Message to our Shareholders

Brian J. Porter

President and Chief Executive Officer


Dear fellow Shareholders,

Over the past year, I travelled throughout our footprint and had the good fortune of meeting with customers, shareholders, employees, community partners, and government officials. I saw firsthand the important impact that Scotiabank makes in the communities in which we live and work.

Across our footprint, our Bank is a driver of prosperity, an enabler of economic transformation, and a partner in development. We are there for families as they save for important milestones, for customers when they need to finance a major project, for our communities when they need support, and for our employees as they acquire the skills they need to thrive in a changing world. We are there for every future.

Earlier this year, we undertook an effort to reimagine our purpose. For every future is the culmination of that effort. It honours our long history, frames the roles we play in society today, and sets out our vision for the future. You will read more about our purpose throughout this report.

earnings by market


Financial Performance

The year was marked by persistent geopolitical tensions, market volatility, and concerns about global economic growth. The challenges faced in 2019 underscore why we choose to lead with a long-term perspective, maintain diversification, and focus on getting the fundamentals right.

After adjusting for acquisition-related costs, we earned $9.4 billion – up 3% compared to last year.

Some highlights of our business performance in 2019 can be found below.

Canadian Banking

  • Delivered adjusted earnings of $4.5 billion     
  • Strong balance sheet expansion; along with deposit growth outpacing asset growth
  • Continued to optimize our business mix and increased our net interest margin
  • Enhanced customer experience through strengthened digital offerings and retail banking product suite

Global Wealth Management (GWM)

  • On November 1st, 2019, we officially established GWM as our fourth business line. GWM earnings are derived from both the Canadian and International Bank. We look forward to consistent, strong earnings performance across GWM over the coming years

International Banking

  • Delivered adjusted earnings of $3.2 billion
  • Diversified operations have delivered another strong year of double-digit earnings growth
  • Main integrations from recent acquisitions in Chile and Colombia have been completed
  • Strategic repositioning efforts are largely complete with improved earnings and credit quality

Global Banking and Markets (GBM)

  • Delivered earnings of $1.5 billion
  • Improved performance in the second half of 2019 versus first half
  • Strong momentum from our GBM businesses
  • Growth in Capital Markets 

As we look ahead to 2020, we are well positioned for growth and optimistic for the future.


Strategic Repositioning 

Early on in my tenure as CEO, our leadership team, with our Board of Directors’ support, set a course to become
a more focused Bank by sharpening our geographic footprint and improving our business mix. More specifically, over the past six years, we undertook a comprehensive strategic repositioning program to exit multiple businesses and countries while increasing our investment and building scale in our six core markets and the wealth management business.

Our program was based on two important beliefs:

1. An overly expansive geographic footprint has some inherent risk and can distract management from its core businesses.

2. Scale is critical to running our Bank efficiently and therefore necessary in providing consistent, strong returns to our shareholders.

I will cover both of these beliefs in greater detail. Before I do that, let me outline our approach to acquisitions and partnerships, which are inextricably linked and of critical importance to our repositioning efforts.

We pride ourselves on partnerships done well. We understand that partnerships are the foundation of our success. The reputation we have earned as a trusted and reliable partner has enabled us to win new business and better serve our customers.

Looking at our acquisitions, we spent years cultivating and deepening our relationships. When businesses came up for sale that aligned with our strategy, we were there as a strong and proven partner. Our approach to acquisitions has been clear and consistent. Using clear and disciplined criteria, we acquired high quality businesses in strategically important markets including BBVA in Chile, as well as Citibank’s retail and small business operations in Colombia. We also considerably strengthened our wealth business through our acquisitions of MD Financial and Jarislowsky Fraser in Canada.

Carrying out a series of acquisitions and divestitures simultaneously is highly complex, particularly while delivering earnings growth. It’s also hard to predict or control the timing of acquisitions. When rare opportunities to acquire strong businesses that fit within our strategy arose, we chose to act.


Geographic Focus

Over the past two years, we considerably sharpened our geographic focus. We announced or completed exits from non-core countries and non-core business operations where we either lacked scale, the markets were too small, or the long-term operating outlook was unfavourable. The geographic aspect of our strategic repositioning program is substantially complete. Our sharpened footprint has positioned us as a leading Bank in the Americas and allows us to connect our customers to the world.

