The Bank of Nova Scotia (TSX:BNS)

Investor Day 2020 Part 2

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Jan 23, 2020

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 guests, I'd like to acknowledge the presence of our Scotiabank partners in Chile, Mr. Salvador and Gonzalo Saeed. 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 We're very pleased and honored to have as our guest this morning Mr. Ignacio Brillonez, 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 Ibernet 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 AldoFA Ibanez 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 Skocha Bank for this invitation. It provides me with the 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 expect that time and to have the obligation to have Q and 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 protests demanding or asking for changes in social areas, capped 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, 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 1st 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 1st month, but the situation has been resuming after that. In the same line, I would like to highlight something that we, Chileers, do not see with all the strength all the time, which is the capacity of our democratic institution to give answer, to give response to what has political institutions have lost a lot of their credibility, their legitimacy, all the boards 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 leaving in Chile. This appeared normal, but I mean, it's not normal to have the very left and the very right in the same favor 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. First part of the pension reform going to the low income Chileans, and this was a significant advance. And 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 deputy's 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 though the democratic institutions are under pressure and are losing credibility, Nevertheless, Chile is among the 20 economies around the world 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 Economist Intelligence Unit. And this is something we tend to forget. We used to speak here that we have a weak democracy 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, 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 two 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. Inequality, despite the many advances, is 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 capita 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 assuming 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, part of the confusion we are facing today is that everything seems to be a priority, at least according to the 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 is the same. But it has been increased since the crisis, since October. Of course, this is something that we observed quite clear and goes from radio, broadcasting, newspapers to Catholic Church and of course, government and Congress. This is 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 Q4 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 GDP decline. This is huge. This is massive. And 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 businessman confidence and consumer confidence has dropped significantly, a radical drop after October 18th. 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 a central bank and the market, economic growth around 1.3% of GBV. Economic growth, 1.3%. Central bank has a central figure of about 1%. Market surveyed is 1.2%. Overall, we are there, 1%, 1.3%, percent, okay? This is but our former scenario was 3.3 percent. So this is a 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 a 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 $3,000,000,000 in 2020. These are transitory measures, one time measures. And in tandem with that, we have provided a series of measures for providing liquidity to small and medium sized companies through different instrument, the capitalization of Banco Stalo, guarantees 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 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 pension state fund, the 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 details, but basically, what the government is proposing is to increase gradually the pension contribution the workers do in 6 points. Actually, it's 10% of their salary. We are planning to increase 6 points in a gradual fashion in 12 years. And half of these 6 points 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%. So this is an important very important reform. Once again, I will skip the details, 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. In terms of the fiscal effort, this is important but reasonable. This is a key message I would like to provide this morning. True, since November and if you look at 2020 or 2021, we are increasing the public fiscal spending in pensions in general by about 0.5 point of GDP, okay? It's about $1,500,000,000 So this is a lot of money, yes, but it's affordable. And even if you go until 2,050 in steady state, the public resources committed to the pension reform in the Pension Sor Hilario and the extra spend, as we state as 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. This will provide with new rules, with certainty in many directions. This is a tax reform that provide incentives to investment, basically, instantaneous depreciation in the for coming 2 years and accelerate depreciation afterwards. So given 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 and A. All in all, because of the tax reform, because of the extra spending basically on pensions, but we are doing some 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 clear. In concrete terms, for 2020, we will be facing transitory fiscal deficit of 4.5 point of GDP and a structural fiscal deficit. You know, the structural rule is our fiscal anchor in Chile. We 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 terms, we are facing fiscal deficit of 3% of GDP. This is quite higher. It's about 1.5 points higher than the goal or the commitment we already have. 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 converge. 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 this results in a higher fiscal deficit. But the point here is our commitment 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 I 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 experienced a trend of increasing gross indebtedness. 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 the fiscal rule, this indebtedness trend should stabilize. Last but not least, we are undertaking several structural reforms, okay? Because here, we have to face with a 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 areas we are quite committed as a 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 at this regards, and we at the Ministry of Finance are committed to advance. And one of the areas in which we are committed is to improve the quality of our spending. And at this regard, we have create ministerial advisory committee for transparency, quality and Impact of the Public Spending. This committee is composed by people from former government officials, 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 deputy's 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 agreement 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 at 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 a 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 GBP per year. 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, a 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 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 signals 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 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 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 risks and a lot of questions. Two main points at this regard if the decision is to move through towards a new constitution. 1st, one of the most salient aspects of the agreement reached by the political parties is the rule of the 2 thirds. The constitutional convention will work with a super majority of tutors to approve the drafting of the new constitution. And this is something quite obvious, you will 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 single majority, but should require a super majority support. And this quorum of 2 thirds is able to ensure that and more important, is able to ensure that moderation should prevail. Basically, 1 third of the agents will have a better power for the changes. So this force the 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 since its beginning as 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 constitutions 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 conclude remarks. If we recall Alice in Wonderland, I think the message is clear. We have to move forward, and we have to move different if we want to advance. I am optimistic about this moment because it poses a lot of challenges, significant challenges. 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 able to address the main challenges. The situation is posing to us in social terms, but also in economic terms. 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 not that 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 surprise 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 our institutions are as weak as we were as they are not delivering, if we go to the data and to the facts, we see that we are making the delivery. The democratic institutions are working, and they are providing with delivery and reforms, social reforms. More important, these social reforms because you will 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. And I show you the numbers on the pension reforms. They are quite reasonable. They are not populist reforms that will be not sustainable in time. They are reasonable as has been our tradition in past years, okay? So the challenges ahead, consensus agreements are the key words. 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 and finance in a responsive 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. Thank you. 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 in right there. Minister, you showed a significant decline historically in income inequality, 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, this is the $1,000,000 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 a given equilibrium. Nevertheless, I think the main point here it's 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. That 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. And it's true, for instance, that in the if you think at the university in the tertiary education 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 this 40% has that dream that going through to the university will change their life in terms of income, in terms of opportunity. And this 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. So this creates a lot of disaffection, and I think is 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 meagulpa disregard 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 attend to a 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 were aware too. And intervention, well, we know that we have a structural problem, okay? And the structural problem has not to do with the way the IFRS 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, living their whole working life and 7 out of 10 that doesn't say, that do not say, 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 the given moment, this explode. 