The Bank of Nova Scotia (BNS) Earnings Call Transcript & Summary

Before I begin, I'd just like to draw your attention to our caution regarding forward-looking statements over the course of the program today. Before I introduce our first guest, I'd like to acknowledge the presence of our Scotiabank partners in Chile, Mr. Salvador and Gonzalo Said. So to start today's program, Chile, as you heard yesterday, is one of our 6 core markets and essential to our strategy in the Pacific Alliance and to our role as a leading bank in the Americas. We're very pleased and honored to have as our guest this morning, Mr. Ignacio Briones, Minister of Finance for Chile. Prior to being named Minister of Finance in October 2019, Mr. Briones had a very distinguished career in academia and in government. He started his career as professor in research at Adolfo Ibáñez University. He was Chilean ambassador to the organization of economic cooperation and development, and most recently, he was the dean of the school of government at Adolfo Ibáñez University. We are very grateful for his presence here today at this important time for Chile, and we look forward to his comments. Would you please join me in welcoming Mr. Ignacio Briones.

Good morning. Thank you for -- thank you to Scotiabank for this invitation. It provides me with opportunity to share with us some views about Chile's current situation as well as our -- Chile's prospects in terms of social reforms and economic perspective. So I think it's valuable to interact with you and to share these views. I think I have, like, 15 minutes. I had a long presentation. I will try to skip some parts in order to respect that time and to have the occasion to have Q&A with you, which is always more important than the presentation. So let me try to do my best to respect the time. Needless to say, we have been facing different times, dealing with difficulties during the last 3 months. And these difficulties can be seen in some pictures. On the one hand, you have massive social peaceful protest, demanding or asking for changes in social areas, coupled with violence, violence, arson, looting and violence in the streets. And this is something that has shocked all of us of the Chileans, and needless to say, the entrepreneurs. It's fair to say, nevertheless, and this is something that -- you know that this is not something idiosyncratic to Chile. This is something that is happening more or less all around the world with different motivations. It can be related to climate change. It can be on issues of gender equality, social and political demands in blue as in Chile or some combination of all of them, okay? But a point -- an important point here is that this seems to be something that is not idiosyncratic to our country. Nevertheless, it's new for us and very striking in several regards. Let me stop a little bit on the violence issue because this is the striking point for, we, Chileans. And here, we have to separate the first impression, and our mind is set to keep the first impression for a long time even if it doesn't fit with data. And the point I would like to highlight here is that the violence, the data, the objective data we have on violence has diminished significantly. If you look at the chart on your left, this is a figure showing the number of significant violent events since October until today. And we reached a peak of about 350 violent, very violent events during the first years. It comes again during November, but my main point here is that, starting in December, the situation has almost normalized, almost normalized with only 1, 2 violent events per day in Chile. We would like to be close to 0 or in 0, but the figure is very clear about the diminution in the violence in our country. And if you look at the chart in your right, this is the percentage of metro station that were closed because of the events of October 18. 77% of all our metro stations in Santiago were affected and closed, but actually, about more than 80% of the metro stations are working normally. So the main point here is to give you a flavor of return to normality in several areas. It's true that we remain in mind the violence, the destruction of the first month, but the situation has been resuming after that. In the same line, I would like to highlight something that we Chileans do not see with all the strength all the time, which is the capacity of our democratic institutions to give answer, to give response to what has been happening in our country. It's true that political institutions have lost a lot of their credibility, the legitimacy. All the bars show this reality. But my main point here is that, nevertheless, they have been able to deliver, and this is something we have to highlight. First of all, and you know, in November, we have this agreement for social peace and a new constitution. This was critical. This was [clue]. Our political forces were able to reach an agreement on a very important matter for our future. And for the moment, we were living in Chile. These appear normal. But I mean, it's not normal to have the very left and the very right in the same table reaching an agreement, and this says something about our capacity to generate consensus in the important issues. In the same time, and this is something in which I was involved, we have been able to reach agreement with the Congress in several other areas, starting with the budget process. It was not easy, but we reached an agreement, a first part of the pension reform, going to the low-income Chileans, and this was a significant advance; and a tax reform, which is almost closed. I was in Congress yesterday. This was why I can't come here yesterday. It was completely approved, massive approval in the deputies chamber, and we are just waiting for the next week for approving a very administrative issue, and this will be a law, a Chilean law. So we are advancing. We are moving forward. And this is my main clue -- message I would like to transmit this morning. On the same time, we cannot forget that even the democratic institutions are under pressure and are losing credibility. Nevertheless, Chile is among the 20 economies around the world and the 20 countries around the world that are considered a full democracy according to the Economist Intelligence Unit, the index -- the democracy index of the economy -- Economist Intelligence Unit. And this is something we tend to forget. We used to speak here that we have a weak democracy and so forth and so on, but let's go again to the data and not to the impressions. We have a strong democracy, and this is something that is important for addressing the challenges, the several challenges and important challenges we have ahead. Democracy and the quality of democratic institutions are critical at this regard. So let me move forward here. Of course, the current situation and the shock provided by the current situation provokes in many people the tendency to forget the solid roots and the very impressive advance that this country has achieved in the last decades. You know the story. And probably, I will repeat something that you know, so let me move very fast, but we have led in the region after the return to democracy in terms of economic growth, per capita economic growth. We have been the leader in terms of reducing income inequality. This is something we forget all the time in our current discussion in Chile. It's impressive. We forget the data. The data is there. We have been leading poverty reduction. 30 years ago, almost half of the Chileans live in poverty. Today, it's less than 10%. This is amazing. And as a matter of fact, if we mix these 2 variables, poverty and inequality, around the world, Chile is a salient example of doing things good. We have been able -- we are in the -- among the countries that have reduced the most poverty and inequality. Is this enough? Probably not, and part of the social unrest is related with this. But we cannot forget the progress we have achieved, and this is something we have to remind and to remind and to remind because the tendency in many areas is to forget and to think that we are starting from scratch. And this is not true. So we have important challenges ahead. This is obvious in social terms, in economic terms, in political terms. And let me present some of these challenges very quickly. In equality, despite the many advances, it's still a challenge, an important challenge we have to address. It's not only equality of income, but equality of opportunities in a broader sense. We have a challenge in terms of economic growth. The figure in your right is clear. In terms of per capital growth, we have been losing momentum. We have been losing economic growth. And this is critical for addressing the new necessities that this country is asking in the future, so resuming economic growth and make the significant structural reforms to face a new step in our successful history is quite important. And among the social priorities, well, you know, part of the confusion we are facing today is that everything seems to be a priority, at least according to our politicians or many politicians from lowering the tolls in the highways to education or pensions. But if we go to the polls, I mean, the main priorities are quite clear. Pensions is, by far, the first one. Then you have health. And then you have education. These are the priorities. And we are making efforts to respond to these priorities. And I will show you something in a little -- in some minutes. I will skip this. But just to provide you with information, that confidence, trust, legitimacy in our major institutions have been declining. Once again, this is not an idiosyncratic phenomena. This is something that occurs everywhere in the OECD. In the rich and industrialized world, it's the same. But it has been increased since the crisis since October. Of course, this is something that we have said quite clear. And it goes from radio, broadcasting, newspapers to Catholic church and, of course, government and Congress. This is an across-the-board phenomena, shocking all our institutions. So in this context, which is the economic -- which are the economic prospects for the Chilean economy. As you know, the fourth quarter will be very, very, very bad in terms of economic growth. We know that in October, economic activity has dropped by 3.4%. The same figure has been reached in November, and we are expecting a drop of about 1.1% of GDP in December. So basically, we will close the year with the fourth quarter, which is already 2.6% of GDP decline. This is huge. This is massive. However, our prospects for 2020 are better than that. And I will go in a few seconds. In tandem with this, expectation has dropped. The confidence, investors and businessmen confidence and consumer confidence has dropped significantly, a radical drop after October '18, and this is something we have to revert. And our basic scenario is that this is something that is reversing, basically because normality, the end of the violence is something that affects directly these expectations in one side or in the other. So which are our numbers? Which are our expectations for 2020? Basically, we are seeing -- and we are in the same line as the Central Bank and the market, economic growth around 1.3% of GDP. Economic growth, 1.3%. Central Bank has a central figure of about 1%. Market survey is 1.2%. Overall, we are there. 1%, 1.3%, okay? This is bad. Our former scenario was 3.3%. So this drop of 2 points, this is important. Very important. But my main point here is that we are not seeing a recession, okay? This is a mediocre economic growth. But it's not a recession, okay? And this is something important to keep in mind. For this, as a government, we have reacted. As you probably know, we launched in early December pro employment and economic recovery plan. This is basically a countercyclical fiscal plan based on 2 elements. First of all, is a 1% GDP fiscal expansion. This is about $3 billion in 2020. This is a -- these are transitory measures, onetime measures. And in tandem with that, we have provided a series of measures for providing liquidity to small- and medium-sized companies through different instruments, the capitalization of Banco Estado, warranties programs, innovation programs, and so on, and so on. I will skip the details. My point here is that we are acting soon. And based on this plan, we are expecting to counteract the negative effects in economic activity as well as the negative effects in employment. As a result of this plan, in 2020, public expenditure will grow by more than 9%, and this is one of the high -- this is the highest public expenditure increase since the subprime crisis. So just to give you a flavor of the effort, the transitory effort we are doing. On the monetary side, inflation is completely controlled, and prices are stabilized, and we are facing an expansionary monetary policy that will remain expansionary in the forthcoming years, okay? So helping to provide a momentum for the recovery. On the structural reforms, let me say some words about our priorities. Our first priority today is pension. I already mentioned that in November, we advanced in providing fiscal support for the so-called pilar solidario. These are the pensions, state-funded pensions for the most vulnerable sectors of our population. And actually, we have in Congress a bill allowing to increase and to improve the pensions for -- of the people that regularly save for their retirement, okay? So this is our first priority. Once again, let me skip the detail. But basically, what the government is proposing is to increase gradually the pension contribution the workers do in 6 point. Actually, it's 10% of their salary. We are planning to increase 6 point in a gradual fashion in 12 years. And half of this 6 point will go to individual accounts, as always, but will be managed by a public entity. And the other half will support a collective savings scheme. I underline saving scheme because this is saving. We are adding to the economy, which will allow to increase the pensions of people that is already retired by about 25%, okay? So this is an important, very important reform. Once again, I will skip the detail. But I would like to highlight that this fund, this collective saving fund is designed, and we have been involved on that, to be, by definition, by construction, sustainable in time, okay? In terms of the fiscal effort, this is important but reasonable. This is a key message I would like to provide this morning. Two, since November, and if you look at 2020 or 2021, we are increasing the public fiscal spending intentions in general by about 0.5 point of GDP, okay? This is about $1.5 billion. So this is a lot of money, yes, but it's affordable. And even if you go until 2050 in steady state, the public resources committed to the pension reform in the pension -- pilar solidario and the extra spend as we state employee -- as employer has to absorb. All in all, we are talking about 0.9% of GDP. These are big numbers, again, but they are affordable, okay? So they are responsible from the fiscal perspective, and this is the point I would like to stress here. As I mentioned, we are almost approved the tax reform, okay? This will provide with new rules, with certainty in many directions. This is a tax reform that provide incentives to investment, basically in [ Santander ] depreciation in the forthcoming 2 years and accelerate depreciation afterwards, so giving a clear incentive to invest in the forthcoming years and several other changes that I will skip and more than glad to answer in the Q&A. All in all, because of the tax reform, because of the extra spending, basically on pensions, but we are doing so many other things, it's clear and it's quite honest to recognize that we will have a departure from the fiscal figures that formerly we present in September. This is true. This is clear. In concrete terms, for 2020, we will be facing a transitory fiscal deficit of 4.5 point of GDP and a structural fiscal deficit. As you know, the structural rule is our fiscal anchor in Chile. We'll take into account the structural revenues and compare them with the current spending, okay? And this is the most important figure for us, to be very honest. But in the structural attempts, we are facing fiscal deficits of 3% of GDP. It is quite higher. It's about 1.5 points higher than the goal or the commitment we already have, okay? But the point I would like to highlight here, if you look at the red line, is that we are departing from the level, but we are committed to convert, okay? So we are facing a transitory shock, the social unrest, the extra spending, the economic -- slower economic growth, which impact in our fiscal revenues. All of these results in a higher fiscal deficit. But the point here is our commitment to convert, okay? We will convert. And our plan is that in 2022, by the end of the government, we will reach a fiscal -- a structural fiscal deficit of about 2% of GDP. We are not glad of that. Our commitment was to go to 1% of GDP. But I would like to insist that more important than the level is the trend and our commitment to that trend. And as a result of all these deficits, of course, you have to finance this deficit and indebtedness will increase, okay? And we are aware that this is something that worries a lot of people. We are worried about this, to be very clear and very honest. Because since several years, we are experiencing a trend of increasing growth in debts. And the reason is quite simple. Since several years, we are facing fiscal deficits, okay, that have to be financed. Nevertheless, our estimate is that by 2024, we will be reaching a gross public debt of about 38 points of GDP, okay? And more important than that is that debt should stabilize at this level, basically because we are converging, as I showed you in the previous slide, we are converging in terms of the fiscal structural deficit. However, and this is something you know better than I, 40% of gross indebtedness is still a very low level compared to our peers. So the main question here is more than the level is the sustainability of indebtedness. And our point is that if we stick to fiscal rule, this indebtedness trends should stabilize. Last but not least, we are undertaking several structural reforms, okay? Because here, we have to face with the contingency, with the current situation, but we have to think in the long term, and the long terms require several structural reforms in social areas but also in economic areas, okay? And this is something we cannot neglect. One of the area we are quite committed as the Ministry of Finance is to improve the fiscal spending, okay? The modernization of the state is one of our priorities. I am aware that this is something that every government put as one of its priorities. Nevertheless, this social and political moment offers a particular opportunity to advance these regards. And we, at the Ministry of Finance, are committed to advance. And one of the area in which we are committed is to improve the quality of our spending. And at this regard, we have created a Ministerial Advisory Committee for transparency, quality and impact of the public spending. This committee is composed by people from former government official, former Ministers of Finance, people from ONGs and so on. And in tandem with that, we have signed, and this is important, an agreement with the Senate and the deputies chamber in order to work together and to improve our budgetary process because the budget is to be approved in Congress. So these are critical stakeholders for us. And once again, this idea of agreement, reaching agreements in important reform areas is something that we cannot neglect. In tandem with that, we have strengthened our teams both at the budgetary office and the Ministry of Finance because, believe me, we are committed to this. We have a lot of room for improve here, and improve means that more efficient use of the economic and financial resources we need to address the different social policies and challenges. And last but not least, we have announced, and this is something we'll start to work in March, a Ministerial Advisory Committee to have a reflection, to have proposals allowing to discuss a medium-term road map for the fiscal revenues. Let me say something here, which is the idea. As you know, we are facing a lot of pressures for increasing taxation, okay? And our point here has been very clear. We have a tax reform, which is approved in Congress. This is about 1% point of GDP. We know that compared to the OECD, we have a gap of about 5 points of GDP in terms of tax revenues, okay? But we also know that we have a gap of about $17,000 in GDP per share. So basically, our point here is, yes, taxation or taxes should increase in the future, yes. But it has to go along with economic growth, okay? So we are putting a first stone in this road map to 1% point of GDP, and we are asking to people from the political parties, on the one hand, technicians from the universities on the other, and experts from the Central Bank to have a reflections and to provide us with a road map to address this question in the medium and long term of this country. And I think this is quite necessary to provide the sign offs that we will not be financing extra social expenditures through debt because we stick to our fiscal rule. We need permanent revenues to finance permanent spending. And this is kind of the answer, a serious answer that we should provide. We should do -- we should increase our revenues in tandem with economic growth, and this should be done in a -- decide but gradual way and not in a one single shot decision. On the political area, I would say that the main political change is the new constitution. As you know, we will have a referendum in April to decide whether we keep at the current constitution or we move towards writing a new constitution. And we will decide as well the mechanism, if the approval wins, the mechanism through which we should write this constitution, if it should be done through a mixture of parliamentaries and new elected people or a fully new elected assembly for this purpose. I would like to highlight one important point here because I am aware this is something that opens uncertainties and risk and a lot of questions. Two main points at this regard if the decision is to move through -- towards a new constitution. First, one of the most salient aspects of the agreement reached by the political parties is the rule of 2/3. The constitutional convention, we work with a super majority of 2/3 to approve the drafting of the new constitution. And this is something quite obvious, you would say, because a constitution, by definition, is something, is a text that should agree on the general principles, and the general principles are not simply decided by simple majority but should require a super majority support. And this quorum of 2/3 is able to ensure that. And more important, it's able to ensure that moderation should prevail, okay? Basically, 1/3 of the agents will have a [ better ] power for the changes. So this force to reach agreement, to reach moderate positions in the new constitution. And the second argument here is to recall our traditional -- our historical traditional history, constitutional history. Chile has had several constitutions in -- since its beginning as a Republic. And this traditional -- this constitutional tradition is important to write the new constitution. And if you look our constitutional history, you will see that -- what we call the constitutional basics, the division of power, civil liberties and rights has been at the center of all our constitutions, and all our constitution have been moderated. And I do not see new elements to think that this time will be different. Okay. So let's move forward to the concluding remarks. If we recall, Alice in Wonderland, I think the message is clear: We have to move. We have to move forward, and we have to move different if we want to advance, okay? I am optimistic about this moment because it poses a lot of challenges, significant challenges, okay? But as I mentioned at the beginning, I am confident in our institution, our democratic institutions. I think this is one of our strengths, okay? And based on this constitution, I am confident that we will be able to address the main challenges the situation is posing to us in social terms but also in economic terms, okay? I am really confident that we are -- we will be able to face a new period of 3 decades of growth and of improvement as a country. I have no doubt at this regard. And so just to highlight some key messages. Needless to say, we are facing a challenge, a new challenge, a challenge that surprised all of us, all of us, okay? But one of the message I have to point out in this presentation is despite the fact, particularly, we, in Chile, look at our institutions as weak, as we were -- as they are not delivering, if we go to the data and to the facts, okay, we see that we are making delivery. The democratic institutions are working, and they are providing with delivery and reform, social reforms. And more important, these social reforms, because you would say, well, if you make a populist reform, this is an easy cake, okay? But the main point here is that reforms that we are able to approve in the Congress, they are quite reasonable. I show you the numbers on the pension reforms. They are quite reasonable. They are not populist reform that will be not sustainable in time. They are reasonable, as has been our tradition in the past years, okay? So the challenges ahead, consensus, agreements are the keywords. We have to reach consensus and agreement on structural reforms in the social areas but also in terms of the necessary economic reform because without economic development, we have no social agenda that can be sustainable in a responsible -- and finance in a responsible manner. So I think this is the main element I would like to discuss with you. Let me insist that we are moving ahead as government as -- doing our best. We are acting fast. And even if I cannot speak on behalf of the Congress, I have to recognize that the Congress is moving ahead as well. We have several challenges, but let me say that I am optimistic about the future of this country. Thank you very much.

So we have time for maybe 1 or 2 questions. If you have a question of the minister, just please raise your hand, and we'll deliver a microphone to you to ask your question. Microphone there for the question and right there.

Minister, you showed a significant decline, historically, in income inequality, an improvement in poverty data historically, yet we still saw the social unrest. So the question for you really is what are the key historical policy mistakes that led us to this point despite the significant improvement in poverty data?

Well said. This is $1 million question, and I am afraid I don't have a very precise answer. Because I have always thought that society is probably the most complex system we can imagine, and the complex system has complex and multiple explanations when they depart from a certain or given equilibrium. Nevertheless, I think the main point here is not inequality in crude terms, okay? Because the numbers are the numbers. We can have our own opinions but not our own numbers, okay? And we have been seeing a decline in income inequality. My conviction is that the reason can lie in a more sophisticated version of what we call inequality. And it's not simply income inequality because at this regard, we have been advancing, but has to do with inequalities of opportunities at the end of the day, because you have a gap between the expectations you have formed and what you are receiving, okay? And it's true, for instance, that in the -- if you think at the university, in the tertiary educational system, university, we have been quite successful in expanding the enrollment. We used to have 20% of attainment 20 years ago. And actually, we are over 60%. And all these people, all these 40% has that dream that going to the university will change their life in terms of income, in terms of opportunity, and it has been true for many of them. But for many of them, it has been not true as well. And you make an effort, and you have the expectations, and when you go to the job market, and you realize that you don't have the abilities and you don't have the opportunities in terms of the job market you were supposed to have, okay? So this creates a lot of disaffection. And I think it's part of the problem we are dealing with. And the other thing, I think, has to do with the quality of many of the public services, particularly health, and pension is an additional issue as well, okay? It's true, and we have to make a mea culpa, at this regard, that we know from many years now that the health system is very good in the large numbers. We have public health indicators that are world-class, okay? But in the day-to-day experience, when you have a surgery, when you have to go a dental or doctor and so on, we are not delivering. We are not treating people with the respect they deserve. We are making them wait for months for a medical intervention. And so this is something we're well aware, too. And in the pension, well, we know that we have a structural problem, okay? And the structural problem has not to do with the way the IFEBP do their job. Their job is basically to invest, and the numbers are there. They have done a good job. But we have a problem of coverage, basically. We have 3 out of 10 people that basically save all the time during their whole working life and 7 out of 10 that doesn't save, that do not save, okay? So these guys will have lower pensions. And we knew that since several years, okay? And we did nothing at this regard. And at a given moment, this exploded. And this is why the first priority, by far, as I show, are pensions. Because pensions, at the end of the day, is an income of the adult person but also an income of all the family because when the husband doesn't have a pension, it's their sons or the nephews or the family in general that have to support them. So at the end of the day, this is an income issue that we have to address, and this is the key priority, by far.

So we have time for maybe -- for one more question, and then we'll move on.

I just wanted to see if you could -- if you're in the position to comment on the role of foreign capital as you think about the future of Chile. It's played an important role until now. It doesn't seem like the protests have been directed at an outside influence. But it -- could they turn a bit more negative towards influence of capitalism from outside the country?

It's a very good question. Foreign direct investment is clue for an open economy as we are, okay? It's clue. It has been clue, and it will be clue in the forthcoming years. Foreign capital, my impression is that has an additional advantage, particularly in these times, is that it tends to be more long-term oriented than we are, okay? And this is why even we have been experiencing bad times in this last month, we have received several very good news from foreign direct investors that they are investing and they are committed investment for the forthcoming years. So they are looking very forward where they're thinking in long-term terms, and this is, once again, a signal and a proof that FDI is critical for us. And we will do everything to encourage FDI because we believe it's critical for us. Coming to the second part of your question, it's hard to give a definite answer. But my impression is that, no, that we shouldn't face unrest to our FDI. On the one hand, because FDI typically is invested in the nontradable sector, providing a lot of jobs, and people value their jobs, and they are good jobs. Foreman jobs, well paid jobs. Think in the mining industry, think in the public utility companies, these are the kind of jobs that people want to have. And if we are -- if they care about income and our claims and protest are because of low income, well, this is the counter example of the kind of income that everybody want to have. Secondly, foreign companies, in general, have better practices in terms of the kind of things that people, the workers are asking in terms of the treatment they have with them, the involvement in the company, the standards in general. So my impression is that, no. I don't see a risk at this regard. And on the contrary, and I insist, FDI is critical for us. And we are working as government in a plan, in several initiatives and proposal for -- redouble our efforts for attracting FDI to Chile. If you want a last question, I'm okay, yes?

