An address by Brian Porter, President and Chief Executive Officer, presented to the Scotiabank Annual Meeting of Shareholders.
To the 185th Annual Meeting of Shareholders
April 4, 2017
Thank you, Tom. Good morning everyone and thank you for being here.
I’m pleased to welcome you to the Scotiabank Centre for our 185th Annual Meeting.
The video you just saw expresses Scotiabank’s vision for the future, and we are quite proud of it.
I would like to start this morning by reviewing your Bank’s results in 2016. Economic performance has generally improved in our key markets over the last 12 months, resulting in increased consumer and business confidence.
Against this backdrop, your Bank delivered very good earnings of $7.4 billion in 2016.
We saw particularly strong performances in our personal and commercial businesses, which generate approximately 80% of the Bank’s earnings.
Canadian Banking delivered best in class earnings growth for the second year in a row.
International Banking posted record earnings, which were driven by solid growth across our key Pacific Alliance countries of Mexico, Peru, Chile and Colombia.
These markets are core to our international strategy, and we have strong confidence in the region’s potential. Finally, our Global Banking and Markets businesses continued to show good earnings momentum.
Our 2016 results reflect the efforts of Scotiabank employees across our footprint. Their hard work provides a superior experience for our customers. Scotiabankers are also proud members of the communities in which we live and work.
In fact, last year, Scotiabankers devoted more than 400,000 volunteer hours to local causes.
As some of you may know, there have recently been devastating floods in Peru and Colombia. I know that I speak on behalf of all Scotiabankers, when I say that our thoughts go out to the victims and the first responders who have been affected.
This year marks Scotiabank’s 185th anniversary and, of course, it also marks Canada’s 150th birthday.
Since our founding in 1832, Scotiabank has had the privilege of serving our customers through all of Canada’s defining moments, including Confederation, two World Wars, the Great Depression and, most recently, the Global Financial Crisis. Throughout all of the ups and downs, we have always remained focused on banking the real economy.
I cite these examples because they illustrate your Bank’s ability to successfully navigate periods of prosperity, as well as times of uncertainty and change.
We are now in a new era of significant change, defined by rapid advancements in technology.
The opportunities for both consumers and businesses in this digital age are unparalleled.
With that context, I would like to provide our perspective on two subjects today. The first is global trade, and the second is the Bank’s role, in the digital economy.
As Canada’s International Bank, we have always been strong proponents of the free movement of goods and services. After all, Canadians benefit from a vast network of trade agreements that have helped to accelerate economic growth, create jobs, and boost living standards.
In fact, Canada punches above its weight because we have preferred access to some of the world’s largest markets. That said, today we are witnessing political movements in many countries that are challenging the long-held view that free trade is a key driver of economic prosperity.
A notable example is the current debate around the North American Free Trade Agreement. Since the inception of NAFTA in 1994, the value of goods traded across the continent has tripled, and millions of jobs have been created.
However, some are questioning whether NAFTA is appropriately serving the interests of American workers.
Given the clear economic advantages of NAFTA to all three of its members, Scotiabank firmly supports the free movement of goods and services throughout North America.
Having said that, let me offer a few thoughts. In renegotiating the terms of the agreement, there must be positive public dialogue on the advantages of free trade. Political and business leaders need to address the concerns of those citizens who feel that open markets have threatened their livelihoods. A good example is the need for re-training programs to support displaced workers who seek to join the new economy.
With respect to NAFTA specifically, we agree that it would be timely to update some provisions. This would ensure that the Agreement better reflects today’s realities. For example, provisions governing services, e-commerce, and intellectual-property protections could all be added to the agreement.
Finally, stakeholders must think longer term. Scotiabank’s 125 years of international operations have taught us not to become overly concerned with the headlines of the day. Instead, we choose to focus on the longer-term growth prospects of our major markets.
For example, in the case of Mexico, continued policy reforms and strong macroeconomic management have positioned the country for growth. In addition, Mexico’s relatively young and expanding middle class continue to make it an attractive place to invest. As a result, we remain confident about Mexico’s economic prospects in the near term, and especially over the longer term.
We are also confident that open markets remain the surest path to greater prosperity.
As I’ve said before, digital technology is transforming economies around the globe at an accelerating pace. This includes Canada, which has tremendous potential to play a leading role in developing the global digital economy.
Let me take this opportunity to provide a brief update on the Bank’s digital transformation. At last year’s Annual Meeting, I spoke about technology, and how it was rapidly re-shaping the financial services industry. Since then, Scotiabank’s digital transformation has gathered strong momentum and is a powerful enabler of our All-Bank Strategy.