Our business model is predicated on a high degree of strategic diversification. Today, we are the only bank with a significant presence in all the major countries in the Americas corridor: Canada, the United States, Mexico, Peru, Chile and Colombia. Today, our six core markets represent 87% of our earnings. We also have a strong and successful wholesale business in Brazil.

Looking at the US, where we originate more than USD $150 billion in assets, we are one of the top 15 foreign banks. Our foundation in the US is strong and we see more potential for growth. We have a highly balanced portfolio anchored in Canada with diversified exposure to the US and in growth markets in Latin America. No single country outside of Canada represents more 10% of our earnings. This differentiates us from some of our competitors who are heavily weighted to the US. 

Strengthened Pacific Alliance Presence

The past year has presented social and political challenges around the world, including in the four Pacific Alliance countries. Recent events in Latin America are mirroring events we are seeing elsewhere in Europe and Asia, as governments struggle to respond to growing expectations from the people of their countries. While the situation in Latin America may have a short-term impact, the long-term picture in the Pacific Alliance region is one of healthier, more prosperous societies with stronger institutions.

At times like this, we choose to maintain perspective. Scotiabank is 187 years old and we have operated through times of tremendous change and volatility. We have been operating in the Pacific Alliance for more than 20 years and have seen change there as well. Navigating through short-term challenges can be difficult. But if we look back, we appreciate the resilience of the Pacific Alliance countries to economic and political cycles.

Our commitment to the Pacific Alliance region is unchanged: we are here for the bright future ahead. We are here for every future.



Scale Begets Scale

There are many benefits that have come from our strategic repositioning efforts. Most importantly, we are generating higher quality earnings that are more reliable and predictable. We also have room and appetite to grow.

Our size allows us to absorb fixed costs more effectively and also lowers some funding costs. It facilitates diversification by product and service which deepens customer relationships. It more effectively allows for investment in technology and digital banking capabilities. Finally, it enhances our competitive advantages in 
each market.

As our Bank grows, so do the opportunities to further leverage our scale. In other words: scale begets scale.

Our investment in Chile is a great example. In 2015, we completed our acquisition of Cencosud’s Chilean financial services business. The transaction enabled us to gain market share and grow our business. It also made us a more competitive buyer when BBVA Chile came up for sale a few years later. Were it not for the acquisition of the Cencosud business, it is unlikely that the opportunity to acquire BBVA Chile would have materialized for us.

strong presence in Chile

Today, we are the 3rd largest private sector bank in Chile with more organic growth opportunities and even greater profitability. We had similar success in Peru and see many opportunities to grow in the same way in Mexico and Colombia, as well as the Dominican Republic, which is one of the fastest growing markets in the Caribbean.

Looking at our announced and completed divestitures, we have thoughtfully withdrawn more than $9 billion from non-core operations. Of that, the majority of the countries were unrated, or had a non-investment grade rating. At the same time, we deployed approximately $7.5 billion of capital into core businesses and geographies, the majority in markets with investment grade ratings (BBB+ and higher) – principally in Wealth Management and the Pacific Alliance countries of Mexico, Peru, Chile and Colombia.

Scotiabank has placed a strong emphasis on reallocating capital to high-quality markets with investment-grade ratings (an indicator of the risk level of the investing environment of a particular country, also taking into account political risk).

By thoughtfully refocusing our investments, we have improved the Bank’s credit risk profile and reduced operational risk. For example, the average ratios for credit losses (i.e., PCLs, GILs) for divested entities are greater than all-Bank, and significantly more volatile. Further, the majority of Scotiabank’s divestitures are from countries that experience a greater threat of money laundering and terrorist financing, among other operational risks.

Another example of our de-risking efforts includes our announced divestitures of Puerto Rico and El Salvador. While Puerto Rico and El Salvador are immaterial to all-Bank earnings, they represent approximately 10% of all-Bank gross impaired loans.

Sharpening our Focus, Reducing our Risk Profile chart

Our efforts to strategically reposition the Bank have been considerable. Execution has required alignment, focus, and discipline. Our repositioning efforts are substantially complete. We are very pleased with our progress to date and we are confident that we will continue to realise the substantial gains from our efforts and investments. 

Reducing Gross Impaired Loans chart


Investing in our Capabilities

Looking at our organic investments, many of these are less visible, but just as important when it comes to positioning the Bank for success. We have invested in our team’s talent and capabilities. We have improved our processes to make us more efficient and effective. We have also invested in technology to give our customers a superior and secure banking experience and have led with digital as a strategic differentiation.

