Good morning, and welcome to Scotiabank's 2019 Second Quarter Results Presentation. My name is Philip Smith, Senior Vice President of Investor Relations. Presenting to you this morning are Brian Porter, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Daniel Moore, our Chief Risk Officer. Following our comments, we will be glad to take your questions. Also present to take questions today are Scotiabank's business line group heads: James O'Sullivan from Canadian Banking; Nacho Deschamps from International Banking; and Jake Lawrence and James Neate from Global Banking and Markets. Before we start and on behalf of those speaking today, I will refer you to Slide 2 of our presentation, which contains Scotiabank's caution regarding forward-looking statements. With that, I will now turn the call over to Brian Porter.

Thank you, and good morning, everyone. Our second quarter results were highlighted by a strong operating performance across all three business lines. We achieved strong earnings growth in International Banking, delivered improved results in Global Banking and Markets, demonstrated prudent expense management across the bank, and made progress on our comprehensive strategy to de-risk and simplify the bank. Global wealth management which we will report as a standalone division of the bank beginning in fiscal 2020 also experienced strong earnings growth and AUM growth. And Canadian Banking delivered positive operating leverage in the quarter. The quarter demonstrated our ability to manage expenses prudently by prioritizing investments, both business and regulatory. This resulted in an improvement in our adjusted productivity ratio to 52.3% for the quarter. We remain focused on improving our productivity target to achieve positive operating leverage this year. Our strategies have repositioned the bank's geographic footprint, achieved several key milestones in the quarter. In the Dominican Republic, we completed the acquisition of Banco Dominicano del Progreso, as well as a sale of our pension and related insurance businesses. In El Salvador we announced the sale of our banking and insurance operations. In Asia we announced a non-binding MOU to reduce her ownership stake in the combined Thanachart-Thai Military Bank. The net gain on the divestitures announced and closed this quarter contributed $0.11 to reported diluted earnings per share in the quarter, and added approximately 8 basis points to our Common Equity Tier 1 ratio. Our focus on our six key markets in the Americas, which account for roughly 80% of our operating earnings, will continue to drive market share and earnings growth. Turning to our financial performance for the quarter, the bank delivered adjusted earnings of $2.3 billion and diluted earnings per share of $1.70. We saw strong growth in our Personal and Commercial businesses with earnings up 8% year-over-year, led by International Banking with earnings up 14% year-over-year on an adjusted basis. International Banking results were led by our Pacific Alliance countries, where we are increasing our market share and making very good progress in our integration efforts. Raj will speak more on that in just a moment. Canadian Banking delivered 4% adjusted earnings growth driven largely by good growth in commercial lending, and wealth management, and better expense management. On the digital front, we also made progress enhancing our customer experience and increasing digital adoption rates with the launch of our fully digital end-to-end eHOME mortgage lending platform and our new mobile banking app, Nova. Global Banking and Markets results rebounded from Q1 with earnings up 25%. We also demonstrated strong expense management and an improved productivity ratio from last quarter. The Other segment which includes the bank’s funding centre experienced a slightly elevated loss due to a flattening yield curve and some prefunding activity. Turning to risk, credit quality remains high and the outlook is stable. Growth in PCLs was substantially driven by acquisitions and volume growth. Our PCL ratio is in line with our long-term average. Daniel Moore will have more to say on that in a moment. Strong internal capital generation in the quarter allowed us to be more active in our share buyback program. We ended the quarter with a Common Equity Tier 1 capital ratio of 11.1% or 11.3% on a pro forma basis considering the impact of announced divestitures expected to close in fiscal 2019. The potential monetization of our interest in Thanachart Bank would add another 25 basis points and provide even further capacity for share buybacks. In summary, the bank continues to make progress towards meeting its medium to long-term objectives, and we are focused on driving stronger momentum in our results. I want to briefly discuss our recently announced a plan to break up Global Wealth Management in the fourth business line effective November 1, 2019. Establishing Global Wealth Management as a standalone division reflects the importance of this business to our bank, our growth aspirations and provides increased transparency to our external stakeholders. This new division will be led by Glen Gowland who will report directly to me. The decision to create a fourth business line also fundamentally changes the scope of our Canadian Banking business, resulting in a change of role for James O'Sullivan. I along with the Board and the management team want to personally thank James for his leadership of Canadian Banking and I look forward to his role as a strategic advisor to the bank. Dan Rees who currently runs our Global Operations Group which closely supports Canadian Banking will lead our Canadian P&C and insurance businesses. Dan joined the bank nearly 20 years ago and has six years experience within the Canadian Bank; he will be sharing the division’s priorities for the business in the near future. I will now turn the call over to Raj.

