Jake Lawrence - SVP, IR Brian Porter - President and CEO Sean McGuckin - CFO Stephen Hart - Chief Risk Officer James O'Sullivan - Group Head, Canadian Banking Nacho Deschamps - Group Head, International Banking Dieter Jentsch - Group Head, Global Banking and Markets

Gabriel Dechaine - National Bank Financial Meny Grauman - Cormark Securities Robert Sedran - CIBC Ebrahim Poonawala - Bank of America-Merrill Lynch Sohrab Movahedi - BMO Capital Markets Darko Mihelic - RBC Capital Markets Doug Young - Desjardins Capital Markets

Good morning, and welcome to Scotiabank's First Quarter 2017 Results Presentation. My name is Jake Lawrence, and I am Scotiabank's Senior Vice President, responsible of Investor Relations. Presenting to you this morning is Brian Porter, Scotiabank's President and Chief Executive Officer; Sean McGuckin, our Chief Financial Officer; and Stephen Hart, the Bank's Chief Risk Officer. Following our comments this morning, we'll be glad to take your questions. Also joining us in the room this morning to take questions are Scotiabank's business line group heads, James O'Sullivan from Canadian Banking; Nacho Deschamps from International Banking; and Dieter Jentsch from Global Banking and Markets. Before we start this morning's call and on behalf of those speaking today, I would like to refer you to slide two of our presentation, which contains Scotiabank's caution regarding forward-looking statements. And with that, I'll now turn the call over to Brian Porter.

Thank you, Jake, and good morning everyone. I'll start on slide four. We are pleased with the Bank's start to 2017. Scotiabank entered the year in a strong position, and we have seen good earnings momentum continue across all three of our businesses. The Bank delivered over $2 billion in earnings and diluted earnings per share of $1.57 for the quarter, up approximately 10%, compared to last year. Our return on equity was strong at 14.3% and within our medium-term objectives. On a pre-tax pre-provision profit basis, our strong revenue growth and focus on reducing structural costs led to a 14% increase, compared to last year. Turning to our business lines, I would like to make some brief comments. Canadian Banking delivered another strong quarter of earnings by focusing on growing and deepening our customer relationships. Further progress in reducing structural costs led to strong operating leverage, and efforts to optimize the balance sheet have resulted in improved margins, and solid loan and deposit growth. International Banking delivered a record quarter of earnings, and was underpinned by solid growth across our key Pacific Alliance markets notwithstanding some geopolitical headwinds. Overall, our personal and commercial banking businesses are generating roughly 80% of Scotiabank's earnings, with strong earnings growth and improving return on equity. Global Banking and Markets also had a strong performance in Q1, continuing the momentum we saw in the second half of 2016, with improved efficiency and profitability. At the enterprise level our structural cost initiatives are progressing as planned. And the Bank generated strong operating leverage, 4.5% this quarter. In terms of risk management, overall credit quality remains stable for the quarter. Risk is evolving as expected across our portfolios. The Bank also remains very well capitalized with a strong common equity Tier 1 ratio of 11.3%. This strength provides us with optionality to invest in our businesses organically, grow through acquisitions, or return capital to our shareholders. On the last point, we also increased our quarterly dividend by $0.02 to $0.76 per share. The quarter's strong performance reflects the ongoing execution of our strategy, and building on our momentum to sustainably grow earnings and dividends for our shareholders. Before I turn the call over to Sean, I want to provide a few comments on our recent digital banking update, which we held on February 2nd. At our update, we articulated our digital vision, including some ambitious goals we have set over the medium-term, and we believe our digital transformation is a key enabler of the Bank's overall strategy. The ever-quickening pace of technological development is having a profound impact on customers, industries, and economies, not just financial services. As such, we believe it is more important for the Bank to move in the right aspirational direction with good velocity rather than focus too narrowly on precise targets or a specific timing. As outlined on the slide, we have identified a number of ambitious goals over the medium-term. We aspire to be a leader in customer experience across our five key markets, as measured by our Net Promoter Score. We have also set goals of having at least 70% digital adoption by our customers. At least 50% digital retail sales, and less than 10% of transactions completed in branch. These digital goals taken together with other efficiency-related efforts will allow Scotiabank to continue improving its leading all-bank productivity ratio to be at 50% or better by 2021. Overall, we believe the Bank is well positioned to become a digital leader. I will now turn the call over to Sean to discuss our financial performance.

