflationary adjustments.

Q4 2023 versus Q3 2023

The effective tax rate was 9 per cent compared with 18.4 per cent due primarily to proportionally higher tax savings from higher tax-exempt income and higher income from lower-tax-rate jurisdictions, as well as the benefit of divestitures. This was partly offset by the impairment charge on Bank of Xi'an. On an adjusted basis, the effective rate was 14.7 per cent compared with 18.4 per cent due primarily to proportionally higher tax savings from higher tax-exempt income and higher income from lower-tax-rate jurisdictions.

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 Oct. 31, 2023, was 13 per cent, an increase of approximately 150 basis points from the prior year. The ratio benefited from the adoption of OSFI's (Office of the Superintendent of Financial Institutions) revised Basel III requirements, internal capital generation during the year, including lower risk-weighted assets, net share issuances from the bank's shareholder dividend and share purchase plan, and the sale of CTFS, partly offset by the Canada recovery dividend tax accrual, the restructuring charges, contract terminations costs and other impairments announced during the fourth quarter.

The bank's Tier 1 capital ratio was 14.8 per cent as at Oct. 31, 2023, an increase of approximately 160 basis points from the prior year, due primarily to the above noted impacts to the CET1 ratio.

The bank's total capital ratio was 17.2 per cent as at Oct. 31, 2023, an increase of approximately 190 basis points from 2022, due primarily to the above noted impacts to the Tier 1 capital ratio, and issuances of $1-billion, 33-billion Japanese yen and 12-billion Japanese yen of NVCC subordinated debentures, partly offset by $352-million in net amortization of NVCC subordinated debentures and other regulatory adjustments.

The TLAC ratio was 30.6 per cent as at Oct. 31, 2023, an increase of approximately 320 basis points from the prior year, primarily from higher available TLAC and lower risk-weighted assets.

The leverage ratio was 4.2 per cent, in line with the prior year, due primarily to growth in Tier 1 capital, offset by OSFI's discontinuance of the temporary exclusion of central bank reserves from its leverage exposures measure and growth in the bank's on- and off-balance sheet assets.

The TLAC leverage ratio was 8.6 per cent, a decrease of approximately 20 basis points from 2022, due primarily to OSFI's discontinuance of the temporary exclusion of central bank reserves from its leverage exposures measure and growth in the bank's on- and off-balance sheet assets.

The bank's capital, leverage and TLAC ratios continue to be in excess of OSFI's minimum capital ratio requirements for 2023. For 2024, the bank will continue to prudently manage its capital to address increasing regulatory requirements. The estimated CET1 impact from adoption of the higher-capital output floor and the implementation of the new Fundamental Review of the Trading Book and Credit Valuation Adjustment Framework requirements in the first quarter of 2024 is approximately minus 75 basis points.

Business segment review

Canadian banking

Net income

Q4 2023 versus Q4 2022

Net income attributable to equity holders was $810-million, compared with $1,170-million. Adjusted net income attributable to equity holders was $810-million, a decrease of $364-million or 31 per cent. The decline was due primarily to higher provision for credit losses and non-interest expenses, partly offset by higher revenue.

Q4 2023 versus Q3 2023

Net income attributable to equity holders declined $252-million or 24 per cent. The decline was due primarily to higher provision for credit losses and non-interest expenses, partly offset by higher revenue.

Total revenue

Q4 2023 versus Q4 2022

Revenues were $3,329-million, an increase of $195-million or 6 per cent.

Net interest income of $2,562-million increased $199-million or 8 per cent due primarily to strong deposit growth and margin expansion. The net interest margin increased 21 basis points to 2.47 per cent due primarily to higher loan margins and favourable changes in business mix, partly offset by lower deposit margins.

Non-interest income of $767-million declined $4-million due to lower banking fees, mostly offset by higher insurance revenue.

Q4 2023 versus Q3 2023

Revenues increased $113-million or 4 per cent.

Net interest income increased $94-million or 4 per cent due primarily to solid deposit growth and margin expansion. The net interest margin increased 12 basis points to 2.47 per cent due primarily to higher loan spreads, and favourable changes in business mix.