Okay. I think we'll -- if it's all right with you, we'll stop there to move the program forward. Thank you very much, Mr. Minister, for your presence today. We greatly appreciate your comments and your participation in our Investor Day. Thank you. Okay. We will now play a short video, and then following that video, we'll have our presentation from Nacho Deschamps on International Banking. [Presentation]

Good morning. Welcome back, and I will now share an overview of our International Banking business, on our financial performance as well as an update on our strategy and outlook for the future. I want to start by highlighting the 3 key messages of my presentation today. First, we sharpened our foot -- geographic footprint, and this work is substantially complete. It will enhance the quality of our earnings. Second, we have performed above our 3 medium-term targets consistently since 2016. And third, we continue to see significant opportunities going forward despite recent challenges given the favorable demographics and strong growth potential of the Pacific Alliance countries, combined with disciplined execution of our strategy. Let me begin with a snapshot of our business. We have a strong and diverse franchise, serving more than 16 million customers across our footprint. We have close to 60,000 employees, 70% of them in the Pacific Alliance countries and a network of over 1,900 branches. Our business generated around $3.2 billion in annual net income after tax in fiscal year 2019, of a balance sheet of $153 billion and almost $120 billion in loans and almost $120 billion in deposits. Our geographical footprint is focused on the countries of Mexico, Chile, Colombia and Peru, supported by a simplified footprint in the Caribbean and Central America. We have a well-diversified and high-quality portfolio with different levels of maturity in our core markets. In this slide, I would like to show how Mexico and Peru have double-digit return on equity. Peru has the most mature, efficient and profit -- is the most mature and profitable operation for us while Mexico's high return is driven by successful organic growth and the large size of the Mexican market. Chile continues to increase its profitability, especially after the BBVA acquisition. On the other hand, Colombia's ROE has reduced significantly in line with the rest of the Colombian financial system due to the country's economic slowdown in the past few years. Nevertheless, in 2019, as Jaime will explain, earnings grew above 50% in Colombia, and we see great opportunities in coming years. Let us take a deeper look into our presence in the Pacific Alliance region. I think we've heard since yesterday, today, the minister was referring to this, not all emerging markets are created equal. And the Pacific Alliance countries stand out for the solid macro fundamentals and vigorous economic growth. All 4 are democratic countries with open economies. Their central banks are independent and have a solid track record in managing low and stable inflation. At the same time, the countries attract foreign investment due to free trade agreements that provide access to the key markets in North America, Europe and Asia. GDP growth has been strong, supported by solid economic fundamentals, investment-grade ratings and low debt-to-GDP ratios. Finally, as Jorge Selaive highlighted yesterday, the demographics of the Pacific Alliance region are really unique. 225 million citizens currently live in the region according to the World Bank. The size of the middle class has expanded more from 30 million to 70 million people in the last 2 decades. That's 40 million new consumers, middle class citizens in these countries. Additionally, the average age is very young, 30 years in average, and there is significant opportunity for growth in terms of banking penetration. Only 50% of the adult population has a bank account and less than 20% own a credit card. These numbers in Canada are 100% and over 80%, respectively. Despite recent challenges, the combination of strong governance, strong growth potential and favorable demographics make these markets stand out for their economic strength. Scotiabank has become the bank of the Pacific Alliance. We are the only bank with full presence in all 4 Pacific Alliance countries. No other bank serves all segments at scale in the region. We have almost 30 years of experience operating in these markets. Our teams have been through multiple macro and political cycles, periods of accelerated growth and financial crises, and we've been able to perform consistently. We have deep knowledge of our markets and head office provides strong global oversight. We have built a significant customer base in the region, serving close to 13 million retail customers in the Pacific Alliance countries. We bank 30,000 corporate and commercial customers, out of which, more than 100 have presence in more than 1 Pacific Alliance countries like we just -- you saw yesterday in the CEO panel. As a result of the footprint optimization, the Pacific Alliance countries will now contribute around 80% of our total IV earnings, as I will explain later. Experience, scale and consistent performance will allow us to continue growing our earnings contribution in the future. Regarding the recent protest in Chile, specifically, the minister just explained, Francisco will explain later, but I want to emphasize that our commitment to Chile remains unchanged. We have been here for almost 30 years and look forward to a bright future. Chile is indeed a great country which has made solid progress as we saw more than any other country in the region. And with strong democratic institutions, the country is responding to new social expectations through this political process. I am confident that Chile will overcome these events and come out even stronger. As you can see on this slide, looking back over the past 4 years, we have gone through similar headwinds like this one in the Pacific Alliance countries. For example, in 2017, with a decline of oil prices, Colombia's GDP dropped below 1.5%. Due to the Odebrecht investigations, Peru went through a period of economic slowdown and political instability, including the resignation of President Kuczynski . During the previous government in Chile, the economy slowed down with an average growth of 1.8%, coming down from above 3.5%. And Mexico's economy slowed from 2.5% in previous years to almost no growth in 2019. This have been individual significant reductions in each country. Despite all these events, we know these markets deeply and we have done well to consistently deliver double-digit growth in international banking during the past 4 years. Our earnings have increased from $1.7 billion to $3.2 billion at a 13% CAGR. As you can see, average GDP in the Pacific Alliance region has remained strong despite these headwinds. Furthermore, since Peru, Chile, Mexico and the Caribbean and Central America as a whole has similar contributions to the all bank earnings, we enjoy a valuable inherent diversification in large high-growth markets. This shows that the Pacific Alliance countries are resilient to political and economic cycles as well as the value of our diversified footprint. Through organic growth and acquisitions, we have increased our market share significantly in the Pacific Alliance markets. We have done well compared to peers. Even when we've had major integrations and modernizations during the way. We have built in our teams a winning mindset. Regardless of external variables, we always aim to outpace our competition, and we are delivering. Winning safe is the essence of our DNA. Later, the country heads will double-click on each of the Pacific Alliance markets. Now let me step back and share our financial performance for international banking as a whole. We have maintained solid growth in both loans and deposits. In loans, the Pacific Alliance countries achieved a 21% growth rate over the past 3 years, and international banking grew 14% overall. We are also particularly pleased with our deposits performance that nearly matches the pace of our loan growth. This is a high priority today as we continue to make efforts to reduce our wholesale funding ratio. Since fiscal 2016, we continued to drive very strong earnings, growing around 15% per year, led by our strong growth in the Pacific Alliance countries. Our operating leverage has been consistently above 3% during the past 3 years while still making significant investments in talent, digital, technology, capital markets, risk and AML. Our productivity ratio continues to decrease, improving over 500 bps since 2016 at a pace around 100 to 150 basis points per year. Our efficiency is driven by a strong focus on revenue growth, disciplined cost control and growing our digital bank. As you can see in Slide 12, we have consistently delivered above our 3 medium-term targets since 2016 in the Investor Day in Mexico City with strong earnings growth, consistent improvement in the productivity ratio and 3% positive operating leverage. Let me shift now to our strategy and particularly to the areas where we have untapped potential going forward. The first one is our footprint optimization, which, as I said, is substantially complete and is already bringing meaningful benefits. Second, our progress in digital banking and its impact on the customer experience, revenues and cost reduction. And finally, we would like to highlight 3 business lines with significant growth potential in international banking: Capital Markets, Wealth and Insurance. Jake and James will explain how we are scaling our capital markets business in the Pacific Alliance, and Glen will describe our wealth management strategy, including our focus on the affluent market in these countries. We'll cover -- I will cover the insurance portion in the upcoming slides. Now let me go to the footprint optimization. Under Brian's leadership, and as Raj explained yesterday, during the past 5 years, the bank has exited around 20 countries and noncore businesses. As a result, 85% of the bank's earnings is represented by 6 countries: Canada, the U.S. and the 4 Pacific Alliance countries. In a few words, Scotiabank's strategy is to be the bank of the Americas from Canada to Chile. And in line with this vision, international banking has been actively reshaping its footprint by executing on 3 key strategic initiatives. One, acquisitions in profitable and higher growth operations in the Pacific Alliance countries and Dominican Republic. I am pleased to report we have successfully integrated our acquired businesses in Chile and Colombia. Francisco and Jaime, our country heads, will update you in the upcoming presentations. Regarding Dominican Republic, we expect to complete the integration of Banco del Progreso in Q3 2020. This is the most attractive market within the Caribbean, with a population of over 10 million people, a solid financial system and a GDP that has grown above 5% for the past 5 years. With this acquisition, our market share is now 10%, and we have become the third largest private bank in the country. From all these acquisitions, we are expecting around $220 million in run rate earnings this year. Two, in Central America and the Caribbean, we have exited our announced divestitures in Puerto Rico, El Salvador and the Eastern Caribbean countries, each of them with a population of less than 1 million. These countries contributed overall to $150 million in our earnings but with lower growth than the Pacific Alliance countries. We are more than compensating all of these earnings with a $220 million NIAT from our acquisitions. Three, we have also closed the sale of Thanachart Bank in Thailand, where we had an equity investment that was profitable but off our strategy of banking in the Americas. The foregone NIAT, as Raj explained, related to this investment is around $350 million. We are extremely pleased with our new footprint in international banking because of 2 main reasons. First, growth. As the Pacific Alliance contribution increases from 66% to 80%, our ability to continue delivering high earnings growth is now stronger. And second, quality. We are enhancing the quality and sustainability of our earnings who are lowering our operational risk. Our footprint in the Caribbean and Central America is becoming much simpler as we exit 10 countries. This will materially enhance our ability to manage risk and provide oversight in the region. Around 2/3 of our earnings in this region will come from our 5 core markets of Dominican Republic, Jamaica, Trinidad, Costa Rica and Panama. In summary, with our reshaped footprint, we will have more scale, less risk, more growth potential and higher quality of earnings. Let me switch gears into our next focus area, digital. After successfully building our foundations and executing diligently, our digital journey has accelerated. Digital is not only generating new revenues and improving customer experience, but it also transforms how the bank operates, leading to cost avoidance and cost savings as sales and transactions rapidly migrate to digital. Think, for example, on the main activities that take place in a branch. On one hand, we will advise our customers and sell our solutions. On the other, we process their financial transactions. Digital is impacting both. First, let's review the impact that digital sales are having in the bank. As consumers change their behaviors using more self-service, they are also adopting our apps and digital offers at a remarkable pace. In 3 years, the percentage of customers in the Pacific Alliance that have adopted our digital solutions has doubled, and digital sales have nearly tripled to almost 30% of all retail sales. As a result, revenues from digital sales are growing above 100% year-over-year and will be twice as much the cost of operating our 4 digital factories in the Pacific Alliance countries. The growth in digital sales has also reduced the average cost of sales by 20% in the past 3 years, seeing the cost of digital is a fraction of the cost of a sale in a branch. Let's now move to branch operations. Since 2016, overall financial transactions increased by almost 30% in the Pacific Alliance, 30% in 3 years. Along the way, as you can see, we have also observed a significant change in the channel mix with more and more transactions being completed through mobile and web, replacing branch transactions which are rapidly going down. We have been able to absorb this increase in transactions while reducing branch costs. To put it simply, with the mix we had 3 years ago in the Pacific Alliance countries, where 32% of the transactions were performed in branches, we would have needed at least 100 additional branches. Not only were we able to avoid new openings, but we were able to close an additional 110 branches. Overall, we have reduced the average transaction cost by approximately 20% as digital transaction cost 10x less than a branch transaction. In summary, digital is a key lever to structurally drive efficiency in our retail distribution and already has enabled more than $100 million in run rate branch cost savings in the Pacific Alliance countries. The cost of operating our branches in this region is approximately $700 million per year. So these savings are material. Complemented by other efforts, digital is also having a material impact on our productivity index in international banking, which has improved from 55% to 50% in the last 3 years that we saw earlier. In parallel, customer experience has significantly improved across all channels. A great example is Peru, as Miguel will explain later. Not only our digital solutions are increasingly being adopted by our customers, but as Shawn will explain later, too, we are deploying digital solutions to our branches, saving processing time for our employees to engage in a more meaningful way to our -- with our customers, leading to better overall experience. Going forward, the impact of digital will only be more relevant, driving further productivity improvements while continuing to strengthen our customer and employee experience. Our last focus area I mentioned is accelerated -- in accelerating our growth drivers is the insurance business. The insurance business in the Pacific Alliance countries is a very important need and presents a very attractive growth opportunity that is aligned with public policy. Penetration of insurance in Latin America is very low compared to developed countries. For example, 80% of the homes do not have insurance coverage. To capture this opportunity, we continue to execute on our insurance strategy and have made good progress on building its foundation. The most notable milestone achieved over the last year is the signing of a new 15-year strategic partnership with BNP Paribas Cardif, an international insurance company with a global presence and a leader in bank assurance partnerships. This partnership will be an important accelerator to our insurance business. It will focus on developing integrated protection solutions to our retail offering, investing in digital, analytics and significantly enhancing our customer experience and sales practices. We have built the necessary foundations to succeed, and we expect to accelerate our insurance earnings in the Pacific Alliance by growing 50% faster than the overall international banking growth. To conclude, normalizing for divestitures and reporting wealth as a new business line, our 2019 earnings were $2.5 billion. As we have successfully met our 2018 Investor Day commitments, we are committing to new medium-term targets. With this simplified footprint, we are confident that we will achieve our 9% NIAT growth target, excluding the effects of divestitures while continuing to improve our operational efficiency as reflected by a productivity ratio of less than 50% and positive operating leverage. It is important that the divestitures will have a short-term negative impact of approximately 200 bps in our productivity ratio. However, just in 2020, we expect to reduce it by more than 100 basis points consistent with what we have done in previous years. The impact of Chile, which was a new event in our region is expected, as I said in the last call, to be mainly in Q1, with our earnings gradually improving throughout the year to achieve a high single-digit growth in 2020 as I already mentioned. In summary, we are very pleased with the progress we are making to build a better international bank. We have sharpened our footprint and the work is substantially complete. Our increased focus in the Pacific Alliance countries will improve our risk profile while enhancing the quality of our earnings. Our digital transformation has gained momentum and will enable revenue growth and efficiency gains. We strongly believe we will continue to achieve our medium-term targets, supported by sound market fundamentals. Thank you very much. Now I will open to -- the floor to take any questions.

So we are -- we have time for Q&A with Nacho. We are running a little behind schedule. So after the Q&A with Nacho, we have 4 country presentations. And what I'm going to propose is we don't have Q&A until we're at the end of those country presentations, and then we can address all of them at the same time in the interest of catching up and getting back on schedule. So with that, if there's any questions for Nacho, from the audience, please raise your hand, and we can deliver a microphone to you.

I scared everyone off with my warning on timing. Okay, we'll have an opportunity to ask Q&A at the end of the international banking section of the program. So thank you, Nacho, very much. And we'll now turn the floor over to Francisco Sardón, our Country Head for Chile.

Good morning, everyone. It's an honor for us, the management team of Chile to have you here, not only the investor community, but also all our officers and executives from Toronto. This is a great opportunity to share with you the story of Scotiabank here in Chile, how we grew the operations in the country and what are our plans for continue this growth in the many -- in the years to come. But before all that, let me use some pages about Chile as a country. Due to its strong economical policies and pro-market reforms applied consistently since the late '70s, Chile has become the most developed and wealthiest country in Latin America. Chile has an open economy, which has created a very competitive business environment in many different sectors, including utilities, retail, mining, fishing and especially the financial service industry. Although there are many charts which can illustrate the strength of the country, I will summarize Chile's performance using just 2 charts, which I found impressive and say everything and were presented by President Piñera a couple of years ago. In 1985, Chile was ranked eighth in Latin America with a GDP per capita of USD 3,900. At that time, Venezuela was the richest country with USD 8,500. By 2015, 30 years later, Chile ranked first with a GDP per capita of USD 23,500, the highest in the region followed by Panama and Uruguay. You may see how much other countries advanced or declined during the same period based on their political and economical models. This is a sixfold increase in 30 years. So based on this fantastic performance, Chile is not only the richest country in the region but has also developed a large financial system and a competitive economy. In Chile, interest rates are as low as in United States, Canada and Europe. Although there are many reasons which have driven this success, the key factor is the fact that Chile has a formal economy of any Latin American country. This has allowed banks to finance all the segments of the population, speeding up growth in the middle class. A consequence of this formal economy is the fact that banking penetration reaches 74% of GDP when SAP ratio averaged 30% or 40% across the region. In this competitive environment, Scotiabank has found a way to compete and succeed. Despite this prosperity, Chile has recently suffered from social unrest. We think there are 2 underlying causes. First, recently, government reforms regarding tax, labor and education impacted investment in Chile, resulting in an economic slowdown in the last 5 years. It's important to note that while Chile has reduced poverty levels dramatically from 40% in 1990 to 8% today, there is still 70% of the population living with a household income of $16,000 a year. As they have emerged from poverty, this large segment of the population has had expectations for continuous improvement. When these expectation are not met, it generates disappointment. Second is a narrative voiced by some that the capitalism and free market model developed in Chile for 40 years has created a big inequality among Chileans which adds frustration. However, we think that Chile has strong leaders who has proven their ability to find a way to solve complex situation before. The country successfully solved a devaluation crisis in 1983, transitioned it to a democracy in 1990; managed the crisis in 1998 and served the supreme global downturn of 2008. Also Chile has a strong institutional frame and a solid judicial power which establishes the rule of law in the country. This fact explains why Chile has the low corruption level in the region. Nowadays, Chile and the stakeholders are sharing and doing all the efforts to implement long-term solutions. Finally, Chilean economic fundamentals are strong enough to manage through this transition process. Let me point out this, we are not discussing about how Chile may finish an economic recession or financial crisis. We are discussing about how to build a better country for the future. So going back to the operation of Scotiabank. Here, you have a snapshot of our bank today in Chile. All the figures are expressed in Canadian dollars in this presentation. Scotiabank Chile is a high-quality bank. We have over 1 million customers, and we are reaching out an additional 2 million customers through our joint venture with Cencosud, a large Chilean retailer that operates in 6 countries across the region, including Peru and Colombia, where they are our partners also. We employ over 9,000 people through a national network of 158 branches. Currently, our loan book reaches CAD 47 billion, and we have CAD 24 billion in deposits. Scotiabank generated CAD 718 million in earnings before noncontrolling interest and operate with a low productivity ratio placed at 42%. Our ROA is 1.6%, and our ROE is 13% before goodwill. Measured by Chile and GAAP financial reports, our profitability is placed at 15%, excluding integration expenses and 13.5% including them, while Chilean banking system average a profitability of 12.5%. Today, we are the third largest bank in loans in Chile and fees by deposits. Our loan book is balanced 50% in commercial loans, which includes the segments of big corporations, midsized companies and small businesses. In retail bank, our loan book is divided 2/3 in mortgages and 1/3 in consumer loans, which includes personal loans and credit card exposure. On the deposit side, we have 1/3 in core deposits and 2/3 in term deposits. I will outline our core deposit strategy later in the presentation. The Chilean banking market has evolved to create 3 distinct banking models. This was different just 5 years before. Consumer finance banks, circled in black; wholesale banks, circled in blue and universal banks circled in red. Consumer banks like regional retailers Falabella and Ripley are able to generate ROEs in the range of 18% to 25% in spite of low market share. Wholesale banks, both international and local names like JPMorgan, HSBC or Security, are low-cost operators with earnings volatility and also low market share. Those banks generate ROEs in the range of 8% to 11%. And finally, universal banks with robust critical mass and market share, covering all market segments through a multi growth and services offering. This group generates above 14% but in a consistent way due to its scale. Just 4 years ago, as I said, there were 4 medium-sized banks in Chile that today they disappear, CorpBanca, BBVA, Scotiabank and Itaú from Brazil. Due to their lack of scale, they were trapped in ROEs between 5% to 10%. So given this situation, a consolidation of the banking market was expected. In 2015, Scotiabank acquired an interest in Cencosud credit card company, acquiring a larger consumer base and a large consumer loan book. In 2016, Itaú acquired CorpBanca. In 2018, Scotiabank acquired BBVA. We made a conscious decision to gain a scale in order to position the bank for increasing profitability in a consistent way for the future. This is the most graphic illustration of our business strategy in Chile. I presented key targets at our January 2016 Investor Day in Mexico City. Chile has over-delivery on our commitments to investors, generating strong earnings growth, reaching a 42% productivity ratio and a solid operating leverage year-over-year. Now allow me to briefly explain how we did it. At the end of 2013, we established an ambitious strategic plan that included 5 strategic pillars to move the bank forward. We maintain a disciplined approach by following the strategic plan. During this time, Chile has had economic volatility, government changes, new regulations and market disruption as both digitalization and cybersecurity became more important. The strength of our plan and the management discipline to execute it properly has resulted in the bank that you see today. Our first strategic focus was leadership. When you think about it, banks are simply a group of talented people supported by an operational system. Given the importance of people, leadership has to be the first priority. We made important changes to our leadership team in order to align our mindset to execute a plan which would move us from a midsized player to a leading bank. Today, I'm joined by my executive management team, and I want to thank them for their commitment and dedication. Communication and innovation were critical to produce new ideas. It included developing a stronger relationship between Chile and head office and also providing training and coaching to our employees. We generated higher engagement and productivity. As I said before, people are everything in banking. Once our team was better aligned, focused and committed, our businesses started to grow faster than market. Our second strategic pillar was to increase our organic growth rate so to grow faster. With this -- we did this in 2 ways. First, we adapted to market practices in Chile. We accepted those market practices, allowing us to make faster decisions and have more effective interaction with our customers. Second, we request greater reciprocity from our borrowing clients in order to grow our deposits and cross-sell our wide range of products and services. As the bank started to grow faster than the market, clients responded with more and more businesses, accelerating our growth. As you can see, between 2013 and 2019, we doubled our loan book before factoring in any acquisition. While the market grew 9% per year, Scotiabank did it at 13% organic growth rate. Including M&A, Scotiabank grew its business in Chile fourfold in just 6 years. Similar focus was placed on the liability side, where our deposit base was doubled over the same period. We grew at 15% for 6 consecutive years while the market did this at 6% CAGR. Our market share gain was 250 basis points. Therefore, our strong organic growth has been critical in allowing us to acquire and gain additional scale. Very simple, we earned the right to acquire. Without this organic growth, we wouldn't be here. Our third strategic focus was to improve productivity and digital capabilities. Between 2014 and 2015, we reduced our branch network from 155 to 89 branches, consolidating our consumer finance business with our retail business. Scotiabank was the first bank in Chile to take this approach and others have since followed. Also by 2015, we implemented our digital factory, where new application and web page were designed. Also by 2016 and 2017, we started to sell some products like time deposits, mutual funds, insurance and personal loans through our digital channels. Today, we are one of the most efficient banks in the country. Our fourth strategic focus was maintaining our strong risk culture. We were very aware that significant loan growth could generate higher provisions and credit losses. Therefore, our strategy was granting credit facilities to existing clients where we were underexposed. Since we already knew those clients, we were able to grow with them without taking much more risk. As a consequence, our nonperforming loans ratio has been consistently better than market due to this approach. And finally, the fifth strategic pillar was acquisitions. In spite of the organic growth we had, we knew it wouldn't be enough to achieve the scale required to deliver consistent and strong returns. We have to find opportunities to acquire and consolidate our presence in Chile. By 2014, we identified the possibility to join forces with Cencosud, the retailer chain that I described before. In May 2015, we acquired a 51% controlling interest in Cencosud credit card operator. This investment had several strategic advantage. First, it diversified our loan book between mortgages and consumer loans; and second, it brought 2 million new customers, representing a great opportunity to expand our cross selling initiatives. After acquiring Cencosud credit card operator, our organic growth continued. By mid-2017, we reached 7% market share coming from 5% just 3 years before. As we were ready to go for more, we found the opportunity to acquire BBVA during 2017. We recognized it as a once-in-a-lifetime opportunity. Scotiabank would become a leading bank in Chile. Also we knew how complementary BBVA would be with Scotiabank. BBVA was strong in digital banking and customer service while Scotiabank led in sales productivity and efficiency. We also identified the complementary nature of our wholesale banking and capital markets operations with low customer overlap and enhanced [pro] capabilities. The combined strength of the 2 banks was very powerful. The results has been as we expected. Today, we are the third largest bank in Chile. We are generating consistent returns, and we are developing more cross-regional businesses as Chilean companies are present in Mexico, Peru and Colombia. In parallel to the acquisition process, we prepare ourselves to execute a successful integration. We closely study all previous bank mergers in the country to identify best practices and avoid common mistakes. The evidence of that study show that, on average, bank mergers took 4 years to complete in Chile and resulted in 200 basis point loss in market share at the combined entity while the integration process was finished. To avoid repeating those poor results, we set out a simple but clear integration plan, starting by appointing the leadership team in advance which cut internal uncertainty from the beginning. These same leaders were in charge of running the bank and integrating the bank. Through this strategy, we established a clear accountability at the Chilean leadership team regarding the result and success of the integration while maintaining attention on our day-to-day operations. We executed 5 steps by specific dates. The last step was the integration of the core system of BBVA with the Scotiabank core platform by November 1 last year. We started our integration in July 2018, and we finished it by November 2019, a period of 16 months, a new record for the Chilean financial system. As part of our integration plan, we established 3 key objectives to ensure integration success. Zero attrition, which produce a certain level of nervousness in head office. We could not afford to lose clients or market share. Therefore, we proactively target existing clients to maintain our combined exposure. The result was an increase of 36 basis points in market share since closing, defying the results of previous bank mergers. Our second objective was to capture synergies in the range of $150 million to $180 million at the end of the integration plan. 80% of those savings has been already achieved and 20% will be achieved before finishing the first half of 2020. Our third objective was to be fully compliant with both Chilean and Canadian regulators. In addition to full compliance with Know Your Customer and anti-money laundering policies. We have achieved the 3 objectives, too. So far, I have told you about where we are now and how we got here. In 5 years, we have taken the seventh ranked bank in Chile with less than 5% market share, generating 7% ROE and $130 million in earnings to transform it in the third bank in Chile with more than 14% market share, generating 13% ROE, excluding goodwill and over $718 million in earnings. As I mentioned before, using Chilean GAAP, Scotiabank profitability ranks third at 15% after Banco de Chile and Banco Santander. After all these facts, the logical question is what's next? As banking industry is changing, we have updated our strategic priorities for 2020 and beyond. Leadership will continue being a top strategic pillar at all times as well as risk culture. Now I will double-click on the 3 new elements of our strategy. Digitalization. Chile is the most developed country in the region for digitalization. We measure our advance in digital banking by 3 KPIs. First, digital sales. Today, 50% of our retail sales are in digital channels, and it is our goal to take this above 75% in the next 3 years. Digital adoption. Nowadays, 60% of our customers are using digital tools like our web page and our mobile application. And third, transactions out of branches. At this time, we process only 6% of the transactions in our branches and 94% digitally. We must have a paperless bank in the future, which implies to continue working with local authorities and regulators to get there. Today, you will see our demos regarding digital banking developments. For 2020 on, we will move towards becoming a digital bank by operating products and services completely digital in their end-to-end process. We have launched a digital acceleration project through our multinational team already. In the future, we will see the banking industry operating mostly digital but still with some physical presence for advisory purposes and specific and more complex transactions. Digitalization will allow the bank to continue improving its efficiency levels to be competitive and profitable in the future. Our third strategic pillar, our new strategic pillar, is a greater focus on core deposits to improve our funding profile. We will pursue 2 key strategies: First, we have a strength, our team to capture payrolls from corporates and commercial clients; and second, we are keeping BBVA leading cash management capabilities to increase our clients' cash balances. An important part of our long-term profitability will be based on executing this strategy effectively, and we are in the right track already. Finally, we will continue to enhance and optimize our business mix. We see good opportunities in commercial banking and small businesses. Those segment has the highest level of reciprocity in terms of deposits per loan granted. Such combination makes them very attractive. Another business initiative in the next 5 years will go to develop our wealth management capabilities. We currently have a strong mutual fund entity, which has over $5 billion under management, and we have also a solid brokerage house. Those services will be complemented with affluent and private banking services both onshore and offshore. As consequence, we are ready to commit to clear targets for the next 3 to 5 years in Chile, NIAT growth of 10% component growth rate. While in 2020, we are going to be in mid-single digits, we think that we go back to a double-digit growth in the next years, our productivity ratio below 41% and a positive operating leverage. I'm highly confident this target will be achieved as we delivered in the past. In doing so, our operation is targeted to produce a 20% CAGR in earnings over 10 consecutive years in Chile. This is an achievement without precedent in Latin America, which remarks Scotiabank capabilities to deliver consistent results. Thank you very much for your attention.