Thanks, Brian. I will begin on slide seven, which shows our key financial performance metrics for the current quarter, and comparative periods. As Brain mentioned, the Bank delivered a very good start to the year, with net income of just over $2 billion in Q1, up 11% year-over-year. Diluted earnings per share of $1.57 were up 10% compared to last year. All three of our business lines delivered a strong quarter to start the year, with double-digit earnings growth. Revenue growth was up 8% year-over-year. Adjusting for unfavorable foreign currency translation, revenue growth was 11%, reflecting 7% growth in net interest income and 15% growth in non-interest income. Interest income was driven by higher asset growth and wider margins across all of our business lines, partly offset by lower contributions from asset liability management activities. Our core banking margin was 2.40%, up two basis points year-over-year. Fee income was positively impacted by higher banking, underwriting, trading revenues, and wealth management fees, as well as acquisitions. Gains on real estate were offset by lower net gains on investment securities. Non-interest expenses were up 3% year-over-year, or 6% adjusting for unfavorable foreign currency translation. The Bank continues to focus on investing on business initiatives which drove higher digital and technology related expenses. Higher performance based compensation and employee pension and benefit expenses also contributed to the increase. These costs were partly offset by continued benefits realized from our previously announced structural cost reduction activity, along with lower advertising and other business expenses. In Q1, we realized approximately $90 million in savings from our cost reduction activities, accounting for roughly one-quarter of our previously announced guidance of $350 million in savings for 2017. Our strong revenue growth and focus on reducing structural cost has lead to a 14% increase in pre-tax pre-pre-provision profit compared to last year. Our provision for credit loss ratio remains stable. The Q1 productivity ratio was 53.7%, improving by 40 basis points quarter-over-quarter, and 240 basis points compared to the same quarter last year. Overall, we delivered strong operating leverage of 4.5% in Q1. As Brian highlighted earlier, the Bank also increased its quarterly dividend payment to $0.76, reflecting a 6% increase compared to last year. Moving to capital, on slide eight, the Bank continues to maintain a strong capital position with a common equity Tier 1 ratio of 11.3%, up from 11.0% in the prior quarter, and up 120 basis points compared to Q1 of 2016. The improvement in the CET1 ratio was driven by continued strong internal capital generation and prudent management of our asset growth. As well, we are seeing positive impacts of higher pension liability discount rates and higher pension plan asset returns which have essentially now reversed the unfavorable impact on capital ratios from the low interest rate impacts on pensions in the previous few years. This improvement contributed approximately 20 basis points to the capital ratio this quarter. Bank's common equity Tier 1 risk-weighted assets declined 1% quarter-over-quarter, reflecting the impact of a stronger Canadian dollar on foreign currency denominated risk-weighted assets partly offset by higher credit and operational risk RWA. Turning to the biz line results beginning on slide nine, Canadian Banking produced a strong quarter, with net income of $981 million, up 12% year-over-year. Adjusting for real estate gains realized in the quarter, earnings are up approximately 7% year-over-year. Total revenues increased 7% from last year, with net interest income of 4%, and non-interest income up 11%. Non-interest revenue growth is primarily in card-driven use, higher insurance revenues, mutual fund fees, and the real estate gain. Loan and acceptance increased 3% from last year. Residential mortgage growth was up 2%, or up 4% excluding the Tangerine Mortgage runoff book. And personal loans are also up 4%. Optimizing our balance sheet remains a key focus as the Bank grew core deposits by 12% in retail savings, and 8% in checking deposits. The net interest margin rose four basis points from Q1 last year. Wealth Management delivered a strong quarter with earnings growth of 12% year-over-year, due and in part by market appreciation and net sales, as well as efficiency improvements. AUM was up 9%, and AUA was up 7%. Provision for credit losses were up $41 million year-over-year or 21%. Higher provisions in the retail portfolio accounted for most of the increase driven by growth in higher margin products, as well as higher commercial provisions due to a single commercial account. The PCL ratio was up four basis points. Expenses increased 2% year-over-year reflecting higher spending on digital and technology, advertising to support business growth, and salary increases, which were partially offset by benefits realized from cost reduction initiatives. Canadian Banking again delivered strong operating leverage, at 4.9% in Q1, or 3.3% adjusting for the aforementioned gains. Turning to the next slide on International Banking, the business line continued to build on the strong momentum of 2016 with a record level of quarterly earnings at 576 million, earnings grew 14% compared to last year, or 18% adjusting for unfavorable foreign currency translation. Earnings growth has been profitable and the business generated ROE of 14.2%. These results reflect continued good retail loan and deposit growth, strong net interest margin, and growth in non-interest revenues, including higher banking fees, insurance revenues, and securities and hedge gains. Benefits from reducing structural costs also contributed to the quarter. Loan growth was flat year-over-year, but up 5% adjusted for foreign currency translation. Our cost in currency basis, Latin America grew 5% compared to a year ago, led by growth retail growth of 12%. Solid loan growth in our Pacific Alliance region was partially offset by a reduction in the remainder of Latin America. Although we are seeing underlying momentum in our commercial loan portfolios, they both experienced some meaningful U.S. dollars denominated pay downs in the quarter due to market-driven factors, and is working through strong levels of commercial loan growth versus the first half of last year. Over the course of this year, we expect commercial volume growth to strengthen on a constant currency basis. International Banking is also driving higher deposit growth, a 5% or 10% adjusting for unfavorable foreign currency translation. The net interest margin increased to 4.73%, up 16 basis points year-over-year driven by an improvement in business mix, acquisitions, and re-pricing following recent interest rate changes in some markets. Credit quality remains stable. Relative to last quarter, loan losses increased 16 million to 310 million. The loan loss ratio was up six basis points. However, this was due mainly to lower acquisition-related benefits and recoveries. Expense growth was 1% versus last year, or up 6% adjusting for the impact of foreign currency translation. About half of this increase was from acquisitions, from higher business volumes and inflationary increases, partially offset by benefits from cost reduction initiatives. The productivity ratio of 55.3% in Q1 improved by approximately 120 basis points from last quarter, and roughly 230 basis points, compared to the prior year. And operating leverage was strong at 4.2% to start the year. Before moving on to Global Banking Markets, I want to reiterate the strong underlying performance in International Banking, as well discuss some thoughts around the outlook. Q1 was another quarter of strong growth, improving margins, stable credit risk, and focus on reducing structural costs has allowed the business to deliver a record earnings. Turning to Scotiabank's Mexico for a moment, I want to emphasize this business continues to perform well, while the pace of hires appreciated causing some headwinds we had another operating tailwind to support earnings and the business has been gaining market share. In fact, Scotiabank's Mexico's market share performance this quarter ranked top three across all key products. Retail loan growth has been strong, margins have increased, and expenses remain well-managed. Pacific Alliance including Mexico are producing strong results and have great potential, and we are committed to the medium-term objectives shared at our Investor Day in Mexico City in 2016. Moving to slide 11, Global Banking and Markets; net income of 469 million was up a strong 28%, compared to last year. This earnings growth was driven by higher contribution from fixed income in Canadian lending businesses, as well as lower PCLs. Trading revenues on a TED basis increased more than 25% year-over-year, driven mainly by strong results from fixed income and foreign exchange as well as comparable levels in the same quarter last year. Revenues also benefited from higher lending volumes and deposits in Canada and the U.S. as well as higher loan origination fees versus a year ago, totally offsetting with lower volumes in Asia and margin compression in the U.S, Canada and Asia. On a quarter-over-quarter basis, margins were down 15 basis points. This is driven by higher allocated funding costs, lower loan origination fees, and margin compression in the three geographic regions I just mentioned. Provision for credit losses of 8 million was down 46 million versus last year. The loan loss ratio improved by 23 basis points to four basis points. Quarter-over-quarter, loan losses were down 31 million, the improvement was driven by lower provisions in the energy sector. Expenses were up 10% compared to last year, due mainly to high performance-based compensation costs as well as higher technology and regulatory expenses. Notwithstanding, operating leverage was very strong at positive 5%. I will now turn to the Other Segment on slide 12, which incorporates the result of group treasury, smaller operating units, and certain corporate adjustments. The results include the net impact of asset and liability management activities. The Other Segment reported a net loss of 78 million this quarter. Earnings in this segment were down from 12 million in Q1 last year, driven by lower securities gains, foreign currency translation amounts, and higher expenses. From the all bank perspective, these lower net gains on investment securities were largely offset by real estate gains discussed earlier in Canadian Banking. This completes my review of our financial results. I will now turn it over to Stephen, who will discuss the risk management.

