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

Good morning, everyone. My name is Michelle Khalili, and I'm the Managing Director and Head of Global Equity Capital Markets at Scotiabank. I'm very pleased to welcome you to our 24th Annual Scotiabank Financial Summit. On behalf of Scotiabank, I want to thank you for being here today and for your business and your partnership. We deeply value the trust that you have put in us, and we hope to continue to strengthen it in the future. We've got a great agenda. Over the course of the next 2 days, we will hear from CEOs from leading financial services companies. These leaders will talk about their corporate strategies and financial performance, current themes and trends impacting financial markets and our industry as well as their own outlook for the sector. Over the past few years, the financial services sector has faced the impacts of economic uncertainty stemming from the global pandemic, from the war in Ukraine, the energy crisis and other global and local events. And this has resulted in heightened volatility, inflationary pressures and rising interest rates. On top of that, the collapse of Silicon Valley Bank and Credit Suisse this past year put a renewed spotlight on bank regulation, especially in the U.S. While Canadian banks are far better capitalized and regulatory measures are far more robust than they were before the financial crisis, there are still risks on the horizon. With the backdrop of heightened macro uncertainty, the financial services industry has played and will continue to play a critical role, providing liquidity when it's needed most as well as timely advice and solutions to help our clients navigate turmoil in global financial markets. Looking ahead, with recessionary pressures and climbing interest rates continuing to present challenges, the sector's role will be as important as ever in supporting clients weather the storm as well as reap opportunities. We've got a great lineup over the next 2 days. So we hope you enjoy the summit and that you gain valuable insights from the important discussions and conversations that will take place. And on behalf of Scotiabank, thank you to all of our speakers and thank you to everyone in the room for joining us for your continued support and for your partnership. I'd like to now invite to the stage Scott Thomson, Scotiabank's President and CEO; and Meny Grauman, Senior Financial Services Research Analyst at Scotiabank. Please join me in welcoming Scott and Meny.

Thank you, Michelle, for that introduction. And Scott, great to see you. I'm so excited that you're here to kick off our conference. And we have 2 amazing days ahead of us, but I'm glad that we could start with our official host, as it were. And a big thank you to all our clients as well. I just want to reiterate what Michelle said. So thank you for being here.

Scott, I want to start off at the beginning and ask you a question about your strategic refresh. I don't want to front run an Investor Day, but I want to understand the rationale, why a strategic refresh, why now. And if you could give us a little bit of insight into the process that's behind the strategic refresh.

Yes. Thanks, Meny, and thanks to all of you for attending. I know all of you are clients of the bank, and it's important -- this is an important summit for us. And thank you for showing up, and thanks for your business. Strategic refresh. So as you think about the last time the bank was in front of stakeholders with a strategic refresh or a strategic overview was 2020. And a lot has changed in the environment since 2020: interest rates, COVID, the U.S. influence in terms of how they're moving forward, regionalization. So lots of changes in the external environment that demand us to, as leaders, to kind of relook at how we're positioning the business. Point one. I think point two is as a Board, as a management team, we're not satisfied with the total shareholder return. And when you look at a 1-, 3-, 5-, 10-year period, that return proposition to shareholders is not acceptable, which demands, again, a relook at how we're positioning the business going forward. And so as I think about the strategic refresh, a big part of it is going to be profitable growth, right, and this focus on returns. And I'm sure for those who are in Scotiabank and part of the process, you're hearing a lot about return on risk-weighted assets. I mean that's going to be a continuing theme for me around how do you drive improvements in our return on risk-weighted assets, and a big part of that for me is business mix. And business mix can be both geographic, but also within core businesses, how do we think about that business mix. And I'm a big believer that ultimately, client primacy is a huge opportunity for us to change from a product-oriented bank to a client-centric bank. And with that, we will drive profitable, sustainable growth over a sustainable period of time. And so that's -- the process has been -- it's been intense. It's been an intense -- I think my first day was February. Realistically, I started in December. And probably going back to September when the Globe and Mail articles came out, I started September 26. And so it's been a very inclusive process involving a lot of senior members of the team. It's been data-driven based on an analysis of all of our business, all of our geographies. And we look forward to sharing that with shareholders by the end of the calendar year.