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 adult doesn't have a pension, it's their sons or their nephews or their 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 a 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 a position to comment on the role of foreign capital as you think about the future of Chile. It's played an important role up until now. It doesn't seem like the protests have been directed at outside influence, but 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. 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 tend to be more long term oriented than we are. And this is why even we have been experiencing bad times in these last months. We have received several very good news from foreign direct investors that they are investing and they are committed investment for the forthcoming year. So they are looking very forward. They are thinking in long term terms. And this is once again a signer and approved 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 toward 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, formal 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 care about income and our claims and protests 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 a government in a plan in several initiatives and proposal for redouble our efforts for attract FDI2G. If you want the last question, I'm okay, yes? Okay. I think, Will, 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. It's not a word. Way more than a word. Deeper than a word. It's culture. A way of being. It's why we chose the Pacific Alliance. Fuerza. Fuerza is force. It drives oceanic. To persevere. To learn. To make smart choices. Adapt. Business, focusing on achieving scale, investing while our revenues still outpace expenses. More. Fuerza is always striving for a better future. Not giving up, never giving in. It's resilience to the changing economic and political cycles of to make sure rewards defeat risk. 1 in our team Gold Cup champions. Encourage to become a major player in the rapidly much, markets. It's forced. And despite what some may say It's knowing we're never going to stop there. Good morning. Welcome back and I will now share an overview of our International Banking Business and 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. 1st, we sharpened our geographic footprint and this work is substantially complete. It will enhance the quality of our earnings. 2nd, we have performed above our 3 medium term targets consistently since 2016. And 3rd, 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 16,000,000 customers across our footprint. We have close to 60,000 employees, 70% of them in the Pacific Alliance countries and a network of over 1900 branches. Our business generated around 3 point 1,000,000,000 in annual net income after tax in fiscal year 2019 of a balance sheet of EUR 153,000,000,000 and almost EUR 120,000,000,000 in loans and almost EUR 120,000,000,000 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 profitable 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 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 these, 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 Selabe highlighted yesterday, the demographics of the Pacific Alliance region are really unique. 225,000,000 citizens currently leaving the region according to the World Bank. The size of the middle class has expanded more from 30,000,000 to 70,000,000 people in the last 2 decades. That's 40,000,000 new consumers, middle class citizens in these countries. Additionally, the average age is very young, 30 years in average and there's 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 this market 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 this market. Our teams have been through multiple macro and political cycles, periods of accelerated growth and financial crisis, 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 13,000,000 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 of the optimization, the Pacific Alliance countries will now contribute around 80% of our total IB 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 protests 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 other BREC investigations, Peru went through a period of economic slowdown and political instability, including the resignation of President Kuchinski. During the previous government in Chile, the economy slowed down with an average growth of 1.8% coming down from above 3.4 3.5%. And Mexico's economy slowed from 2.5% in previous years to almost new growth in 2019. These 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 €1,700,000,000 to €3,200,000,000 at a 13% CAGR. As you can see, average GDP in the Pacific Allian region has remained strong during despite these headwinds. Furthermore, since Peru, Chile, Mexico and the Caribbean and Central America as a whole have similar contributions to the Old 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 had major integrations and modernizations during the way. We have built in our teams a winning minds 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 20 1% 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 continue 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 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 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. 2nd, 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 Glenn 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 non core 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 10,000,000 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 3rd largest private bank in the country. From all these acquisitions, we are expecting around EUR 220,000,000 in run rate earnings this year. 2, 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 1,000,000. These countries contributed overall to €150,000,000 in our earnings, but with lower growth than the Pacific Alliance countries. We are more than compensating all of these earnings with a NIA 220,000,000 from our acquisitions. 3, 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 €350,000,000 We are extremely pleased with our new footprint in International Banking because of two 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 thirds 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 reshape 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 advise our customers and sell our solutions. On the other, we process their financial transactions. Digital is impacting both. 1st, 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 have 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 transactions cost 10 times 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 $100,000,000 in run rate branch cost savings in the Pacific Alliance countries. The cost of operating our branches in this region is approximately €700,000,000 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 solutions are increasingly being adopted by our customers, but as Sean 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 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 accelerating 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 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 €2,500,000,000 As WISAC have successfully met our 20 18 Investor Day commitments, we are committing to new medium term targets. With this simplified footprint, we are confident that we will achieve our 9% Niant 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 not time for Q and A with Nacho. We are running a little behind schedule. So after the Q and A with Nacho, we have 4 country presentations And what I'm going to propose is we don't have Q and 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 and 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 Sorbonne, 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 from 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 continuing 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 1970s, 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 two charts, which I found impressive and say everything and were presented by President Pinera a couple of years ago. In 1985, Chile was ranked 8th in Latin America with a GDP per capita of $3,900 At that time, Venezuela was the richest country with $8,500 By 2015, 30 years later, Chile ranked 1st 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 6 fold 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 SARB 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. 1st, 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 expectations are not met, it generates disappointment. 2nd 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 well to solve complex situation before. The country successfully solved a devaluation crisis in 1983, transitioned it to a democracy in 1990, managed the crisis of 1998 and served the subprime global downturn of 2,008. 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, Chilean 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 1,000,000 customers and we are reaching out an additional 2,000,000 customers through our joint venture with Senco Sud, 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 €47,000,000,000 and we have €24,000,000,000 in deposits. Scotiabank generates €718,000,000 in earnings before non controlling interest and operate with a low productivity ratio placed at 43%. Our ROA is 1.6% and our ROE is 13% before goodwill. Measured by Chilean GAAP Financial Reports, our profitability is placed at 15%, excluding integration expenses and 13.5% including them, while Chilean Banking System averaged a profitability of 12.5%. Today, we are the 3rd largest bank in loans in Chile and 5th 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 thirds in mortgages and 1 third in consumer loans, which includes personal loans and credit card exposure. On the deposit side, we have onethree in core deposits and twothree in term deposits. I will outline our core deposit strategy later in the presentation. The Chilean banking market has evolved to create 3 different banking models. This was different just 5 years before. Consumer Finance Banks, circling black wholesale banks, circling blue and universal banks, circling red. Consumer banks like regional retailers Falabella and Ripley are able to generate ROEs in the range of 18% to 25 percent 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 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 product 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: Corbanca, BBVA, Scotiabank and Itau 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 Cenco Supe credit card company, acquiring a larger consumer base and a large consumer loan book. In 2016, Itau acquired Corbanca. And in 2018, Scotiabank acquired BBVA. We made a conscious decision to gain 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 overdelivery on our commitments to investors, generating strong earnings growth, reaching a 43% 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 maintained 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 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 stronger relationship between Chile and head office and also providing training and coaching to our employees, which 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. We did this in 2 ways. 1st, 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. 