Okay, we are more or less back on schedule, but we'll take a break now. We'll be returning at 11:15 Santiago time. Yes, 11:15 Santiago time or 9:15 Eastern time for the remaining country presentations. Thank you. [Break]

Everyone can please take their seats. We'll begin in just a moment. So we are now going to move north, up the coast. And here from Miguel Uccelli, our Country Head for Peru.

Good morning. It is my pleasure to meet you and share with you an overview of our presence in Peru. Peru represents a very attractive growth opportunity for Scotiabank. We have a strong and winning management team in place, a robust and clear strategy and a diverse portfolio to maintain our solid double-digit growth. Peru is one of the best-performing economies in Latin America. Our country's GDP has grown for 21 consecutive years, reaching $221 billion in 2018. Its GDP per capita has doubled since 2007. Peru has one of the lowest inflation rates in the region and the least volatile interest rate during the last 10 years. Our country has a solid fiscal position with a low debt-to-GDP ratio of 26%. Its market openness and the free trade agreements that Peru has signed over the last 15 years have allowed the country to triple its exports. Currently, 90% of Peruvian exports are made under such agreements. Peru has a low and fast-growing banking penetration. Total loans account for just 38% of GDP today compared to 30% in 2016. As an example, consumer loans represent only 8% of GDP and mortgages only 6%. In comparison, Canada's total banking loans-to-GDP ratio is above 100%, as you know, with mortgages representing 53% and consumer loans, 22%. One of the main reasons explaining this low and fast-growing penetration is the fact that Peru earning investment-grade as early as 2009. Peru's demographic also contribute to its growth potential. 53% of the population is below the age of 30, with an average age of 27 years old compared to Canada's average of 42. In summary, a combination of growing and stable economy, young population combined with low banking penetration highlights Peru's untapped potential. Moving on to the next slide. In Peru, we operate under a solid and stable financial environment based on the following pillars. First, Peru's banking system has grown between 2x to 3x faster than GDP during the last 10 years. Second, we have a strong governance. Peru's Central Bank and banking regulators enjoy a solid international reputation. Third, there are over 30 financial institutions in Peru. However, the 4 largest banks account for 81% of the total banking sector assets. Fourth, Peru's banking system has shown adequate asset quality with historical low nonperforming loans ratio. And finally, a solid capital position with all bank's capital ratio at 14.7, above the required banking regulator. In the next slide, we see a summary of our business in Peru. Scotiabank is one of the most relevant financial institutions, serving 4 million retail customers across the country. We have 12,000 employees, 314 branches, along with almost 1,000 ATMs and over 11,000 corresponding tellers. We're the third largest bank, with a $21 billion loan portfolio and a $19 billion deposit portfolio. In fiscal year 2019, we generated earnings of $810 million and a return over equity of 25.6% as a result of a steady and strong double-digit growth during the last 4 years. Through our focus on efficiency, we reached 35.2% per equity ratio, which positions us as the most efficient bank in Peru. Additionally, we are currently the leading bank in personal loans in Peru and the second bank in corporate banking and small business. Turning to Slide 6. Over the last 22 years, Scotiabank has become the third largest bank in Peru. Since we entered the Peruvian market in 1997, we have a successful track record of key acquisitions that have complemented our solid organic growth. Throughout these integrations, we have strengthened our presence and expertise in multiple market segments, diversified our portfolio and achieved 18.1% loan market share. In the next slide, we see that during the last 5 years, Scotiabank Peru has completed 2 targeted acquisitions that have contributed to gain scale and improved steadily return on assets. In 2015, we acquired and fully integrated Citibank's retail and commercial operations in Peru. This acquisition allowed us to increase our market share both in credit cards and the affluent segment, adding over 130,000 customers. Last year, we acquired 51% of Banco Cencosud, completing our regional alliance with the leading retailer Cencosud. The acquisition helped us increase our credit card market share by 300 basis points and it's also giving us direct access to over 1.4 million Cencosud retail customers. These integrations have supported our strong organic growth and allow us to gain scale and reinforce our position in the market. The following slide shows that Scotiabank has a solid #3 position in a concentrated market, where as I mentioned, the 4 largest banks hold 81% of the market. Our 18.1% loan market share has increased 79 basis points over the last 3 years, mainly driven by corporate banking, credit cards and personal loan volume growth. During the same period, we have reduced our gap with the second bank by 217 basis points. In deposits, we have a 16.5% market share, which has increased by 80 basis points, primarily driven by retail and wholesale core deposit growth, also reducing the gap with the second bank by 187 basis points. During the same period, international rating agencies have recognized our consistent local performance and adequate asset quality and reserves by maintaining or upgrading all our credit ratings. Moving on to the next slide. During the past 3 years, we've increased our market share in almost all portfolios, becoming a relevant player in most segments. In certain strategic portfolios such as personal and small business loans, we ranked #1 and #2 in the market, respectively. The key drivers behind this growth are: first, targeted acquisitions such as Citibank's personal banking portfolio and Cencosud credit card business; second, a highly analytical team closely aligned with the right marketing and distribution strategy; and third, a consistent investment in analytical and risk world-class solutions that have allowed us to grow sustainably, improving our origination process and portfolio management as well as our value proposition. As an example, we have been able to offer preapproved lending, driving growth in retail loans while maintaining stable PCL ratios. Today, over 80% of our personal loans are preapproved. In the case of mortgages, we have grown our portfolio by 24% in the last 3 years, and we believe we still have an opportunity to increase market share. In Slide 10, we see that our $21 billion loan portfolio has had a consistent 7% compound annual growth rate within the last 4 years, maintaining a balanced composition between wholesale and retail banking. During the last 5 years, Peru's GDP grew 3.4%. And during the same period, our loan portfolio grew 2.4x faster, a ratio which we expect to maintain for the years to come. As we will see in a few slides, we have a significant growth opportunity in small and medium business, and given Peru's infrastructure gap, we also see a significant opportunity in corporate and commercial banking. The next slide shows our $18.7 billion deposit base composed by $2.2 million of stable and low-cost savings accounts. We have been able to improve our deposit mix focusing on our core deposits, increasing demand and savings accounts from 52% in 2016 to 57% today versus 43% of term deposits, improving our local cost of funds and increasing our stable and low-cost accounts. Our physical presence is still an important component to attract deposits. However, our digital transformation is rapidly changing the way our customers interact with us. As an example, in October 2019, 45% for our term deposits and 21% of our total savings accounts we originated through -- were originated through digital channels. These numbers were below 3% only 3 years ago. Turning on to next slide. We have had a consistent positive operating leverage, driven by our revenue growth and multiple cost-saving initiatives to improve our productivity ratio, which closed at 35.2% in fiscal year 2019. Our team performs recurrent assessment to maintain our historical best place in productivity and to strengthen our efficiency discipline through our structural cost transformation program and zero-based budgeting initiatives. Slide 13 shows that during the last 5 years, we've accomplished steady double-digit NIAT growth. As mentioned before, solid growth of our core deposits and loan portfolios, combined with prudent risk management have been key to increasing our net income at 12%. Our cost management strategy has allowed us to achieve best-in-class efficiency ratio as we saw on previous slides. As we can see, in Slide 14, Scotiabank Peru has achieved the financial targets we established 3 years ago, double-digit NIAT growth of 12%, productivity ratio way below 43% and a positive operating leverage. Slide 15 shows 3 growth opportunities for Scotiabank in the years to come. First, drive growth in low penetration segments like small and medium business, capitalizing the opportunity to increase our market presence. Second, strengthen our customer-centric culture, maintaining our focus on customer experience as our #1 priority and key driver to all our business and investment decisions. And third, scale digital by driving business impact and building capabilities to become the leading bank for our customers. The next slide, we have broken up market share for small and medium business, which represent an attractive opportunity as they offer significant growth potential. We expect to be as relevant in small and medium business as we are now in other portfolios such as corporate or personal loan in which we compete with over 20% market share and have grown strongly during the last 3 years. With a combined market size of $21 billion and an average risk-adjusted margin of 5.6%, we expect to capture an additional $100 million revenue through our focused distribution and marketing strategy, combined with our strong risk management and analytical tools. Going on to next slide. Customer focus has become a key component of our customer-facing employees culture. Our customer experience system, The Pulse, helps us to identify customer key pain points and develop solutions to continue improving their end-to-end experience. As an example, during the last 12 months, we have received 380,000 answered surveys and made over 44,000 callbacks to our customers to thank them for their business and identify service improvement opportunities. Embedding a strong customer experience culture within our team has allowed us to reach high customer satisfaction levels in a record of 100 branches with a Net Promoter Score above 70%. As shown on the left side, during the last 2 years, our customer Net Promoter Score has significantly improved through all channels. We strongly believe that customer centricity drive business growth. Therefore, a continuous focus in customer satisfaction will allow us to seize another $100 million revenue opportunity by continuing our double-digit growth in core deposits and doubling our bank assurance business, for which, as Nacho mentioned, we recently closed our Pacific Alliance JV with BNP Paribas. The next slide shows how our digital transformation is already driving business impact. We have achieved great progress in all our key metrics and build strong capabilities during the last 3 years. During 2017, we focused on recruiting a highly talented team to set up our digital factory in Peru. On September 2018, we launched our new app, powerful, user-friendly and safe application for our customers. By the end of fiscal year 2019, already 18% of our sales were made through our digital channels. 32% of our customers were transacting through our digital channels and our branch transactions decreased from 31% to 18%. Additionally, last month, we achieved 21% of digital sales, growing over 300 basis points over only 2 months. Our digital transformation allows us to produce new release of mobile banking at market demand. For example, during the next 2 months, our digital offering will include new features such as QR-code payment and money transfers using customers' cellphone contact lists, a feature similar to InteracT in Canada that will allow customers to transfer funds 24/7 for the first time in Peru. In our demo later today, we'll be showing these and other features such as our multiple bill payments hub and credit card configuration. Our digital adoption and digital sales will increase at even faster rate during 2020 as we deploy a new protocol to digitally assist our customers at our physical branches. This strategy will include WiFi access to 100% of our branches. We strongly believe that our sound digital strategy, well supported by analytics and fully integrated with our physical presence, will allow us to become Peru's leading digital bank. These 3 areas of focus are supported by enhanced risk management capabilities. The next slide shows that Scotiabank Peru has consistently enjoyed healthy and stable level of PCLs that are lower than our peers. This trend is a result of a strong risk culture, a close oversight from our risk team in Toronto and an important investment in risk and analytical solutions. During the last 4 years, we've invested over $14 million in world-class risk management and analytical tools that have allowed us to maintain the consistent growth levels with stable PCLs. In the next slide, we're extremely proud to have been recognized by well-known entities for our best practices. Scotiabank Peru has been recognized among the best -- among the company with the Best Corporate Governance by EY for 5 consecutive years. PwC has recognized us among the 10 Most Admired Companies in Peru for 3 consecutive years. Also, we have achieved fourth place among the best companies to work for by Great Place to Work and recognized among the best companies to work for by women and millennials. These and many other awards help us shape a sustainable reputation for all our stakeholders. This allow us to continue attracting top talent in the market. The next slide shows our new medium-term targets. Going forward, we project to continue double-digit growth in the next 3 to 5 years with an even more competitive productivity ratio of less than 37% and a positive operating leverage. Finally, Scotiabank Peru is well positioned in an attractive macroeconomic environment with low banking penetration, growing economy and a solid regulatory system. Scotiabank Peru has a proven track record of a sustainable double-digit growth in line with our medium-term commitments to investors as well as a strong reputation with all our stakeholders. Our sound strategy, focused on customer experience, leadership, efficiency, digital transformation and risk management, will allow us to reach our aspirational goal of $1 billion net income and ensure short, medium and long-term business success. Thank you. Now I'll leave you with Adrián Otero, Country Head of Mexico.

Good morning, everyone. It's a pleasure to be here with you. As many of you know, I have recently assumed the CEO position at Scotiabank Mexico. Prior to this, I have held different leadership positions in the financial sector, managing secure retail lending, wholesale and investment banking. Let me tell you that when I was asked to join this winning team, I did not hesitate to come on board. As you will see during my presentation, the bank's performance has been outstanding and critical foundations for the future have been built. The bank is now prepared for the next level despite the current macro slowdown. I want you to leave with 3 key messages today. First, Mexico has a strong and resilient economy. Second, over the past 3 years, Scotiabank Mexico has outperformed the market and consistently deliver strong results. Third, we have built the foundations for the future and have well identified opportunities to capture our untapped potential. Let me start with Mexico's current context. Mexico has a dynamic and resilient economy, which will continue to create meaningful opportunities for our business going forward. The economy has been soft in 2019 with GDP growth of less than 1% but the underlying fundamentals remain strong, including strong export base, close ties with North America and fiscal discipline. The demographic profile of the population is very attractive, both the working age population and the middle class continue to grow. Also, we have a strong and well-capitalized financial sector and banking penetration is still low. We operate in a closely and well-regulated market. This ensures a stable banking sector, which is crucial for our economy. The macroeconomic environment has changed, yes. But this is not the first period of increased uncertainty we go through. Mexico has a history of resilience, and we continue to see the long-term potential. Let me show you. As you can see on the Slide 3, credit volumes have consistently grown throughout economic cycles and have an average double-digit growth. Even during the 2008 crisis, loan volumes expanded. On average, loans in the financial system have expanded at a rate significantly above GDP growth. Going forward, and even though the transition to a new federal administration has yielded slower growth in 2019, loan and deposit volume remained positive, and we anticipate a rebound in 2020. Let me highlight some facts that reflect the strength of our economy. Mexico has a population of 125 million and an average age of 28 years. Mexico's banking penetration is one of the lowest among LatAm with just 35%. Debt to GDP is 44%. 80% of Mexican debt is in local currency while 20% is in foreign currency. International reserves plus the IMF flexible credit line exceeds the value of Mexico's foreign debt. Furthermore, remittances continue to grow and have reached a record of USD 30 billion. We have developed notable manufacturing capabilities in key sectors, including electrical and transfer equipment and our manufacturing sector accounts for 17% of our GDP. To provide further context, Mexico's manufacturing and exports represent 1/3 of all LatAm manufacturing exports and double the size of Brazil. To sum up, the size of the economy of the market and its growth potential remains very significant. We are confident about the market fundamentals. Given this, we have invested in our bank. Most notably, as I will explain later, we have a new, robust and modern core banking platform. This will let us to be more efficient, faster and have better information to serve our customers. Let me give you a snapshot of our business in Mexico. Scotiabank operates a full-service financial group that serves customers across the country and across market segments. We have been present in Mexico for over 30 years, and we are leaders in secure retail lending and corporate lending. We have over 3.5 million clients, and our footprint includes over 500 branches and 7,000 ATMs, including our ATM sharing alliance with 11 partners. Our business generated almost $600 million in net income after taxes in the last 12 months. We have a strong balance sheet of $30 billion in loans and $25 billion in deposits. Turning to Slide #6. We have registered great progress over the last 3 years, almost doubling our NIAT. This strong NIAT growth has come with an important improvement in our returns. This has sustained our solid capitalization of 13% in Mexican GAAP and Level 1 capital ratio of 12%. It is worth noting that the Mexican banking system as a whole is competitive, profitable and well capitalized. In this environment, Scotiabank Mexico has gained relevance, scale and market share, building a more profitable and robust franchise. In terms of where we are in the market, Scotiabank has been the most dynamic financial group in Mexico over the past 3 years. During that period, our performing loan book expanded at the 18% compound annual growth rate. This enabled us to capture the most market share of any bank in the system. With this, we achieved a 7.5% loan market share as of November 2019, positioning us as the sixth largest lender in the country. Our performance in deposits has also been positive. In terms of deposits, we hold a 5.6% market share, while in mutual funds, we hold a 6.7% market share. Turning to our position and growth per segment. We have outperformed the market across all major products and businesses. Overall, we have increased our market share close to 200 bps in loans and almost 30 bps in deposits. Since we implemented the Net Promoter Score in 2017, we have closed the gap relative to the market leader. This has been behind our ability to attract new customers. As a result of this, we won market share across products. We have also performed very well in our commercial and corporate segments. In fact, in wholesale lending, we are the bank that gained the most market share during this period. Passing to Slide #9. Between 2016 and 2019, our loan book expanded at the 18% CAGR. This growth was driven by attracting new customers and was attained, preserving the high-quality of our portfolio. At present, 61% of our wholesale portfolio is investment grade while 86% of our retail portfolio is secured and in fixed rate. This helped us to reduce our sensitivity in an environment of falling interest rates. In addition, our wholesale portfolio is well diversified. No individual industry exposure represents more than 15%. Moving on to deposits. On Slide 10, you can see that during that period, we also grew our deposits at the 16% CAGR. We closed fiscal 2019 with $25 billion in deposits, 46% are demand and savings. In terms of revenue and productivity, our volume growth has been complemented by significant improvements in operating efficiency. Over the past 4 years, our revenue has grown at the 10% CAGR and our productivity index has improved by almost 800 bps. This has been driven in part by disciplined cost control, progressive streamlining of our organization and ambitious $200 million investment to overhaul our core banking platform. Let me elaborate on the next slide. In 2018, we completed, on time and on budget, a comprehensive business modernization program. This program was aimed at replacing 70 legacy systems with a new integrated core banking platform. As a result of this, we now offer our customers more rapid response times. For example, by integrating our product on-boarding processes, we reduced the time to onboard by 50%. In addition, through the program, we implemented a comprehensive customer view and an Enterprise Data Lake. This will help us to have better information to understand our clients. In summary, the improved operating efficiency and incremental business volume has led to one of the highest NIAT growth rate in the industry. Between 2016, 2019, our NIAT grew at the 20% CAGR to reach almost $600 million. Lower tax credit compared with 2018 and operating expenses related to the new core banking platform are impacting our annual comparison for the fiscal year. Excluding these effects, we're experiencing a flat 2019. Looking back on the 2016 commitments, given the increased scale, relevance and efficiency we have gained, we have significantly outperformed the targets we communicated in 2016. Scotiabank Mexico has an outstanding performance over the last 3 years. But now we need to think about the future. This is why we are updating our strategy. Together with my team, we carry out a comprehensive assessment of our business. We identified several untapped opportunities that depend on our own ability to execute. Allow me to elaborate on 3 of them. We have an opportunity to further enhance our retail productivity through segmentation, analytics and deeper client engagement. Having this cross-customer approach will support core deposit growth and help us to reduce our cost of funds. As I mentioned earlier, our modernization program is giving us better tools to capture this opportunity. We also have an opportunity to leverage the digital capabilities we have built to help us to reduce our distribution cost while ensuring we are our customers preferred bank. Finally, we are working on building a stronger ancillary business to drive primary relationships and further revenue growth. Our main thrust in this front is strengthening our cash management, wealth management and capital markets franchise. We are pursuing this opportunity while maintaining our strong risk culture, disciplined cost control and leadership development. Let me start with productivity and customer engagement. I will talk about the opportunity that we have in retail. Currently, our customers have 1.3 products on average versus 2 products for our competitors. The opportunity is to leverage our large customer base and look for ways to deepen our relationship with our clients. How are we capturing this opportunity? First, leveraging analytics to increase customer segmentation, improve target offerings and anticipating customer needs. I'm happy to report that we have recently hired a new Head of Analytics. His experience will be complemented by our new alliance with BNP Cardif, which will focus on the bank assurance business. Second, we will be launching a self-effectiveness program to reinforce productivity and service protocols across channels. Third, we are leveraging our best-in-class customer experience system to identify customer pain points and enhance key journeys. We are able to get first-in-hand feedback that trigger immediate actions to solve our customer issues. Finally, to ensure execution, we're implementing business development units across our different business lines. These new teams will have a 360 view of the customers and will drive our transformation to being a more customer-centric bank. Moving on to the opportunity in digital. We have made great progress in our digital transformation. Now more than 1/4 of our retail products are sold through digital channels and 39% of all credit cards. The opportunity going forward is huge. There are around 90 million Mexicans with the smartphones. And as I mentioned previously, banking penetration is still low. This is why we continue to focus on better digital experiences for our customers. An example, in June 2019, we launched our new mobile app, and the response has been very positive. Our customer satisfaction score for digital channels, measured by NPS, has increased 20%. We are adding new features, such as self-serve loan and deposit origination capabilities to support the deposit growth. Additionally, we will benefit from a new one-click loan feature and a new QR-code payment system launched in Mexico in October. This quarter, we will be launching our new online platform for retail. Also, we are building better and stronger cash management platform to serve our commercial customers. We are transforming our bank. We need to improve the connectivity with our clients. In terms of capital markets, we are continuing our modernization efforts by investing to upgrade our global capital markets platform. We are strong players in the local debt capital market but in my experience, I see significant opportunity to grow the business in FX and derivatives with commercial clients. In order to accomplish this, we have embarked on our modernization program that will yield greater connectivity between our Pacific Alliance and international operations and ensure a seamless experience for our wholesale clients. It will entail new front office talent, upgraded system and a more robust back office. Finally, in terms of risk management, our efforts to exploit untapped potential across our business line will continue to be supported by a strong risk management culture. We are investing in tools for origination, fraud prevention, collections and cybersecurity, leveraging the experience of other countries and applying best practices. Moreover, our local risk team works in close collaboration and oversight of our global risk team in Toronto. Looking ahead, I am really excited about the future of our franchise, and I'm proud to be part of this team. With the opportunities we have, and despite the near-term headwinds of the Mexican economy, we are sustaining our 3 to 5-year earnings growth target to 7% to 9%. Our guidance assumes a tax rate close to the statutory rate of 30% while in the last 2 years, it has been below 20%. For 2020, the higher tax rate will be compensated by the elimination of the 1-month [ lag ] in Q1. Finally, we will continue to improve our productivity ratio to less than 50% and to continue generating positive operating leverage. In summary, Scotiabank Mexico has achieved significant success over the past 3 years, gaining market share relevance and consistently outperformed the market and delivering outstanding results. We are aware about the challenges ahead of us, but the market fundamentals are strong. We are a modern bank with best-in-class capabilities in risk management, digital and customer experience supported by a new core banking system. We have identified opportunities to exploit our untapped potential. Our main challenge is to execute, and I'm confident in our ability to do so. Given this, we are well positioned to deliver on our updated financial commitments to you. Thank you.