Our investments in these areas are creating cost efficiencies, modernizing our technology platforms, and enhancing our ability to release new features and capabilities with increased frequency. Our efforts will better protect the Bank and enhance the customer experience.

Across the Bank, we undertook a series of efforts to modernize our technology platform. Through one of our key platform modernization projects in Mexico, we have simplified operational processes and product offerings, reduced client onboarding time by 85%, eliminated 70 older systems and decreased the number of operating reports by 72%. The ongoing, financial benefits of our modernization efforts in Mexico are more than $75 million per year.

We are also embracing and executing a secure Cloud-first technology strategy. Cloud computing is the on-demand delivery of compute power, database, storage, and applications on a pay-as-you-go basis. Moving to the Cloud brings down costs, improves speed of innovation, enables analytics and helps us deliver enhanced digital solutions to our clients. 

The year-over-year growth in our technology spending is now moderating. Going forward, our steady state investment in technology will focus on optimizing our operating model and maintaining industry-leading technology.

As we run our business, we face different strategic choices and trade-offs. With regard to technology, we made the decision to modernize our foundation and build our capabilities. As a result, our investment in technology has been purposefully elevated since 2014. We could have chosen to cut our technology spend to boost our short-term bottom line. Instead, we made the strategic choice to invest for the future. 

Significant Investments in People, Processes, and Technology

People: Fostering Talent and Leadership

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  • Driving engagement: 81% employee engagement score globally, up 2% from last year
  • Building an inclusive workplace:
    >  39% of Vice Presidents and above in Canada are female;
    >  Approximately 80% of divisions at the Bank saw an increase in female Emerging Leaders;
    >  92% of employees believe Scotiabank’s commitment to being an inclusive workplace
  • Boosting skills today and for the future: 92,500 employees can now access LinkedIn Learning.
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Process: Embracing Smart Automations

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400 automations in production 

+ 25 new automations per month


1 million hours saved

> $100 MM value since January 2018

Technology: Cloud-First Approach

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Lower costs

Faster innovation

Enhanced digital solutions


Scotiabankers in our Communities

At the Bank, we are an important part of the economic and the social fabric of every country in which we operate. We take that responsibility seriously. Last year, Scotiabankers contributed more than 350,000 hours of volunteering time in their respective communities. The Bank also contributed nearly $100 million globally through donations, sponsorships and other forms of assistance. I want to thank our employees for representing our Bank well in our communities.

Over the years, we have stood by our customers and communities in good and challenging times. Earlier this year, when Hurricane Dorian hit The Bahamas – the worst Atlantic hurricane since 1935 in terms of velocity to make landfall – we were there for our customers and employees. We worked with our partners at the Red Cross to provide much-needed aid and supplies.

One of our Bank’s philanthropic priorities is to see young people in our communities thrive. We work with a number of outstanding charitable partners to achieve our objective. United Way is a great example. Our partnership with United Way dates back more than 50 years. In 2019, we pledged $15 million over five years to United Way Greater Toronto. Our donation was the largest corporate commitment in United Way Greater Toronto’s history.

We also work with Big Brothers Big Sisters to enable mentorships that provide young people with much needed support and guidance.

Through our partnership with FC Barcelona and the FC Barcelona Foundation, we are committed to developing 18 FutbolNet festivals across six countries over a three-year period. Our investment will positively impact more than 18,000 children. In 2019, over 5,000 young people participated in the FutbolNet Festivals with 44% girls’ participation, which is up by 4% from 2018. We believe strongly that giving back is the right thing for the Bank, for our employees, for our communities and our society. 


In Closing

Our progress in 2019 would not be possible without the contributions of more than 100,000 Scotiabankers. Their dedication and efforts have helped to build a stronger business and culture. Over the past few years, we have done a lot of heavy lifting. Today, we are an even more competitive Bank in each of our core markets with multiple avenues for growth. We have the capital, the reputation, the partnerships, the expertise, and the people to realise our ambitions for the future.

I want to thank our Board of Directors for their confidence in our leadership team. In particular, I want to extend my gratitude to our new Board Chairman Aaron Regent for his leadership. The Bank is fortunate to have a highly engaged Board of Directors and our success is a testament to their support.

It continues to be my privilege to lead this tremendous institution and to work alongside more than 100,000 dedicated Scotiabankers as we deliver for our customers. I want to extend my profound thanks to you, our shareholders, for the trust you continue to place in our team. We do not take it for granted. We are more confident than ever that the best is yet to come.