I want to talk about client primacy and a few of the other key strategic pillars that you've been highlighting to investors over the past year really. But sticking to the strategic refresh and just even the process, I wanted to understand, when you went into this process, was there anything sacred that was not on the table? How did you view that in terms of the mandate for this strategic process?

Yes. Given the return as of -- from a shareholder perspective, there was no -- there's definitely a mandate for change. And so this is not going to be continuing on the way we continued on because that hasn't delivered the results that all of you should expect. That being said, there's a lot of good things that were going on in the business, and we need to make sure we build upon some of those great things while also reevaluating some of the other areas. And so yes, mandate for change. Yes, we've looked at all of our businesses. And yes, we will continue to accelerate those businesses that are doing well. I'll give you one example. Wealth came very clear to me very quickly that we built a great, organically and also through acquisitions, built a great wealth franchise here. And so there's an example of something that we're going to continue to double down on, right? And so this is not going to be a complete rework, but it is going to be accelerating the things that are working well and reevaluating the things that we can do better.

And then more from a management point of view, how do you sort of initiate and bring change to an organization as large and complex and as old as Scotiabank? How do you think about that from the management perspective?

Yes. I mean that's -- the biggest part here that probably isn't front and center for investors but is really front and center for me is culture and how do we make sure we bring the 90,000 Scotiabankers along on the journey that we're starting. And so a big part of this strategic refresh was making sure it was inclusive, making sure it was collaborative, making sure it wasn't just me and the Board. It was the whole management team was actually involved, all the EVPs across the organization. And then as we continue to get through this, communicate, communicate, communicate and making sure you align your incentives around what you're trying to prioritize. So that's probably the hardest part about this, Meny, is making sure once you've aligned on the North Star in the strategic direction, making sure that you bring the 90,000 Scotiabankers along in that journey.

And I want to talk about the key pillars of that strategic vision, kicking off with client primacy because you brought it up. I mean you talk a lot about how the bank needs to prioritize markets where the bank has scale. You talk about prioritize clients where the bank has product capability and connectivity. Can you give us examples that you've identified where those conditions haven't existed or maybe haven't fully existed?

Well, let me turn the question around a little bit and focus on areas where we do have scale and we do have the product capabilities, yet we don't have the right client primacy. And so I'll take the Canadian P&C business as an example. We've spent -- we're over-indexed on mortgages and auto relative to our competitors. And I would argue that, that doesn't necessarily, particularly when you're looking through single-product customers, drive client primacy. And so there's a great opportunity for us to increase our relationship with our clients through multiproduct propositions to drive that type of client primacy. And the good news is we're not starting from scratch here, right? I mean you look at Scene. Scene is a great example of an opportunity to drive that type of client primacy. And just go back to the last quarter and you see the growth in our credit card portfolio. A big part of that is on the back of Scene. The second case, I would say, where we have a great opportunity on the client primacy front is our GBM business. I think historically, we've been a lending-first organization with not as much wrap around the credit. Jake and the team have done a great job over the last few years, transitioning that business. And there's a great opportunity to continue that transition, right? And we'll come to the U.S., I suspect, in terms of our GBM franchise there. But there's another example of being able to move from a single-product lending relationship to a more holistic, client-primary relationship.

So that's client primacy. You also talk a lot about capital allocation. So I want to talk about that in terms of capital allocation to the highest risk-adjusted returns on a full cycle basis. So again, there, if you can kind of sort of audit the organization and highlight sort of examples where the bank has not adhered to those principles as they should.

Yes. I mean I think the obvious example is the international franchise. And right now, we have, I think, $20 billion of the $60 billion in capital in our international business. And from a return on risk-weighted assets or risk-adjusted ROE basis, the returns there are not commensurate with the risk. And so the challenge and the opportunity for us is how do we use that great franchise that we have. And we do have a great franchise in a lot of these countries to be a differentiator, but at the same time, not having a drag on the profitability for shareholders. And so again, back to the strategic refresh, a lot of data-driven analysis around all of the markets we're in. And I think where you're going to end up is you're going to see a moderation of capital into the international business and an acceleration of capital into more of our core businesses. We'll have more to say on that at the Investor Day. But ultimately, that's the type of capital allocation discipline that we're talking about.