Non-interest income increased $19-million or 3 per cent. The increase was due primarily to higher income from associated corporations, insurance revenues and foreign exchange fees, partly offset by elevated private equity gains in the prior period.

Provision for credit losses

Q4 2023 versus Q4 2022

The provision for credit losses was $700-million, compared with $163-million, an increase of $537-million. The provision for credit losses ratio increased 48 basis points to 63 basis points.

The provision for credit losses on performing loans was $414-million, compared with $10-million. The provision this period was driven primarily by the impact of the unfavourable macroeconomic outlook and continued uncertainty around the impact of higher interest rates resulting from policy tightening to address inflation, including the related impacts on migration in the retail portfolios and on certain sectors in the non-retail portfolios. The provision for credit losses ratio on performing loans increased 36 basis points to 37 basis points.

Provision for credit losses on impaired loans was $286-million, compared with $153-million, an increase of $133-million or 87 per cent due to higher formations in the retail and commercial portfolios, including auto loans and unsecured lines. The provision for credit losses ratio on impaired loans was 26 basis points, an increase of 12 basis points.

Q4 2023 versus Q3 2023

The provision for credit losses was $700-million, compared with $307-million, an increase of $393-million. The provision for credit losses ratio increased 36 basis points to 63 basis points.

The provision for credit losses on performing loans was $414-million, compared with $49-million. The provision this period was driven primarily by the impact of unfavourable macroeconomic outlook and continued uncertainty around the impact of higher interest rates resulting from policy tightening to address inflation, including the related impacts of migration in the retail portfolios and on certain sectors in the non-retail portfolios. The provision for credit losses ratio on performing loans increased 33 basis points to 37 basis points.

Provision for credit losses on impaired loans was $286-million, compared with $258-million, an increase of $28-million or 11 per cent due primarily to higher retail formations. The provision for credit losses ratio on impaired loans was 26 basis points, an increase of three basis points.

Non-interest expenses

Q4 2023 versus Q4 2022

Non-interest expenses were $1,513-million, an increase of $116-million or 8 per cent, due primarily to higher personnel costs, including inflationary adjustments, advertising, business development and technology costs to support business growth.

Q4 2023 versus Q3 2023

Non-interest expenses increased by $65-million or 4 per cent, due primarily to higher personnel, advertising and business development costs to support business growth.

Provision for income taxes

The effective tax rate was 27.4 per cent for the quarter, compared with 25.7 per cent in the prior year and 27.3 per cent in the prior quarter.

Average assets

Q4 2023 versus Q4 2022

Average assets increased $1-billion to $447-billion. The growth included $9-billion or 11 per cent in business loans and acceptances, $2-billion or 3 per cent in personal loans, and $1-billion or 18 per cent in credit card loans, partly offset by a decline of $11-billion or 4 per cent in residential mortgages.

Q4 2023 versus Q3 2023

Average assets decreased $3-billion or 1 per cent. The decline included $6-billion or 2 per cent in residential mortgages, partly offset by growth of $2-billion or 2 per cent in business loans and acceptances.

Average liabilities

Q4 2023 versus Q4 2022

Average liabilities increased $39-billion or 11 per cent to $386-billion. The growth included $22-billion or 11 per cent in personal deposits and $11-billion or 9 per cent in non-personal deposits, primarily in term products.

Q4 2023 versus Q3 2023

Average liabilities increased $10-billion or 3 per cent. The growth included $5-billion or 4 per cent in non-personal deposits and $4-billion or 1 per cent in personal deposits, primarily in term products.

International banking

Net income

Q4 2023 versus Q4 2022

Net income attributable to equity holders decreased $81-million to $562-million. Adjusted net income attributable to equity holders decreased $80-million to $570-million. The decrease was driven by higher provision for credit losses, lower non-interest income and higher provision for income taxes, partly offset by higher net interest income and the positive impact of foreign currency translation.

Q4 2023 versus Q3 2023

Net income attributable to equity holders decreased by $66-million or 10 per cent. Adjusted net income attributable to equity holders decreased by $65-million or 10 per cent. The decrease was due primarily to lower non-interest income, partly offset by lower provision for income taxes, higher net interest income, the positive impact of foreign currency translation and lower provision for credit losses.