Thanks, Sean, and good morning. We remain very comfortable with the underlying fundamentals of the Bank's risk portfolio. The results this quarter are within expectations and the loan loss ration was stable at 45 basis points. Our energy portfolio remains well-managed, and had a net recovery of 13 million in Q1 with no new formations. The cumulative energy loan loss ratio since 2015 of 2% is well below our guidance of less than 3% until the end of this year. We remain committed to our guidance, and are actively managing our exposures. Overall, our retail credit performance in Canada and International is performing as expected. In Canada, higher provisions in retail are being driven by growth, and relatively higher spread loans, reflecting asset mix and portfolio seasoning. This quarter there was also provisions on a single commercial account. In International, overall credit quality versus last quarter was driven by higher retail provisions in the Caribbean and Central America, due to lower acquisition-related benefits in recoveries. Commercial provisions were largely unchanged. Now looking at credit metrics, gross impaired loans were down 3% quarter-over-quarter. The decrease was driven by International as well as Global Banking and Markets. Our net impaired loans as a percentage of our portfolio was unchanged to 49 basis points quarter-over-quarter. Net formations amounted to 723 million, up from the 645 in the prior quarter. The increase was driven by higher international retail formations through Colombia and Peru, with all other areas either flat or improving. Looking at our market risk, which remains low in Q1, our average one-day-all-bank VaR was 12 million, up 1.6 million from the prior quarter, and there were no daily trading losses in the quarter. Slide 15 shows the recent trend in loss rates for each of our businesses. Our loan loss ratio this quarter is 45 basis points, unchanged from last quarter, and year-over-year. Canada Banking PCL ratio, up four basis points year-over-year was driven by retail exposures as the bank continues to optimize its balance sheet as well as the one commercial accounting, I mentioned earlier. In International Banking, the loan loss ratio was up six basis points quarter-over-quarter, and seven basis points compared to a year ago. Global Banking and Markets improved to a low of four basis points due to the lower energy-related provisions. Overall, we believe our credit portfolios remain in good condition. And with that, I will now turn the call back to Brian.