Thank you, Brian, and good morning, everyone. Before reviewing our financial results, I would like to start on Slide 6 and provide an update on the material acquisitions, BBVA Chile, MD Financial and Jarislowsky Fraser. These integrations are proceeding very well as reflected in improved market share, very high customer retention rate and strong performance against integration metrics such as synergies which are on track to meet our targets. In International Banking, our operations in Chile have seen an increase in the combined market share, a significantly lower productivity ratio and strong growth in earnings following the acquisition of BBVA Chile. In Wealth Management, both MD Financial and Jarislowsky Fraser have experienced positive asset growth since they were acquired. MD surpassed $50 billion in assets during the quarter for the first time in its history. Customer retention rates are higher quarter-over-quarter and about pre-acquisition levels and we have co-located Scotia Private Banking in all major MD offices in Canada. This quarter the acquisitions contributed approximately $60 million to the bank's earnings. We are well on our way to exceed our goal of $0.15 of adjusted diluted EPS accretion in 2020. Turning to the financial results, I would like to draw your attention to our new disclosure on Slide 20 titled Other Items Impacting Financial Results, we’ve clipped the items we have discussed in prior quarters in our MD&A and investor presentation but did not adjust reported earnings. Turning now to the Q2 2019 key financial performance on Slide 7. All my comments set follow including the discussion of business line results will be on an adjusted basis that excludes acquisition and divestiture-related amounts. The bank delivered $2.3 billion in earnings and diluted EPS of $1.70 for the quarter, down slightly compared to last quarter -- last year. Revenue increased 8% from last year, primarily driven by the impact of acquisitions. Net interest income was up 6% driven mostly from the impact of acquisitions. Also contributing to the increase was growth in commercial and retail lending in International Banking, solid loan and deposit growth in Canadian Banking as well as higher corporate loans in Global Banking and Markets. These increases were primarily offset by lower contributions from assets liability management activities. The core banking margin declined 2 basis points versus last year, primarily driven by the impact of a flattening yield curve on our asset liability management activities. The bank earned higher margin from International Banking, from change in business mix, driven by the acquisitions and in Canadian Banking primarily from deposits that were partly offset by lower margins in Global Banking and Markets. Non-interest income grew 11% compared to last year to approximately [Technical Difficulty]. Also contributing to the growth was higher banking revenues, wealth management and underwriting fees, higher income from associated corporations, partially offset by the impact of the adoption of IFRS 15. Expenses were up 8% year-over-year. The increase was largely driven by the impact of acquisitions, partially offset by the adoption of IFRS 15 on the expense line. Excluding the impacts of these items, expense were only up 1% year-over-year, reflecting the bank’s efforts to prudently manage its expense growth by prioritizing its regulatory and business growth related investments. Consequently, the bank's productivity ratio declined to 52.3%, an improvement of 20 basis points year-over-year. Our PCL ratio on impaired loans was 49 basis points, up 3 basis points from last year. There were net provisions on performing loans of $22 million and then combined with provisions on impaired loans resulted in a total PCL ratio of 51 basis points. Our tax rate was in line with last year and in line with our outlook of 21% to 25% through 2019. On Slide 8, we provide an evolution of our CET1 capital ratio over the last quarter. The bank reported a Common Equity Tier 1 ratio of 11.1% in line with the last quarter. The bank’s strong internal capital generation of 21 basis points was deployed in organic risk weighted assets growth across the businesses, absorbed by the net impact from the bank's acquisitions which closed during the year and offset by share buybacks activities and increased employee pension and post retirement benefits liability that was impacted by the discount rate changes in the quarter. Risk weighted assets increased by 1.6%. During the quarter we repurchased 4 million common shares during -- or 7.25 million shares on a year-to-date basis, at an average price of $72.19 per share. In the last 12 months, the bankers repurchased and cancelled 13.25 million shares. The pro forma impact of announced non-core divestitures that are yet to close will increase the CET1 ratio to be approximately 11.3%. The monetization of our significant investment in international bank would further increase our pro forma CET1 ratio approximately 25 basis points. We are pleased with the pace of capital rebuild driven by strong internal capital generation, prudent management of risk weighted asset growth and the divestitures that will continue to improve the bank’s CET1 ratio. In addition, the Bank of Xi’an in China, in which we have an 18% ownership position, recently completed its initial public offering. Our current market valuations, our equity stake stands at over $1.2 billion and provides additional flexibility for capital over the medium-term. Turning now to the business lines results beginning on Slide 9. Canadian Banking reported adjusted net income of $1.1 billion, up 4% year-over-year. The Q2 2018 benefit from aligning the reporting of our Canadian insurance business and higher level of real estate gains and reduced the division’s earnings growth by approximately 4%. As you can see on Slide 20, the earnings growth rate in the second half of 2019 will benefit from lower real estate gains in the same period last year. In retail lending, residential mortgages grew 2%, personal loans 3% and credit cards 6%. Meanwhile, business lending grew 9%. Given a slower start to the housing market in 2019, we would expect low single-digit volume growth for the year in mortgages. Deposits grew a strong 11% and for the third straight quarter outpaced the asset growth. The net interest margin was up 3 basis points year-over-year and 2 basis points quarter-over-quarter driven by higher deposit subscribers. We expect margins to be stable to modestly higher for the balance of the year. Non-interest income was up 5% due to higher fee income from banking, wealth management business and higher credit fees. The lower level of real estate gains and the alignment of the reporting of our Canadian insurance business last year reduced this growth by 4%. Wealth management adjusted earnings increased a strong 26% year-over-year, driven by contributions from recent acquisitions, as well as the core businesses. AUM growth was strong at 6.3% quarter-over-quarter, reflecting positive net sales and market appreciation. We delivered positive operating average of 1.1% this quarter through prudent expense management. Consequently, the productivity ratio improved 60 basis points to 50%. Turning to the next slide on International Banking. My comments are based on results on a constant dollar basis. Adjusted earnings of $787 million were up 14% year-over-year, driven by strong contributions from organic and acquisition-related asset growth, well above our medium-term adjusted net income growth target of 9% plus.Q2 results reflected strong asset growth in the Pacific Alliance, positive marketing leverage, good credit quality and growing digital sales. The Pacific Alliance had very strong net income growth of 11% driven by strong performance in Chile, double-digit growth Peru and improved portfolio quality in Colombia. Our GBM operations in Latin America were also very strong, up more than 25% year-over-year, driven by both by our capital markets and corporate banking businesses. Revenue grew 22% with net interest income up 20% and non-interest income growing at 26%. Net interest income growth was driven by loan growth in the Pacific Alliance region which increased 42% year-over-year, including our acquisitions in Chile and Colombia. Non-interest income growth was driven by higher banking and credit card fees and increased contributions from associated corporations. More than three quarters of the expense growth was from acquisitions, with the remaining growth in line with business volume growth and impact of inflation. Prudent expense management contributed to the productivity ratio improving by 210 basis points year-over-year. Operating leverage was strong at positive 5% for the quarter, marking the 18th straight quarter of positive operating leverage. Moving to Slide 11, Global Banking and Markets. Net income of $420 million was up a strong 25% from Q1 due primarily to better market conditions. Net income was down 6% year-over-year while revenues were in line with last year, higher non-interest expenses and lower credit loss recoveries impacted the net earnings. Corporate loan growth was strong up 16% year-over-year reflecting strong growth in the US and Canada. Overall the M&A and corporate lending pipelines remained strong. Lending margins remained stable while deposit margins were lower compared to last year. Non-interest income grew mainly due to higher trading revenues and fixed income and improved underwriting and credit fees. Expenses were down 8% quarter-over-quarter and up a modest 5% year-over-year. The year-over-year increase was driven by higher regulatory and technology investments, partially offset by lower performance-related compensation. The productivity ratio improved by 840 basis points versus last quarter to 51.6%. I will turn now to the Other segment on Slide 12, which incorporates the results of group treasury, smaller operating units and certain corporate adjustments. The results also include the net gain on divestitures and the net impact of asset and liability management activities. The Other segment reported lower revenues from asset liability management activities and lower returns from our holdings of high quality liquid assets that were negatively impacted by the flattening yield curve. Some pre-funding done late last quarter of TLAC eligible instruments to meet the 2021 TLAC requirements also impacted the results this quarter. Given the current shape of the yield curve, we expect continued margin compression on our high quality liquid asset portfolio. This completes my review of our financial results. I’ll now turn it over to Daniel who will discuss risk management.