Thank you, Adrián. So we will now turn to our last of our country presentations. And following this presentation, I'll ask the country heads to come back to the stage, and we'll have ample time for Q&A for all the presenters that you've seen here this morning. And with that, I'd like to introduce Jaime Upegui, our Country Head for Colombia.

Hi, good morning. It's a pleasure to me to have you here today to talk about our operation in Colombia, our history and our main opportunities. As you will see in the following presentation, Colombia represents an important opportunity to consolidate international banking in the Pacific Alliance. In first half of 2019, our GDP grew 3% versus last year, above the average of the region and showing an optimistic forward-looking perspective to our economy. Before I start, please let me share some relevant facts about our country. We are the third largest, most populous country in LatAm, and we are -- our economy is considered the fourth largest in the region with a GDP of $331 billion. We are the only country in South America with coasts in both Pacific Ocean and Caribbean Sea. This is a strategic advantage because Colombia has access to the more northern market and the Asian market at the same time. In the last 5 years, the Pacific Ocean ports increased its participation in external commerce in 500 bps, mainly in nontraditional exports. With regard to the banking system, we have a great opportunity to grow while our financial deepening was 46% in 2018, which is low compared to other countries in the region. The middle class segment is growing at a rate of more than double the total population. During the past year, Colombia and its financial system has faced a number of challenges. There are 3 main stages to describe the financial system performance. From 2010 to 2014, GDP grew 5% in average and loans at double-digit rate. In the second stage between 2015 and 2017, there was a slowdown in the economy, mainly affected by oil prices reduction and the effect of El Niño, a climate cycle that affect weather patterns impacting agriculture and distribution services. Colombia GDP grew -- dropped to 1.4% in 2017, which impacted loan growth, reducing it to a single digit. The financial system PCL ratio rose from 4.4% to 5.7% in 3 years, impacting significantly the profitability of the industry. Finally, the recovery cycle. Since 2018, the economy was recovered, its growth rate and forward-looking market expectations are positive with a potential growth of 13% average in the total system loans. In line with the economic performance, the profitability of the banking system was significantly affected in 2017. Since 2018, the economy started to recover and grow while the profitability of the banking sector is currently recovering and PCL are falling. Scotiabank improvement is taking longer due to our portfolio mix, which is mainly concentrated in retail loans and credit cards. In 2019, we saw an inflection point with better results, lowering our retail PCL ratio by over 300 bps compared to the previous year. In the slides that follow, I will be discussing our promising result in 2019 and our strategy for the next several year, which is off to a good start. Now let me share with you the evolution of our history in Colombia. Scotiabank entered Colombia market in 2010 by acquiring the operation of Royal Bank of Scotland, a wholesale bank in Colombia. Later on, in 2012, Scotiabank acquired 51% of Colpatria Multibanca, a bank focused on retail, mainly in credit card business. Between 2015 and 2017, due to the economic challenges, the bank adjusted its risk exposure to reflect market condition and invest in control function in anticipation of the next economic cycle. After 2017, Colombia returned to the growth path. In 2018, Scotiabank acquired Citibank's customer and small business portfolio, which added well-trained customer-focused bankers and analytical capacity. The transaction also added 500,000 customers to our base, mainly in the affluent segment, along with 47 branches and $2 billion in loans. To take advantage of the recovery cycle and maximize the benefits from the acquisition, we decided to implement our digital and technology transformation and invest more than CAD 300 million over 5 years to change our core banking system, launched a new mobile and online banking platform and enhance our capital market trust and onboarding system. The final pillar of this strategic plan is to diversify our business mix, improve wholesale banking market share and create synergies between the corporate, commercial and the retail segments. These are the key elements of our strategy: to be a universal customer-centric and digital bank, not only by changing the bank infrastructure but also its process and culture. Now moving to the next slide, let me present some numbers from our bank in Colombia. We serve more than 3 million customers, including business partnerships and employ 9,000 people. With a loan portfolio above $12 billion, we have a market share of 6%. We are the market leader in retail credit card with almost 2.6 million cards. Finally, in the past several years, we have been optimizing our branch network, improving its efficiency to manage our business. Today, we are the fifth largest bank in the country in terms of loans and deposit and the ninth bank in number of branches with 188 branches. Colombia's financial system has more than 25 banks. 10 of them account for 90% of loans and deposits. The 3 main banks in the industry are local and represent more than 50% of the market. As mentioned before, after our last acquisition in 2018, we are the fifth largest bank in terms of market share of loans and deposits and the second international bank. As Nacho mentioned, deposit growth is a key priority for us. In the case of Scotiabank, deposits have grown 400 basis points more than loan in the past 3 years. Moving to the next slide. We're improving our market share by making investment, which improve our competitiveness and acquiring new businesses to gain scale. In the last 3 years, we have grown market share, 103 basis points in loans and 126 bps in deposit, driven by latest acquisition in 2018. We are the market leaders in retail credit cards, ranking #1 in number of cards and second in volumes, increasing our position in 430 (sic) [ 413 ] bps -- points since 2016, mainly driven by the acquisition in 2018. Our main competitive advantage has been maintaining a balanced portfolio mix between co-branded and our own branded card. Today, we have more than 15 alliance with different industry leaders, in example, Claro, Cencosud, American Airlines, to serve our customers according to their needs. These partnerships are critical to maintain our competitive advantage, giving us access to transactional and demographic information for 9 million clients, representing almost 35% of employee people in Colombia. Also, we have a strategic and exclusive partnership with Enel, the energy company in Bogotá, to distribute Credito Facil Codensa. It's a credit card oriented to the mass market. Furthermore, as I mentioned previous slide, wholesale banking represent another important driver of our future growth. As of today, we have 4% market share, but our aspiration is to grow to 6% in the following years. In this point, we have -- we are already getting positive early readings. As October 2019, our growth over the previous 12 months is 2x the average of the industry. Regarding our loan portfolio, it grew more than $3 billion between 2016 and 2019, representing a compound annual growth rate of 12%. We have the opportunity to balance the mix of the portfolio by increasing the wholesale banking share to at least 45% of total loans in the following years. As of today, our commercial and corporate loan have a balanced portfolio exposure with no individual sector representing more than 15%. We also have made noticeable progress in deposits with compound annual growth of 16% over the last 3 years, which is higher than our loan growth of 12%. Our focus has been on improving the deposit mix to reduce our dependency on institutional clients. In 2016, we were the first bank in the country to launch a no-fee account, [Foreign Language], which allow us to increase our retail loan-cost deposits by more than 15% annually during the last 3 years. Moving to our efficiency ratios, our operational leverage and productivity ratio were impacted in 2017 and 2018 by the economic slowdown and the reduction of the central bank rate by more than 200 basis points. This economic shock also affected the industry as I mentioned at the beginning of the presentation. Compared with the banking sector, our productivity ratio in 2018 was 160 bps better than the industry average. Additionally, between the fourth quarter 2018 and 2019, the ratios were impacted due to the acquisition of Citibank retail and SME business, whose efficiency ratio was above 70%. 2 months ago, we concluded the process to migrate the acquired business to a consolidated banking core system. This will produce important savings on terms of IT and infrastructure service that were provided by Citibank and allowed us to produce efficiency in processes, channels and administrative costs. During 2019, we generated CAD $14 million in synergies to our structural cost transformation program and closed 29 branches, representing 64% of the acquired network. Our earning growth is aligned with the economic trends. The net income after NCI compound growth between 2016 and 2019 was 53%. As I mentioned, 2019 has marked an inflection point with the rebound in our performance, driven by improvement in portfolio risk due to the economic recovery and our risk exposure adjustment. Our strong risk culture has been critical in improving our portfolio risk and our earnings. As you can see, the economic headwinds in 2017 and 2018 affected delinquency rates in the industry as well as in our portfolio. But because of our loan mix, which is mainly focused on retail loans and credit cards, our portfolio was affected more than the industry. Let me remind you that 62% of our loan portfolio is retail while the banking sector as a whole is only 46%. 2019 shows a change in trends of our nonperforming loans ratio, reducing the gap to the industry by 50 bps, driven by the economic recovery and our investment in analytics, new statistical tool and the regional collection platform. Reviewing our 2016 Investor Day commitments and the performance of the business, as I mentioned before, the country has faced economic challenge that has required some important changes to adapt to a new market condition and investment to develop growth pillars by acquiring new businesses and renewing IT platforms. We were -- we are confident that better economic growth and improvement in our business will continue over the medium term, as I will be presenting the next session in addition to portfolio quality improvement that we expect will continue in the upcoming years. We also have some additional opportunities that allowed us to improve our growth and our returns. To achieve our long-term goals, we have identified 3 focus areas of growth. First, wholesale banking. Our goal is to become a leading player in this segment by combining our global expertise with a local understanding of the customer in the Colombian market. Second, insurance. By expanding our customer-centric view, we are committed to taking the insurance business to the next level by leveraging our strategic partnership with BNP Paribas Cardif over the next 15 years. And third, digital, leveraging Scotiabank scale and technology expertise to become a leading digital and customer-oriented bank, improving customer experience and increasing business efficiency through the use of digital solution. The goal of wholesale banking is to become a leading player in Colombia. As such, we have several strategies which are showing early results. We have increased the portfolio of both assets and deposits at a rate that outperforms market growth. We are overtaking our competitor with double-digit in both areas in 2019. The bank has leveraged the expertise of global teams to enhance our capability and position ourself as international bonds house for Colombian corporate issuers. Finally, we have become a leader for the top corporate clients in Colombia by supporting their global and regional growth with innovative products like the multi- and cross-jurisdiction solution. We have some notable examples. Successfully arranged the acquisition finance solution for Brookfield when acquiring the control of Gas Natural in Colombia. We lead Empresas Públicas de Medellín liability management program for $2.6 billion with credit facilities in 3 jurisdictions and dual-tranche international bond issuance, the largest in the company history. We are taking the bank insurance business to the next level in Colombia with the regional agreement signed with then BNP Paribas Cardif. Combining Cardif's digital and analytical expertise and our large portfolio of more than 3 million customers, we aim to double our revenue in the next 3 years. One of the most relevant benefits from this long-term partnership is that both of us are investing in creating new portfolio, new product portfolio; simplifying the uses of the insurance to the clients and facilitating a transparent sale process; implement new digital features to improve sales and onboarding processes and customer experience; develop new analytics models to increase the deepening of the portfolio, duplicating the percentage of customers with at least 1 credit insurance. Digital and analytic capabilities are critical for the success of our strategy by creating new solutions to offer the right product to the right customer through the appropriate channel at the proper time. We have also received promising early readings of our digital transformation. For instance, during 2019, we launched a complete mobile and online platform to improve customer experience and reduce transaction in branches. Pure digital transaction share increased more than 400 bps during the last year. To date, 90% of our savings accounts and term deposit are digital, reducing significantly the time to open new products from hours to minutes in branches. We duplicate digital adoption in the last 3 years and expect to increase more than 500 bps during the next year. I invite you to visit our stand and meet our digital customer experience. Moving to our new medium-term targets, I am very confident that the consolidation of our strategy will be moving Colombia to a consistent profitable growth path. In NIAT growth, our expectation is 15% plus compound growth for the next years. In the productivity ratio, we aim to reach a business efficiency ratio of 49%. And in operating leverage, positive trend, ensuring that revenue growth exceed expense. As a summary, Colombia is a very attractive market to invest and a high potential growth opportunity. We have developed a clear strategy to take advantage of those opportunities based on being a universal, customer-centric and digital bank. And finally, Scotiabank is committed to invest to assure the success of the strategy and deliver the medium-term goals. Thank you, and I will take your questions. I invite my colleagues to be here in the podium.

Okay. Thank you very much, Jaime, and I would -- so we're going to have the 4 country heads come up to the stage here. And I encourage the audience to ask questions of any of them. Then we have between roughly 15 minutes, maybe a little more than that, for Q&A. So if you have a question, if you could raise your hand. We have one right here, and we'll run the mic over to you and go from there. Thank you.

Gabriel Dechaine, National Bank Financial. In yesterday's presentation, the -- one of the slides that stuck out for me was each of the Pacific Alliance countries and all the reforms, the taking place currently or prospectively, taxation, labor, social reforms. How is that evolving landscape affecting business investment, be it foreign-to-direct investment or local businesses? I'm more interested in that and their demand for credit because when rules are changing and in flux, it does have an impact on CapEx decisions and things like that. If you can maybe touch upon in each of your countries.

Maybe one at a time come up to the lectern. And...

Okay. Let me start with Mexico. So as you already know, we have a new government in place. So this is a learning curve as any other government, so we have a slowdown in 2019. And of course, every change create uncertainty, but we need to take into consideration market fundamentals that we have there. So the government is working really hard with the private sector in order just to give more clarity at how they can work together. A clear example, they already announced an infrastructure program of USD 40 billion that will be implemented in the next years. So -- and of course, we are expecting a rebound in 2020.

Rebound.

So sometimes you want politicians to make reforms, and sometimes, you don't want to make any, right? In our case, we have been without a congress for the last 4 months. The president, after too much discussion with the Congress, legally closed the Congress, and we elect a new one in Sunday. And it will not be really an issue for the President. He has high popularity because he's been fighting corruption very aggressively and people have -- are respecting that very much. Having said that, the Minister of Finance is set -- us a goal for the year to increase public spending. And she's already -- she already can show a very good and tangible example because in January, public spending have been 70% above the January over the last 5 years, okay? So she wanted to break the cycle in which January usually is a low spending. And the other target for the year is to increase and unlock some of the most important projects, infrastructure projects that are some under private -- some are private projects, some are public projects. One thing that worked very well for Peru in the last 18 months was the infrastructure building for the Pan American Games. And the reason why that worked very well is because the government signed a government-to-government agreement, something that had not been done in Peru with the U.K. And it was a 1.2 billion spending in infrastructure that worked wonderfully. No corruption, everything on time. And so the Minister and the President are planning to implement the same system, G2G agreements, with -- it could be Canadian, Australian, U.K. These are the most mentioned names to unlock some of these major infrastructure projects.

Well, in the case of Chile, as I mentioned during my presentation, due to the reforms of the previous government, especially tax reform and the labor reform, it was a reduction in the investment level. However, during the last year, there were several mining projects and energy projects that were reactivating the investments. And therefore, the next year, we expect also the public investment is going to increase in important amount. So during the next years, we expect a recovery in the prior investment supported by the public investment.

Okay. In the case of Colombia, you will see that the forecast for the growth is more than 2% GDP for the 3.5% GDP in the next years. We are not seeing changes in the inflows of the investment in the country. What is important in the past tax reform that had passed the Congress in last December, it was to promote investment in the country. For example, they are reducing the income tax for companies from 37% gradually to 30%. That's significantly and I believe it's important. Also, the government has this strategy to invite investors in technology area, where the President of Colombia name Economía Naranja, or Orange Economy, to try to attract additional investment in these new sectors that provide a lot of employment.

So I think just to wrap that, I think regardless of the reform, all the reforms you're seeing here are supportive of investments and supportive of consumption. And consumption marches on across all these countries, as Brian remarked in his opening statement yesterday. Good. Other question? In the front?

It's Meny Grauman from Cormark Securities. Just a question specifically for Mexico. I'm just wondering how important is M&A for the strategy in Mexico going forward. I say that in the context that one thing that stuck out to me was just how impactful obviously M&A was in pushing BNS forward in both Chile and in Peru. So I'm wondering how critical M&A, as especially from a scale perspective, from an ROE perspective in Mexico.

Let me take that one. Well, first, I'm very proud of the effort of the Mexican team because 250 basis point growth in market share, all organically, speaks to a tremendous focus and performance. You know in this moment, as I've said, we are really focused on executing our new footprint optimization across international banking. We are, of course, open to look to opportunities for M&A, as we -- Brian and Raj mentioned yesterday. And if those appear in Mexico, we'll look at them and we would make a decision. But we don't see frankly anything coming in the coming year. We don't see any signal that, that would happen.

There's a question over there in the far side, right there, so in the middle.

Nacho, I just wanted to come back to you. If you look at each one of the countries and you look at the medium-term targets you've set for them, you've given the consolidated international a low bar relative to what you're asking each one of these guys to deliver now. The gap, I guess, is the Caribbean. But how much of it is indeed the Caribbean and how much of it is conservatism, I guess, on your part at the consolidated international level?

Well, I think on the one side, is the Caribbean and Central America that even with this reshaped footprint, we expect to get to grow at mid-single digits. So that combination of a double-digit growth in the Pacific Alliance countries and the Caribbean makes us confident that 9%-plus is an ambitious but achievable target. The other thing is that although these -- all of these countries have this potential to really grow for the next decade at a very robust pace, well, we have the circumstances like any country, macro or political, social cycles. And what I really would reinforce is that our confidence in the target is not only the resilience, the growth but also the diversification. This is not a Mexico play or a Brazil play or any concentration in any of these markets.

A question -- it's Rob Sedran from CIBC. A question on Chile. It's the most developed market, but I also noticed it's the widest gap between loans and deposits. So I know one of the initiatives you have is to grow the deposit side. But I'm curious, is there a structural reason why the gap is as wide as it is? Is it the acquired businesses? Is there something else to know? And is it any kind of impediment to growth on the loan side when the gap to the deposits is that large? I mean is it all being funded locally or is it a global treasury that's funding it?

Yes. Going to the first part of your question is that Chile has a structural issue that you identified quite well is -- and the reason behind is the development of the pension fund system. So you have a situation where pension funds are able to provide funding to the banks at a lower rate than a term deposit. So when you see the 3 largest bank before we had the acquisition of BBVA, so Banco de Chile, Santander and Bci, they concentrate 80% of the core deposits and a huge part of the term deposits. So they are more balanced. However, remember that both BBVA and Scotiabank were middle-sized banks. And in the case of the middle-sized banks, we didn't have too much core deposits. We have just 1/3, 2/3 in term deposits, but the difference was funded by wholesale banking funding coming from the pension funds, mutual fund entities, insurance companies. And those deposits were very cheap, very competitive. So you can fund your bank with wholesale banking funding, which is not the best alternative but at very cheap prices. So prices was not a problem. Right now that we are bigger, going to the second part, first of all, we have been growing, as I showed in the presentation, the core deposits are very fast-paced but the gap is important. To give you an idea, a bank like Bci, which is the best-in-class, they have 25% of the total funding in core deposits and we have around 15%. So we have to improve that. That's why our strategic plan established that core deposits should grow 2x the loan -- the total loan portfolio growth, and we are going to do it through this strategy of payroll, as said there. About the -- if there is a limitation, we don't want to -- we have limits in the ALCO committee about how much we can expand the loans versus deposits, and we have limits regarding that and we keep the bank within the limits.

Francisco, maybe it's worth to mention the gap [indiscernible]

Yes. The increase in the -- at this moment, that gap opportunity of having less core deposits related to the total funding structure of the bank is 70 basis points, and we plan to close 50% of that gap, so 35 basis points in the next 3 years. That is going to represent around $40 million of additional NIAT.

We have a question down here. Oh, he's got the mic already. Good.

I'll start with Nacho, please. Nacho, when Dan did his -- Dan Rees did his presentation yesterday. He talked about the products per customer being north of 10 products as being the customers that the bank regards as the highest quality. I'm curious as to across your footprint in the Pacific Alliance, how you're measuring success in terms of cross-sell. And maybe to tie into that, one of the interesting slides you had was, it's not only the branches that you've closed, it's the branches that you haven't had to open as a result of the success in digital. How does less face-to-face interaction with your customer base impact the ability to cross-sell?

I think, first, Dan and I frequently talk about this. This is a very important aspect of our relationship with our customers, to really getting to know them better. We call it segmentation. But really, at the end is to have a much more granular ability to understand our customer base and we're investing heavily to do that. And of course, I fully agree that while the role of the branch is changing, that is going to change for more meaningful face-to-face interaction. Today, the branch is really using a lot of the effort of the staff to do operations and to do even back-office operations. And quite frankly, that is not what customers like. That also affects the experience when they go to the branch. So I would say, the vision is customers and employee using the same tools. So the branch is important, but the branch needs to be digitized to improve that customer and employee experience. And that would allow us -- we'll change the role of the bank, probably the real estate space. This has been done in a way that had been very relatively smooth. This is not a one shot. It's really a constant focus on how we can adapt to these behaviors and to leverage the opportunity of digital tools, both in the branch and in other channels. And the benefit of that will be better advice. The branches are becoming digital training centers because a lot of customers like other experiences, like an Apple store, are going there to really understand how our app goes, how can they do a term deposit. And once they learn this, we all, not all, but many of us like self-service, if it's sufficient, fast, convenient and safe. So I think both things are very important. And deepening our relations in the bank is very important across Canada, across international banking.

Are there any other questions in the audience? Oh, right in the back there.

I was hoping we could talk a little bit more about the state of the rollout of the bancassurance agreement with BNP, maybe just in terms of what's launched so far, what's soon to launch. And to what extent is the effort digital?

Okay. Let me just give you a general picture, general explanation, and maybe I will let Miguel explain a little bit more how we are developing these index in one example. As I said, insurance is a very important need. But we had the opportunity to connect this much more in the value proposition of our customers when we are having a conversation about what we can help them solve in terms of their everyday life or future decisions. So the purpose of this is to have a 15-year strategic alliance. BNP Cardif doesn't have insurance companies competing in these markets. Their strategy is really to develop a partnership and they are running the risk of the business. They are manufacturing these products. Our strength is the distribution, our customer interaction. But no doubt, where we found a very common understanding was on digital and analytics where we want really to integrate as we are growing so fast, as you saw our digital interface, we want insurance to be part of that. So it's already happening. And I will let, maybe, I don't know, Miguel or Jaime, whoever wants to -- both of you are doing -- Miguel?

Sure. Sure. The expertise that BNP Paribas has in Colombia as a white label, providing services to other banks, is fantastic. And we have been -- even though we have a very healthy insurance business in Peru, as a broker, it represents around 100 million revenue, which we plan to double in the next 3 years, we haven't done -- so we do that through our branches but not digitally. And what we've seen, learn -- when the person learning this from Colombia, is the way they do it digitally. And the best way to sell optional insurance digitally is basically to take almost all exclusions out of it. When you usually purchase an insurance, you'll have pages and pages of what's covered and what's not. So as opposed to sell an insurance of $2 per month, with a lot of exceptions, maybe we can go to $3 and then just sell a clean version. That's what we are starting to do. And we, again, plan to double our business from 100 million to 200 million in the next 3 years.

Yes. Maybe to add, in Colombia, we started to work together with BNP Paribas since March 2019. We accomplished with the integration all the transition of our insurance portfolio for other companies to BNP Paribas with a lot of success. And what we are doing now, for example, is selling very easily in our tools that we will present and Sean will present, and you can see it in the demo that we plan to do in the digital factory. You can see that it's very easy in the conversation, for example, selling a credit card. You can ask the customer if they want to be protected for, for example, of unemployment. And it's a simple click that you put in your platform, digital platform. It's very easy and it's now running and we are growing very fast the cross-selling at the moment that we are selling the card.

So the technology demos that will follow the presentations today will provide very sort of granular examples of various themes around 5 of our core markets. And there will be opportunity, one of those is insurance and you'll provide -- we'll be showing you a clean example of that later on. Another question here?

Yes, just a quick one on Colombia for Jaime. That's the only region where it looks like the target was increased relative to the old target. Is it just the low starting point?

Yes. I believe this is the part we are, I believe, that we have an opportunity to grow. We had, in 2019, this inflection point and we believe that we could grow it better from now on.

Okay. And then another pan-regional question, sorry about that. But seeing any changes in business customer behavior, maybe for the capital markets team later on, but whether they're changing what currency denomination they want their loans to be in, if they're pushing more into deposits, let's say, over the past year because they want to maintain higher liquidity levels for whatever reason.

Yes. Well, talking about the wholesale clients, specifically in Mexico, they have the possibility to manage pesos, U.S. or even euros, right? So -- but we hasn't seen any change. No, as in any other multinational, they have their risk management policies. And also, I think that one of the things that is good now that we have a more stable currency and FX is that now you can have access to the capital markets locally. So you have the diversified investor base as well. So it makes that we have a more stronger solid capital markets transaction. So -- and the companies has been really disciplined towards how they manage their balances during the last years.