Thank you, Stephen. Before we open the call for questions, I would like to highlight some of the key takeaways from our presentation, and comment on the outlook for Scotiabank. We delivered strong results to start the year, and we expect this momentum to continue over the balance of the year. In Canada, we continue to strengthen the customer experience, optimize business mix, and reduce structural costs. For the International Bank, our operations delivered record earnings and generated strong operating leverage. We continue to see great potential across the Pacific Alliance region, including Mexico. And Global Banking and Markets has seen improved market activity and lower energy-related credit costs, which is leading to improved results. Our previously announced restructuring charge is on track, and we are delivering improved operating efficiency as we reduce structural costs. As we continue to transform the Bank digitally we will make further investments to redesign and streamline processes to become a digital leader. The investments will make us more efficient and easier for new customers to do business with us, and existing customers to do more business with us. In closing, we are pleased with our results this quarter, and I will now turn the call back to Sean for questions.

Thanks, Brian. That concludes our prepared remarks. We'll now be pleased to take your questions. Please limit yourself to one question and then rejoin the queue to allow everyone the opportunity to participate in the call. Operator can we have the first question on the phone please.

Thank you. The first question comes from Gabriel Dechaine, National Bank Financial. Please go ahead.

Hi, good morning. Thanks for taking my question. I just wanted to delve into that commercial loan growth in International a bit. And you talked about it, Sean. Like to hear a bit more about that, how big is the USD denominated portfolio? And would these actions take preemptively by corporate that were better able to do so, and maybe there are some others there that are having a bit more difficulty. Have there been any changes to your watch list in the International segment specifically in that type of portfolio.