Thank you, Raj. I’ll turn to Slide 14. Our credit quality is high and our underlying credit performance remains stable. This is evidenced by our stable delinquency rates in Canadian retail and our improving rates in international retail. It is evidenced by our stable GIL ratios in Canadian Banking and our improving ratios in International Banking and Global Banking and Markets. Moreover our loan loss provision covers nine quarters of write-offs and our tiered PCL ratio of 49 basis points is in line with our 30 year of historical average of 46 basis points. Our PCLs were impacted by Day 1 adjustments of $151 million relating to our acquisitions in Latin America as required by IFRS 9. My comments that follow will exclude this amount. On an all-bank basis total PCLs of 722 million were up 5% from last quarter and up 35% year-over-year. Roughly one-third of the year-over-year increase was due to acquisitions, another third was due to volume growth and the balance was due to changes in forward-look indicators and other items. More importantly, however, the PCL ratio on impaired loans was generally stable quarter-over-quarter and year-over-year. In our retail portfolio we remain focused on A and B customers in using proactive analytics and collection efforts. Our non-retail portfolio continued to perform very well with modest levels of PCLs and stable to declining formations. Given our portfolio closures our diversifications and our continuous oversight, we are well positioned for economic growth while remaining downturn ready. Our risk management philosophy is to provision conservatively and we certainly believe we're ahead of the curve in this regard. Turning now to Slide 15. You can see the recent trend in loss ratios for each of our businesses. On impaired loan basis PCL loss rates are generally in line with last quarter across all three business lines. The increase in our total PCL ratio was largely driven by Canadian Banking led by less favorable forward-looking macroeconomic inputs, as well as my volume growth. But partially offset by the impact of our continued improving credit quality. Looking now at other credit metrics on Slide 16, gross impaired loans increased modestly to $5.4 billion from $5.3 billion last quarter with the growth primarily due to acquisitions and underlying organic portfolio growth. Therefore the gross impaired loan ratio remained flat versus last quarter and down compared to a year ago. Net formations of $861 million were down 9% quarter-over-quarter but up 24% year-over-year. Lower net formations versus last quarter were driven primarily by lower net formations in Global Banking markets and the Canadian P&C business, partly offset by a lower reversal international commercial. The increase compared to prior year were linked most of increases in our international retail portfolio largely due to acquisitions. Turning to our net write-off ratio, it remained stable, with a small impact in International Banking from recent acquisitions. In summary again, we continue to see the benefits of our diversified business model and the benefits of our investments in digital and in analytics to support our adjudication models and our collections processes, as evidenced by our generally stable credit metrics. And we remain confident in underlying credit quality of our portfolio. I'll now turn the call back over to Brian for some closing remarks.