One area that I want to zoom in on is Canadian mortgages where balances are down 2 quarters in a row. And the question is how do you sell something like that to your frontline producers? How do you convince the organization that you kind of have to take a step back or shrink a little bit in order to achieve the goals that you're highlighting?

Yes. I mean the mortgages business is an interesting one. So if you reverse 2 years ago, we were primarily focused on volume growth. And as a team, we're saying let's change that to profitable growth and primary relationships. And so we're being really thoughtful about origination. We're being really thoughtful of ensuring that our channels focus on multiproducts. And that, in combination with a slowing market, has resulted in a little bit slower growth on that side. The same can be said probably about the commercial business is we've got a great opportunity in our commercial. We're #5 in Canada. We're going to continue to grow that. But we're really going to focus on the customers that provide more than just the loan, right? And so as you go out and communicate that with our frontline salespeople, you need to be really clear on what are you trying to achieve, continue the communication, communication, communication and make sure your incentives are aligned. And that's a process that takes time. Again, back to the cultural piece, that's the hardest part of this. But ultimately, that's where we're going to see the results. And so a lot of work is being done on the communication side, and a lot of work is being done on the incentive side.

And of course, the third pillar that you talk a lot about in terms of operational efficiency, you've talked about excellence in operational efficiency as a key goal. And the question is, Scott, what does that really mean on a practical level? Is it just expense management? Or are you getting at something [ more ]?

Yes. I mean when I was at Finning, we coined it better, faster and at a lower cost, right? And that's -- there's a lot in those 3 words: better, faster and a lower cost. So if you think about better, what does better mean? It's better customer experience. It's better advice to drive a better outcome for your clients. When you think about faster, it's prioritization. It's end-to-end digitization and being really clear on what you're trying to accomplish. And cost -- at a lower cost, it's this relentless discipline around cost management. And you're starting to see some of that come through, right? In the quarter, we had pretty decent expense growth relative to revenue growth. I mean I know we think about years here when thinking about operating leverage. But in the quarter, we actually saw positive operating leverage, and we're going to see continued discipline on the cost front. And I think there's a lot of opportunity in this regard, by the way. As I think about our international business, as an example, we'd really run that business in a decentralized fashion, country by country by country. If you take a more regional view, there's a real opportunity to be more thoughtful about cost and capital. When I was thinking about back to my 9-year journey at Finning, ultimately, we've been on this operational excellence journey. And you think about where we went from and where we got to. We went from a mid-20s SG&A as a percentage of sales to a mid-teens percentage of sales. Now that was a 9-year journey, but all of that dropped to the bottom line and all of that's now reflected in the earnings capacity of that business. And so there is a great opportunity here to make sure this better, faster and at a lower cost mantra kind of lives within the organization.

And I think that's a very relevant point. Coming out of this last earnings season, obviously, expense management is top of mind for investors, especially in a slowing revenue environment overall, a challenged macro outlook. The question keeps coming up, so I'll ask it from a higher level, but the question of restructuring charges. So philosophically, are you open to taking restructuring charges under the right circumstances? Is that within your sort of management view of something that is a tool at your disposal?

Yes. I mean I think the question is, is there a continued cost opportunity in the business? And I believe there is. I think, again, there was a great focus from the team over the last couple of quarters to reverse the expense growth, which I was pleased with. As we continue to move forward, there's going to be areas where we focus on, areas where we don't focus on. And again, this operational excellence mantra will continue to drive the ability to be more efficient both from a capital and cost perspective. And so this is going to be a continuing theme during my tenure. And I think shareholders will benefit from that.

I want to talk about International Banking, obviously, a key part of the bank. You touched on it in terms of when you were talking about the capital allocation pillar. Scotiabank has just recently disclosed the ROEs of the countries in the International Banking segment. And the question is when investors look at those ROE trajectories, what are they supposed to get from that information, especially in the context of what you were just talking about before in terms of the focus -- renewed focus on capital allocation to highest-return areas?