2nd, we request greater reciprocity from our borrowing clients in order to grow our deposits and cross sell our wide range of pros 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 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. Included in M and 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 double over the same period. We grew at 15% for 6 consecutive years, while the market deal is at 6% CAGR. Our market share gain was 2 50 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 2015, we reduced our branch network from 155 to 89 branches. Consolidating our consumer finance business with our retail business. Scotiabank was the 1st 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 2017, we started to sell some products like time deposits, mutual funds, insurances and personal loans through our digital channels. Today, we are one of the most efficient banks in the country. Our 4th 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 consequence, our nonperforming loss ratio has been consistently better than market due to this approach. And finally, the 5th 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 consolidate our presence in Chile. By 2014, we identified the possibility to join forces with Senkosuit, the retailer change that I described before. In May 2015, we acquired a 51 controlling interest in Senko Suits credit card operator. This investment had several strategic advantage. First, it diversified our loan book between mortgages and consumer loans. And second, it brought 2,000,000 new customers, representing a great opportunity to expand our cross selling initiatives. After acquiring SENCO's credit card Operator, our organic growth continued. By mid-twenty 17, 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. BBBA was strong in digital banking and customer service, while Scotiabank led in sales productivity and 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 3rd 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 when 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 tension 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: 0 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 $150,000,000 to $180,000,000 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 twenty twenty. 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 Laundry 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 7th ranked bank in Chile with less than 5% market share, generating 7% ROE and €130,000,000 in earnings to transform it in the 3rd bank in Chile with more than 14% market share, generating 13% ROE excluding Woodwill and over $718,000,000 in earnings. As I mentioned before, using Chilean GAAP, Scotiabank profitability runs 3rd 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. 1st, 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 3rd, transactions out of branches. At this time, we process only 6 percent 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 a 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 continue improving its efficiency levels to be a competitive and profitable in the future. Our 3rd strategic pillar or new strategic pillar is a greater focus on core deposits to improve our funding profile. We will pursue 2 key strategies. First, we have strengthened 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 segments have 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 $5,000,000,000 under management, and we have also brought a solid broker's house. Those services will be complemented with affluent and private banking services, both onshore and offshore. Consequence, we are ready to commit to clear targets for the next 3 to 5 years in Chile. NIAD growth of 10% component growth rate, while in 2020, we are going to be in mid single digit, we think that we go back to a double digit growth in the next years, a 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 targeting 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. North, up the coast and hear from, Miguel Lucile, 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 €221,000,000,000 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 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 earned its investment grade as early as 2019. Peru's demographic also contributed 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 and top potential. Moving on to the next slide. In Peru, we operate under a solid and stable financial environment based on the following pillars. 1st, Peru's banking system has grown between 2 to 3 times faster than GDP during the last 10 years. 2nd, we have a strong governance. Peru's central bank and banking regulators enjoy a solid international reputation. 3rd, there are over 30 financial institutions in Peru. However, the 4 largest banks account for 81% of the total banking sector assets. 4th, Peru's banking system has shown adequate asset quality with historical low nonperforming loans. And finally, capital positions with all banks' capital ratio at 14.7, point 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 4,000,000 retail customers across the country. We have 12,000 employees, 314 branches along with almost 1,000 ATMs and over 11,000 correspondent tellers. We're the 3rd largest bank with a €21,000,000,000 loan portfolio and a €19,000,000,000 deposit portfolio. In fiscal year 2019, we generated earnings of €810,000,000 and a return over equity of 25.6 percent 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 productivity 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 corporate banking and small business. Turning to Slide 6. Over the last 22 years, Scotiabank has become the 3rd 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 improve 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 Zencosuit, completing our regional alliance with the leading retailer, Zenkozut. The acquisition helped us increase our credit card market share by 300 basis points and is also giving us direct access to over 1,400,000 Cenkacel 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 number 3 position in the concentrated market where, as I mentioned, the 4 largest band 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 2nd 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 2nd 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 rank number 1 and number 2 in the market, respectively. The key drivers behind this growth are: 1st, targeted acquisitions such as Citibank's personal banking portfolio and Cenkazoo credit card business 2nd, 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 proposition. As an example, we have been able to offer pre approved lending driving growth in retail loans while maintaining stable ACL ratios. Today, over 80% of our personal loans are pre approved. 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 $21,000,000,000 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 2.4 times 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 $18,700,000,000 deposit base composed by $2,200,000 of stable and low cost saving accounts. We have been able to improve our deposit mix focusing on our core deposits, increasing demand and saving accounts from 52% in 2016 to 57% today versus 43% of term deposit, 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% of our term deposits and 21% of our total saving 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 35 0.2% 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 per information program and zero based budgeting initiatives. Slide 13 shows that during the last 5 years, we've accomplished steady double digit NIIAD 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 slide. As we can see in Slide 14, Scotiabank Peru has achieved the financial targets we established 3 years ago. Double digit Niant 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. 1st, drive growth in low penetration segments like small and medium business, capitalizing the opportunity to increase our market presence. 2nd, strengthen our customer centric culture, maintaining our focus on customer experience as our number one 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 customer. In 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 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 €21,000,000,000 through our focused distribution and marketing strategy combined with our strong risk management and analytical tools. Moving on to next slide. Customer focus has become a key component of our customer facing employees culture. Our customer experience system, the PULS, 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 €100,000,000 revenue opportunity by continuing our double digit growth in core deposits and doubling our bank Assurant 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 built strong capabilities during the last 3 years. During 2017, we focus 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 For example, during the next 2 months, our digital offering will include new features such as QR code payment and money transfers using customer cell phone contact list, a feature similar to Interact in Canada that will allow customers to transfer funds 20 fourseven 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 Wi Fi 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 three areas of of focus are supported by enhanced risk management capabilities. The next slide shows that 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 EUR 14,000,000 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 company with the best corporate governance by E and Y for 5 consecutive years. PwC has recognized us among the 10 most admired companies in Peru for 3 consecutive years. Also, we have achieved 4th place among the best companies to work for by workplace work and recognized among the best companies to work for by women and millennials. These and many other words 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, growing economy and a solid regulatory system. Schocha Juan 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 €1,000,000,000 net income and ensure short-, medium- and long term business success. Thank you. Now I'll leave you with Adrian Nottero, Country Head of Mexico. Good morning, everyone. It's a pleasure to be here with you. As many as 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. 2nd, over the past 3 years, Scotiabank Mexico has outperformed the market and consistently delivered strong results. 3rd, we have built the foundations for the future and have well identified opportunities to capture our ONTAP 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 Slide 3, credit volumes have consistently grown throughout economic cycles and have our average double digit growth. Even during the 2,008 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 remain 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 100 and 25,000,000 and an average age of 28 years. Mexico's banking penetration is 1 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 parent debt. Furthermore, remittances continue to grow and have reached a record of We have developed notable manufacturing capabilities in key sectors, including electrical and transport equipment and our manufacturing sector accounts for 17% of our GDP. To provide further context, Mexico's manufacturing exports represent a third 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 3,500,000 clients and our footprint includes over 500 branches and 7,000 ATMs, including our ATM sharing alliance with 11 partners. Our business generated almost €600,000,000 in net income after taxes in the last 12 months. We had a strong balance sheet of €30,000,000,000 in loans and €25,000,000,000 in deposits. Turning to Slide number 6. We have registered great progress over the last 3 years, almost doubling our NIIET. This strong NIIET 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%. 