Thank you, Daniel. As we look to the second half of 2019, we expect our financial performance to be better than the first half of this year for a number of reasons: Further contributions from recent acquisitions, along with the positive benefits from our integration efforts; Secondly, continued strong growth in International Banking; Thirdly, stronger second half performance in Canadian Banking and Global Banking and Markets; Fourthly, our continued focus on prioritization in expense management and productivity improvements; And lastly, strong capital ratios which provides the bank optionality. That concludes my comments from the quarter and I'll turn the call back to Raj.

Thanks, Brian. 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?

Our first question comes from Robert Sedran of CIBC Capital Markets. Please go ahead.

Yes, I just wanted to come back to the loan losses and that slide that shows the long-term average on there. I mean Daniel, if I take out Argentina and the global financial crisis, which arguably are very unusual events, or I guess we're comfortably about that longer term average? And is -- do you feel like given the evolution of loan and geographic mix, does it suggest that the 49 basis points this quarter on impaired is going to continue to migrate higher, just given where the growth is coming from?

Well I think -- Rob, thanks for the question. The bank is a very different bank than it was over the long-term average, as we've increased International Banking credit exposure. And we're going to take for that risk. So to work discipline at the bank, we are very focused on originating the right source of customers, originating A, B in retail. And we're very focused on making sure that that impaired loan ratio maintains our conservative underwriting discipline. So we would have a cautiously optimistic outlook from here regarding the forward-looking compared to PCLs.

I didn't mean to suggest that there wasn't revenue attached to that shifting loan and geographic mix. It just seems like the loss rate should be rising, commensurate with that higher revenue that you're getting in some of the different shifting mix. The structurally higher loan losses should come with the structurally higher revenue. Is that the right way to think about it?

I think that's the right way to think about it, but it is offset significantly by the improved credit quality in the book.

Our next question comes from Meny Grauman of Cormark.