So the first thing is that I'm trying to build a new compact with our stakeholders, not just shareholders, but all stakeholders around trust and credibility. And so making sure we're transparent with where things are working well and where things aren't working well is a massive priority for me. And so why are we highlighting that? Because we're highlighting we have a challenge, right, and then we have to get after that challenge. So now as a team, what are we going to do about it? So Colombia is the obvious one that is front and center given the net NIAT performance and the ROE performance. And the team is working hard in trying to fix that business, right? And for us as a management team, do we have conviction that we can actually fix that business? Or should we think about divesting that business? And a lot of that depends a little bit on not only the conviction of being able to do it but also the external market, and the objective here is to maximize the return to shareholder. And so we'll make judgments around all of those issues as we move forward in some of these markets.

So maybe that's a good place to jump off just with the next question, which is divestitures. I don't want -- you don't have to reveal your plans here, although if you want to, you're welcome to. But is a divestiture something that at least is on the table? Again, is it a tool in the toolbox from your perspective?

Yes. I mean nothing is off the table, so divestitures aren't off the table. But I want to come back to this, one, the international business can be a differentiator for us. And so we need to focus on areas where we have connectivity across the platform and using that international business, which is a great franchise, to provide differentiation versus the other Canadian FIs. So that would be point one. Point two, we also have work to do, and there's a great opportunity to fix some of these businesses, and Colombia would be a perfect example. When you actually look into Colombia and you see 70% cost -- productivity ratio of 70%, I mean, that's an obvious opportunity to go in and fix that. And are you better to do that and then evaluate whether to sell particularly given the macro environment? Or is it better to kind of move on? And that's a question that we'll look at geography by geography and business by business. But divestitures would not be off the table, in my mind.

You mentioned connectivity. So I think that's maybe a good place to go to. We could talk about sort of north-south connectivity. But first, I want to just talk about within the International Banking segment, within the Pacific Alliance countries. A lot of times, investors come, and their key question is what's the connectivity within those groupings of markets that we operate in? So from your perspective, is there connectivity there? Where is the connectivity there?

Yes. So first, I believe you need to create connectivity. I mean as you think about your overall business, you have to have connectivity across the platform to create the right value proposition. So I guess that would be point one. Point two, where do I see the most connectivity? I see the most connectivity with Mexico. And you think about the trade flows between Canada and the U.S., U.S. and Mexico and that whole NAFTA region, and those are really significant. And when you look at -- I think it's [ $600 billion ] per year between Canada and the U.S. and $600 billion per year between Mexico and the U.S. So really significant trade flows. When you think about where we're actually successfully creating connectivity, you look at the GBM business. And that GBM business right now in the U.S. is 8% of the overall earnings of the bank. People don't appreciate how big that business is right now. And that is great connectivity. Other areas of connectivity we should create is that wealth. We've got a great international wealth franchise. It's growing at 25% in the last quarter. Creating that connectivity across the platform would be extremely important. So Mexico is the obvious place for connectivity. Is there connectivity between Peru, Chile and Colombia? There's actually some around those specific alliance companies. We actually do a lot of business with multi-Latino companies and there's an opportunity with multinational companies, but definitely not as much as the Mexico-U.S.-Canada corridor.

And from your perspective as CEO, when you talk about connectivity, where do you feel -- how do you feel you can drive connectivity as a CEO of Scotiabank in terms of what kind of levers do you have in order to drive that?

Yes. I mean -- and it's back to the cultural piece a little bit, enterprise-wide thinking and making sure we're not thinking in silos. We're actually thinking through an enterprise-wide lens. And so I'll give you a perfect example, cash management. I think because of our decentralized model, we had a Canadian team thinking about cash management, a U.S. team thinking about cash management, a Mexican team thinking about cash management. Actually, in every single country in the region is thinking about cash management. My view would be if you're trying to create connectivity, you should have a cash management strategy across the business that you're involved in. And that's something that actually is going to cost you less in the long run because you're not doing it 10x. You're doing it one time, right? And so that's an example of kind of enterprise-wide priorities and then incenting those types of priorities to drive the right outcome.