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 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 November 2019, positioning us as the 6th 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 product 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 number 9. Between 2016 2019, our loan book expanded at percent 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 €25,000,000,000 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 EUR 200,000,000 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 onboarding processes, we reduced the time to onboard by 50 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 NAV growth rates in the industry. Between 2016, 2019, our NIVE grew at the 20% CAGR to reach almost €600,000,000 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 are 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 identify several on top 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 where our customers prefer bank. Finally, we are working on building a stronger ancillary business to drive primary relationships and further revenue growth. Our main trust 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 ways to deepen our relationship with our clients. How are we capturing this opportunity? 1st, leveraging analytics to enhance customer segmentation, improve target offerings and anticipating customer needs. I am 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 insurance business. 2nd, we will be launching a sales effectiveness program to reinforce productivity and service protocols across channels. 3rd, 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 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 one quarter of our retail products are sold through digital channels and 39% of all credit cards. The opportunity going forward is huge. There are around 90,000,000 Mexicans with 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 deposit growth. Additionally, we will be 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 a stronger cash management platform to serve our commercial customers. We are transforming our banking. 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 have embarked on non 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, upgrade system and a more robust back office. Finally, in terms of risk management, our efforts to exploit on top 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 Toronto. Looking ahead, I am really excited about the future of our franchise, and I'm proud to be part of this team. With opportunities we have and despite of the Mexican economy, we are sustaining our 3 to 5 year earnings growth target to 7% to 9%. Our guidance assume 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 mother bank with best in class capabilities in risk management, digital and customer experience, supported by a new core banking system. We shall identify opportunities to exploit our own top 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 update financial commitments to you. Thank you. Thank you, Adrian. 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 and A for all the presenters that you've seen here this morning. And with that, I'd like to introduce Jaime Ukegui, 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 represent an important opportunity to consolidate international banking in the Pacific Alliance. In first half of twenty nineteen, 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 3rd largest, most populous country in LatAm and we are our economy is considered the 4th largest in the region with a GDP of 231,000,000,000 dollars We are the only country in South America with coast in both Pacific Ocean and Caribbean Sea. This is an 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 2nd stage between 2015 2017, there was a slowdown in the economy, mainly affected by oil prices reduction and the effect of El Nino, 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 has recovered its growth rate and forward look at market expectation 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 at 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 result, lowering our retail PCL ratio by over 300 bps compared to the previous year. In the slide that follow, I will discuss our promising result in 2019 and our strategy for the next several years, 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 percent of Colpacre Multibanca, a bank focused on retail, mainly in credit card business. Between 2015 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 a small business portfolio, which added well trained customer, focused bankers and analytical capacity. The transaction also added 500,000 customer to our base, mainly in the affluent segments, along with 47 branches and €2,000,000,000 in loans. To take advantage of the recovery cycle and maximize the benefits from the acquisition, we decided to implement a digital and technology transformation and invest more than C300 million over 5 years to change our core banking system, launch a new mobile and online banking platform and enhance our capital 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 3,000,000 customers, including business partnerships and employing 9,000 people. With our own portfolio above EUR 12,000,000,000, we have a market share of 6%. We are the market leader in retail credit card with almost 2,600,000 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 5th largest bank in the country in terms of loans and deposit and the 9th 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 5th largest bank in terms of market share of loans and deposit and the 2nd international bank. As Naso 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 in loans and 100 26 bps in deposit, driven by latest acquisition in 2018. We are the market leaders in retail credit cards, ranking number 1 in number of cards and second in volumes, increasing our position in 430 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, Cenco Soup, American Airlines, to reserve our customer according to their needs. These partnerships are critical to maintain our competitive advantage, giving us access to transactional and demographic information for 9,000,000 clients, representing almost 35 percent of employee people in Colombia. Also, we have a strategic and exclusive partnership with Enel, the energy company in Bogota, to distribute credit of Asic 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 €3,000,000,000 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 year, which is higher than our loan growth in 12%. Our focus has been on improving the deposit mix to reduce our dependency on institutional clients. In 2016, we were the 1st bank in the country to launch a no fee account, Puentasero, which allow us to increase our retail low cost deposit by more than 15% annually during the last 3 years. Moving to our efficiency ratios. Our operational leverage and productivity ratio were impacted in 20172018 by the economic slowdown and the reduction of the Central Bank rate by more than 300 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 Q4 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 conclude 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 process, channels and administrative costs. During 2019, we generated EUR 14,000,000 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 any NCI compound growth between 2016 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 2018 affected the 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 economy 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 in 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 goal, 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. 2nd, 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 Cartiv over the next 15 years. And 3rd, digital, leveraging Scotiabank's 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 boats, asset and deposit, 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 ourselves as international bounce house for Colombian corporate issuers. Finally, we have become a lead 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 Naturale in Colombia. We lead empresas publicas de Medellin liability management program for €2,600,000,000 with credit facilities in 3 jurisdiction 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 Ben Pepe Diva Cardif. Combining Cardif's digital and analytical expertise and our large portfolio of more than 3,000,000 customer went 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 usage of the insurance to the clients and facilitating a transparent sales 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 customer with at least one credit insurance. Digital and analytic capabilities are critical for the success of our strategy by creating new solution 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 transactions in branches. Pure digital transaction share increased more than 400 bps during the last year. Today, 90% of our savings accounts and term deposits are digital, reducing significantly the time to open new products from hours to minutes in branches. We duplicate digital adoption in the last 2 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 NILEG 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 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. So we're going to have the 4 country heads come up to the stage here and I encourage the audience to ask questions if any of them. We have between roughly 15 minutes, maybe a little more than that for Q and A. So if you have a question, if you could raise your hand, we have one right here and we will run the mic over to you and go from there. Thank you. Thank you, Gabriel Dechaine, National Bank Financial. In yesterday's presentation, one of the slides that stuck out for me was each of the Pacific Alliance Countries and all the reforms that are 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 do 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 on how they can work together. A clear example, they already announced an infrastructure program of $40,000,000,000 that will be implemented in the next years. So and of course, we are expecting our rebound in 2020. 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 a 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 are respecting that very much. Having said that, the Minister of Finance is set as goal for the year to increase public spending. And she's already she already can show a very good intangible 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 €1,200,000,000 spending 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 for the next year, we expect also the public investment is going to increase in important amounts. So during the next years, we expect a recovery of the private investment supported by the public investment. Okay. In the case of Colombia, you would see that the forecast for the growth is more than 3% 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 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, what the President of Colombia named Economia 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 investment and supportive of consumption and consumption marches on across all these countries as Brian remarked in his opening statement yesterday. Other question? Hi, it's Meny Brahmin from Cormark Securities. Just a question specifically for Mexico. I'm just wondering how important is M and A for the strategy in Mexico going forward? I'd say that in the context, one thing that struck out to me was just how impactful obviously M and A was in pushing BNS forward in both Chile and in Peru. So I'm wondering how critical M and A is especially from a scale perspective, from an ROE perspective in Mexico? Let me take that one. Well, first time 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. 