Well, in the case of Chile, we have seen declines due to the social unrest. They were hedging their positions, doing cross-currency swaps and also FX transactions. And Scotia has advantage that we have between 20 -- a 20% market share in derivatives. And that's going to explain a very good result in the first Q of 2020 basically because capital markets is over budget because these new business opportunities that the clients has been requiring for us.

Okay. Well, maybe we take one more question. I think there's a question in the -- right over here.

We're seeing that the digital transformation is happening very fast in Latin America. So I just wonder how are you thinking about fintechs, how are you thinking about Amazon, MercadoLibre, MercadoPago entering in the region.

Well, let me answer briefly just because of time but we can take it off-line. We like very much working with fintech. We do this through partnerships. We have 3 key partnerships that allow us to scan this fintech market across the Americas and even in Israel. In Israel, we have partnered with Viola Partners. It's very important for regulatory technology, fraud, the tremendous technology opportunities. In the U.S., Latin America, we have partnered with QED Investments (sic) [ Investors ]. We have identified and invested selectively through them in some of the most promising fintechs. You will see one. Please look at the Mexico stand. Konfio, one of the most interesting small business online lenders that we are partnering with them, and it's been a successful experience. And in Canada, we have partnered with George & Partners. It allows us also to scan this market. So there's a lot of complementary between the banks and fintechs in many aspects. We really don't compete. And relative to the large technology giants, I would just leave this, a reflection. Look at the large U.S. banks and the way the large technology companies are partnering with them. I think this is a reflection that the partnership can also work at a large carrier scale for banks.

Is there one more question? Darko, do you have a question? Right in the front of here, please. And then we'll -- this will be the last question for this session. Thank you.

It's Darko from RBC. I just want to take us back to the bancassurance for a moment, please, because when I think of your 2 countries where you're doing these -- the bancassurance deals, I think of a young population, a population that is under-banked. So I don't necessarily think of insurance as being the first and foremost thing that you would be doing. So the question is, were you approached? Is this an exclusive agreement? Is this because competitors were doing it and you saw an opportunity. Can you just perhaps -- will this expand this entire opportunity?

No. I would say, Darko, it's a good question. Of course, we proactively did this, it was a complicated process because we really look for all the partners that could be the best fit and with this simultaneous process in the 4 Pacific Alliance countries. We have been in this business for many years. We are not in the manufacturing, in insurance risk. We are in distribution. But frankly, it's about our aim to really improve customer experience. To be very frank, insurance has a risk not to provide the best customer experience. And we want to integrate much more with the experience we provide to our customers in all channels. And the type of products is mostly around life. This are really -- this is very important in our markets that a lot of people that doesn't have a really adequate life coverage. So this -- besides the creditor insurance linked to our -- to lending, there's tremendous opportunity to provide specific solutions to protect life, to protect unemployment, as Jaime said, to protect accidents, to protect disbursements in an ATM. These kind of solutions are the most common. Is that clear?

[indiscernible]

Sorry.

It's exclusive to...

Sorry, it's an exclusive partnership? Well, let's say, exclusive in the sense that we have committed to work together. Of course, they have another business. And in certain insurance products, mostly around health, is where we have an exclusive agreement to work together.

Okay. Well, thank you very much. That will conclude our section on the Pacific Alliance and International Banking. Thank you.

So our last presentation of the morning session is on Global Wealth Management. Glen Gowland unfortunately was unable to travel with us to Chile, so we have recorded and will play his remarks. Following his remarks, we will have Nacho Deschamps; and Max Menard, who is the President and Chief Executive Officer of Jarislowsky Fraser, up here to answer questions. Glen will be next available to investors at the BMO Wealth Management Forum on March 6. If there are investors or analysts who would like to be in contact with Glen in the absence of his presence here, please let Investor Relations know when we can set that up. So with that, I'll put the video and then afterwards, we'll have Q&A.

Good morning, everyone. The big question for wealth management businesses is, where will growth come from both today and in the future. Scotia's Global Wealth Management business has been on a very strong growth trajectory. And over the last 5 years, we've made some very conscious choices to focus on areas with superior profitable growth prospects and where we can differentiate from our competitors. Today, we will talk about those choices and how they have driven existing growth and where we see the biggest opportunities for future growth. Global Wealth Management Strategy is focused on delivering value to customers in areas that are not already commoditized or potentially even going to 0, like we've seen with commissions on trades and passive investing. We've built a unique business model that provides superior growth prospects, both in Canada and internationally. Today, we will give everyone a clear picture around the unique opportunity we have in our existing businesses, the capabilities we've added to drive further growth and how we will leverage our combined capabilities and unique business model for future growth opportunities. Historically, the Wealth Management business has been primarily built to leverage our retail footprint in Canada. And today, just over 80% of our net income comes from there. We've refocused both the investment management business and the advisory business, which I will talk more about in a few moments, while adding strategic acquisitions to fill important gaps and create scale in our targeted segments. We have no material gaps in our Canadian business, and we have a scalable business model that is different and, we think, superior to our competitors. There's lots of runway for growth. We have an asset management business that has the broadest distribution network in the country and the most integrated wealth management advisory model, including private banking, estate and trust, advanced financial planning and other wealth management services. I talked about the build-out being mostly complete in Canada. And overall, we have $500 billion in assets. So we have all the scale we need, and we're seeing above-industry growth in the areas where we are focused. In the last 10 years, assets in our Wealth Management business in Canada have increased threefold, driving earnings growth by 4x. We've achieved this growth while making investments to build a market-leading Wealth Management platform in 2 key areas. First, in asset management. We are an active management shop. We've added a number of investment professionals to build on our expertise that focuses on risk-adjusted returns to deliver industry-leading investment results. We have also built capability and are industry leaders in new areas like active ETFs and liquid alternative funds, where we are the market leader in sales and hold nearly a 30% market share. Secondly, in our advisory business, we have the fastest-growing private banking platform in Canada and the largest trust and private investment counsel businesses, both growing at rates above industry averages. Also, we've built the highest number of team of expert specialists per adviser in Canada with financial planning, business succession, insurance and estate and trust experts. Now let's look outside of Canada. The opportunity in international is significant, and we can follow our footprint and leverage the capabilities and approach that worked so successfully in Canada. Mexico is a good example of how we can build out a complete wealth management offering successfully. We followed the bank's retail and commercial footprint. We leveraged in-country expertise and risk teams and aligned our service offering to the maturity of the market and customer needs, including asset management, private banking and investment advisory. It's still early days but opportunities are coming, especially across Pacific Alliance countries. If we look at asset management opportunities, AUM is expected to double by 2025 to $5.3 trillion. For the advisory business opportunities, 86% of affluent and high net worth customers in Latin America want personalized and integrated financial plan-based advice, similar to what we have built in Canada. 5 years ago, we spent a vast amount of time researching and talking to Wealth Management clients from across our footprint on what they needed and where they find value. In a nutshell, it boiled down to 2 key things that clients are willing to pay for. The first is alpha. People are willing to pay for a superior-performing, innovative investment solutions that are actively managed and focused on lower risk. Secondly, seamless advisory services that solve complex wealth management needs like private banking, estate and trust, particularly for business owners. We have been intentional and focused on these areas and services that customers will pay for. And we've throttled back in areas that are more commission or transaction-based. For example, we improved the quality of the private banking offering, moving from a concierge-type service to sophisticated lending solutions with experienced commercial bankers, and now our business is growing faster than any of our competitors. We moved upmarket in our full-service brokerage business with fewer advisers and higher-quality books, focused on high net worth clients who benefit from integrated wealth management advice. The average new household in our full-service brokerage business is now $1.4 million. And we built scale with the MD and Jarislowsky Fraser acquisitions. We now have the largest private investment counsel and trust businesses in Canada. We have integrated MD and Scotiatrust businesses under common leadership with a 33% market share and growing. And Jarislowsky Fraser filled a key gap in our institutional offering. As you can see, the momentum continues to build, and we are seeing proof in the results that we are on the right track. In addition to contributing more to all-bank earnings, we are focused on earnings quality and efficiency. As indicated earlier, the earnings mix is far more fee-based, and we have built a highly efficient business model with productivity ratios that have already met 2018 Investor Day targets of less than 65%. That includes our acquisitions that came in significantly higher than that. So to put that in perspective, Scotia's Wealth Management productivity ratio is 900 basis points on average lower than our other bank competitors. We've also seen double-digit AUM growth over the last 3 years. Mutual fund AUM, we are now #2 among Canadian banks. And this includes $57 billion in dynamic funds, which are sold outside of Scotia channels. This is a truly unique competitive advantage in our asset management business. We also got ahead of the curve on a number of industry themes in this area. We've significantly reduced fund fees 2 years ago and now have lower-than-industry pricing across multiple categories. We discontinued sales in deferred sales charge mutual funds almost 3 years ago, which regulators have just mandated to be stopped and will have no impact on our sales flows going forward. We have an experienced leadership team, each with decades of industry experience and the momentum continues to build across our businesses. We suggested on our Investor Day in 2018 that Global Wealth Management should be closer to 15% of all-bank earnings within 5 years. This would require almost a double in net income over that time frame. We are well positioned to get there and are over 13% already, but let's look at how we reached that 15% target. We have a 3-pronged strategy for future growth. The first is to maximize growth through our existing foundational businesses; the second is to leverage our acquisition capabilities and opportunities for growth in new segments; and thirdly, targeting growth in key international markets. Let's look at each of these in greater detail. In asset management, we know that people will pay for innovative, high-performing investment management, so we purpose-build unique products for each channel from funds to managed asset programs to private pools. We are accelerating AUM growth in proprietary and third-party sales channels unique to Scotia. And over 1/3 of our gross sales are through third-party advisers and independent financial planners outside of Scotia channels. Additionally, innovations like our industry-leading liquid alternative solutions that I referenced before, are higher-margin, higher-demand fund products, where the fees are typically about 1/3 more than traditional mutual funds. On the advisory side, we've developed specialized expertise for growth in high net worth customer segments. Over 50% of clients in Canada with over $1 million in investable assets are business owners, yet only 8% of these business owners have a formal succession plan. We've built teams of business succession and financial planning experts to deliver on this segment, and we're really just hitting our stride. We've completely integrated our branding and operating model with co-location in every new office we build, and we've co-located over 1/3 of our existing branches, including all of our largest cities which were a priority. The second prong of growth is through leveraging our acquisitions. We added 2 key businesses that will supercharge our growth: an iconic institutional brand in Jarislowsky Fraser, which fills a key gap in our institutional and ultra-high net worth space; and a category killer in MD Management with 50 years' experience in the physician space. Both these acquisitions are integrated into our business model now, and they're adding capabilities and opportunities to complement the Global Wealth Management platform. Jarislowsky Fraser is seeing organic growth in the institutional space outside Scotia, and we are also growing their mandates and leveraging their ESG capabilities within Scotia channels, both in Canada and internationally. Jarislowsky Fraser's ultra-high net worth individual business is also growing. The average account size of $10 million is creating excellent opportunities for our private banking and trust businesses, which we are just beginning to capture. MD assets are at record levels, and MD has a 33% share of the physician market in Canada. They have now added Scotia's retail and private banking services, which was a missing piece in their offering that physicians were asking for across all stages of their careers. In the first year, experienced private bankers were co-located in all major MD offices across the country, and we are seeing strong growth in that area as well as in Scotia's new health care plus offering. Scotia and MD's combined capabilities is proven to be a powerful growth catalyst. As an example, since the acquisition, Scotia and MD have signed 23 exclusive physician-focused partnerships that allows us exclusive opportunities to leverage both MD and Scotia banking offerings with these groups. And we also have an opportunity to replicate MD's winning process and gain valuable market share with other professional customer segments through our MD relationship both in Canada as well as international countries. Speaking of international, international wealth management represents our third area of growth. As mentioned, we have been very successful following our retail and commercial footprints with wealth management in Canada. And the Pacific Alliance countries are not exactly the same but the process to do it will rhyme. Nacho and I work closely together and are building wealth management leadership with Raquel Costa, who joined us in August and has 20-plus years of industry experience in Latin America. She came to us from HSBC Mexico, where she led the customers and core banking operations for the retail banking and wealth management businesses. And she has also spent 12 years with Santander in Brazil and the United States. Dan Rees and I worked hand-in-glove in Canada; and Nacho, Raquel and I are doing the same in international. Our international wealth management strategy will be to follow the bank's footprint to realize opportunities as each country and local markets' wealth management needs develop. One of the first areas of focus will be building out the mass affluent market offering. The middle class in Latin America grew by 13 million households in the last 10 years. There will be opportunity to hub-and-spoke investment management capabilities to complement in-country expertise to capture this growth, and we've already begun. Canadian-based asset management teams now manage over $1 billion in international portfolios, and we recently launched a new Jarislowsky Fraser global equity mandate in Mexico, which is seeing good flows. The high net worth segment is also growing rapidly. And as wealth grows, needs become more complex and require specialized financial planning, private banking and trust services to deliver the whole bank to these customers. In Mexico, 70% of country's GDP is from family businesses. So the business model we have developed, including MD's unique approach are easily exportable to other regions. We recognize that many ultra-high net worth customers in Latin America and Canada are global citizens. Geopolitical influences and currency volatility add complexity to their financial needs. And 1 gap we have is a U.S. capability that we will look to fill through build-out, but also potentially an acquisition. An acquisition would likely be smaller, with some investment management and ultra-high net worth capability for us to use for Canadian and Latin American ultra-high net worth clients. You'll hear more about our progress internationally moving forward. We believe that our unique approach and highly efficient, scalable platform will drive growth across the Scotiabank footprint, and we're well positioned to deliver on our medium-term targets. So for key takeaways, Scotia's global wealth management business is uniquely positioned to deliver superior growth. First point, lots of room to continue above-market growth in asset management and advisory businesses in Canada. They are fully built out, and now we are realizing on that opportunity; point two, the newly integrated businesses of Jarislowsky Fraser and MD deliver additional growth across new customers and segments, both in Canada and internationally; and lastly, we will leverage our Scotiabank footprint for international growth and potentially augment with the U.S.-based ultra-high net worth offering. Outside Canada, there's some early wins, but outstanding medium to longer-term growth opportunities. We have strong momentum and look forward to carrying it into global wealth management's next phase of growth. Thank you very much, and we'll open up for questions.

Okay. If I could please ask Nacho Deschamps and Max Ménard to come to the stage. Given Nacho's focus on international, and Max's focus on institutional and Jarislowsky, I would respectfully ask that if you could limit your questions to those areas that they're best qualified to answer questions. And as I mentioned before, anything beyond that, related for example, to Canadian wealth management, we would defer that to -- for future interactions with Glen Gowland. Are there any questions? I hear lunch around the corner, I think. . Okay. If there are no questions, we'll conclude this morning's session on that note. These gentlemen will both be available, obviously, in person for any future follow-up questions and answers. Thank you. So this concludes our formal program for this morning. [Break]

Okay. Good afternoon, ladies and gentlemen. The, again, formal part of our program for this afternoon. This afternoon, we'll shift focus slightly away from the Pacific Alliance in Latin America and we'll have 4 presentations: Global Banking and Markets; Global Risk Management; Digital and Technology, and then Brian Porter will come up with some closing remarks. Following his remarks, I will come up and provide some instructions about the 5 technology demos that we're going to cycle everyone through, which will be in the auditorium next door. That will be the concluding part of our Investor Day program today. So with that, I'd like to introduce Global Banking and Markets. We'll be hearing from Jake Lawrence and James Neate. And with that, I'd like to invite Jake to come up to speak. Thank you.

Thanks, Phil. Good afternoon, everyone. As Phil mentioned, my name's Jake Lawrence. Along with James Neate, who will be up in a minute, we're the co-Group heads of Global Banking and Markets or as we'll refer to it more commonly, GBM. James and I have had this role since December of 2018, and over the past year-plus, we've been refining GBM's strategy and determining the areas of greatest opportunity to build this business. This has led to some additions and it's also led to some subtractions, and we're going to touch on both of those today. In all, we've made significant progress in organizing our business for 2020, but also for the future, and we're excited, both of us, to have the chance to talk to you about it today and give you a bit of an overview of an organization that's probably a bit more complex than the rest of the bank, and the results are maybe a bit more opaque. We're going to start with an overview of the GBM business overall, talk about our strategy, and I'm going to talk a bit about our U.S. operations, which I had the opportunity to lead for a number of years. I'm then going to hand it over to James, who will take you through the LatAm business as well as the strategy for that market, and we'll finish up with some financial targets. And as you're all aware, LatAm is an important part of the GBM business. I think that was on display last night at the CEO dinner, but the specific results for this division are reported in the International Banking segment. And the bank -- the strength of the bank's retail presence across the Pacific Alliance is obviously well understood and I think even better understood after the past couple of days, and we're going to highlight the strength in GBM in these markets in the following presentation. So we hope that we're able to impart on the audience joining us in the room and online that we're similarly uniquely positioned and strongly positioned with our wholesale franchise in LatAm. Within our GBM franchise, we really are focused on an Americas strategy across our 6 core countries. We talked a bit about it. Brian did it in his opening remarks, from Canada to the tip of Chile, including the U.S., Mexico, Peru and Colombia as well. And increasingly, we're focused on taking these Americas capabilities and delivering them to Europe and Asia, and also bringing companies from Europe and Asia to the Americas. Now over the last year, we've worked to set a clear, focused strategy for the GBM team built around 3 very simple and clear pillars that James and I have repeated a number of times: client, product and geography, and we've repositioned our business to execute on that strategy. We've made the necessary investments in the business, upgrading in some people areas, trying to improve our processes, and we're making investments in technology now that will take a few years but will make a difference in our businesses. We've begun to shift our business mix to drive improved growth. We've also uptiered the talent to complement our existing bench strength we have within the Global Banking and Markets business and feel we have the right people in the right roles to more effectively serve our clients throughout the Americas and the rest of the world and to also capture a greater share of their wallet and greater share of the revenue pie that's available to us. And we think, today, we're better positioned to capitalize on the significant opportunity in front of us and better leverage our Americas footprint across the entire franchise. Now I'm going to start with some context. As I mentioned, the GBM business is sometimes a bit more opaque than the rest of the bank. We are a leading Americas franchise. We're the second largest wholesale bank among our Canadian peers. We serve more than 15,000 clients across 21 countries with more than 3,000 employees on our team. And in fiscal 2019 last year, including the LatAm business, we generated approximately $6 billion in revenue for the bank and over $2 billion in NIAT for the organization as well. And as both Brian and Raj mentioned yesterday, the repositioning that began with our bank 6 years ago has continued across GBM over that period of time. With changes to our business and geographic mix, we've positioned ourselves to take greater share in our core markets, but we've also reduced risk, which isn't obviously measured as easily or understood as it's happening. We've aligned to the all bank strategy with several of our initiatives. We've derisked our noncore metals business and reduced our trade finance and corresponding banking franchise, reducing our customer footprint globally and some of the access points to our organization. We sharpened our focus on the Pacific Alliance, and when James gets up, that will become even clearer. When we talk about the U.S. in a minute, you'll also see the expansion into the U.S. and the results of some of our planned and targeted growth. Europe and Asia has involved being more focused, focused on the Americas. And as I mentioned earlier, delivering the Americas to Europe and Asia, and Europe and Asia to the Americas. And given our balance sheet structure, we've also increased our emphasis on corporate payments and deposits. We want to reduce our reliance on wholesale funding and strengthen our divisional balance sheet. But at the heart of our business is strong loan growth. And as many of you are aware, it's built -- our wholesale business was built on the foundation of our experience as a very strong corporate lender, and we continue to build on that success as we move forward. This slide shows our loan volume, which continues to increase, up more than 10% in 2019 and up 9% CAGR since 2016. As of the end of last year, our GBM loan book reached almost $130 billion. It's a very high-quality loan book. Our business is downturn-ready, as we've mentioned before, with more than 2/3 of this loan book being investment-grade. The strength of the loan business is mirrored across our Americas footprint. Our weighted loan mix by geography shows that more than 50% of our lending comes from Canada and the U.S., but we also have strength in LatAm where an additional 30% of our loan book comes from. And not only do we have the diversification by geography. We also have diversification by sector, and we're diversified around areas of historical strength for the bank including financial services, energy and real estate, all of which are aligned to the geographies we do business in. Now competing, you got to have competitive strengths. And it's no secret that banking has become increasingly complex coming out of the global financial crisis, new entrants, nontraditional players coming into the market, and winning in this space is more difficult than ever. However, we think our organization has a set of unique competitive advantages that not only allow us to compete but to increasingly win more of our clients' wallets across the Americas and on through rest of the world. So when we think of our competitive advantages, I think of them across footprint, balance sheet and expertise. And I think, between yesterday and this morning, you've seen the strength of our footprint. It's a unique footprint. I believe it was Nacho who mentioned earlier, we're the only bank that's in wholesale bank in all 4 Pacific Alliance countries. But in addition to that, we complement that with both the Americas and the U.S. Our balance sheet. I talked about the size of that being an experienced corporate lender. Given our competitive cost of funding as well as our cost of capital as a highly rated bank, it allows us a position to develop relationships with customers. We also use it as a jumping off point, and we think we have room for improvement for other businesses, particularly fee-based ones, to grow in incoming years. And then in addition to footprint and balance sheet strength, we also view expertise as a competitive advantage. In certain sectors, power and utilities, real estate and infrastructure as well as capital markets products; on the financing side, prime services, repo as well as in equity derivatives. We think those competitive advantages position us well as we move forward. So with that as context and background for the division, I'd now like to turn a bit more towards our strategy and actually looking towards the future, which will wrap up with our financial targets at the end. Our strategy is focused on expanding our full-service corporate offering and our regional and institutional capabilities to better serve clients and deliver more profitable growth to our shareholders. As I mentioned, the strategy is centered around 3 pillars: client, product and geography. James and I have been very clear, on the client pillar, we're very much rooted in increasing our relevance to corporate customers, and we've done that by aligning our resources around our most significant revenue opportunities in the corporate space. We also realize that it can't just be about lending. So we've made some investments and increased our focus around non-lending wallet activities such as origination, equity capital markets, debt capital markets, advisory, so strengthening our investment banking, merger and acquisitions practice, as well as other capabilities we have around FX and rates such as hedging and balance sheet strength around deposits and payments. We've deployed a data-driven and measured approach to this so that we best target the most relevant revenue opportunities, and we've already seen improved client coordination across the franchise as well as stronger financial results from these efforts. The second category is the product pillar. And it's really focused around strengthening our capital markets offerings. We want to be able to cross-sell institutional financing through investment in new select capabilities. So if we're going to be a large financier in capital markets, we need to have stronger capabilities around electronic prime services, direct market access as well as swap capabilities. We also have some distribution gaps that we want to get stronger in. So we want to build stronger origination capabilities, and I talked about ECM and DCM, and those obviously feed into that with stronger primary flow to help us grow our other capital markets activities in secondary trading, hedging, et cetera. And we think there's opportunities to get stronger in those areas, particularly in some new sectors like technology as well as health care. And so with a stronger product suite, we're extending more of our services and delivering greater value to our client, with the objective of winning more of their wallet. And then finally, the third pillar, geography. It's an area of strength that's been touched on today by myself as well as others. We are capitalizing on that Americas footprint. We're providing clients with access, as I mentioned, to markets from Canada, all the way to the tip of Chile. And from some of the discussions, hopefully, you've had around the edges of this conference, you've seen some of the clients we're doing business with and how we're providing them services throughout the regions. We believe in Canada, our home market, which is very important to us. We've not yet captured what we believe is our natural market share. And so we're working hard to protect our home base and enhance our franchise in this very important market. In the U.S. over the past couple of years, we've begun a program of targeted phase growth, and we're going to get to financials in a minute that demonstrate that, to complement the services in Canada and the Pacific Alliance. And then here in Chile, 1 of the 4 countries of the Pacific Alliance, James will talk a bit more in a moment, but we continue to create a top-tier local and cross-border wholesale franchise. And we're really focused on the opportunities in Mexico, a large market, as well as Chile, which drive about 60% of the revenues from the region. Our recent acquisition of BBVA Chile, which has been on highlight in market here, has added meaningfully to our wholesale capabilities as well. Our fixed income and derivatives capabilities have been strengthened meaningfully and are helping increase our product offering not only in this market but across the region. And as we said before, while we have a very focused Americas strategy, we do have capabilities in Europe and Asia, but they're very focused on supporting 2-way connectivity with the Americas. So our clear client product and geography strategy has done a lot for our team and our business. It sharpened our focus on winning market share in key sectors. It's helped us start to add in more capabilities and tools to win a greater share of wallet, and we think it's already starting to pay some dividends in our financial results and our financial performance. And James and I are confident in our ability, of ourselves and the team, to execute our strategy. Now before we move on, I'd like to take a moment to talk about the U.S. franchise. So the U.S. has always been a critical part of the bank's history but has a lower profile, I'd say, relative to other businesses. So if you've been around the bank for a while, covering the bank, investing in the bank, you would have heard the story about Scotiabank being in Jamaica before we were in Toronto. We'd follow the spice trade between Europe, the East Coast of Canada, the Caribbean and back around. But what's not often well known is we're actually even in Minneapolis before we were in Jamaica or before we were in Toronto. So our history in the U.S. exceeds 100 years. And since we don't report GBM numbers by region at this stage, the true heft of U.S. operations aren't fully appreciated or understood and often masked. So our U.S. business, it's the vast majority of the GBM. And it accounts for approximately 9% of our all bank NIAT in 2019. Further, our GBM business is a very well-known partner of the Fortune 500 and we're a very bona fide business in this market. We have more than 4,000 clients across the U.S., served by 700 employees in 5 offices. And last year, the U.S. region delivered close to $2 billion in revenue and close to $800 million in NIAT. So further dimensions to show you the strength of the business in the U.S. market, which is obviously key to our Americas strategy. Now our U.S. business historically has operated on a global product basis. However, in more recent years, we've transitioned the GBM office from a satellite one to really a U.S.-centric business with better organization around our customer base focused on more meaningful cross-sell opportunities. This dedicated focus is delivering better financial results, which is on the slides, and we're seeing better upside in our equity capital markets, debt capital markets, FX and M&A businesses. And we've made significant progress on building complementary capabilities, including LatAm-based focus -- LatAm-focused talent in the U.S., and James will show how we've -- how that's enhanced our league table performances. We've also enhanced our distribution to greater leverage the balance sheet commitments. And beyond being a key bridge between Canada and the Pacific Alliance for our multi-region clients, the U.S. contributes approximately 1/3 of the divisional revenue. Our broad Americas strategy is rooted in the strength of our offering in Canada, the United States and Latin America, and to provide a deeper overview of the LatAm business. I'd now like to ask James to come up join me on stage. Now before he comes up, I'll give a quick introduction. So many of you will have had the chance to interact with James over the past day or so, or in his previous capacity as Executive Vice President and Head of International Corporate and Commercial Banking. In that role, James was very instrumental in building the business across Latin America and has logged many miles on planes getting to know our corporate clients, our commercial clients, the teams in the region, and has done a fantastic job. The bank's business dominance in LatAm is a result of his decade-long leadership in the region and his strength to understanding of both the markets as well as Scotiabank's unique positioning and offering to our clients. So James, I'll invite you up to take the team -- the group through the Pacific Alliance business and strategy as well as the footprint.