You talked about International Banking. I want to get to the U.S. But before that, I think it's important that we talk more about Canada. We touched on the mortgage business. But one thing that I've noticed is you're talking more about Tangerine, and that's something that has caught my ear. And so the question is what do you like about the business? And a follow-up question really is where do you see that business going? What potential do you see in that business?

I mean, so I think people are probably pretty clear because I keep mentioning it: I really like Tangerine. And as I think about a great customer experience, as I think about mobile leaning, digital leaning, as I think about deposit focus, as I think about a great cross-sell between wealth and deposits and I look at the connectivity or the overlaps -- or not the connectivity, the overlap between our Canadian P&C customers and our Tangerine customers, which is really limited, the question for the management team is how do we accelerate that business and that's going to be a key priority for me. I think we've had that business for a long time. We bought it from ING 10 years ago. In the last couple of years, actually, the results have been really positive. Gillian Riley, who's the CEO there, have done a great job in terms of driving that business. We have the opportunity now, and you probably saw the leadership changes to bring in someone to oversee that business. So Gillian will continue to be the CEO but bringing in someone from ING with 30 years of retail experience to actually help us accelerate that is a great opportunity. And I do see this as a business, particularly given the limited overlap with our P&C business, that can actually be pretty aggressive in the Canadian market. And that's going to be a positive to our shareholders and stakeholders.

That was really my next question. So maybe we can build on that in terms of how do you see Tangerine sort of operating alongside the full-service P&C business. And so is there any tension there? Or how do you see that...

Yes. Listen, I think there's going to be great learnings from our Tangerine business that we can bring back into our Canadian P&C business. And I definitely don't want to create a back office that's duplicative of what we've done. The team has done a great job making sure that we have one cost base. But is that Tangerine business going to be more aggressive in the market in terms of trying to focus on primary customers, focus on wealth, growing their business? The answer is yes. That is going to happen, and that's going to be across the whole Canadian marketplace.

You touched on management change within Tangerine. You announced a few management changes recently. So I think that maybe is a good opportunity to just ask about that and what investors are supposed to sort of read into those changes, and if you could just comment on those changes.

Yes, listen, in any transition, there's an opportunity for a refresh. And I think it hasn't been just at the management level. It's also been at the Board level. So you saw 2 new Board members come in: Sandra Stuart from HSBC and Michael Medline from Empire. I think as a Board, we recognize that we have an opportunity to have a little bit more financial services expertise and a little bit more C-suite expertise. So those 2 additions are meaningful. As you look at the changes that we've had to my team, we've added Francisco Aristeguieta, who comes to us from a U.S. banking environment, State Street and Citi, running our international business. We've added Jacqui Allard, who comes to run our global wealth business. We've added a new Head of HR, Jenny Poulos; and then Aris Bogdaneris, who I just talked about. We've also made some internal promotions as well to recognize the fact that we've got a great team. We do have a great team that is going to be capable of doing a lot of great things, but we will also benefit from seasoned, experienced professionals who've seen things done outside of this market, both in Europe and the U.S., that will help both mentor the next generation of leaders and provide immediate support to the team to drive what we're trying to do from the strategic refresh.

I want to stick with Canada again and maybe a little bit of a macro question as well. Commercial loan growth is something that you've talked about in terms of prioritizing. Scotiabank has really been driving peer-leading commercial loan growth for a while now. Q3, it was up 15% year-over-year. So that's very strong, and there's success there. But I guess when you look at that kind of growth, the question is where is that coming from? Is it a sign that maybe the economy is just not as weak as maybe investors think it is? We know that there's the pressure of higher rates. It doesn't seem to be translating into slower commercial loan growth, at least not for Scotiabank. So the question is when you see that kind of growth and the team is delivering that kind of growth, how do you view that from a risk perspective? And maybe from a macro perspective, how does it all make sense?