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 and 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. Is there a question over there on the far side? Right there, it's right in the middle. Not sure. I just want 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 the 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, Saurabh, is the Caribbean and Central America that even with this reshaped footprint, we expect to grow up 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 these potential to really grow for the next decade at a very robust pace, well, we have these circumstances like any country macro or political social cycles. And what I really would reinforce is that our confidence in 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 an 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 at a term deposit. So when you see the 3 largest banks 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 term deposits. So they are more balanced. However, remember that both BBVA and Scotiabank were middle sized banks. In the case of the middle sized banks, we didn't have too much core deposit. We have just onethree, twothree 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't found your bank with wholesale banking funding, which is not the best alternative, but at very cheap prices. So prices was not a 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 deposit should grow 2 times the loan the total loan portfolio growth. And we are going to do it through this strategy of payrolls, etcetera. 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. Yes. The increase in the increasing at this moment, that GAAP opportunity of having less core deposit related to the total funding strategy 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's going to represent around $40,000,000 of additional net. We have a question down here. Oh, he's got the mic already. I'll start with Nacho, please. Nacho, when Dan did his Dan Reese 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, I Dana and I frequently talk about this. This is a very important aspect our relationship with our customers. It's 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 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 employee experience. And that would allow us will change the role of the bank, probably the real estate space. This has been done in a way that has 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 the branch and in other channels. And the benefit of that will be better advised, 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 efficient, 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. Thank you. Thanks. I was hoping we could talk a little bit more about the state of the rollout of the bank insurance 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 this 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, Cardiff 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, 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. The expertise that BNP Paribas has in Colombia as a white level 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 €100,000,000 revenue, which we plan to double in the next 2 years. We haven't done so we do that through our branches, but not digitally. And what we've seen and we're in the process of 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 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 That's what we are starting to do. And we again plan to double our business from $100 to $200 in the next 3 years. Maybe to add in Colombia, we started to work together with the M Pesa Ariga since March 2019. We accomplished with the integration all the transition of our insurance portfolio for other companies to bend Petaridad 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 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. There'll 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 think this is the part I believe that we have an opportunity to grow. We had in 2019 this inflection point and we believe that pickup grew 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? Thanks. Yes. Well, talking about the wholesale clients, possibility to manage pesos, U. S. Or even euros, right? So but we haven't seen any change as any other multinational. They have their risk management policies. And also, I think that one of the things that is good in order that we have a more stable currency and FX is that now you can have access to the capital markets locally. So you have 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 how they manage their balances during the last years. Well, in the case of Chile, we have seen that the clients due to this social unrest, they were hedging their positions, doing cross currency swaps and also FX transactions. And Scotia Bank had the advantage that we have between 20% and 20% market share in derivatives, and that's going to explain a very good result in the 1st Q of 2020, basically because capital markets is over budget, because this new business opportunity that 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. Sorry. Thank you. 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, Mercado, Pago entering in the region? Well, let me answer briefly just because of time, but we can take it offline. 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, tremendous technology opportunities. The U. S, Latin America, we have partnered with QED Investments. We have identified and invested selectively through them in some of the most promising Fintechs. You will see 1. Please look at the Mexico stand, Confio, 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 Georgian Partners that 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 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 scale for banks. Is there one more question? Darko, do you have a question? Right in the front here please. And then, well, this will be the last question for this session. Thank you. Thank you. It's Darko from RBC. I just want to take us back to the bank assurance for a moment, please, because when I think of your 2 countries where you're doing these the bank assurance 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 and will this expand this entire opportunity? Thank you. No, I would say Darko, it's a good question. First, 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 the insurance risk, we're 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 experience we provide to our customers in all channels and the type of products is mostly around Life. These are really this is very important in our markets that a lot of people doesn't have really adequate life coverage. So besides the credit or insurance linked 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? 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. Glenn Gallon 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. Glenn will be next available to investors at the BMO Wealth Management Forum on March the 6th. 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 and we can set that up. So with that, I'll play the video and then afterwards we'll have Q and 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 $500,000,000,000 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 4 times. 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 council businesses, both growing at rates above industry averages. Also, we've built the highest number of team of expert specialists per advisor 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 works 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 $20.25 to $5,300,000,000,000 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 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 up market in our full service brokerage business with fewer advisors 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 1,400,000 dollars And we built scale with the MD and Jarislowsky Fraser acquisitions. We now have the largest private investment council and trust businesses in Canada. We have integrated MD and Scotia Trust 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 ivity 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 number 2 among Canadian banks. And this includes $57,000,000,000 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 significantly reduced fund fees 2 years ago and now have lower than industry pricing across multiple categories. We discontinued sales and 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 reach 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 a third of our gross sales are through third party advisors 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 a third 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 $1,000,000 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 a third 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, who has 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 Frazer 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 $10,000,000 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 1st 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 Healthcare 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 3rd 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 Reese and I work 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. 1 of the first areas of focus will be building out the mass affluent market offering. The middle class in Latin America grew by 13,000,000 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 $1,000,000,000 in international portfolios. And we recently launched a new Jarislowsky Frazer 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 one 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 are 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 2, 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 ultrahighnetworth 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. If I could please ask Nacho Duchamp and Max Menard to come to the stage. Given Nacho's focus on international and Max's focus on institutional and Jurislavski, 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 future interactions with Glen Gowen. 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. So I just ask if everyone can please take their seats, we'll start the program. Thank you. Okay. Good afternoon, ladies and gentlemen. Again, formal part of our program for this afternoon. This afternoon, we'll shift focus slightly away from then Brian Porter will come 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 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 is Jake Lawrence. Along with James Neate, who will be up in a minute, we are 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 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. 