We're going to do the fist punch. It will be a practice. Thank you, Jake. I really appreciate the introduction. Scotiabank GBM offers the largest top-tier local and cross-border wholesale banking platform here in Chile and across the Pacific Alliance. We have a strong emphasis on corporate lending, FX, debt origination, hedging, business payments and advisory services. Our team of roughly 500 employees, mainly concentrated in the Pacific Alliance, serves over 5,000 clients and delivers significant double-digit growth results to our bottom line. Our revenues exceeded CAD 1 billion in fiscal year 2019. GBM LatAm has a consistent record of strong revenue and earnings growth with a 12% revenue CAGR over the last 3 years and over 20% year-over-year growth. Further, we have strengthened our leadership across the Pacific Alliance, particularly in DCM, fixed income, FX trading and M&A. We have put our coordinated operating model to work in the region and we are now benefiting from the integration of BBVA Chile's wholesale business. What we want to articulate here is the true breadth of the business. It is clear that Scotiabank GBM has built out and evolved its offering across Latin America in recent years, deepening integration amongst our clients and the markets in which we operate. And not surprisingly, our business in Latin America looks a lot different today than it did a decade ago. As you heard in detail yesterday and earlier this morning, the growth of our franchise in the Pacific Alliance countries is deliberate. The Pacific Alliance countries have business-friendly environments, healthy democracies and a commitment to good governance. In addition, they have above average income growth and, most importantly, a rapidly expanding middle class. We have built our business across Latin America in lockstep with Canadian international investors' growing interest in the region. The historical strength of our balance sheet and reputation as a trusted market coordinator has provided the backbone to the growth. Further, the BBVA Chile acquisition provided additional capital markets expertise and cash management capabilities, which positively impacted our performance. We also have a highly focused and profitable business in Brazil, where we have 72 employees who generated net income after tax of CAD 115 million in 2019. There was significant upside for business -- of additional business in Brazil. Overall, our business in LatAm is well known but not known well. On this page are some key corporate and institutional clients we've advised on transactions in the region. We advise local and international clients on M&A and international investors trading LatAm securities. Our capabilities across the Americas are not limited to any one sector or product, and our capabilities span banking to advisory, bridge financing to public market origination, corporates, financial sponsors and state-owned enterprises. These capabilities are translating into milestone transactions. For example, GardaWorld, Scotiabank acted as a sole financial adviser to BC Partners on its acquisition of a 51% interest in GardaWorld security in a CAD 5.2 billion recapitalization. Broadcom. On the heels of a successful transaction in which Scotiabank was joint lead arranger and book runner on Broadcom's $23 billion credit facilities to finance the acquisition of CA Technologies, we were awarded a book runner role on Broadcom's $11 billion senior notes issuance in March of 2019. Coney Park-Carlyle. Coney Park is one of the largest family entertainment center networks in LatAm with over 150 locations. Scotiabank acted as an M&A adviser to Carlyle on their acquisition of Coney Park and also provided multicurrency acquisition and financing facilities. This list includes only a few examples of our broad capabilities and works to demonstrate the breadth of our unique platform. League tables provide a snapshot of success in any given time. They also offer a clear picture of GBM's significant business building and strategy execution in LatAm over the last decade. These league table results clearly demonstrate the success of our top-tier advisory and origination franchises. Scotiabank climbed the ranks to reach #2 position in debt capital markets in calendar 2019, further demonstrating the relevance of our franchise in the Pacific Alliance. We also moved from 16th to 2nd in syndicated loans in Latin America and from 25th to 10th in M&A across the Pacific Alliance. This slide shows additional select rankings that illustrate our success across products and geographies. As of November 2019, Scotiabank earned a #2 market share ranking in derivatives and a #1 in fixed FX forwards, each in the local market. This sheds light on the strength of our combined platform following the acquisition of BBVA here in Chile. In Peru, we ranked #2 in local sovereign bonds. In Colombia, we ranked #3 in combined primary and secondary local sovereign bonds. Notably, we have achieved this level of success in Latin America without a significant presence in Brazil. Scotiabank is also proud to be a leader in green bonds in Latin America. Over the last 2 years, we've completed 9 green bond transactions in LatAm, totaling approximately $1.5 billion. We compete with both local and international players in these markets, taking into consideration entrenched local banks with deep roots in each of these markets, we are pleased with our progress to date, but we are aiming even higher. Our LatAm strategy is well aligned with our overall GBM strategy. We will continue to strengthen corporate relationships and increase our relevance with these clients. Organized into sector teams, our corporate and investment banking teams are working together to increase market penetration and deliver the whole bank to our clients. We are enhancing our capital markets capabilities to focus on origination and primary flows. We are strengthening our distribution and trading capabilities to better support our corporate and institutional clients. We are delivering local franchises to international investors with enhanced connectivity. Our corporate loan book is a strong foundation to our business, and it remains strong. We have built top-tier lending relationships with local, regional, multinational corporate clients. Over half of the largest Pacific Alliance companies whose operations span across the regions are Scotiabank clients. In addition, we provide equity research coverage to approximately 70 Pacific Alliance companies covering critical sectors including financials, mining, utilities and oil and gas. If we consider only the largest corporate clients here in Chile, Scotiabank boasts a 25% market share. We remain focused on our strategic lending opportunity for clients with the greatest non-lending fee potential. We will continue to leverage our unique local footprint, serving local, regional, multinational clients in the Americas and around the world. It is clear that our overall Latin American results are significant and a growing part of GBM's global revenues. LatAm accounted for 20% of total GBM revenues in 2018, which has increased to 24% in 2019, and we expect this to grow faster than any other parts of our footprint. On a more granular level, and as we stated earlier, Mexico and Chile drive approximately 60% of our revenues in the region. We have built our businesses by diversifying our geographic and product mix. Diversification is not new to Scotiabank. This has always been key to our strategy. Our diverse revenue base is important. The Americas account for approximately 89% of GBM's total earnings. Our diverse revenue base by product is equally a strength. By product, the leading 4 sources of revenue are corporate and investment banking, fixed income, business banking and equities. There is clear opportunity for growth in capital markets. Looking at the specific opportunity, the Pacific Alliance capital markets and advisory fee pool totals approximately $6 billion. Fixed income and FX in the region account for 70% of capital markets' revenue pools, which aligns well with our strengths. To this end, we have set clear and focused strategic priorities in LatAm. One, we will build our business in Mexico to capitalize on the greatest opportunities. Two, we will support our corporate client franchise in Colombia by building out our product capabilities; and three, we will continue to build selectively in Brazil. The business upside to building international connections are strong and Scotiabank is uniquely positioned. In 2019, Pacific Alliance products sold to international investors accounted for more than 60% of capital markets' revenue pools. Working with our clients, we continue to enhance connectivity to capture LatAm product flows between New York, London, Toronto, Asia and our local LatAm teams. In Mexico, we are deepening local fixed income and FX trading to capture more opportunities. And we are identifying new Pacific Alliance corporate clients to access our debt and equity capital markets international distribution platform. Our GBM business is well diversified, and we see clear opportunities to grow across geographies and products. Our LatAm franchise will continue to be a significant and growing contributor to GBM's overall global revenue pools. In the medium term, our outlook for GBM is for earnings growth of 5%, productivity ratio of 50% and positive operating leverage. In summary, we have successfully repositioned our GBM business with a clear focus on executing our Americas strategy. Our business mix shift is well underway and will drive greater market share and improve results. We are poised to capitalize on the significant opportunity in front of us to leverage our Americas footprint across our entire franchise. On behalf of our global leadership team, Jake and I look forward to continuing to demonstrate the strength of our GBM business and Americas strategy going forward. Thank you.

Okay. Thank you, James. We have a few minutes for some questions. If there are any in the audience, please put your hand up and we will direct a microphone to you. First question?

Good afternoon. It's Gabriel. First question, I noticed in the way the business is laid out in the Pacific Alliance, a lot of the emphasis was on corporate, but -- corporate clients seeing a lot of potential for more sovereign activity, especially on the debt side. Can you talk about your capabilities there, what you've done to build out the teams in Chile, for example?

Yes. I mean, so in terms of us looking at sovereign-related exposure, it certainly is a key element to our overall book and we actually were quite active with sovereigns right now. If you take a look at our DCM league tables as it relates to sovereigns, we've led 3 of the 4 last DCM U.S. dollar issues for Chile. We've led 3 of the last 3 for Peru. We just closed the transaction for the Republic of Peru yesterday, which is our first joint book runner. So we have great sovereign coverage currently right now. We do extend balance sheet when -- bridge to bond type structures, et cetera, but it's a key component already to the franchise, and the expertise is already there.

Okay. My next one, this is to Jake's part of the presentation. You touched upon some of the structural changes, I guess, you've made to the business over the past few years. We saw something similar in the P&C banking and international, and there's a discussion on some of the earnings that you gave up in doing so. Could you quantify anything about the nature on the capital markets side?

So around the metals and commodities business and even the trade finance, foregoing that would have been in excess of $150 million in revenue annually, and we were thoughtful about doing it. We knew it would provide a runoff of business. But we also, at the same time, identified opportunities, particularly in the U.S. and Pacific Alliance that are going to allow us to grow back through that and have greater long-term growth potential.

So probably a lot smaller in terms of impact?

Smaller in impact.

And replaceable?

And replaceable with higher quality earnings, frankly, that are more driven around our corporate customers.

Okay. Next question, right here in the front. Thank you.

One quick one first and then a longer one for James. Just on your medium-term objectives, you talked a lot on the business with LatAm included. Are these for -- including the LatAm piece for these objectives? Or are they as is for the business as we see the segment?

So as the segment's reported, it doesn't include the GBM LatAm portion. We've broken that out in the new disclosure we released earlier this week. So the targets are excluding LatAm. If we were to incorporate LatAm, we'll see those numbers move higher up in single digits.

All right. And then the, I'll say, the more fulsome question for James. You talked a lot about the strength of the bank as a corporate lender, and that's been part of the culture for a long time. You didn't speak too much about credit quality, and it's certainly a key topic for the industry over the last little while. GBM has had recoveries for 2 years now as the cycle is getting longer in the tooth. When you think about the trade-off between credit and revenue, I don't know if Dan Moore will like me saying this, but are you taking enough risk in your corporate loan book? There's a lot of the fee pools on the origination side happened with lower-rated credits. And as you look for that revenue pickup, do you have to give something back in terms of credit?

Yes. I mean, as you're well aware, we're an organization that's actually instilled in a very, very, very strong credit culture. And so I'm really happy with where our risk profile is currently right now. So in terms of us onboarding any additional balance sheet risk to kind of help get to the next level from an earnings driver perspective, that's not going to happen. I mean this is a downturn-ready organization, one that we really put credit culture at the core of how we actually approach clients and markets, et cetera. And I think that it doesn't diminish the ability to be able to cross-sell because there's lots of opportunities with FX, with derivatives. Our DCM franchise in Latin America, specifically, as you saw certainly by the league tables, it's on fire. And that came from dealing in the corporate space, dealing in the investment-grade space, providing great service, great capital allocation and driving the cross-sell off of that. So we're quite comfortable with the way we're managing it.

Just adding on, James. If you look at our Canadian business, we talked about Canada being an important home market. We don't -- our credit book is very strong, high quality in Canada, Sumit. Our positioning in the origination businesses, ECM and DCM, over the past several years isn't where it needs to be and it's not where it's going to be in a few years. So as we move that up, strong origination fee comes in, better balances out against the accrual income from the loan book and also activates the rest of the secondary market capabilities, the capital markets capabilities in secondary.

Okay. A question in the front here, in the middle. Thank you.

Just want to clarify a couple of things with respect to the reporting. Do the -- does the loan growth get included as part of the International segment's results as well then?

Right. Yes. So all of the balance sheet, all the P&L rolls into international banking and the new disclosure breaks out some of that information, but particularly the NIAT.

Okay. And when you kind of talked about the -- I think you had about $128 billion, the aggregate loan portfolio you had to break down between the different geographies, which geography do you think is going to be the driver over the next couple of years when you think about that -- the loan growth aspect of the business?

Yes. There'll be 2 key markets. Canada is a very competitive market. The other ones we're looking at, the U.S. and LatAm, are as well. But just given the size of the market opportunities, LatAm first provides significant opportunity for us. And in addition to that, we think the U.S. is still a market, while we've been there more than 100 years, has opportunity left in it. We're seeing people move out of that market and we think we've got the chance to take some share.

And just one last follow-up on that. Just maybe to Sumit's point, you also said that, that $128 billion was about 2/3 kind of investment-grade. So when you push a little bit further on that, do you see that 2/3 shifting much? Or is it going to be about...

I think in terms of our allocation across investment-grade and non-investment-grade, I think as you look at the book going forward, we hold it continue current levels right now.

It's Darko from RBC. Just a couple of questions. I'm going to tie in a couple of numbers here just real quick. The 5% NIAT growth objective. Jake, in the beginning, you said that there was going to be some technology investments that you're making, and is -- so when I think of 5%, it looks relatively low compared to everything else we're seeing here. So is that part of the reason why -- is it -- or is it a deliberate restraint on the growth? And then secondarily, attached to that, is that kind of the capital -- the RWA growth that we should also -- would be sort of mirroring that 5% growth rate for your business?

So let's start with the earnings number. When we look globally at investment banks and wholesale banks, earnings declined last year. When we look forward to 2020, 2021, forecast are for about 2% growth. So we actually think, on a relative basis, 5% positions us well to grow relatively stronger than our competitors throughout the Americas. So it's obviously a market-sensitive business, you work in it, everyone in the room works in it. If markets are stronger and there's better opportunities, we expect we'll capture that upside based off how we currently forecast and see things. We think 5% is a reasonable number, given what the rest of the world could look like, where we expect rates to be, what volatility could look like. In terms of RWA growth, I think, yes, we're going to be balance sheet-driven and we're sensitive there. So we think 5% is probably in line with where we think earnings will grow, RWA and earnings.

And just to follow up on that, the technology spend is not something that's...

We don't view it as a headwind. We've got to triangulate on our expense management, not only between productivity, the absolute expense rate but also operating leverage. So maybe looking at any one quarter, you're going to see a move up in expenses, but we've got to focus on being more productive. And technology is going to be required. When we look at the businesses you operate in, we operate in, increasingly, they're becoming lower touch and electronic execution is key. Now we're not going to rush out and build everything. We think there's opportunities to partner, Nacho talked in the last presentation about partnering with fintechs and other providers. We think there's opportunities around nontraditional liquidity providers to partner with, so we don't have to build it to the same degree. But a lot of the technology that's been done to date has been more fundamental in table stakes that are required for us to properly execute on pursuing a corporate client strategy.

Okay. Are there any other questions? We have time maybe for one more. Okay. If there are not, thank you very much, and we'll move on to the next stage of the program. So our next presenter is from Global Risk Management. Let me welcome Danny Moore.

Good afternoon, everyone. I have to say, I am particularly excited to be able to come here and talk to you today about Global Risk Management, or GRM as we call it at Scotiabank. Today, I'm going to give you an overview of GRM. I'm going to talk about our key principles for managing our diverse footprint. I'm going to take a moment to look at our current risk status and, finally, give some highlights of our priorities and where we're going from here. So let me start with our mandate. In risk, we use the enormous resource of data and the insight that this provides us. We combine that with expert judgment. We foster strong partnerships internally and externally to the bank, and we do that to drive meaningful impact for the bank. Since 2018, the last time we had an Investor Day, the landscape has changed quite a bit. For instance, risks that were then considered emerging and called nonfinancial such as third-party or climate change risk, these are now some of the most important risks that we manage, and they most definitely have financial implications. However, one thing hasn't changed, and that's our strong Scotiabank culture. Throughout these changes, our strong risk culture continues to underpin our operations. So as new data-driven practices such as IFRS 9 have emerged, and as we learn more about them, we ensure that strong judgment can be applied here as well. Specifically, you will note that we added more scenario analysis to our downside simulation in IFRS 9 to ensure that we continue to provision early and provision conservatively, as we've always done. Now we get a lot of questions about how we manage risk within our international footprint. So I'd like to take some time to walk you through our risk management design and why, in risk, we are confident in supporting our business partners around the globe. Our risk management and our anti-money laundering practices are grounded in 3 principles. First, strong local risk management practices, and these are executed by some of the bank's top talent. Second, these practices are governed by one set of universally high standards from Canada. And third, that the diversification of our investments in the Pacific Alliance drives a stronger risk-return ratio for the whole bank. Let's delve into each one of these principles a little deeper. First, strong local practices. Now as you can see from the presentations over the last few days, we're tapped into deep local knowledge and deep local expertise, and that manifests itself in our talent, in our strategy and in our technology. When it comes to talent, in risk, we create the future officers of the bank and deploy those leaders back into the business. You see we view risk as a training ground and helps both enforce and operationalize our risk culture in the businesses and across the whole bank. As an example, 3 of our 4 Pacific Alliance CROs, Chief Risk Officers, have all held senior roles outside of their country. Here in Chile, Alberto, our CRO, joined Scotiabank through the BBVA acquisition and brings with him decades of local knowledge and local insight. From a strategy perspective, the color in our global risk framework is filled in by local dynamics and by local intelligence. For example, in corporate and commercial lending, local adjudicators provide us with key insights into local markets and local trends. If we look at retail, the adjudication processes in the Pacific Alliance are the same as they are in Canada. Equifax and TransUnion are still our primary credit bureau providers. However, the customer acquisition strategies are locally derived at a country, region or even at a customer segment level. Finally, you can see our strong local practices in our technology as local markets provide an ideal environment for what we call test and learn innovations that make the total bank stronger. For example, we created and tested a predictive model in international that generates preapproved leads. It uses our own transaction data and brings that together with other data we have with the bank to create a creditworthiness prediction for clients that may have limited or thin credit bureau data. The need existed here in this market to bolster credit bureau information, and this innovation has since been scaled in Canada to make better and more precise credit decisions across our major markets. The second principle is that all this local insight and local decision-making is governed by Canadian oversight. Across our global footprint, we abide by 1 set, 1 set of universally high standards. Risk appetite limits for the whole bank are set in Canada and cascaded out locally. For example, when it comes to AML, our customer risk rating score, these models are developed, managed and validated in Canada. In credit risk, as another example, industry limits, single name limits, credit strategies, these are all set by our Canadian head office. A further illustration of this fact is the point that in business banking, only 15% of adjudication is done in country. Our head office provides advice and counsel to the other 85%. For example, a $25 million BB- corporate credit would be adjudicated in Toronto, whereas a $10 million A credit would be adjudicated in-country. In order to achieve this level of integration, we employ a dual reporting structure across our international footprint with local CROs reporting to both the country head locally and to Toronto, to myself, ultimately. Finally, portfolio monitoring occurs in both the local and the head office levels, including early warning thresholds and portfolio risk ratings. Finally, after the importance of strong local intelligence and uniformly high Canadian governance, the best and last form of defense is the time-tested principle of diversification. James spoke about this earlier. This is where our strategy at Scotiabank really shines through. If there's one takeaway from my presentation today, it's this, that our well-diversified portfolio overall drives higher-quality returns for the bank. And while many banks may seem to operate similarly, at Scotiabank, our asset allocation underpins our investment thesis and differentiates us. The Pacific Alliance drives higher risk-adjusted returns in high-growth markets on a stand-alone basis, but most importantly, returns that are not highly correlated with those of the Canada or the United States. Therefore, this produces a better Sharpe ratio with a higher return per unit of risk in Canada and the Pacific Alliance combined than in Canada alone or in Canada and the U.S. combined. You can see that our capital investments have maximized the risk-return proposition across our geographies, making the total bank a stronger investment than any of its parts. This is a financial equivalent of 1 plus 1 being greater than 2. And why is that? Unlike the strong ties that link credit trends in Canada and the U.S., the Pacific Alliance is much more distinct. That independence, that diversification, that's what makes our portfolio stronger today, and we'll continue to make it stronger tomorrow. So let's have a look at how this plays out in practice through the PCL line on Slide 8 here. And you can clearly see that our proactive strategies, combined with our global view on portfolio construction, has driven stable overall PCL performance over the long term. Furthermore, at the micro level, and as part of our strategy to be downturn-resilient, we have rebalanced our portfolio to a higher-quality assets, particularly in the unsecured space. In Canadian Retail, approximately 88% of our originations are in prime-plus segments. In International Retail, about 80% of originations are in similar segments and our wholesale book is over 65% investment-grade. Turning to International Banking specifically. You can see that our credit fundamentals remain strong, even through the course of acquisitions. You can also see the benefits of diversification here, that the region's combined PCL is generally stable despite some level of fluctuations at the country level. Let's double-click through to Canada now. As you heard from J.F. yesterday, the Canadian economic fundamentals remain strong. In our portfolio, we are seeing those strong fundamentals reflected. Our traditional early warning indicators such as card and auto delinquency are well within expected levels. In fact, they've been consistently stable or improving in many cases throughout the years across our portfolios. And in corporate and commercial credit, early warning indicators have shown no sign of softening. So we're taking advantage of these relatively benign conditions to invest in more analytics-driven lending strategies across the entire life cycle, from originations to line management, through to collections and with the ongoing investments in talent and in risk technology. Turning now to our allowance for credit losses or what we call ACL on Slide 11. This is perhaps the second most important slide in my presentation as these ratios, I think, provide real proof positive of our conservative credit culture in action. You see, we continue to have strong loan loss provision coverage of more than 8 quarters. Moreover, our ACL ratio or the coverage of our allowances to our gross impaired loans, or looked at another way, the coverage of allowances to our performing book, which consistently maintained at levels that lead our peers, and by a margin, I might note. And this holds for both our total book and our non-IV book of business. This conservatism is at the heart of our risk management practices and our risk culture at Scotiabank. And furthermore, the recently added scenario analysis to our downside simulation in IFRS 9 also reflects this culture. Now let's turn and have a look at our goals going forward. We have 3 key priorities. The first is accelerating the risk-return optimization via digital, via analytics and via partnerships. The second is enhancing our customer experience by providing a more tailored solution for each of our customers. And the third is keeping our customers' trust. Further valuing our customers' trust, and we do that best by keeping the bank safe. Now firstly, we are prioritizing achieving optimal risk-return for our shareholders, of course, constrained by our risk appetite. We have new capabilities here, powered by data, powered by advanced analytics and powered by our strong partnerships. For example, our strategic partnership with retailers, such as the one here in Chile with Cencosud, is helping to drive our prime plus credit origination strategy by providing A and B rated preapproval leads that are based on behavioral analytics. Chile's Cencosud is already using big data models and retail transactional data, such as information about family composition and geo reference information in its decision-making process to drive higher quality preapprovals and grow higher margin for the shareholders. We've learned a great deal through our partnership with Cencosud in the region, and it's opened the door to selectively working with other partners that can also generate large pools of new customer leads. In each case, our analytics provide us with the tools to rapidly identify which of these potential new customers best fits our risk appetite. When it comes to the customer, risk is a key partner in enhancing the customer experience. For example, in Mexico, we are maximizing the rich data we have to better understand our customers. We no longer only focus on credit bureau data or customer risk profile. Now we have the tools and techniques to quantify customer value, and they can form decisions across the life cycle. So we leverage our own deposit data, our external credit bureau data, of course, our transaction patterns and internal payment history to estimate the customer lifetime value. This allows us to manage credit card limits more strategically. For instance, we can offer existing high-value customers attractive limit increases, enhance, increase our share of wallet without increasing our risk. Conversely, we've reduced our exposure to less desirable segments through credit limit decreases. In Canada, we've done 50,000 of these last year just to derisk our portfolios. And we're maximizing the value of this technique by increasing the pace of cross-selling new products to existing customers with low-risk and high lifetime value. So the benefits of this add up to 2% increase in risk-adjusted revenue. And most importantly, we're able to offer the right product to the right customer at the right time. And of course, we're scaling this across our markets in Mexico and Canada internationally. Today, technology is connecting us to our customers in new ways, providing us with new opportunities. And this is just one example. About the bank's technology investments, which Michael and Shawn are going to speak about in a minute, are enabling the bank, enabling risk to make better risk decisions, better credit decisions, using more data and do all this faster than we've done it before. In short, as we invest in new tools and data and analytics, we're building even better experience for our customer and better returns for shareholders. Finally, our most important priority, keeping the bank safe, which is all about safeguarding trust while balancing risk and return. By sharpening our focus on core businesses and core geographies, we have materially derisked the bank. As you heard from Brian yesterday, since 2014, we've exited more than 20 countries and 10 business lines, eliminating noncore operations where, frankly, the bank's infrastructure and risk were disproportionate to the return. We thoughtfully refocused the bank and refocused its capital, redeploying that capital in core markets while rebuilding our capital levels through divestitures, and as Raj mentioned, strong internal capital generation. But keeping the bank safe is an ongoing and a multifaceted effort and I'd like to highlight 3 other ways in which we are derisking. First, we are continuing to strengthen our cyber defenses. We're doing this across the bank's perimeter and throughout our internal applications and our internal networks. We are doing this by measuring and managing our risk across the full life cycle from identified to protect, from detect to respond and, of course, through to recovery, all of which we report on regularly to the Board. Speaking tactically, we do this by deploying stronger authentication methods to customers. We do this by deploying advanced systems access controls internally. We do this by strengthening security perimeters around our critical assets or what we call our crown jewels. Taken together, these and many other measures have led to a reduced security risk index score for the bank consistently over the last 3 years. This is important for us to get right as keeping the banks safe is valuing our customers' trust and valuing our customers' data, and that is core to everything that we do. Our second priority, reducing operational and AML risk, amongst those nonfinancial risks we talked about earlier. Most of our divestitures are from countries that experienced a greater threat of money laundering amongst other operational risks. In fact, the average operational risk loss rates in the countries we exited are higher than the average loss rate in our 6 core markets. Those countries also ranked amongst the top 50 for money laundering. To put it another way, keeping the bank simple is keeping the bank safe. Thirdly, improving our credit quality. Through our acquisitions and divestitures, we have improved the bank's credit risk profile and reduced volatility and built recession resiliency. And here, again, you'll see that the average PCL ratio of our divested entities is significantly higher and more volatile than the bank's core PCL ratio. And despite averaging only 5% of all bank earnings, our divested entity gross impaired loans or GILs accounted for an average of 18% of all bank GILs. Credit quality will further improve as our de-risking program to drive the portfolio mix to higher weighted investment grade, prime and super-prime segments. In fact, we have already made progress, rebalancing our mix in Canadian retail to 90% in prime plus segments. About 100 basis points improvement over the last 2 years. So although we're not calling for a recession, the credit cycle will always endure, and we will continue to make our portfolios downturn ready. Now it wouldn't be a meeting with my analyst friends without a question on outlook. So let's turn to that. The outlook for 2020 is stable, and overall credit quality for the bank remains strong. We continue to invest in our talent, in our technology and in our analytics to strengthen those portfolios further and make them downturn ready. As we mentioned during the fourth quarter call, we expect our PCL ratio to remain stable to slightly higher in 2020, and the new forward-looking scenario does not change this. Any variation in the stability of our PCLs will be a result of changes in macroeconomics or what we call forward-looking indicators in the language of IFRS 9 and will be mitigated by strong diversification and by our high credit quality. Scotiabank's customers are at the center of everything that we do. And we are improving customer journeys end-to-end by making better decisions, by making faster decisions and by making more tailored decisions. And we're doing all of this while safeguarding our most important asset, the trust of our customer. Our job in global risk management isn't simple, but it is straightforward. It is to manage risks across the bank and to balance risk and return. In other words, to make better decisions for our shareholders and for our customers. We do this by tapping into local knowledge and local expertise. We do this by employing one set of universally high standards across our footprint. We do this by building strong, well-diversified portfolios that maximize returns and that minimize volatility. And we ground all this in a strong risk culture, whereby we provision early and we underwrite conservatively. Ultimately, the winning combination of our people, our practices and our Pacific Alliance portfolio make us a better bank. Thank you, and I'm open for questions.