Yes. So let's split your question in 2 parts, both long term and short term. And long term, I like commercial, right? I mean as you think about commercial from a NIM perspective, from a return on risk-weighted assets perspective, from an ability to bring the whole organization to a customer, a client, commercial is a great business. And when you look at where we're positioned in international, we haven't been a commercial bank. We've been a corporate bank and a retail bank. We have a great opportunity to expand our commercial focus internationally. And that actually, I believe, will be lower risk and higher return on risk-weighted assets than where we are today. And then when I look at our Canadian business, which gets back to your question, we're #5, right? So we're #5 in this business. And Dan and the team have done a great job over the last few years, growing that business, and you've seen a pretty significant growth rate. But it's off a lower base, and I still continue to believe that we have an opportunity in that regard. And a core competency of this bank is credit adjudication. A core competency of this bank is credit, credit risk management. And so that plays well with how we're thinking about the commercial business, particularly in an environment like we're in today, which comes back to the short term. And when I look at the team and I see the amount of deals that we're passing on, the kind of the pipeline, the deals that we're closing, the thoroughness and discipline with which Stephen Bagnarol and the team are looking through from a growth perspective but balancing this growth returns and really focusing on primary customers, I feel good about it right now.

I want to talk about -- we mentioned we're going to get back to the U.S., obviously, the biggest banking market in the world. Historically, Scotiabank has been very clear: No to P&C business in the U.S. But there was a view that we needed to do something -- or Scotiabank needed to do something in wealth in order to give some capability to service Latin American customers. So I just wanted to get your high-level thoughts on the U.S. market. And has anything changed in terms of sort of a wish list or where you could potentially see an opportunity for Scotiabank in the United States?

Yes. So when you think about this connectivity that I talked about, we have a great platform in Canada. We have a great platform in Mexico. We have a growing platform in the U.S. And as I mentioned, 8% of the bank's earnings now come from the U.S., that corporate -- that GBM business. Jake and the team have done a lot of great things on that business in terms of building out capabilities. And we're moving from the lending to a better balance between lending and non-lending activities. And yesterday, it's coincident that I'm up here today, but yesterday, we were joint bookrunner, as an example, on 5 deals in the U.S., $10 billion of deals. We were 26% of the market in the U.S. yesterday from a DCM perspective. So we've moved up the league tables. We're now, I think, 16th from a DCM perspective. We are, I think, 8th from a power and utility perspective. And so we're early in this journey, but Jake and the team have done a great job building out that capabilities. And I want to continue to grow that. As I think about other opportunities for us, you've highlighted wealth. We have this great international wealth opportunity, and we have this good Canadian opportunity that we've organically grown. We need to create the connectivity on the wealth side. And so we'll continue to think about that. And then over time, we'll evaluate commercial, and I think that's a longer-term proposition. But when you think about the connectivity between Mexico commercial, Canadian commercial and U.S. commercial, that's something that we should evaluate over time.

You've touched on Mexico a few times during this talk, but maybe to zoom in on Mexico and really focusing on what you like about it. You talked about the connectivity. But in terms of -- maybe if you can start from some of the macro trends that are impacting Mexico and then kind of dig in from there.

Yes. So let me start where our positioning, right? I mean we're the -- we've got scale. We've got 8% share. We're the fifth largest bank. It's a big business with a great opportunity to continue to organically grow. We've got a great leadership team there. We've actually upgraded the technology. So we have a good technological core, and you can see it through the returns. Our returns, I think, last quarter were 25% return on equity in that business. And so that's a great starting point. And then you layer on the mega trend of what's happening in Mexico and what's happening across the Americas. This near-shoring piece, which we're going to publish something from a research perspective shortly, it is real. The amount of capital that is going into the north of Mexico and the connectivity between Mexico and the U.S. is really significant. And so that -- whenever you can combine a great scale opportunity with a mega trend, I think that's something that you should really focus on.

I want to talk about capital and talk about -- it was a very strong quarter for Scotiabank when it comes to CET1 ratio. But I want to get a better understanding of how you're thinking about capital now in terms of your philosophy of capital, how defensive do you feel you have to be, what kind of capital ratio are you comfortable carrying, what kind of spread to the minimum regulatory capital requirement do you feel is appropriate in this kind of environment.

