Richard E. Waugh Speech - April 9, 2013
Address by Richard E. Waugh
Chief Executive Officer
To the 181st Annual General Meeting of Shareholders
Halifax, Nova Scotia
April 9, 2013
"I like to describe us as a multinational bank, which means that we have a global mindset, but we act locally. We meet the unique needs of customers, large or small, at the local level, in each market we serve."
Thank you and good morning.
Scotiabank is built on a solid Canadian foundation, but as Canada's most international bank, our multinational footprint is obviously a big part of our history, including who we are today and certainly our future.
First and foremost, it gives us balance and diversification, which is at the heart of our strategy.
It also helps our people develop a global mindset, a necessity for doing business in the 21st century.
I like to describe us as a multinational bank, which means that we have a global mindset, but we act locally. We meet the unique needs of customers, large or small, at the local level, in each market we serve.
Yet all of them are supported by the full resources and best practices of Scotiabank, with our nearly $70 billion in market capitalization and 82,000 employees.
This is not the same as how global banks operate. Many are run out of London or New York but with little local investment.
As we tell our customers we don't fly in and fly out. We stay. Just as we have for over 120 years internationally.
Our approach is also a very Canadian one - open-minded and respectful to differences in others, but also prudent and well thought out. These are things that we, as Canadians, do very well but don't take advantage of nearly as much as we should.
This brings us to a broader discussion about the future of Canada's economy, and the need for this country to be more international in seeking markets for our goods and services.
I've spoken about this before and I will do so now because I believe it's one of the biggest issues facing Canada's economic future.
So, today I'd like to talk about:
- Why it is so critical for Canada's economic future that we expand beyond our traditional trading partners to high growth emerging markets.
- I'll discuss how international expansion can help address key barriers to growth and productivity.
- And finally, why Canada and most importantly, those of us in the private sector, must seize the opportunity right now.
Let me begin with why this issue is so important for Canada's economic future.
I'm going to focus on three reasons.
The first reason is that we need to face the realities of the global economy that we are in today. We've got to be in the places where the growth is happening. Right now, Canada's business community can do a lot better.
By mid-century, emerging markets are predicted to account for 70% of global trade. Right now, less than 12% of Canada's exports go to those markets.
We are several decades into globalization, and still, roughly three quarters of our exports go the US. It's no wonder Canada's export performance is second worst in the G20.
Many of us are too reliant on the past legacy of a weak Canadian dollar, an almost singular focus on natural resources and a near-complete reliance on the U.S. to buy what we're selling.
What's happening with the Keystone pipeline should remind us that America's national agenda trumps all else, so we can't rely on them for our own prosperity. Relying on one customer is never a good strategy.
Let me briefly touch on the potential Scotiabank sees in emerging markets.
This year we expect GDP growth in our key international markets to be more than twice what it is in Canada or the U.S. - not to mention the EU, which is barely expected to grow at all.
But GDP growth alone does not tell the whole story. These emerging markets have great demographics including fast-growing populations, lots of young people and a rapidly expanding middle class.
Simply put, this opens up great opportunities for Canadian businesses.
You may have heard the term "underbanked" which means that people use fewer banking products and services so there's a lot of potential for growth for home loans, car loans and credit cards.
One way we measure that is to look at private sector loans as a percentage of GDP. The higher the number, the more saturated the market is.
Canada and the U.S. are at well over 100%.
Colombia, in contrast, is at only 45%. Peru and Mexico are at just 26% – with lots of room to grow.
And I want to make it clear: the opportunities are not only in banking. Booming economies with an expanding middle class are good for Canadian businesses in many industries.
Take infrastructure, for example. Last year, as part of my work with the Brazil-Canada CEO Forum, I met the CEO of a company based in Halifax. His company installs LED lighting. He told me that they had just signed a large contract to install streetlights in Sao Paolo, Brazil.
I asked him about the project, and he told me that the neighbourhood in which they were working had never had streetlights before so everything needed to be designed and installed from the ground up.
There probably isn't a single street in any major Canadian city today without streetlights.
But that kind of opportunity does exist in emerging markets and we Canadians have the strengths and expertise to win the business if we go after it.
The second reason this is important for Canada's economic future is that it creates important jobs for Canadians.
When a company headquartered in Canada expands internationally, that doesn't just create jobs abroad. It also creates jobs at home, high-paying, skilled head office jobs and great careers that Canada wants and needs.
Scotiabank's head offices in Toronto contain key business and support functions for our operations in 55 countries. When we grow, in Canada or abroad, so does our team at home. We have highly-educated and skilled professionals in a wide range of fields, living, working and contributing to their local community, economically and socially.
And of course, we rely on a lot of Canadian suppliers to help us including accountants, lawyers, IT professionals, and so on.
This has a significant ripple effect through tax revenues, spinoffs for local businesses, money and volunteers for charities and contributions to our culture and the arts.
It also creates an environment to attract highly motivated and educated workers and entrepreneurs from around the world who help us to innovate with new ideas.
The third reason this is important for Canada's economy is because it will boost our productivity.
Canada's struggles with productivity are well known, and I've spoken before about the three key elements that will improve it: efficiency, innovation & scale.
Broadening our trade to international markets can help address all three of these critical elements.
Let me use Scotiabank as an example:
We've improved efficiency by centralizing functions. Our customer contact centre in Mexico, for example, services Mexico, but also handles select calls from Canada and we have plans for that facility to service our Central American locations in the near future.