Our digital strategy is ambitious: We aspire to be a digital leader in the financial services industry.
To achieve our goal, we have established several measurable, medium-term objectives. Let me give you two examples. Firstly, we want to provide our customers with the best banking experience in all five of our key markets. Here in Canada, Mexico, Chile, Peru and Colombia. That means offering our customers superior advice, as well as easy to use products and services that they would recommend to their friends and family.
Secondly, 80 per cent of our customers already choose to do some aspects of their banking through mobile and digital channels. By continuing to enhance our digital capabilities, we expect that number will reach 90 per cent in the next few years. As we make progress against these objectives, our customers, our employees and our shareholders will all benefit.
While we are focused on our own digital transformation, we are also keenly aware that new technologies and capabilities are transforming all industries.
Countries around the world are positioning themselves to take advantage of digital opportunities. Canada needs to be a leader in this area.
Navdeep Bains, Canada’s Minister of Innovation, Science and Economic Development has rightly described the current state of play as “a global innovation race.” The good news is that Canada is off to a strong start.
Our Governments are playing an important role in developing the digital economy by supporting key public investments in education, economic infrastructure, and cybersecurity.
For example, the Federal government recently announced an investment of $125 million in AI research institutes in Montreal, Toronto and Edmonton.
However, in this innovation race, we encourage our Governments to do even more by making tax rates competitive; ensuring our regulatory frameworks keep pace with technological change; and fostering conditions that attract and retain Canadian talent.
Ultimately, innovation succeeds when investments in people, processes, and technology are driven by the private sector. Let me give you two examples of how Scotiabank is leading the way:
The first example is located just a few blocks east of here, in the heart of downtown Toronto. We call it the Scotiabank Digital Factory. At 70,000 square feet, our Factory is the largest innovation hub of its kind here in Canada.
Not only is our Factory providing career opportunities for hundreds of Canadian tech savvy professionals, it is contributing to Canadian innovation through partnerships with Fintech firms around the world. In addition to our Factory here in Toronto, the Bank has also launched similar Factories in Mexico City, Lima, Santiago and Bogota.
Scotiabank’s investments in skills training and education are another good example of our contribution to Canada’s digital economy. The Bank has launched many new digital partnerships with leading Canadian universities and organizations over the past year.
Most recently, we announced a partnership with the University of British Columbia focused on cybersecurity.
We are also championing Artificial Intelligence and machine learning capabilities, which are re-shaping our industry along with many others. In essence, Artificial Intelligence – or AI – harnesses the power of machines to enhance intelligent human behaviour.
The technologies behind AI are already making our lives simpler. For example, take Netflix’s ability to predict what shows you might like, or Amazon’s digital personal assistant, Alexa, who can help you with a host of things.
AI is only going to become more powerful and prominent in our everyday lives, including in how we bank. Over the last couple of weeks, we announced investments in two significant artificial intelligence initiatives: NextAI and the Vector Institute.
Each one has brought together government, academia, and corporations to help scale-up Canadian AI capabilities. At the same time, our investments are helping young entrepreneurs develop and commercialize digital solutions.
A good example is our investment in the Creative Destruction Lab at the University of Toronto. This Lab is a world-class incubator that is helping to launch some of Canada’s most promising AI start-up firms.
Canada has a unique opportunity to develop a world-leading Artificial Intelligence ecosystem, but we have a lot of work ahead of us. Scotiabank will continue to do what we can to assist Canada in becoming a leader in the digital economy.
For example, we are committed to building even more digital partnerships, which are important because they are good for aspiring Canadian entrepreneurs; they’re good for Canadian business, including Scotiabank; and they’re good for the Canadian economy.
Let me close with this. As we celebrate our 185th anniversary this year, we are fortunate to be one of Canada’s longest enduring companies. We are, in fact, older than the country of Canada itself.
Significant milestones like this offer a good opportunity for reflection. At the beginning of the year, I decided to re-read this book which was written 85 years ago to mark the Bank’s 100th anniversary.
As I flipped through the pages, I came across a passage, written by Hector McInnes that really resonated with me. He wrote, and I quote: “The Bank’s growth has been possible only through strength of character, honesty of purpose, courage and wisdom…”
These words are as true today as they were when they were written. Scotiabankers are very proud of our legacy. We all recognize that it is built on a long history of operating with integrity, and working to help customers become better-off. We do not take our customers’ trust for granted.
As we work to build an even better Bank, we will ensure that our policies and practices remain consistent with the high standards that our customers expect. I would like to thank all Scotiabankers around the globe for their hard work and their commitment to our Bank.
I feel privileged to lead our team each and every day.