Yes. So when I started, I think it was January 8 when I was in front of all of you at the RBC conference. I think our [ CET1 ] ratio at that point roughly was 11.3%, 11.3%. And I said our commitment by the end of the year was to get to 12%. And so here we are at 12.75%. And so I'm feeling good about how we're positioned. As we look forward, there's some uncertainty on the horizon, though, right? And we don't know what Peter is going to do in December. Hopefully -- I know he's the guest speaker tomorrow. Hopefully, we'll learn a little bit from that, but we don't know what Peter is going to do from that regard. And we've also got the reversal of some of the transition benefits we had earlier in the year from a Basel perspective and the floor kicking in and the review of our trading book, which will be a material drag on the capital at the first part of next year. And so the objective here, which I've been pretty consistent, is continue to keep a modest buffer to the regulatory minimum and keep enough capital to execute on the growth plans that we have in place coming out of the strategic refresh. And so there's nothing more complicated than that, Meny.

And you did a risk transfer agreement last quarter, and the question is why. So...

Yes. So Raj and I have a lot of conversations about this. Once these uncertainties are behind us, the #1 objective, we'll get off this DRIP, right? I mean the DRIP, we recognize, is not a great use of shareholder capital, and we have it in place because of the uncertainties that we just referenced. When you look at a better use of capital than the DRIP, it's the risk transfer, but it's not much better, right? The best objective -- or the best way is to manage your risk-weighted asset growth organically so you don't have to use a risk transfer or a DRIP. And so we're really cognizant of it. But right now, it's a tool in the toolkit that we're using to manage through these uncertainties. As we get through those uncertainties, the objective would be to definitely shut off the DRIP going forward.

And maybe that's a good segue just in terms of investors to understand your capital deployment priorities in an environment where your capital position is looking very good. I think those questions start to come up from investors. So just to give some insight in terms of how you're thinking about as you look ahead, how would you rank your capital deployment sort of wish list right now?

Yes. I mean capital discipline is going to be a mantra that you're going to hear from me time and time and time again, and we're going to have continued conversations around that. Right now, we're managing through these uncertainties that I talked about. On the back end of that, we'll have growth opportunities, organic growth opportunities that we'll want to execute on. I don't see the flexibility or the need right now to do a share repurchase or share buyback. I know we've done that historically. Right now, that wouldn't be in the cards. As I think longer term, is that a tool in the toolkit? For sure, but not in the near term. And so for me, right now, the key priority is going to be organic -- managing that capital, getting through these uncertainties and then managing organic growth.

And then I see time is running out, but we probably have time for one more question. It's 2023, so an AI question seems to be par for the course. And I'm curious, so there's a lot of hype about AI. I know Scotiabank is investing in AI. The question, I think, is most relevant for investors is how excited should investors be about AI? Is this something that is potentially going to move the needle in terms of expenses and help make that job easier? Could it potentially drive revenues? From a bottom line perspective, where is this taking us from your perspective?

Yes, definitely the topic of the day. So we have a lot of conversations about this internally. And I was pleased to see that the bank has been working on this for -- this isn't new to the bank. And actually, the capabilities within the bank are significant. And so the key for us is finding the use cases where we can implement AI to actually drive business results. And for me right now, the obvious one is on the cost and efficiency side. And we'll share a couple of use cases with you at Investor Day, but you can imagine credit adjudication. That's a great opportunity there. Contact centers in terms of how we think about contact centers, both improving the customer experience but also driving at a lower cost. Those are the type of things that will be the first port of call. Longer term, I do think there's a customer experience here in terms of driving insights to the customer to help drive that primary customer relationship. But ultimately, right now, I think it's mostly on the cost and efficiency side.

Okay. With that, Scott, I want to really thank you so much for being here and again kicking off what promises to be 2 great days of discussions with the leading CEOs of financial services companies in Canada. So thanks so much. Really appreciate it.

Great. Thanks, Meny.

Thanks, Scott.