It's similar to the way our award-winning customer contact centre here in Halifax drives efficiency by serving our customers across Canada.
We've improved innovation by adopting best practices from our acquisitions around the world. When we enter new markets, we are not only teaching but we are also learning. And when we discover a better way to do something, whether it's in HR, systems or customer service, we deploy it across the Bank.
We are also driving innovation by building a diverse workforce and fostering a culture of collaboration across it. Diversity breeds innovative thinking, broad perspectives and new ideas.
We strive to collaborate as openly and as often as we can so that those ideas get spread around. We encourage mobility across business lines and geographical locations for the same reason.
When people come to Scotiabank's headquarters for the first time, they are often surprised not only to see the diversity of our workforce but also to hear so many languages, particularly Spanish, being widely spoken in the hallways and elevators.
Lastly, when it comes to building scale, it's clear that looking abroad for acquisitions has allowed us to grow much faster than if we had only looked in Canada. It has also allowed us to spread our costs throughout a much larger platform.
All of this increases our productivity and is one reason why we are a leader among both Canadian and international banks in productivity and efficiency.
Certainly, when we see excellent opportunities here, we take them as we did with ING DIRECT Canada, Dundee Wealth and so on, but the reality is that great opportunities like that don't come along very often.
To grow strategically and to get efficiencies of scale, we are proactive on our international strategy in emerging markets. That makes us unique in Canada, but it's also something that very few international banks are doing successfully.
It's my view that Canadian businesses need to seize the international opportunities available to us and not just big companies, but all companies.
It is important to understand: This is not something that we should look to the government to do for us. This is something that Canadian companies have to do on our own within a government framework that supports private sector efforts. I can tell you from experience this works.
And we need to do it now because Canada's window of opportunity is open now, and the timing will never be better.
For one thing, we have support from our governments, and even our central bank. In fact, they have asked Canadian companies to take action on this issue over and over again.
There are programs and resources available now through government agencies to help pave the way. And the government has opened the door by signing numerous free trade and investment agreements in South America and Asia.
So we have the tools we need. But we as businesses need to lead the change in mindset.
Canadians need to understand how well Canada is viewed abroad. I've travelled the world for many years, and I can tell you that in my experience, right now Canada's brand is stronger than it's ever been. The timing is right.
We are one of very few developed countries to get through the financial crisis and recession in relatively good shape – our economy, our banks and our businesses.
People want to do business with us. We represent the best of all worlds – fiscal and economic health, a civil, democratic society that that values diversity, free and open markets and arguably the soundest banking system in the world.
And because we're not a large country, we aren't viewed as a threat, either economically, politically or militarily.
There are so many ways that we can contribute using our world class expertise in banking, energy, mining, health services, infrastructure, transportation, high tech and others.
And it's all based on strong Canadian values and principles. We've come a long way in defining our unique Canadian culture over the last few decades.
Of course, we're not perfect. And we cannot be complacent. There have been some recent high profile examples of Canadian multinationals making mistakes. That's certainly not something that any of us wants to see, but it's a good reminder to all of us that we need to be ever vigilant to conduct our business in a balanced, responsible way and to uphold the great Canadian reputation that has been created.
I can tell you that in Scotiabank's experience, the people, companies and governments that we deal with in emerging markets are overwhelmingly receptive to our "Canadian Way" our Scotiabank way.
We're viewed as a stable partner with a strong culture, for proven risk management, corporate integrity, trust, respecting local issues and a willingness to help accomplish important economic and social goals in those countries. As I said earlier we don't fly in and fly out, we stay.
Scotiabank's reputation abroad is a big advantage for us and our country's reputation is a big advantage for all Canadians and it's one that we need to use more effectively.
I would like to conclude by suggesting that all Canadians make this issue of international trade a priority and support our businesses and government policies on this initiative.
The economic need is clear. Dusting off the plan we used last century is not going to cut it this century. The global economy has changed and Canada needs to change with it.
The business opportunities in emerging markets are diverse and plentiful – and the private sector can't sit back and rely on tariffs or other government protection – we've got to take the lead.
The benefits are tangible. Scotiabank's international operations have made a significant and growing contribution to our bottom line. They have also improved the quality of our team, our business practices, our growth prospects and our productivity.
The risks are relative and very manageable. Many of these countries have made big strides in the past couple of decades in terms of the strength of their democracies, rule of law and the quality of their institutions.
And let's not forget, there are significant risks to the status quo. Some Canadians make the mistake of thinking that we can't compete on the world stage or that we don't need to when in fact, we can, and we must.
Let's take advantage of the fact that Canada's brand is strong, and we are well positioned to succeed in a wide range of diverse markets.
More than two centuries ago, traders from Halifax ventured abroad to new markets, and helped establish Canada as a great trading nation. And for 181 years, Scotiabank has been there to help our customers reach their goals.
Today, Canada is still a great trading nation, one that has the talent and resources to take on the world and win. Scotiabank is proof of that and was just recognized as Global Bank of the Year. (The Banker magazine)
With our deep roots in Halifax, and in communities across Canada, and with our international network, diverse expertise, and our values, we are ready and able to help our customers reach their potential - and help Canada reach its potential.
It is by fulfilling these important roles that we will not only contribute to creating growth for customers and communities we will also achieve the targets we have set for our shareholders this year, and for years to come.