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. It'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 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 LatAm. Within our GBM franchise, we really are focused an Americas strategy across our 6 core countries. We talked a bit about it, Brian did 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 focus 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 up tiered 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 2nd 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 $6,000,000,000 in revenue for the bank and over $2,000,000,000 in NIA 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 de risked our non core 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 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 up 9% CAGR since 2016. And up 9% CAGR since 2016. As of the end of last year, our GBM loan book reached almost $130,000,000,000 It's a very high quality loan book. Our business is downturn ready as we've mentioned before with more than 2 thirds 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 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 strength. And it's no secret that banking has become increasingly complex coming out of the global financial crisis, new entrants, non traditional 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 the 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, believe it was Nacho mentioned earlier, we're the only bank that's in a wholesale bank in all of our I believe it was Nacho 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 the coming 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 we'll 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 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 franchise as well as stronger financial results from these efforts. The second category is a 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 financer 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. I talked about ECM and DCM. And those obviously feed into with stronger primary flow to help us grow our other capital markets activities in secondary trading, hedging, etcetera. And we think there's opportunities to get stronger in those areas, particularly in some new sectors like technology as well as healthcare. 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. It's an area of strength that's been touched on today by myself as well as others. We 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 we'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, one 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 DBVA 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 America strategy, we do have capabilities in Europe and Asia, but they're very focused on supporting two way connectivity with the Americas. So our clear client product and geography strategy has done a lot for our team and our business. It's 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 exceeds 100 years. And since we don't report GBM numbers by region at this stage, the true heft of our U. S. Operations 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 NIA in 2019. Further, our GBM business is a very well known partner of the Fortune 500 and we're a very bonafide business in this market. We have more than 4,000 clients across the U. S. Served by 700 employees and 5 offices. And last year, the U. S. Region delivered close to $2,000,000,000 in revenue and close to $800,000,000 in NIAP. So further dimensions to show you the strength of the business in the U. S. Market, which is obviously key to our America strategy. Now our U. S. Business historically has operated on a global products 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 slide, and we're seeing better upside in our Equity Capital Markets, Debt Capital Markets, FX and M and A Businesses. And we've made significant progress on building complementary capabilities, including LatAm based focused 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 third of the divisional revenue. Our broad America 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 and 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 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. Thank you, Jake. 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 C1 $1,000,000,000 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 and A. We have put our coordinated operating model to work in the region, and we are now benefiting from the integration of BBVA's Chili'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 CAD115 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 and A and international investors trading LatAm securities. Our capabilities across the Americas are not limited to any one sector of 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, Garda World, Scotiabank acted as a sole financial advisor to BC Partners on its acquisition of a 51% interest in Garda World Security and a CAD 5 point $2,000,000,000 recapitalization. Broadcom, on the heels of a successful transaction in which Scotiabank was joint leader ranger and bookrunner on Broadcom's $23,000,000,000 credit facilities to finance the acquisition of CA Technologies, we were awarded a Bookrunner role on Broadcom's $11,000,000,000 senior issuance in March of 2019. Kony Park, Carlisle. Kony Park is one of the largest family entertainment center networks in LatAm with over 150 locations. Scotiabank acted as an M and A advisor to Carlyle on their acquisition of Kony Park and also provided multi currency acquisition financing facilities. This list 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 lead table results clearly demonstrate number 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 and 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 number 2 market share ranking in derivatives and a number 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 number 2 in local sovereign bonds. In Colombia, we ranked number 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 have completed 9 green bond transactions in LatAm, totaling approximately US1.5 billion dollars 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 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 strategy. Our diverse revenue base is important. The Americas account for approximately 89% of GBMs total earnings. Our diverse revenue base by product is equally a strength. By product, the leading four 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, Pacific Alliance Capital Markets and Advisory Fee Pool totals approximately $6,000,000,000 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. 1, we will build our business in Mexico to capitalize on the greatest opportunities 2, we will support our corporate client franchise in Brazil. The business upside to building international connections is 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 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 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 the microphone to you. First question. Hey, 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 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 lead tables as it relates to the 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 1st joint book runner. So we have great sovereign coverage currently right now. We do extend balance sheet when bridge the bond type structures, etcetera. 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 and C Banking in international, and there was some discussion some of the earnings that you gave up in doing so. Could you quantify anything about the nature on the capital market side? So around the metals and commodities business and even the trade finance, foregoing that would have been in excess of $150,000,000 in 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 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 than impact. And replaceable. And replaceable with higher quality earnings frankly that are more driven around our corporate customers. Okay, thanks. Thank you. Okay. Next question right here in the front. Thank you. Thanks, guys. 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 see those numbers move higher up in single digits. All right. Thank you for that. 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 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 because a lot of the fee pools on the origination side happen 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 kind of help get to the next level from an earnings driver perspective, that's not going to happen. And this is a downturn ready organization, one that we really put credit culture at the core of how we actually approach clients and markets, etcetera. 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 lead 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 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, stronger 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. Question in the front here in the middle. Thank you. I 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 segments results as well then? Yes. So all of the balance sheet, all the P and L rolls into international banking and the new disclosure breaks out some of that information, but particularly the NIA. Okay. And when you kind of talked about I think you had about $128,000,000,000 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 loan growth aspect of the business? Yes. There will 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 was about 2 thirds kind of investment grade. So when you push it a little bit further on that time, do you see that 2 thirds shifting much? Or is it going to be about? No. I think in terms of our allocation across investment grade and non investment grade, I think as you look at the book going forward, I would we hold it to continue current levels right now, yes. Hi, 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% NIAID growth objective. Jake, in the beginning, you said that there was going to be some technology investments that you're making. So when I think of 5% it looks relatively low compared to everything else we're seeing here in that. So is that part of the reason why is it or is it a deliberate restraint on the growth? And secondarily attached to that, is that kind of the capital, the RWA growth that we should also would it 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 forecasts 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 on 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 where we think earnings will grow, RWA and earnings. And just a 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 and 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 non traditional 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 are required for us to properly execute on pursuing a corporate client strategy. Are there any other questions? We have time maybe for one more. Okay. If they're 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. I'd like to 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 non financial, such as 3rd 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. And 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. 1st, strong local risk management practices, and these are executed by some of the bank's top talent. 2nd, these practices are governed by one set of universally high standards from Canada. And 3rd, 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. 1st, strong local practices. As you can see from the presentations of 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. It 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 within 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 pre approved leads. It uses our own transaction data and brings that together with other data we have at 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 one set, one 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. 