Okay, I'll ask Nacho to address that.

Yes, this is Nacho. Let me step back and tell you I'm very pleased with this performance on International Banking. This is really a record quarter, and we are executing our strategy. You see double-digit growth in revenues, good expense control, operating leverage. So it's true, commercial loan growth has been below our expectations. This is, as Sean explained, we have had some pay downs of U.S. dollar denominated loans by corporates, but we still see good domestic growth of commercial in the countries. Relative to our peers, we are winning market share. We see our pipeline rebuilding, and we expect commercial to strengthen over the course of the year. There is, also I would like to highlight, that retail growth was very positive, offsetting a slower commercial growth. So overall, I'm very confident with our earning objectives that we have provided as an outlook for International Banking.

And Gabriel, this is Stephen. On the watch list issue, no, the watch list in International, in fact, the overall watch list for the Bank was stable-to-down this quarter. And International, especially on the commercial side, actually showed some improvement.

Okay. Well, I'll stick to the one question. Thank you.

Thank you, Gabriel. Next question, please.

Next question is from Meny Grauman in Cormark Securities.

Hi, good morning. I just wanted to ask a question about the composition of the loan growth in Canadian Banking. It seemed like the story for 2016 at Scotia was that you were -- to some extent deemphasizing mortgage growth in favor of unsecured lending in the credit card, in particular. And I'm wondering given sort of the slowdown we're seeing in the credit card book how your outlook between those two specific loan books between the credit cards and the mortgages is changing. Are you getting less positive on the credit card side, and conversely, are you getting more positive on the outlook for the Canadian mortgage business? James O'Sullivan: Sure. Thanks, Meny, it's James. I would say, first of all, we're very much executing our plan. We continue to be focused on asset mix, and frankly on growing deposits faster than assets. And I think that's an important point. So if we look at average assets, they're up 3%, that would be 4% ex the Tangerine runoff. And if we dig into assets what we see is that mortgages, up a bit less than 4%, commercial banking assets you've got to adjust for the sale of Roynat Lease Finance, but commercial banking assets are up 8%, and small business loans are up 8%. So I've said before, these are very much choices that are not outcomes that just sort of befall upon us. I would say to your specific question, what saw in the first quarter was higher mortgage volumes that we planned. I think we found ourselves very well positioned frankly with an available balance sheet and three strong distribution channels, so mortgage volumes did come in a bit higher than we originally planned. Our appetite for those volumes on an ongoing basis is going to be very dependent on the outlook for margins, but we like the optionality. We'll see how margins develop. As for credit cards, I think the principle feature for the past two or three quarters has been the expected runoff of the MasterCard portfolio. The whole portfolio is performing very, very well, but we expected a portion of it, a private label portion in particular, to runoff [indiscernible]. And so we're issuing against that, and balances are roughly flat at sort of $6.7 billion-$6.8 billion. But as we speak, I think it's important -- as we speak, we're working hard on plans to identify the next leg of growth in credit card. As we sit here today, Meny, we're proud of the fact that we've doubled the profitability of our card business over the past three years, but we're mindful that sitting here today, 2% of our domestic balance sheet is committed to credit cards. Our peer average would be about 4%. And this is a business we very much like strategically. So overall I'd say asset growth, the asset mix initiative is going as expected. Q1 did see more mortgages than we expected, and that's okay. We like that optionality. And we continue to work hard on cards.

Thank you. And maybe if I could just as a follow-up maybe for Brian, early in 2016 you were one of the more vocal voices out there talking cautiously about the Canadian mortgage market. Have your changed your outlook or your view in any way?

No, I made some comments at the end of Q2 last year, and it was primary concern, our primary concern was around the Vancouver market, secondarily the Toronto marketplace. And we've been supportive of the changes that the government has made to the mortgage market. I think we're going to need some time to see those take hold, and we'll see that through the spring mortgage season, but there's a number of factors that work here. There is population growth, immigration, there's the time that it takes to develop a property in terms of getting through the government processes, all those different types of things here. So this is a complicated issue. We're concerned that from the perspective that trees don't grow through the sky, and markets will correct at some stage here. And we're proud of the fact that we believe we've got a very conservative mortgage book here with 50-plus percent is insured, and the LTV on the remaining portion is 51%, and we've reduced tail risk in our portfolio. So really, the message is we're governing ourselves accordingly.