Net income

Q4 2023 versus Q4 2022

Net income attributable to equity holders was $562-million and adjusted net income attributable to equity holders was $570-million, down $143-million or 20 per cent. The result was driven by higher provision for credit losses, lower non-interest income, higher provision for income taxes and non-interest expenses, partly offset by higher net interest income.

Q4 2023 versus Q3 2023

Net income attributable to equity holders decreased by $76-million or 12 per cent. Adjusted net income attributable to equity holders decreased by $75-million or 12 per cent. The decrease was due primarily to lower non-interest income and higher non-interest expenses, partly offset by higher net interest income and lower provision for income taxes.

Total revenue

Q4 2023 versus Q4 2022

Revenues were $2,799-million, an increase of $81-million or 3 per cent.

Net interest income was $2,137-million, an increase of $180-million or 9 per cent, driven by higher interest income from securities and deposit margins, mainly in the Caribbean. Net interest margin increased by 10 basis points to 4.18 per cent, driven by asset repricing outpacing cost of funds, lower inflation and changes in the business mix.

Non-interest income was $662-million a decrease of $99-million or 13 per cent, driven by lower trading revenues and banking fees.

Q4 2023 versus Q3 2023

Revenues decreased by $52-million or 2 per cent.

Net interest income increased by $38-million or 2 per cent, driven by margin expansion. Net interest margin increased by eight basis points to 4.18 per cent, mainly driven by asset repricing outpacing cost of funds, changes in the business mix and higher inflation.

Non-interest income decreased by $90-million or 12 per cent due to lower trading revenues and lower banking fees.

Provision for credit losses

Q4 2023 versus Q4 2022

The provision for credit losses was $512-million compared with $386-million, an increase of $126-million or 33 per cent. The provision for credit losses ratio increased 30 basis points to 119 basis points.

Provision for credit losses on performing loans was $7-million, compared with $37-million. The provision this period was driven by the impact of the continued unfavourable macroeconomic outlook, primarily impacting the commercial portfolio and retail portfolio growth. This was partly offset by retail credit migration to impaired.

Provision for credit losses on impaired loans was $505-million, compared with $349-million, an increase of $156-million or 45 per cent. This increase was due primarily to higher retail formations across the Pacific Alliance markets. The provision for credit losses ratio on impaired loans was 118 basis points, an increase of 37 basis points.

Q4 2023 versus Q3 2023

The provision for credit losses was $512-million, compared with $510-million, an increase of $2-million. The provision for credit losses ratio was 119 basis points, an increase of one basis point.

Provision for credit losses on performing loans was $7-million compared with $26-million. The provision this period was driven by the impact of the continued unfavourable macroeconomic outlook primarily impacting the commercial portfolio and retail portfolio growth. This was partly offset by retail credit migration to impaired.

Provision for credit losses on impaired loans was $505-million compared with $484-million, an increase of $21-million or 4 per cent due partly to higher retail formations, primarily in Mexico and Peru, and higher commercial provisions. The provision for credit losses ratio on impaired loans increased by seven basis points to 118 basis points.

Non-interest expenses

Q4 2023 versus Q4 2022

Non-interest expenses were $1,522-million, an increase of $50-million or 3 per cent. Adjusted non-interest expenses were $1,512-million, an increase of 3 per cent, from inflationary pressures, partly offset by prudent expense management and savings initiatives.

Q4 2023 versus Q3 2023

Non-interest expenses were $1,522-million, an increase of 2 per cent. Adjusted non-interest expenses increased by $35-million or 2 per cent from $1,477-million last quarter, driven mainly by technology expenses to support business growth.

Provision for income taxes

Q4 2023 versus Q4 2022

The effective tax rate was 22.3 per cent, compared with 13.5 per cent. On an adjusted basis the effective tax rate was 22.4 per cent, as compared with 13.6 per cent in the same quarter last year due primarily to lower inflationary adjustments in Chile and Mexico.

Q4 2023 versus Q3 2023

The effective tax rate was 22.3 per cent, compared with 22.9 per cent. On an adjusted basis the effective tax rate was 22.4 per cent, compared with 22.9 per cent, due to lower inflationary adjustments in Mexico.