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 $25,000,000 BB minus corporate credit would be adjudicated in Toronto, whereas a $10,000,000 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 at 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 standalone basis, but most importantly, returns that are not highly correlated with those of the Canada or the United States. Therefore, this produces a better sharp 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 linked 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 80% 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 JF 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 year throughout the years across our portfolios. And in corporate and commercial credit, early warning indicators show 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 lifecycle from originations to line management through to collections and with 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 2nd 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 is to our gross impaired loans or looked at another way, the coverage of allowances to our performing book, it's 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 Sanco Sud 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 Sanco suit 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 pre approvals and grow higher margin for the shareholders. We've learned a great deal through our partnership with Sengo Sood 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 lifecycle. 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 that enhance increase our share of wallet without increasing our risk. Conversely, we've reduced our exposure to less desirable segments through credit limit decreases. Canada, we've done 50,000 of these last year just to de risk 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 of how the bank's technology investments, which Michael and Sean 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 non core 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 identify 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 parameters 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 bank 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 non financial risks we talked about earlier. Most of our divestitures are from countries that experience 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 six 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. 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 derisking programs 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 color 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 Q4 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 nine 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 a couple of minutes for questions, if there are any for Daniel. Mic in the front there. Daniel, can you explain how the bank's 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, Benny. Say, first of all, the oil and gas portfolio and the energy portfolio is an important one for us, 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 as a society is to look at how we do that responsibly going forward. To that end, we've 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. We've signed up for the TCFD disclosure standard. We've committed to putting $100,000,000,000 to work. We're already well along that path putting $100,000,000,000 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 credit adjudications when a specific loan comes up? Is that part of the conversation? And in what way does it come up? 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're part of the dialogue on every single credit where we do. Some it's nothing, some it's material, but it's an inherent part of our process now, Manny. Another question in the front here. Hi, Thank you. I've got Ed Starco 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 the 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 the measure a different way 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 not high enough because your coverage against the last 12 months is low. Not playing devil's advocate here, I just legitimately want to hear how you think about looking at coverage per se? Sure. So you're taking in 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 talk 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 that given our portfolio, that we should credit performance speaks for itself, fair quotes. 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. I have gotten a lot of questions over the last couple of days on the 4th 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 sectors 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, some looked at a sharp down and then recovery back to the mean 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? Oh, right here. Just a numbers question, I guess. Can you quantify, I guess, in your wholesale book in Pacific Alliance exposure split between USD denominated debt and local currency? Gabriel, I'd have to revert 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. Daniel? I'd like to welcome Sean Rose to the lecture. Sean, hello. Thanks. You're welcome. Sean will be discussing digital and then Michael serves will follow with a presentation on technology. Good afternoon, everyone. I'm Sean 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 were 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 Zerbbs, 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 non digital customers. We can talk more about that later in the Q and A. Customer satisfaction for these customers is also higher with an increase of 500 basis points on NPS. They generate 75% less complaints than non digital customers. And lastly, they're 4 times 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 3 times the products of their non digital counterparts. When looking at cross pack, digital customers have on average 2 times the products of non digital customers and they are more engaged with us. In Canada, a digital customer's deposit balance is double that of a non digital one and it's even higher end pack at 4 times the deposits balance. This trend also holds true for newly digital customers. Non digital customers who become digital have showed increased value across all markets. For example, in Canada, non digital customers' balance increases 30% within the 1st 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 re recruit our best people diligently, so that they choose to stay with us even amongst highly competitive alternatives. 3 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 re recruiting our people. We've seen tremendous outcomes by promoting talent from within and deploying them across our global footprint. Just to give two 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 shared 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, guy is taking pictures over here, we created our app with insights for 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 could 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. 1st, boosting online origination 2nd, building new digital platforms 3rd, 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 Zirbs. Our focus is on delivering a compelling experience 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 is 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 excited 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 E Home Canada's 1st all digital mortgage application last year and it's going great. We are reimagining sales by providing contextual offers at times when customers are most likely to act. This feels less like the 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. Columbia is a great example of the impact digital can have in our retail distribution channels. Now 90% of our savings accounts open in branch are done via digital solutions. Customers spend less time doing branch transactions with the 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 year and a half from 40 minutes to just 8 fully KYC compliant. Here you can see one of our advisors 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 20 6% in 2016 to 16% in 2019 with the expectation that we will reach 14% just next year. 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. In 2018, Canadian Banking delivered 95,000,000 documents digitally. This can serve 300,000,000 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 reimagined the customer journey 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 a 99% crash free rate, it's actually closer to 4.9 percent than 2%, but 99.98% is pretty darn good. And that's drastically reduced our resolution times and that's critical for serving our customers. We now outperformed the competition and speed for key customers' tasks. We are the fastest app in the industry for senior balances, sending an e transfer, transferring funds and paying bills. In transferring funds, we are 2 times 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 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 US85 $1,000,000 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 universities. In addition to the strong partnerships we've built across Canada with leading institutions like the Rotman School of Management in UBC and TAC to Monterrey in Mexico, just last week, we announced a new partnership with Federico Santa Maria University focused on powering digital innovation and women in STEM here in Chile. Our 3 pronged innovation agenda helps us learn from best in class players to create and curate solutions, adapt and maintain our competitive advantage within the and 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 and 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. 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, Sean, and afternoon. I'm Michael Zherbs, the Chief Technology Officer of Scotiabank. And I'm really pleased to provide you an update on our technology progress also our outlook. Modernizing our technology is a key focus for the bank. And as Sean 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 BBVA integration here in Chile leveraged key components of that foundation, reducing cost, risk and time to completion. So that was the first point. 2nd, we're executing a cloud first strategy and we're 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, as the new Canadian mobile app, which Sean just referred a moment ago, are all cloud based. And we're achieving this with a 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 roadmap, further generating value. So let's now go into how we are delivering on our monetization 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, by replacing our core banking platform in Mexico or by building a common software development platform that offers one automated and secure path to the cloud and to full reuse of shared capabilities. And it's important to note that these are one time 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. Sean referred earlier to the 1,000 digital talent we brought on board. And while as a result, our engineering resources have grown by 45% across digital and technology between 2015 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 UK 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 named productivity gain levers: 1st, reuse 2nd, infrastructure optimization and 3rd, 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 of the business, and let's recap our progress. In 2017, we started with 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. You'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 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 pace 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 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 are pursuing a 2 pronged approach. First, we are 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 a 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 are 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. 