Thank you.

All right, thank you. Next question on the line, please.

Next question is from Robert Sedran in CIBC.

Hi, good morning. I'd like to come back to International Banking, if I may. You guys don't seem that flushed [ph] by some of the currency movements, and I understand why. It's out of your control and the results are good even with some of the currency headwinds. But I suspect the central banks in the region are a little more concerned about the currency activity. When you think about your business going forward, the margin in particular, but if they start to tighten rates is there a negative impact on the economy that you might foresee. How should we think about a potential central bank response or an ongoing central bank response to some of the weaker currencies in the region?

This is Nacho. Well, I think interest rate increases have been important. As you mentioned, this is really a tailwind for us. I am very pleased how our teams have proactively managed the prices. In Mexico in particular there's been a 200 basis point increase Q2 - till the end of Q3. So we expect this to be an upside in our results going forward. And I still see the fundamentals of these countries talking about the Pacific Alliance in general, very positive, a young population growth this year between 2.5% and 3%. So overall the dynamics of growth underlying I think are going to be positive. And I think it's a very good part of the world to be investing in banking going forward.

So Nacho, do you think that the loan demand then is just not as interest rate sensitive as it might be in more developed markets?

There is some impact of course of interest rates going up. But I see that one factor, for example, is the credit penetration in general in this market is relatively low. So historically loan growth has been two or three times higher than GDP. I expect those dynamics to continue. Do you think of these more in the medium-term? I think there are very strong drivers for growth in the Pacific Alliance countries. And specifically for 2017 I see an opportunity of interest rates going up and strengthening our revenues in the year. So there's some impact, but overall I think the fundamentals are for growth in the coming years.

Okay, thank you.

Sure. All right, next question, please.

Next question is from Ebrahim Poonawala in Bank of America-Merrill Lynch.

Good morning. If you can shift to just capital levels means, -- Brian, I believe you mentioned last quarter that at 11% you had good amount of optionality on how to allocate capital. We are obviously at 11.3%. Could you just talk about in terms of how you're thinking about sort of capital management, be it capital return, and also you've talked about potential M&A opportunities, be it in some of the Pacific Alliance countries. Are there realistic opportunities where you see yourself deploying that capital over the next six to 12 months?

Sure. Well, my answer really hasn't changed from prior quarters. We like optionality as a bank and we like how we're positioned here. And we're going to be patient. And we have choices to invest in our business organically, which we're doing. We also will have from time to time acquisition opportunities that are on strategy. And it's not just in the Pacific Alliance; we've done quite a few things in Canada in the course of the last three years here, whether it's the JPMorgan portfolio, for example, or other targeted acquisitions. So we're going to be patient here, be thoughtful about how we deploy the shareholders' capital. That's what we get paid to do. And the countries of priority will be Canada, Mexico, Peru, Chile, Columbia, and those are our five major focus markets.

All right, thank you.

Thank you. Next question please.

Next question is from Sohrab Movahedi in BMO Capital Markets.

Thanks. Just wanted to go back maybe to James O'Sullivan; James, on the cards portfolio in Canada, maybe this stuff tails well with Stephen Hart as well. I mean, in the quarter the PCL rate there is now over about 430 basis -- I think 435 or so basis points. I understand that there's a numerator and a denominator there. And when the denominator slows and as the book seasons this number kind of has to get to its, let's call it, a run rate or a normalized rate. But as you think about the next leg of your card strategy here, what -- obviously you're getting the NIM, but what sort of PCL rates are you targeting for this book on a run rate basis? James O'Sullivan: Well, I'll start. I mean, we are very focused on risk-adjusted margin as we've discussed in other forums. But, Sohrab, when I think about cards I just want to reemphasize, this is a strategic initiative. It's truly an initiative that we're going to look at and measure over a horizon period of three to five years. And so doubling our portfolio, doubling our profitability from where we started is, I think, a very, very good start. But this is driven by a desire to be much more relevant in payments broadly to our customers. And I think the most important thing here for all of us to bear in mind is we can't make the mistake of separating risk from reward. We really like this business, it's important to our customers.