Average assets

Q4 2023 versus Q4 2022

Average assets were $238-billion, an increase of $6-billion or 3 per cent. Loans grew 2 per cent, primarily in Mexico, Brazil and Chile. The growth included 7 per cent in residential mortgages, partly offset by a decrease of 1 per cent in business loans.

Q4 2023 versus Q3 2023

Average assets were in line with prior quarter. Total loans decreased by 1 per cent, driven by a 2-per-cent decrease in business loans mainly in Chile and Peru. This was partly offset by an increase of 1 per cent in residential mortgages, mainly in Mexico.

Average liabilities

Q4 2023 versus Q4 2022

Average liabilities were $184-billion, an increase of $11-billion or 6 per cent. Total deposits increased by $11-billion or 9 per cent, primarily in Mexico and Brazil. The growth included 12 per cent in non-personal deposits and 3 per cent in personal deposits. Term deposits increased by $12-billion or 21 per cent while non-term deposits decreased by 3 per cent.

Q4 2023 versus Q3 2023

Average liabilities were $184-billion, an increase of $2-billion. Total deposits increased by $3-billion or 3 per cent, primarily in Mexico and Brazil, mainly driven by non-personal deposits which increased by 4 per cent.

Global wealth management

Net income

Q4 2023 versus Q4 2022

Net income attributable to equity holders was $327-million, compared with $361-million. Adjusted net income attributable to equity holders was $333-million, down $35-million or 10 per cent. The decline was due primarily to higher non-interest expenses, partly offset by strong revenue growth in the international businesses and higher brokerage revenues in Canada.

Q4 2023 versus Q3 2023

Net income attributable to equity holders decreased $39-million or 11 per cent. Adjusted net income attributable to equity holders decreased $40-million or 11 per cent, due primarily to higher non-interest expenses and lower mutual fund fees.

Total revenue

Q4 2023 versus Q4 2022

Revenues were $1,332-million, an increase of $43-million or 3 per cent due primarily to higher revenues in the international businesses and higher brokerage revenues in Canada.

Q4 2023 versus Q3 2023

Revenues were down $4-million due primarily to lower mutual fund fees, partly offset by higher net interest income.

Provision for credit losses

Q4 2023 versus Q4 2022

The provision for credit losses was $5-million, an increase of $4-million. The provision for credit losses ratio increased seven basis points to nine basis points, mostly on impaired loans.

Provision for credit losses on performing loans increased by $1-million, while the provision for credit losses on impaired loans increased by $3-million.

Q4 2023 versus Q3 2023

The provision for credit losses was $5-million, an increase of $3-million. The provision for credit losses ratio increased six basis points to nine basis points, mostly on impaired loans.

Provision for credit losses on performing loans increased by $2-million, while provisions for credit losses on impaired loans increased by $1-million.

Non-interest expenses

Q4 2023 versus Q4 2022

Non-interest expenses of $887-million increased by $89-million or 11 per cent, driven largely by higher volume-related expenses and personnel and technology costs to support business growth.

Q4 2023 versus Q3 2023

Non-interest expenses increased by $44-million or 5 per cent, driven largely by higher technology, advertising and business development expenses to support business growth.

Provision for income taxes

The effective tax rate was 25.4 per cent compared with 25.8 per cent in the prior year and 25 per cent in the prior quarter.

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

Q4 2023 versus Q4 2022

Assets under management of $317-billion increased $6-billion or 2 per cent driven by market appreciation partly offset by net redemptions. Assets under administration of $610-billion increased $30-billion or 5 per cent due primarily to higher net sales and market appreciation.

Q4 2023 versus Q3 2023

Assets under management decreased $14-billion or 4 per cent due primarily to market depreciation. Assets under administration decreased $21-billion or 3 per cent due primarily to market depreciation, partly offset by higher net sales.

Global banking and markets

Net income

Q4 2023 versus Q4 2022

Net income attributable to equity holders was $414-million, a decrease of $70-million or 14 per cent. This was due mainly to higher non-interest expenses, lower net interest income and higher provision for credit losses, partly offset by higher non-interest income.

Q4 2023 versus Q3 2023

Net income attributable to equity holders decreased by $20-million or 5 per cent. This was due to lower non-interest income, higher provision for credit losses and non-interest expenses, partly offset by higher net interest income and the positive impact of foreign currency translation.