2nd, 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 year 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. Cloudlets reflect capacity across the demand cycle, reducing operating customer per server basis across reducing operating customer 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, shared microservices, a single secure cloud platform for data and public cloud infrastructure. Automation increases efficiency and reliability. Microservices drive savings through 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 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 $500,000 for in setup costs for the 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 customer growth, Whether it is digital retail branch solutions in Colombia, local mobile apps across Canada or ID, mortgage approvals on e commerce sites in Chile, data interfaces to our new core banking system in Mexico or hyperscale 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 had Adrian 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 $30,000,000 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 costs, less risk, faster implementation and lower operating and labor cost. We need 1 team, not 2 or 3 teams as we would if we had 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 in cybersecurity over the last 4 years, leading to a roughly 30% improvement in control efficacy in areas such as Internet gateways, ATMs, database, 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, 1st 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. 3rd, it will encrypt and tokenize sensitive customer information so data leakage becomes almost impossible, even when files are accessed maliciously, they're 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. 1st, we will leverage all customer focused microservices globally. 2nd, we'll have the majority of eligible applications on the cloud. 3rd, we'll execute prioritized application roadmaps for all businesses to drive consistency and to systematically identify opportunities for reuse. 4th, we'll perform analytics on real time data and we'll do all of that on strong cybersecurity foundations. With the 10% gain in developer productivity and the 30% reduction in operating costs that we've seen with our common platform, the 40% server cost reduction that we realized with cloud and the rapidly growing reuse of microservices, 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, Sean, to come back up stage, and I think we have time for a few questions. Thank you. Okay. We have a time for a few questions before we turn to our closing remarks. So there's some questions here in the middle. Thank you. Darko from RBC. I am admittedly old and not that tech savvy. So please take this question with a grain of salt as I throw it. I've got 2 questions and yet 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 is 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 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 point. 2nd point that's really important to note is it's less about where things sit. 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 the 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 are automated, that we know exactly that the developer has gone through the appropriate gates before code goes into production and it automates many of the manual controls which we would have had in all the 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 that 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 we can strategically balance what we do with the one and the other. Thank you for that. 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're 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 1st and foremost, right? Thank you for that. 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 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 different markets in Latin America, different stages of evolution with different ways to approach a more open environment is 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 Sean's and my job to get the bank ready at the 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 fully 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 your team Jean is sharing, those are all key foundational building blocks that when Canada is ready, we can respond really, really fast. And in the meantime, we're experimenting here in Latin America, we're experimenting with tangerine and we get the organization as ready as possible. Let's 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 question maybe for Sean and then one for Ken as well or yes, for Ken's repertoire Michael's job, sorry. You said, Sean, that progress in customer digital adoption generally is accelerating. Is that because of anything that was holding capability wise Scotiabank? Or is there just improved attitude towards adoption, digital adoption by customers? Because you've got some targets to kind of go up, I just wonder how much of it is within your control and how much of 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 two 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 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 super fast 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. 2 years ago, we were in the low teens in terms of biometric authentication. IPhone 10 comes out right about 70% today. All of these things inspire, 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 Sean hits it out of the park and you get to 90% digital? Option? There are it's a really good question. And let me give you 2 data points there. 1st, 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 tele interface in a branch. It's underneath that is 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 cost of mobile experiences is different in different countries and so on, 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 in a way that we can take full advantage of the cloud. So the very short answer is generally no. So we've The cost will stay variable. 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 of that. Our teams haven't grown in the development of this since the Q1 of 2018 and our throughput has gone up about fourfold. So yes, we've still got some headroom for sure, but the efficiencies are already being displayed. Great time for a couple more questions. Hi, there. It's Dean from Mackenzie Investments. This is maybe a question more for Sean. Just thinking about future digital competition from the FAANG 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, multi generational 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, but really holding very dear our core values of making sure that risk and security and privacy are job 1. And so, we've learned a lot from them as technology companies, but not necessarily in how they treat their customers. Do you think that privacy of 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, if younger people are fine to share everything online, it seems like they don't care about that as much. That's a great point. I think it depends on the relationship that you have. If there is 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. So yes, I think it's going to stay very important. Maybe, Ian, right behind you. Thanks. Maybe just to follow on Ian'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, starting point is our customers' trust is everything and keeping 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 come back, I've talked to Daniel before, I'll do it one more time, simplicity. I'd say 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 a 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 we focus on there. Steve, it doesn't stop with these bad actors. We also have to 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 multi layered approach that we take to be able to make sure that we have truly a safe bank against all actors. Okay. Maybe time for one more question, maybe in front here. I'm just curious to get a sense for the scale of your teams 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 Sean and I were talking about earlier, innovating locally is really, really important. So we've built up the digital factories. We have strong local technology teams to do what needs to be done locally. We're also focused on leveraging common capabilities, especially here in Latin America and across our Latin American environments. So we continue to build up centers of expertise that aren't just country specific, but go across countries, right? So, we are major technology employer in Canada and in also all the other markets that we serve. I'm not sure frankly if we're breaking out our numbers publicly or not for what it matters. Let's say 10,000 ish ish tons of people. And between us for our 5 countries, about 1200. Thank you. 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 true where we really, really understand our customers, where 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, Sean. Those would be great examples. It was really important for us, for example, to 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 where do we have a competitive advantage, and we look at some of our risk models, of the simulations around risk models, we will do it ourselves again. So it's an 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 Sean made earlier, because that 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 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 I feel like that's it. So we'll cut it off there. So thank you, Michael. Thank you, Sean. All right. Thanks, guys. So we're running slightly ahead of time, which is by our 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 people here in Santiago, which you remain seated. So some brief instructions around the technology demos that will follow and conclude our program. Thank you. On behalf of the Scotiabank team, appreciate everybody's here time and attention for the past day and a half. 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 and moving dates, etcetera. 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 day and a half. As you have heard early 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 non core 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 percent 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 Officer, I know firsthand about the bank's long standing approach to risk. We like to air 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, went 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 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 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 25,000,000 of the 34,000,000 shares we issued 2 years ago, as Raj mentioned yesterday. And as we see it, don't think that we'd stop at 9,000,000 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.

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