That's right. And it's Stephen here. And certainly from what we've been doing, we've been looking to invest in the whole lifecycle of the card. We've improved our analytics upfront, and we're spending a lot of time and effort on the collections side, the backend to improve our overall performance. So we see that actually starting to show, and we're seeing improvements. We expect the run rate to plateau this first half, and then start to come back down in the second half as the portfolio seasons. But certainly the vintages -- the new vintages we're seeing coming on are really showing that improvement going forward.

Okay. And just as a quick follow-up, James, you're still continuing to -- the bulk of the growth is still coming through existing Scotia customers? James O'Sullivan: That's correct.

Thank you.

All right, next question on the line, please.

Next question comes from Darko Mihelic in RBC Capital Markets.

Hi, good morning. A question on your investment gains, or lack thereof, when I look at page 23 of your supplemental, the available for sale securities, fairly big swing in Canadian-U.S. sovereign debt values. And then wonder if you can just speak to -- was it something that was like a one-off in the quarter kind of come back? And also, Sean, should I think about securities gains going forward as being more moderate given the fact that you're in a net unrealized loss? Thank you.

Yes, we don't generally project out security gains. It's just one component of many components that's used to help manage the overall returns for the shareholder. I don't think you can read too much. And in terms of the shift, in terms of the debt, obviously the high rates takes off some of the unrealized gains there. But we manage this over the longer term, and there will always be some gains that we are able to harvest each quarter.

And if I may, just one clarification as well, Sean, in your investor presentation on slide 12, when you mentioned that the other segment was affected by hedges. I just wanted some clarification on that. If you could just mention, is that hedge breakage or just normal course hedging because currencies move one way and the other segments are benefitting from the hedging activity?

Yes, it's really the -- that's the foreign exchange comments you were referring to?

Right.

That's where the P&L items come in at an average rate, and then it gets marked to a spot at the end of the quarter. And it just so happens Q1 of '16, the spot was going one way against the average, and in Q1 '17 is going opposite way. So the year-over-year, which is magnified in terms of that, but it's really just not so much hedged gains or losses, it's just more that mechanism where you bring in your P&L items at an average rate, and you've got to shoot up through a spot right at the end of the quarter.

Okay, fair enough. I may follow-up with you offline. Thank you.

Sure. Next question on the line, please.

It's from Nick [indiscernible] in Credit Suisse. Q – Unidentified Analyst: Hi, good morning. Just a question on the margin on International, I was wondering if you could provide us with an update on your outlook there, because I know we've seen some rate hikes, but it was down slightly from last quarter. And then are you building in any rate hikes or cuts into that outlook? Thank you.

Thank you. No, I think our NIM has been quite stable. Actually, it's a little bit up compared to year-over-year. We're very focused also, as James mentioned for Canada and International, also in risk-adjusted margin. Our risk-adjusted margin is 385 basis points up against the last year. So I see our margins stable, and also our risk-adjusted margin going forward.

I would just add, we do have an upward P&L bias towards the higher rates, so we'll see some modest improvement over the coming year. Q – Unidentified Analyst: Thank you.

All right, next question on the line, please.

It's from Doug Young in Desjardins Capital Markets.

Hi, good morning. Hopefully this is just more of a quick question. I guess obviously, Nacho, I just noticed as I go through your release that obviously Peru is a big part of the International division. But earnings were down in Peru year-over-year. And I'm just wondering if there was anything abnormal in there? If you can kind of flush out just any further details on that? Thank you.

Thank you for your question. No, I see Peru is having a strong year. It's true that is not so much driven by revenues, because asset growth has been, in general, it's more moderate. But the operating leverage of Peru is positive. And we have seen, especially relative to the market, because you always have to compare relative to other peers Peru, our Scotiabank Peru is performing very strong, actually number one bank growth year-over-year.

And this is Dieter. You saw some shifts in the FX capital markets business as the dollarization substantial was completed. And now there's a structural change.

Okay. So, if there are some additional details, I may follow-up with you. Thank you.