Total revenue

Q4 2023 versus Q4 2022

Revenues were $1,354-million, in line with the prior year as higher non-interest income was offset by lower net interest income.

Net interest income of $397-million decreased $95-million or 19 per cent. This was due mainly to higher trading-related financing costs, and lower corporate lending margins, partly offset by higher deposit margins.

Non-interest income was $957-million, an increase of $95-million or 11 per cent, due mainly to higher fee and commission revenue, partially offset by lower trading-related revenue.

Q4 2023 versus Q3 2023

Revenues increased by $11-million or 1 per cent.

Net interest income of $397-million increased $60-million or 18 per cent. This was due mainly to higher deposit margins and higher corporate lending margins.

Non-interest income decreased by $49-million or 5 per cent, due mainly to lower trading-related revenues, partly offset by higher fee and commission revenue.

Provision for credit losses

Q4 2023 versus Q4 2022

The provision for credit losses was $39-million compared with $11-million. The provision for credit losses ratio was 11 basis points, an increase of eight basis points.

Provision for credit losses on performing loans was $30-million, compared with a net reversal of $11-million, due to the continued unfavourable macroeconomic outlook, including higher interest rates, and on certain sectors in the North American non-retail portfolios.

Provision for credit losses on impaired loans was $9-million, related primarily to one account in the engineering and contracting sector, compared with $22-million in the prior period. The provision for credit losses ratio on impaired loans was three basis points, a decrease of three basis points.

Q4 2023 versus Q3 2023

The provision for credit losses was $39-million, compared with a net reversal of $6-million. The provision for credit losses ratio was 11 basis points, an increase of 13 basis points.

Provision for credit losses on performing loans was $30-million compared with $4-million, an increase of $26-million due to the continued unfavourable macroeconomic outlook, including higher interest rates, and on certain sectors in the North American non-retail portfolios.

Provision for credit losses on impaired loans was $9-million, related primarily to one account in the engineering and contracting sector, compared with a net reversal of $10-million in the prior quarter. The provision for credit losses ratio on impaired loans was three basis points, an increase of six basis points.

Non-interest expenses

Q4 2023 versus Q4 2022

Non-interest expenses of $779-million increased by $83-million or 12 per cent. This was due mainly to higher personnel and technology costs to support business growth, and the negative impact of foreign currency translation.

Q4 2023 versus Q3 2023

Non-interest expenses increased $21-million or 3 per cent, due mainly to higher technology costs to support business growth and the negative impact of foreign currency translation.

Provision for income taxes

Q4 2023 versus Q4 2022

The effective tax rate for the quarter decreased to 22.8 per cent from 25.2 per cent in the prior year, due mainly to the change in earnings mix across jurisdictions, partly offset by the increase in the Canadian statutory tax rate.

Q4 2023 versus Q3 2023

The effective tax rate for the quarter was 22.8 per cent compared with 26.5 per cent, due mainly to the change in earnings mix across jurisdictions.

Average assets

Q4 2023 versus Q4 2022

Average assets were $500-billion, an increase of $39-billion or 8 per cent, due mainly to higher securities purchased under resale agreements, trading assets and the impact of foreign currency translation.

Q4 2023 versus Q3 2023

Average assets increased $7-billion or 1 per cent, due mainly to higher securities purchased under resale agreements and the impact of foreign currency translation.

Average liabilities

Q4 2023 versus Q4 2022

Average liabilities were $471-billion, an increase of $41-billion or 10 per cent, due mainly to higher increases in securities sold under repurchase agreements and the impact of foreign currency translation.

Q4 2023 versus Q3 2023

Average liabilities increased $21-billion or 5 per cent, due mainly to higher securities sold under repurchase agreements, higher deposits and the impact of foreign currency translation.

The other segment includes group treasury, smaller operating segments and corporate items which are not allocated to a business line. Group treasury is primarily responsible for balance sheet, liquidity and interest rate risk management, which includes the bank's wholesale financing activities.

Net interest income, non-interest 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.