Okay. Thank you, Daniel. We're almost back on time here, so we do have some -- a couple of minutes for questions, if there are any, for Daniel. [ Mike ] in the front there.

Daniel, can you explain how the banks are thinking about environmental risk has evolved, especially since the last Investor Day? And specifically, what the practical implications are in thinking about in particular, exposure to commodities, oil and gas, in particular.

Sure. Say, first of all, the oil and gas portfolio and the energy portfolio is an important one for us. It's an important one for the country. It's an important one for the globe. We still continue to consume energy. Without banks lending to the energy sector, oil and gas prices would be materially higher. And so our job as a bank, our job to society is to look at how we do that responsibly going forward. To that end, we put forward 5 climate commitments. You would have seen those recently. I'll try and see if I can remember all 5 for the benefit of the audience. Those involve enhancing our disclosure and our reporting around our exposure to the sector. We've already started that when we signed up for the TCFD disclosure standard. We've committed to putting $100 billion to work. We're already well along that path, put $100 billion into green initiatives. We are incorporating credit -- in our credit decisioning a full assessment of environmental risk is something we've done, but we are enhancing to look at both transition risk as well as potential for climate change risk directly to the businesses. We're decarbonizing our own footprint. That's an important initiative for us to get it right internally. And we're building a Scotiabank center of expertise so that we can both train internally as well as provide workshops and conferences externally for people to learn more about this important initiative. So it's become a very big topic for us, and we're pleased to lean into it going forward.

And just as a follow-up, are you incorporating environmental issues into specific credited educations when a specific one comes up? Is that part of the conversation? And in what way does it come on?

Yes, 100%. So again, that was the point. Both transition risk and physical risk are direct elements of the credit adjudication process. They impact our credit assessment. They are part of the dialogue on every single credit that we do. Some of it is nothing and some of it is material, but it's an inherent part of our process normally.

Another question in the front here.

I've got -- It's Darko from RBC. Just a few questions here. First, Dan, could you speak to just some broad strokes about the new scenario and the decision that led you to incorporate a new scenario in your IFRS 9? That would be the first question. The second question is, your ACL ratio, as you mentioned, was very high relative to peers. But I could measure it another way. I can measure your ACL versus your past losses for the last 12 months. And on that measure, you would actually be at the very bottom of the pack. So I wonder if you can comment on thinking about to measure it differently. And whether or not perhaps one could conclude that given your loan portfolio, you should, in fact, have a high ACL coverage ratio against those loans and perhaps isn't high enough because your coverage against the last 12 months is low. Not playing devil's advocate here, I just generally want to hear how you think about looking at coverage per se.

Sure. So you're -- taking it in the reverse order. You're right that we look at coverage in many different ways, and that's appropriate. You look at it versus risk-weighted assets, you can look at it versus net write-offs, quarters of coverage we talked about and quarters of coverage is not a simple metric. You have to decide whether you're looking at 4, 8, 36 quarters, how do you look at what the right long-term metric is. But if you look at our credit experience, if the devil's advocate point is given our portfolio that we should perhaps have a higher ACL coverage to GIL ratio or to performing loans, if you look through the cycle, our credit performance speaks for itself. And of course, our business banking credit performance over the last 15 years has been about 15 basis points of loss, whereas peer group average would be 26 basis points. So I think that closes that point effectively. The -- I've got a lot of questions over the last couple of days on the [ 4 ] scenario, why we did it and why it makes sense. Look, we're 8 quarters into this brave new standard of IFRS 9. We're all collectively learning about it, and the Canadian banks were the first to adopt it. And one of the things that we've learned is that like most models, how you implement them matters. And so we've seen best practices emerge as the whole banking sector has learned about this. In Europe, in particular, addition of additional scenarios was important. The other thing that we observed is that there were a variety of practices on the types of downside scenarios that were applied. Some looked at a low-for-longer scenario, and some looked at had a sharp down and then recovery back to the main scenario. We incorporated the former, not the latter. And so we -- in order to cover the portfolio properly and to look at all tenors of assets, we decided that adding a sharp-down and back up scenario to our pessimistic outlook was appropriate. We get better coverage of the portfolio that way and better granularity.

Are there any other questions? Right here.

Just a numbers question, I guess. Can you quantify, I guess, in your wholesale book in Pacific Alliance exposure, the split between USD-denominated debt and local currency?

I'll give that after. Report to you on that -- I wouldn't have that stat top of mind for me.

Okay. We'll take that offline. Okay. Thank you very much, Daniel.

Thank you.

Okay. So we'll now move on to our last business line or function presentation before we close off, okay? Let's all welcome Shawn Rose to the lectern. Shawn, hello.

Thanks.

You're welcome. Shawn will be discussing digital, and then Michael Zerbs will follow with a presentation on technology.

Good afternoon, everyone. I'm Shawn Rose. I'm the Chief Digital Officer here at the Bank of Nova Scotia. It's been 3 years since we shared our digital -- thank you. It's been 3 years since we shared our digital strategy with you for the first time, and over a year, since we updated you on our progress. Brian has said that we're becoming a technology company in the business of financial services, and digital is now a key strategic pillar of our business strategy, affecting our entire organization at the very core. I'm excited to be here to talk to you about what it means to put that vision into practice. 2019 has been a great year of acceleration and impact for digital. I'd like to focus today on how we are approaching our digital transformation on a global scale and the progress we've made to date. Immediately after my presentation here, my colleague, Michael Zerbs, our Chief Digital and Technology Officer, will elaborate on how our technology modernization efforts are making this possible. Let me start with the cornerstone of our model. We have a single digital strategy across the bank. The delineation between what is digital and what is not is eroding, both for our customers and how we work. The digital banking team works in tight partnership with the business, analytics and technology across countries and functions to ensure that everything we are driving is linked directly back to our key business priorities. If there is one headline that I would like you to take away from my presentation today is that our digital transformation is gaining momentum, creating scale and facilitating growth both for customers and our business. In 2019, we made tremendous progress against our targets across all our markets in the Pacific Alliance countries and in Canada. I'm energized by the progress we're making. Digital is allowing us to rethink our business models, and this is opening up a ton of untapped opportunity for our customers and for Scotiabank. It is clear that digital is critical for us to deepen and widen the customer relationship. We are seeing customers actively select into digital as their preferred choice for engaging with us. And getting customers to become digital is key for the revenue and growth strategy. Digital customers provide greater value to the bank. No question. They're more engaged, happier, and stickier customers. The retention rate for our digital customers is 70% higher than for nondigital customers. We can talk more about that later in the Q&A. Customer satisfaction for these customers is also higher with an increase of 500 basis points on NPS. They generate 75% less complaints than nondigital customers. And lastly, they're 4x more likely to be primary customers. This is really important. We see clear evidence that these customer behaviors are generating direct business impact, both in the Pacific Alliance and in Canada, regardless of the geography or the product. In Canada, digital customers have 3x the products of their nondigital counterparts. When looking across PAC, digital customers have, on average, 2x the products of nondigital customers. And they are more engaged with us. In Canada, a digital customer's deposit balance is double that of a nondigital one. And it's even higher impact at 4x the deposit's balance. This trend also holds true for newly digital customers. Nondigital customers who become digital, have showed increased value across all markets. For example, in Canada, nondigital customers' balance increases 30% within the first 2 months of digital adoption. Talent is central to our strategy. It's not just a war for digital talent, it's also a battle against attrition. Our strategy is not only to attract the skill sets we need but also to recruit and rerecruit our best people diligently so that they choose to stay with us even amongst highly competitive alternatives. Three years after we launched our digital factory network, more than 1,000 digital professionals from all around the world are working with us across the countries. And I'm very proud that we've been recognized by Hired Inc. who have ranked us among the top 5 technology employers in Toronto. Global mobility offers us a powerful advantage in rerecruiting our people. We've seen tremendous outcomes by promoting talent from within and deploying them across our global footprint. Just to give 2 examples. Our former design lead in Mexico is now our Director of Global Design, and our former engineering lead in Colombia is now Global Engineering Director working out of Toronto as well. Both leaders are working to elevate our practices across countries. For us, this transformation is as much about culture as it is about technology. And we are proud of the digital culture we are building alongside of this venerable institution. Accelerating our growth at scale requires us to focus on driving innovation built for reuse. Our analytics-powered search and help tool is being deployed across our 5 digital factories and in our contact centers. One platform is used by more than 600,000 customers and 20,000 employees each and every month. Our Canadian mobile platform infrastructure was built to be universally applicable across countries and channels. More than 90% of the code has been reused for our newest mobile application being deployed for the Central America and Caribbean region. Canvas is our customer-focused global design framework. It enables designers and developers in 5 countries to share the same components and code, ensuring consistency and efficiency while allowing for country-specific customization. Over 100 teams today, bank-wide, have adopted this system. We have built global share development operations practices, tools and processes that increase our ability to deliver software swiftly while maintaining stability and uptime. All our digital factories develop country-specific application designs. But as you can see, draw from our global design framework to create a cohesive and uniquely Scotiabank customer experience. This way of working is a huge differentiator for us. We continue to strive to improve on our customer experience every day with a sharp focus on what customers really want and really love. For example, in Peru, the guy is taking pictures over here, we created our app with insights from more than 2,500 users. With their feedback, we've built customer-led features focused on needs specific to that country. Just to mention a few. You can hide your account balances when opening the app, which is driven by privacy and security concerns locally. You can do cardless cash withdrawals. You can lock, you can unlock your credit card or you can set it as a standard to unlock and vice versa. We give that degree of modality for the local experience. We can now apply these solutions where it makes sense. For example, Mexico is now also deploying cardless cash withdrawal. Innovation happens locally to meet the unique needs of our customers and can be leveraged globally. We've talked before about our medium-term digital goals and our aspiration to be a customer experience leader in our core markets. We know our goals are ambitious, but we deliberately set aspirational targets to challenge ourselves, change the way we operate, and move the dial in overall growth and performance. To achieve these targets, we have been focusing on 4 key areas: first, boosting online origination; second, building new digital platforms; third, developing self-service capabilities; and finally, transforming customer experience. Each of these is aligned to one of our digital metrics and supported by our technology modernization program, of which you'll hear a little bit more from my partner, Michael Zerbs. Our focus is on delivering a compelling experience for customers while increasing our operational efficiency and scaling our businesses. I'm excited to say we are making huge progress across all of our digital metrics and core markets, and the progress has only accelerated. We have seen steady year-over-year growth in digital sales from 11% in 2016 to 28% in 2019 with an expectation of achieving 35% in 2020. We expect to meet our 50% target in just 2 to 3 years. It's very ambitious. I'd like to congratulate our team in Chile, who started this journey below 30%. It's pretty exciting actually. We started this journey below 30% sales, and we now have more than 50% of our products sold digitally. That's huge, Danny. Really excited. So we're accelerating our growth by deploying digital solutions through branches and refining the branch customer experience of the future. We are taking our digital portfolio to the next level by developing digital-first products. For example, we launched eHOME, Canada's first all-digital mortgage application last year, and it's going great. We are imagining sales by -- we are reimagining sales by providing contextual offers at times when customers are most likely to act. This feels less like a sales campaign and a lot more like advice, which we believe will not only drive stronger sales outcomes, but also build healthier, long-term customer relationships. As I mentioned, we are reimagining the branch of the future. Our vision is an experience where customers and employees will share the same mobile-first tools that prioritize ease of use, amazing customer experiences and facilitate advice-based conversations that support our customers' deeper financial needs. Colombia is a great example of the impact digital can have in our retail distribution channels. Now 90% of our savings accounts opened in branch are done via digital solutions. Customers spend less time doing branch transactions with a 75% reduction in account opening time. This is just the beginning. The platform we built has the potential to be leveraged across all our products, all of our channels from branch to contact center to ATMs. As customers embrace mobile and digital for their day-to-day banking needs, we are focused on serving them better every day. In Colombia, account opening has just been reduced in the last 1.5 years from 40 minutes to just 8, fully KYC compliant. Here, you can see one of our advisers, supporting a customer through the digital account opening experience. This frees up our branch teams to be more focused on providing advice directly to our customers and improves the customer experience. In-branch NPS has doubled since the start of this initiative. We have steadily increased the share of our customers who are digitally active, up from 26% in 2016 to 39% at the end of 2019, with the projection of achieving 45% in 2020. Keep in mind, this is balanced across our 5 core markets, each of which has uniquely different levels of digital maturity amongst its local population. How are we doing it? Let me give you a few examples. We launched 5 new apps with a consistent technology architecture and customer-focused design. We are reengineering customer onboarding processes in all channels so that no matter how you join Scotiabank, you become a digitally active customer day 1. This is complemented by the repositioning of our branches as education centers, leveraging our strong branch network to boost the digital acumen and behaviors of our employees and customers. Transactions occurring in branches have declined steadily over the last 4 years from 26% in 2016 to 16% in 2019, with the expectation that we will reach 14% just next year. We're making traction by focusing on the customer tasks that benefit most from a more streamlined alternative to the branch. New in-app help and search has lowered call volumes to the customer center dramatically; implementing a digital dispute resolution channel, which now services 70% of all dispute resolutions across Canada; institutionalized a bank-wide paperless initiative. And in 2018 Canadian banking delivered 95 million documents digitally. This can save 300 million sheets of paper. Lastly, streamlining the credit card bill payments experience in mobile to reduce payments made in branch. Our Canadian mobile banking platform is a great example of best-in-class mobile experience focused on features that our customers use most often. In the app, we reimagine the customer journey, and our customers love it. We have seen 20% more daily users per -- logins per user versus our previous application, and our customer rating on the App Store for Apple has increased from 2.5 to 4.6 and almost 4.7 stars with 180,000 reviews. Improving platform stability and availability has also been a huge focus for us. We have achieved 99% crash-free rate. It's actually closer to 4 9s than 2, but 99.98% is pretty darn good. And that's drastically reduced our incident resolution times. And that's critical for serving our customers. We now outperformed the competition in speed for key customers' tasks. We are the fastest app in the industry for seeing your balances, sending an e-transfer, transferring funds and paying bills. In transferring funds, we are 2x, maybe even faster than our -- any industry peer. We know we need to proactively identify and accelerate the development of new capabilities with our increasingly competitive business environment. To do so, we have immersed ourselves within FinTech and technology communities, partnered with top firms and academic institutions across our markets. We have partnered with leading FinTechs, competing over -- completing over 70 successful proof of concepts with 15 more currently underway. Our partnerships are driving impact across different businesses. For example, in Chile, we've partnered with MercadoLibre's e-commerce platform. That's the eBay of Latin America, which helps customers to sell and lease properties. Homebuyers can apply directly for Scotiabank mortgages through our partners' website as part of their home search experience. Since this partnership started, 15% of total mortgage originations in Chile come from this platform. We have also established strategic relationships with VCs, committing more than USD 85 million to invest in companies aligned to our agenda directly. These partnerships not only provide us a strong return, they enable us to constantly scan local FinTech markets for emerging players of interest to us. We are also deeply engaged with the global academic community and have established over 60 partnerships with institutes and universities. In addition to the strong partnerships we've built across Canada with leading institutions like the Rotman School of Management, UBC, and Tec de Monterrey in Mexico, just last week, we announced a new partnership with Federico Santa María University focused on powering digital innovation of women and stem here in Chile. Our three-pronged innovation agenda helps us learn from best-in-class players to create and curate solutions, adapt and maintain our competitive advantage within the industry. As you can see, we are excited for the future of Scotiabank. We are transforming our business and our culture from the core, and we're playing to win in this digital space. It's been a great year for digital and our bank. I'm particularly excited about 2020 as we aspire to end next year with figures very close to 40% of digital sales, 50% of digital adoption and 10% of transactions in branches. It's incredible how much progress we have made since this journey began. As we continue our journey, we will be focusing on the following: we will continue to invest in attracting and nurturing top talent to better position our company for the future, and we will continue to advance the digital capabilities that support the transformation of our branch customer experiences and our retail distribution network to drive increased operational efficiency. Digital has not only changed the way we serve our clients, but also who we are and how we operate. Thank you. And I'll now invite my partner, Michael, to share how our technology modernization efforts are making this possible. He and his team have been amazing partners. Thanks for your time.