Next question on the line, please.

It's from Sohrab Movahedi in BMO Capital Markets.

I just wanted to ask, Nacho, just in Mexico in particular, just given some of the headlines over the last few months, are you actually seeing opportunities to grab market share here on a sustainable basis?

Absolutely, Sohrab. I was in Mexico two weeks ago. I think, I see Scotiabank very proactive. We are winning market share in all of the markets, and we are -- it's just an opportunity to really to be close to our customers, very strong retail growth, really winning primary customers in general. So, I think Mexico was really a top performer. You see EMEA growth year-over-year, 70% growth in constant terms, the dynamics are strong overall, operating leverage in Mexico is more than 10%. So, we are executing also in a very disciplined way, we're attracting a logical transformation of our core platform. And so, really Mexico is improving. The underlying drivers are strong across their lines and a very top performer in the quarter. A – Brian Porter: Sohrab, it's Brian. It's just -- there has been a lot of questions on International, and I just stressed this one point as that it's important to get the big picture right, and the person on Main Street, whether there are Mexico City, Ohio, Montreal, or any other city in the Pacific Alliance, our day-to-day business is somebody's purchasing a home or planning for retirement, that's not changing in terms of what's going on in somebody's Bloomberg screen. So, I think it's important that what's going on in Main Street is different than what's going on in terms of the latest rhetoric out of Washington or the latest tweet. So, just to reiterate, our business is performing and exceedingly well. We are in the right countries. We are focused. Our businesses are operating very well. And just to highlight another point is that we are very conservative in these countries about composition of our balance sheet. So, in terms of U.S. dollars versus local currency, so Mexico for example, our book in Mexico would be 90% Peso-denominated, and if we are lending U.S. dollars, we are lending them to an entity that sources U.S. dollars. So we are very careful about that in our cross-country exposures. Throughout the International division, are very tightly managed.

All right. Brian, just to be clear, I have no doubt about that. I actually wanted to see if that rhetoric may have caused some of your few competitors to bring back their hones and for you to pick up some? That's what I was trying to kind of get… A – Brian Porter: Yes, and it was a good question Sohrab, and you see that in our market share numbers.

Thank you.

All right. Next question on the line, please.

Thank you. We have a follow-up question from Ebrahim Poonawala in Bank of America Merrill Lynch.

Hi. I just had a couple of follow-up questions, Brian, to your point, is it safe to assume that the mix you gave that 90% of Mexico is USD and Peso-denominated, is that kind of true for the rest of the Pacific Alliance countries? A – Brian Porter: It's pretty close. The one out buyer would be Peru, and that's the -- in Peru, The Central Bank has gone through a process of de-dollarization of Bank's balance sheet. So, that would be more $60, $40 Sol dollars, but the trend continues more Sol than dollars in terms of Bank's balance sheets, but again we manage our exposures very, very carefully, and the number I gave you on Mexico would be similar in Chile, for example, and Colombia. Q – Ebrahim Poonawala: And just a follow-up to that, if I can, means there is clearly a lot of differentiation weed that tend to bucket the four markets together, and as you look out at least over the next twelve months, where do you see the bigger sort of opportunity from earnings or loan growth perspective, and where are you most concerned from a credit perspective?

All right. I would say this is an advantage of having a franchise with different markets that compensate also one for the other. I would say the drivers in general we see overall good prospects for interest rate upside in the region. I see volumes commercial -- retail volumes are very strong, and we'll continue to grow double-digit. And as I said, commercial volumes will strengthen over the course of the year. All the countries have been very focused on structural cost. The operating leverage at the International Banking is 4.2%, seventh consecutive quarter with positive operating leverage year-over-year. So, that will continue to be an important driving of earnings for us, and very relatively stable also retail PCLs. So, I see the Pacific Alliance overall performing well. We are doing well in the countries, as Brian said, and I'm very confident on our earnings objectives outlook for International Banking. Q – Ebrahim Poonawala: Got it. Thank you.

Next question on the line, please.

There are no other questions at this time.

Okay. Well, thank you all for participating in our Q1 call. We look forward to talking to you for the Q2 results by the end of May. Thank you.

Thank you. And that will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.