Net income from 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 2023 versus Q4 2022

Net income attributable to equity holders was a net loss of $759-million, compared with a net loss of $603-million last year. Adjusted net income attributable to equity holders was a net loss of $487-million compared with a net loss of $100-million in the prior year. The higher loss of $387-million was due mainly to lower revenues primarily related to higher financing costs and lower income from hedges, partly offset by higher income from liquid assets, and lower investment gains. The decline in revenue was partly offset by lower provision for income taxes and lower non-interest expenses.

Q4 2023 versus Q3 2023

Net income attributable to equity holders decreased $460-million from the prior quarter. On an adjusted basis, net income attributable to equity holders decreased $188-million due mainly to higher financing costs, lower income from hedges and lower income from associated corporations. This was partly offset by higher income from liquid assets and lower provision for income taxes.

1. The bank's Q4 2023 and fiscal 2023 reported results were adjusted for the following items. These amounts were recorded in the other operating segment.

A) Divestitures and wind-down of operations

The bank sold its 20-per-cent equity interest in Canadian Tire Financial Services (CTFS) to Canadian Tire Corp. The sale resulted in a net gain of $367-million ($319-million after-tax).

B) Restructuring charge and severance provisions

The bank recorded a restructuring charge and severance provisions of $354-million ($258-million after-tax) related to work force reductions and changes as a result of the bank's end-to-end digitization, automation, changes in customers' day-to-day banking preferences, as well as the continuing efforts to streamline operational processes and optimize distribution channels.

C) Consolidation of real estate and contract termination costs

The bank recorded costs of $87-million ($63-million after-tax), related to the consolidation and exit of certain real estate premises, as well as service contract termination costs, as part of the bank's optimization strategy.

D) Impairment of non-financial assets

The bank recorded impairment charges of $185-million ($159-million after-tax) related to its investment in associate Bank of Xi'an in China whose market value has remained below the bank's carrying value for a prolonged period. Impairment of intangible assets, including software, of $161-million ($114-million after-tax) was also recognized.

2. The Q1 2023 and fiscal 2023 reported results were adjusted for the following items. These amounts were recorded in the other operating segment.

A) Canada recovery dividend

The bank recognized an additional income tax expense of $579-million reflecting the present value of the amount payable for the Canada recovery dividend (CRD) in Q1 2023. The CRD is a Canadian federal tax measure which requires the bank to pay a one-time tax of 15 per cent on taxable income in excess of $1-billion, based on the average taxable income for the 2020 and 2021 taxation years. The CRD is payable in equal amounts over five years; however, the present value of these payments was recognized as a liability in the period enacted.

Additional information relating to the bank, including the bank's annual information form, can be located on the SEDAR+ website and on the EDGAR section of the Securities and Exchange Commission's website.

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.

Shareholder dividend and share purchase plan

Scotiabank's shareholder dividend 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 2024

Record and payment dates for common and preferred shares, subject to approval by the board of directors:

  
RECORD DATE       PAYMENT DATE
    
Jan. 3, 2024     Jan. 29, 2024
April 2, 2024   April 26, 2024  
July 3, 2024     July 29, 2024   
Oct. 2, 2024     Oct. 29, 2024


  

Annual meeting date for fiscal 2023

Shareholders are invited to attend the 192nd annual meeting of holders of common shares, to be held on April 9, 2024, at Scotiabank Centre, Scotia Plaza, 40 King St. West, second floor, Toronto, Ont., beginning at 9 a.m. Eastern 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 Feb. 13, 2024. Please visit the bank's website 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 2023 audited annual consolidated financial statements and accompanying management's discussion and analysis on request and without charge by contacting the investor relations department at 416-775-0798 or investor.relations@scotiabank.com.

Conference call and Web broadcast

The quarterly results conference call will take place on Nov. 28, 2023, at 8 a.m. ET 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 toll-free at 1-800-952-5114 using ID 9758737 followed by the pound call (please call shortly before 8 a.m. ET). In addition, an audio webcast, with accompanying slide presentation, may be accessed via the investor relations page on Scotiabank's website.

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 Nov. 28, 2023, to Jan. 4, 2024, by calling 905-694-9451 or 1-800-408-3053 (North America toll-free) and entering the access code 1127377 followed by the pound key. The archived audio webcast will be available on the bank's website for three months.

We seek Safe Harbor.