Well, thank you, Shawn, and good afternoon. I'm Michael Zerbs, Chief Technology Officer of Scotiabank. And I'm really pleased to provide you an update on our technology progress and also our outlook. Modernizing our technology is a key focus for the bank. And as Shawn already mentioned, it underpins our digital strategy. The close alignment among technology, digital, analytics and our business is at the heart of our progress. It enables an all-bank technology strategy that supports growth across all channels, all business functions and all core markets. So over the last year, we've executed our technology road map as planned, and we've delivered on our commitments. I would like you to take 3 things away from my presentation today, 3 key headlines. First, we've built a strong technology foundation to support our growth. It enables us to deliver business value faster, more efficiently and more safely. It is now at a maturity level where it scales across businesses, and across geographies. It enforces consistency, it enables reuse. And to give you just one relevant example, our successful EBITDA integration here in Chile leveraged key components of that foundation reducing cost, risk and time to completion. So that was the first point. Second, we're executing a cloud-first strategy, and we are doing it securely. Moving to the cloud enables analytics, it speeds up innovation, it helps us deliver enhanced digital solutions to our clients at scale and at lower cost. Our new customer-facing solutions, for example, is the new Canadian mobile app, which Shawn just referred to a moment ago, are all cloud-based. And we're achieving this with our hybrid cloud strategy, Microsoft Azure, Google and private. The third point is technology modernization is generating cost efficiencies and productivity gains, which free up or rebalance capacity, which we then use to accelerate the delivery of our technology road map, further generating value. So let's now go into how we are delivering harmonization objectives while controlling our technology spend. The growth in total technology spend has been decelerating from 14% back in 2017 to 7% now in 2019. And we have been able to reduce the rate of growth because we've done some of the heavy lifting earlier. To give you a few examples, replacing our core banking platform in Mexico, we'll be building a common software development platform that offers one automated and secure path to the cloud into full reuse of shared capabilities. And it's important to note that these are onetime initiatives. You don't replace the core banking system every year. These are not things we do over and over again. We've also assembled amazing technology and digital teams. Shawn referred earlier to the 1,000 digital talent that we brought onboard. And well, as a result, our engineering resources have grown by 45% across digital and technology between 25 -- between 2015 and late 2018. We now have the capacity and the talent to execute at the required scale and pace. And therefore, going forward, our resources will be growing at a much slower pace. So these data points demonstrate that it is possible to combine digital leadership with controlled expense growth. And industry benchmarks confirm the perspective. For example, a recent report by a U.K.-based research firm placed Scotiabank in the leaders quadrant for digital leadership and cost-to-income ratio improvements based on an assessment of 50 of the leading global banks. As we look forward, we expect technology costs to continue to grow at single-digit rates as technology modernization provides us with 3 key main productivity gain -- levers. First, reuse; second, infrastructure optimization; and third, leveraging a common platform. And I will now discuss these 3 levers in turn. So first, let's talk about reuse. Reuse amplifies the value of technology to the business and let's recap our progress. In 2017, we started building the foundation for our digital transformation and for our technology modernization. In 2018, the focus was on supporting major digital initiatives, such as new mobile apps in our core markets or the fully digital account opening solution in Colombia that you heard about a moment ago. We've also heard earlier how these apps have accelerated digital sales, transaction migration, digital adoption and customer experience. At the same time, we built common technical services such as customer authentication, security services, error logging and customer notification, and we made them available globally to all development teams. And what's important here is that these services are required by all applications. And we can now reuse them as we develop new applications. There's no need to build such services again and again. It's not only more efficient, it also enhances the security and reliability through consistency as we have one and the same version of each service across applications rather than different local flavors. Last year alone, those services saved about 10,000 person days of development time. Since then, we've developed additional globally reusable services at a rapid pace, including business services, such as customer profile, verifying an address, customer risk ratings, FX rate conversions and wire transfers. In each case, we now have one way to do things rather than multiple ways. Today, we have around 600 instances of reuse, and we expect to surpass 2,000 in 2020, and therefore, achieve additional gains in development productivity and in security through consistency. As we adopt common technical services at scale, the business impact, for example, by reducing the time to market of customer-facing, revenue-generating initiatives continues to accelerate faster than technology productivity gains on their own. So that was reuse. Now over to infrastructure. We're pursuing a two-pronged approach. First, we're optimizing the location and operating model of our data centers. So let's give you an example. We've migrated local data centers from Chile, Peru, Uruguay, Panama and Costa Rica into our Mexico hub. To raise IT resilience, [offer] scalability and capacity and reduce IT risk and complexity. As a result, we've reduced operating costs for those data centers by approximately 20%. We'll continue to -- our efforts to optimize infrastructure across our footprint, with Colombia following next year and similar efforts underway in Canada. Now we've also leveraged the Mexican data center hub to provide the additional capacity and the additional resilience that was needed to support the BBVA Chile workloads when they were migrated a few months ago. This would have been much, much more harder and more difficult had we relied on a local data center instead. Second, we are moving to a cloud-first approach through a lift and transform strategy as well as building cloud-native data environments with industry-leading data security. Over the next 3 years, we will move another 9,000 servers to the cloud on top of the 8,500 servers moved so far. Together, this will account for the majority of all eligible Windows and Linux servers across our footprint. Cloud lets us flex capacity across the demand cycle, reducing operating cost in a per server basis across -- reducing operating cost on a per server basis by about 40%, excuse me. These savings will be reinvested to support growth in digital. And third, we are leveraging a common platform. As you heard, in 2018, we've built a leading-edge software development platform that underpins our technology modernization, and that makes it easier to innovate, create new business solutions, quickly and safely and consistently embrace the cloud doing so. Its key elements are automation, share of microservices, a single secure cloud platform for data and public cloud infrastructure. Automation increases efficiency and reliability. Microservices drive savings for reuse. We talked about this a few minutes ago. And our cloud strategy offers scalability and provides a secure, standardized data platform for analytics. Microservices also allowed us to pursue an ambitious digital strategy without modernizing our core legacy systems as a precondition. Microservices insulate the digital applications from legacy systems and let us replace those systems over time and as needed or when alternatives become available. Now in any technology organization, including ours, people drive the majority of cost, and it is essential to enable them to be as productive and as efficient as possible. We have significantly improved application developers productivity through the automation of testing, operational processes and security policies. Specifically, where developers leverage our common development platform, the proportion of time spent in development has increased by 10% with the corresponding proportional decrease in less value-added activities, and the labor cost of operating those applications once built has been reduced by about 30%. When we automate, we also reduce the cost of setting up infrastructure. We can now save approximately $0.5 million for -- in setup costs for typical development initiative. At the same time, teams can deploy code now up to 25 times a day, achieving much faster iterative testing and feedback cycles without increasing cost. So we will continue to accelerate the adoption of our common platform across the bank and reinvest the savings to deliver customer value, speed of delivery and scale. Because we share common capabilities, we can innovate efficiently locally to support our customer growth. Whether it is digital retail branch solutions in Colombia, local mobile apps across Canada [ ID ], mortgage approvals on e-commerce sites in Chile, data interfaces through our new core banking system in Mexico or hyperscaled valuation and risk models for capital markets that involve trillions of calculations, they all leverage common services. And where they use the cloud, they use the cloud consistently. Core banking provides another important proof point for leveraging common capabilities. You heard Adrián earlier today talk about our new core banking platform in Mexico, which is the same as in Chile, and which will also be rolled out to Colombia. In Mexico, it resulted in a significant reduction of bespoke systems and approximately $30 million of annual run rate savings alone. For Chile, it also supported all of our acquired customers when we migrated their data from BBVA to our systems, which as you can imagine was a huge effort. Leveraging the same core banking system in both countries and having the additional capacity to support the integration of BBVA resulted in low implementation cost, less risk, fast implementation and lower operating and labor costs. We need 1 team, not 2 or 3 teams, as we would if we had different solutions. It's a great example for global software solutions that can be scaled across our footprint. While we have moderated our overall growth in technology spending, we have doubled our investment inside the security over the last 4 years, leading to a roughly 30% improvement in control efficacy in areas such as Internet gateways, ATMs, database and server application security. We're also really proud of the industry-leading secure cloud data platform that we are building. To protect our customers, that platform will, first of all, enforce security through automation. Automation results in consistency and reduces the opportunity for human error analysis. Consistency and reuse also facilitate effective cybersecurity management by reducing complexity and by reducing the potential attack surface. The platform will require authentication for our shared microservices, which is very different from a traditional architecture where internal services are trusted. Service authentication makes it much, much harder for malicious attacks to succeed. Third, it will encrypt and tokenize sensitive customer information, so data leakage becomes almost impossible, even when files are accessed maliciously, they are unreadable. And finally, we'll do that by carefully managing and monitoring access to data with permissions based on role and location. We are committed to further modernizing our technology in all key dimensions: common platform, infrastructure, applications, data and cybersecurity. We are very proud of the digital and technology team that we've assembled. We are leveraging the talent and experience to make the following medium-term commitments. First, we will leverage all customer-focused microservices globally. Second, we'll have the majority of eligible applications in the cloud. Third, we'll execute prioritized application road maps for all businesses to drive consistency and to systematically identify opportunities for reuse. Fourth, we'll perform analytics on real-time data, and we'll do all of that on strong cybersecurity foundations. With the 10% gain in development productivity and a 30% reduction in operating costs that we've seen with our common platform, the 40% server cost reduction as we realized with the cloud and the rapidly growing reuse of micro services, global systems and shared infrastructure, we are confident we can achieve these targets while maintaining a single-digit growth rate in technology investments. Scotiabank's technology organization will accelerate the delivery of business and digital value while transforming the bank's cost structure. Thank you very much for your time, and I'll ask my partner Shawn to come back at the stage, and I think we have time for a few questions. Thank you.

Okay. We have time for a few questions before we turn to our closing remarks. So there's some questions here in the middle.

It's Darko from RBC. I am admittedly old and not that tech-savvy, so please take this question with a grain of salt as I -- I've got 2 questions for you, actually. So the first one is, you've repeated -- Michael, you repeatedly referred to the cloud system is providing data security, and yet, the Financial Stability Board recently put out a paper that suggested they were concerned about the cloud and third-party providers, and especially for a bank like yours, which is very geographically diverse. I don't know if you're familiar with it. But could you give me an idea as to why we should not be concerned about -- and what does the FSB really concerned about?

So I think, go back to what Daniel said in the previous presentation, simplifying the bank makes the bank safer. Now when -- as we adopt cloud-based solutions, we're doing it in one way and in one very consistent way. We're replacing heterogeneous systems, which we built over time before. So that's the first part. Second point that's really important to note is it's less about where things sit. Now we often talk about the cloud. What is actually really much more important is how we get to the cloud, how we enable developers, how we make sure that they stay on a safe path and don't go off the path and develop in a different way. So when I referenced earlier a common development platform, one of the key purposes of the platform, in addition to efficiency, is to make sure that every developer has exactly the same security checks that automate it, that we know exactly that the development has gone through the appropriate gates before code goes into production and it automates many of the manual controls, which it would have had in older legacy environment. So that makes it much, much easier to keep the bank safe. The third point is I believe one of the concerns raised in the paper relate to the -- relate to too much of a dependence on a single cloud provider, and the concentration risk it would result in the industry. That's exactly why I mentioned at the beginning of the presentation that we have a very explicit dual-cloud strategy where we work with 2 of our partners and we make sure that we have leverage with both of them and they can strategically balance what we do with the one and the other.

And just another question...

If I could add 2 quick things to that. It's also a lot about the people, the sophistication of the partners that you have. And in our case, we have 2 key partnerships and then really the maturity of the development teams that are doing this work. There's a lot of standardization that goes along with this. There's also a growing maturity curve in utilizing these tools. We're in almost year 5 on this journey, with 2 of our key partners we are in year 3 and 4. And so our teams are getting better and better at utilizing these services, and so that plays a big role in this. So right now, we feel really good about our cloud-first strategy, but we're also going to make sure that we keep our customers safe, first and foremost, right?

Just another question quickly. I'm not that familiar with the state of each individual country here. So I wonder if you can give me a brief overview. And I know I could be opening up a can of worms with this question, but the question is, there's a pursuit of open banking, and it's potentially coming to Canada. What is the state down here in these countries? And is it going to be a big cost to Scotia to get ready for that?

So I'd give you 2 answers. The very quick answer is really look at some of the demos in the other room because we have a great example of an open bank-like use case in Chile. And personally, I find the ability to see different markets in Latin America at different stages of evolution with different ways to approach a more open environment. It's actually really helpful to us in terms of developing our tools. That's the short answer. The slightly long answer is I consider a key part of Shawn's and my job to get the bank ready at a technology and digital level for whatever open banking brings. I don't want to go into what is open banking, when is it coming in Canada. That's a totally separate conversation. But the services environment that I described, the new data environment that I described, the common authentication and security methods, the common components that the digital team Shawn is sharing, those are all key foundational building blocks that when Canada is ready, we can respond really, really fast. In the meantime, we're experimenting here in Latin America, we're experimenting with Tangerine, and we'd get the organization as ready as possible. Just look at the demo.

Yes. For each of our countries in Latin America, since we've only been doing it, this work for the last 3 years, we're using modern development standards and architecture in each and every one of the countries. That's part and parcel of the conversation around what open banking is, is developing things the right way. And so I would say what we have to work on over the next couple of years is what our point of view is on being open for our customers, for third parties, for our regulators and for this bank. And so open banking will be a byproduct of really good practices. First and foremost, we're going to be ready.

A question maybe for Shawn and then one for Ken as well -- or yes, for Ken Zerbs on digital -- Mike, sorry. You said, Shawn, that progress in customer digital adoption generally is accelerating. Is that because of anything that was holding, capability-wise, Scotia back? Or is there just improved attitude towards adoption, digital adoption by customers? Because you've got some targets that are going to go up, I just wondered how much of it is within your control and how much if it is just customer behavior.

Quite a bit of it is in our control. I would say that there are probably 3 rails there, the first 2 that you mentioned, and then there is also an acceleration of the capabilities that are being delivered by the hardware partners that are the backbone of the industry, primarily with Apple on one side, Google on the other, which is providing the Android operating system. The speed in which that you can get into an application very, very quickly buys you time on the tail end to have great interactions with your customer. No customer has ever said, "Hey, I want to spend more time on the app," or spend more time that is wasted. The technology -- our approach with user experience and customer experience to be able to make sure that we have fewer checkpoints but they're safe, that the technology does it very quickly and that we're partnering with these hardware providers and software providers to just give a superfast experience to our customers is actually yielding at least part of the acceleration of digital adoption. It's just that much easier. It's super fast. Anybody can do it. Two years ago, we were in the low teens in terms of biometric authentication. iPhone 10 comes out, we're at about 70% today. All of these things conspire, I would say, to make a really good customer experience. So yes, we're in control of a fair amount of it. But sure, customer appetite for this type of work is changing, and adoption is accelerating as a byproduct to that.

And so Michael, when you have increased digital adoption and engagement with the customers, maybe an old-school type, again, question is, does the technology, whether it's from a cybersecurity perspective or from a delivery mechanism, is it scalable, what you have? Or will you -- is there capacity available still on the rail, so to speak? And will you have to add capacity if Shawn hits it out of the park and you get to 90% digital?

There are -- it's a really good question, and let me give you 2 data points there. First, that's exactly why it was so important for me to talk about the common services that we've been building. Because the wire transfer service, it actually doesn't quite matter whether you call it from the mobile app or whether you call it from the teller interface in a branch. It's -- underneath it, it's the same service. The same would be true for looking up an address or a KYC check or things like that. So we want to make sure that while the front end looks really different because, of course, the mobile experience is different in different countries and so on, the underlying services are the same. So that gives us leverage in terms of not redeveloping the same thing over and over again for each channel. More importantly, the Canadian mobile app, for example, is a great success story of how we leverage cloud capabilities where it really mattered because we were able to combine a traditional back end, our core banking system, with capacity in the cloud to support a rapidly growing number of users. So we've architected it using the common development platform, architected it in a way that they can take full advantage of the cloud. So the very short answer is, generally, no. So...

The cost will stay variable then?

Yes, correct.

Quick follow-up on that. What we did -- what we've done in Canada with Nova is extensible to the Caribbean. What it really provides, I would say, a really solid platform and foundation, which is what we've created over the last couple of years, is a bit of creativity in play for our business leaders to decide what they wish to do in local markets. What we're doing in the Caribbean, 90% code reuse, probably a 50% savings, we could make that just as differentiated as we would like, but our starting point is actually allowing us to take it, clone it, put it in a new environment for big cost savings. So that buys us some space. There's no question on that. Our teams haven't grown in the development of this since the first quarter of 2018, and our throughput has gone up about 4-fold. So yes, we still got some headroom for sure, but the efficiencies are already being displayed.

Great. Time for a couple more questions.

It's Dean from Mackenzie Investments. This is maybe a question more for Shawn. Just thinking about future digital competition from the bang group of companies, what are the biggest mistakes that you think they're making as they move more and more into your sector of financial services?

Yes. I think that's a great question. Really, with the exception of Apple, all of them have made pretty egregious decisions around personal data and selling it, right? And there's a covenant between people and your technology provider or your partner with hardware. But if they're selling a lot of that information, it disrupts their eventual ability to piece that back together again when entering a new industry that is highly regulated like ours. And so I think Apple has done a very, very good job of making sure that they hold the line in that area. The others are kind of on a spectrum. I think Google is on the good side of it but certainly is selling your data. Facebook is on the other side, very successful, but they made that deal 13 or 14 years ago and continue to grow this practice. We see this in the United States with the political system, with what they're doing. They can't put it back in, right? And so for us, to be able to make sure that this deal that we have with our customers, many of them, lifetimes, multigenerational customers, that, that trust that we have with them is never ever broken. We don't sell anybody's PII. We actually don't track any PII when we cookie somebody as they're going through our site. We just won't do it. And so there are plenty of ways that we can actually go forward and partner with these great technology companies. I don't know that we're going to learn a whole lot from them in terms of their own journey with how they've treated their customers. So take the best of what it is that they're doing and probably leverage that. I think the way that they make things and the architecture is really great. We're really holding very dear our core values of making sure that risk and security and privacy are job 1. And so we learn a lot from them as technology companies but not necessarily in how they treat their customers.

Do you think that privacy data will be as important in the future, as you've just mentioned, with all of us right now?

I think it's even more important. And...

Just thinking like younger people are fine to share everything online, it seems like they don't care about as much.

That's a great point. I think it depends on the relationship that you have. If there's an agreement between you and a partner, in this case, Facebook, where you get what you want out of this and it's free, I think that's fine. Your relationship with the bank is fundamentally different. Our customers tell us that. If 10 years from now, in addition to everything that we're doing with technology, we were the world's safest bank, I'd bet on that. And I think that, that probably goes towards customer privacy, too. Yes. So yes, I think it's going to stay very important.

Maybe right behind you?

Maybe just to follow up to Dean's question a little bit. Bad actors seem to be central to data breaches and after some higher profile issues in Canada, have you made any changes to data access? How do you think about your cyber and security efforts as a result of that?

So look, the starting point is our customers' trust is everything, and keeping our trust -- our customers' trust in the bank safe is really, really important. Now absolutely, we're looking at cybersecurity every day. We have a very strong governance and measurement regime. We have a strong strategy, and that's really important. Because it's easy to say I want to improve. But if you don't know what you want to improve, when you're going to improve it, what the impact is and how you keep track of the many applications, the many businesses, the many parts of the bank and make sure that we all continue to improve at the same time, it's just a bunch of words, right? So focusing on a very clear set of metrics that we, together with our partners in risk, monitor every week in every management meeting and every board meeting, that's part of the answer. The second answer is, I'll come back, I quoted Daniel before, and I'll do it one more time, simplicity, right? So it's -- I think the focus on making sure that we -- as we modernize the bank, as we modernize the bank's technology, we reduce the number of different solutions that we have. We know exactly what we have where, and we put the best possible defenses on our next-generation tools is a key part of our strategy as well. But it's clearly top of mind and it's clearly something that, both from a technology perspective as well as from a behavioral and cultural -- risk culture perspective, we worry about everything, and we focus on that.

Steve, it just -- it doesn't stop with these bad actors. We also have to make sure that the tools that we're putting in the hands of our team members are just as secure as an open exposure point to the bank from those outside. And so at each and every level of whether it's tool adoption internally for productivity measures or making sure that we're closing off some of these exposure points so that we can keep our customers safe, there is a multilayered approach that we take to be able to make sure that we have consistency across that, so that we can say that it's truly a safe bank against all actors.

And maybe time for one more question, and maybe in front here.

I'm just curious to get a sense for the scale of your teams today and where they're located and then also curious to understand if there are any key really critical software applications that you've chosen to develop and maintain internally and why.

So if I look at our global footprint, we continue to have a large number of development functions in Canada, right? So that continues to be a major part of our footprint. Having said that, as per what Shawn and I were talking about earlier, innovating locally is really, really important. So we built up additional factories. We have strong local technology teams to do what needs to be done locally. We are also focused on leveraging common capabilities, especially here in Latin America and across our Latin American environment. So we continue to build up centers of expertise that are not just country-specific but go across countries, right? So we're a major technology employer in Canada and then also all the other markets that we serve. I'm not sure, frankly, if we're breaking out the numbers publicly or not or that it matters. Let's say 10,000-ish in terms of people.

And between us for our 5 countries, about 1,200.

And then just on the things you've chosen to develop internally.

I think the key for developing internally is where do we have a competitive advantage, where are we better doing it ourselves than relying on common solutions. And generally, that's proof that we really, really understand our customers. When we need to understand our customers, we understand the behaviors, we are being better and faster in many areas of the customer value and customer experience that you talked about, Shawn. Those would be great examples. Those are really important for us, for example, take our mobile apps and to develop them ourselves. Of course, I wouldn't dream about writing our own database. 20 years ago, as a leading global bank, we would probably have written our own database, so the utility tools where absolutely it makes sense to buy strong commercial solutions that allow us to move forward. If you look at certain verticals like capital markets, deep, deep subject matter expertise in key vendor communities, so probably, there would be a higher number of commercial solutions in the capital markets area than some other areas of the bank. But again, when we go down to whether we have a competitive advantage and you look at some of our risk models, some of the simulations we own, the risk models, we will it do ourselves again. So it depends type of answer, but we have a very careful process to decide what do we do where. And final part of the answer is don't forget about the fintech comment that Shawn made earlier because it, again, brings us a key set of new ideas that we incorporate as well in partnership with our fintech partners.

We've been doing technology modernization since the 1960s, so I would say a lot of what sits over the current application is a productivity suite about what you would expect from any major technology company, G Suite, Slack, Splunk, BigQuery. All of those productivity tools for current development methodologies layered in with what makes us a bank, right? So from core system to productivity suite, it's about what you would expect from a, very modern technology company, okay? I feel like that's it.

Okay. And so we'll cut it off there. So thank you, Michael. Thank you, Shawn.

Thanks, guys. Appreciate it.

That was nice. So we're running slightly ahead of time, which is by design, so I'd like to invite Brian Porter up to the stage for some closing remarks. Following Brian's brief closing remarks, I will be back on stage for the people here in Santiago, if you remain seated, so some brief instructions around the technology demos that will follow and conclude our program. Thank you.

Speaking on behalf of the Scotiabank team, appreciate everybody for your time and attention for the past 1.5 days. As you all know, the bank has a long history of operating here in the Americas. We believe seeing and experience the countries where we operate in person provides you with a very meaningful perspective. We hope you have come away with a better understanding of our high-growth markets in the Americas and the bank's growth strategies. On behalf of the entire management team at Scotiabank, we would like to thank the Chilean Minister of Finance, Minister Briones; all of our investors, panelists, customers, analysts and guests who could join us here in Santiago and everybody joining us via webcast. I would also like to thank our team here in Chile, led by Francisco, for hosting a fantastic event and particularly for supporting our customers in the country during a difficult period. I would also like to thank Phil Smith and the IR team for all the hard work they've done in terms of putting the Investor Day together and all the coordination of moving dates, et cetera. It's more than a full-time job. Phil and the team, thank you very much. Before ending our formal presentation, I would like to leave you with a few key messages to recap the last 1.5 days. As you have heard earlier in our presentation, the bank's repositioning efforts are substantially complete, and we are focused on growth in our 6 key markets. We have reduced our exposure to noncore businesses that operate in markets with lower investment-grade country ratings, greater earnings volatility and lower growth and lower returns. With these actions, approximately 95% of our earnings were generated from the Americas, where we are uniquely positioned as a bank. We are in the right markets, and we have scale in our core markets. The repositioning efforts have changed the bank's earnings profile. From our perspective, every dollar earned is not the same on a risk-adjusted basis. Having previously held the role as Chief Risk Officer, I know firsthand about the bank's long-standing approach to risk. We like to err to conservatism. We like to be downturn-ready, and we like to provision early and prudently. There is an appropriate balance between risk and return, and we strike the right balance. To make up for our earnings gap, we certainly could have extended our balance sheet, lent down the risk curve to seek returns to fill that gap. However, we chose not to do that because that's not how we bank. Our repositioning efforts have positioned the bank for long-term sustainable earnings growth and a higher return on equity. Our digital investments, as you just heard, are strengthening our operations and providing a path for continued improvement to our productivity ratio. We refer to the benefits of our technology investments as our digital dividend. Ongoing investments in data and analytics are helping us better understand our customers and improving their experience. We are seeing an increasing progress against our digital targets, with countries like Chile that are very advanced. We have a large footprint to extend our investments with the ability to reuse and reinvest across our platform. Maintaining strong capital and liquidity ratios is a key line of defense for the bank and provides a level of optionality you've heard me speak about before. We expect to operate with a common equity Tier 1 ratio of approximately 11.5%, and that is the level that we think is an appropriate for the bank during the course of 2020. Share buybacks and dividends will continue to be part of our ongoing capital management. Strong capital ratios position the bank to execute on potential acquisitions in core markets when they make sense, none of which is imminent. I'll repeat that, none of which is imminent. We will remain patient for opportunities that are the right strategic fit and reasonably priced. In the meantime, we will be a buyer of our own stock. We have repurchased 25 million of the 34 million shares we issued 2 years ago, as Raj mentioned yesterday. And as we see it, don't think that we'd stop at 9 million shares. In this type of environment with these type of valuations, we will continue to be a buyer of our own equity. Our management team is committed to delivering on our medium-term objectives, which were reaffirmed today. We are focused on driving sustainable growth, and we are fully positioned to do so. We have optionality to invest in higher return on equity markets that differentiate us from our peer group. We are positioned for the future as a leading bank here in the Americas. With that, I'd like to thank each and every one of you for your continued support, time and attention. Thank you very much.