Hi, good morning. A question about the broker channel, we've hearing that competition in the broker channel is increasing quite significantly. And I know this that if you look at published market share data that your market share -- so I think it's about 640 basis points in Q1, the latest data that we have. So I'm just wondering what the outlook is from your perspective in the broker channel and what -- where do you see your share going going forward?

Yes, well, thanks Meny. I think in the broker channel, we are consistently number one or number two. And my observation on that channel as compared to some others would be that there continues to be a strong consumer preference for that channel, particularly amongst millennials. So that remains the channel that we are very, very committed to bearing in mind that we also have a direct sales force. We also have the branch channel and most recently we have both Scotia eHOME as well as Tangerine. So lots of channels but that's one we're committed to because Canadians love it.

And just to follow-up, is competition getting tougher there and what's driving that competition from some of them the non-bank peers from your perspective?

Yes, I don't know that it’s -- I’d say, the tougher yes. But I'd say it's been getting tougher over four, six quarters, frankly, maybe since B-20. But it's always been -- and there's a lot of participants in that market. So it is a competitive channel. But nothing -- I mean nothing markedly different this quarter than say -- and say last quarter.

Our next question comes from Steve Theriault of Eight Capital. Please go ahead.

Thanks very much. A question on capital markets. We saw the revenue line get back to Q2 levels of last year, but expenses still elevated and operating leverage negative. So I guess in terms of the question, as capital markets, it sounds like you think it'll continue to get back on track here, how much of that is about higher revenues and how much of it is about getting the expense base back to sort of the 550, 560 range versus a closer to 600 range that this quarter? I know you cited very higher regulatory costs and technology costs, maybe also some comments around as you expect those to alleviate or is it contributing to a higher run rate on expenses?

Steve, it’s Raj I will talk to the expenses and then maybe Jake can talk about the revenue side of it. As you can see expenses growth is a modest 5% as you know this quarter compared to the double-digit we had in Q1, looking forward it’s going to have elevated expenses because of all the regulatory investments we have made, so the run rate of the 550 million that you quoted is probably going to be higher than that. And if I were to guess it won't be the 645 that we had in Q1 because we also have some seasonality relating to performance-based compensation which always happens in Q1 and it shows up more significantly in GBM being a lower cost base. Without giving a specific number I think it could be anywhere between 550 million and 600 million probably close to the 600 million that’s a quarterly run rate on the expenses as we look forward for the next two to three quarters. But I think more importantly if you look at the bank as a whole I think we have increased with our productivity ratio improvements that’s happened and GBM is also a big part of it as it contributed to the bank's productivity ratio, it’s -- we will continue to manage expense growth by prioritizing our spending across the bank and GBM is also part of it and we will be informed by revenue growth that happens across our businesses so that we can generate positive operating leverage for the bank as a whole. Jake you want to talk with the revenues?

Yes. Just one another point on the expense side, just with the regulatory class, we also are investing in our business and our people, I think that’s going to be important to help drive the revenue growth going forward. When James and I look at some of the underlying fundamentals in the business this quarter loan growth up 16%, deposit growth also up double-digits, we're encouraged that we're going to see some more stability in that revenue line moving forward assuming we get reasonable market conditions to operate and so we're comfortable with the revenue as we’re getting our hands on the expenses as Raj noted.

Our next question comes from Mario Mendonca of TD Securities. Please go ahead.

Dan if I just take you to Page 25 of your presentation, there were a few numbers that for me be helpful to get an understanding. What I’m getting at here is the sequential increase in the PCLs ratio, impaired loans and personal loans specifically. Now I imagine that’s mostly auto we're looking and would you point us to something like seasonality or anything in particular that would drive that increase, the sequential increase?

Yes, there’s A bit of seasonality in those numbers, in the impaired loan in particular as well as some particular one-offs, this strategy that we had to test and learn around that we wouldn’t be recurring in the future.

Can you elaborate on that, you said one-offs, what do you mean by that?

So , as we continue to improve through our risk strategies we're looking at various different ways of originating and improving that risk return curve, by and large as you seek through our numbers, if you look through our unsecured line across all the segments we have a improving delinquency rate with improving GIL rate with improving formation rate. But in this one quarter we have non-recurring personal loan adjustments largely driven through that line that we talked about that we don’t see going forward.

Is that the same that we're seeing in credit cards that’s over 400 basis points in Canadian credit cards, again not a huge number for cards but it’s unusual in Canada, the same thing here?

Yes. So the interest in talking about cards is that as we look towards to the complexities of the IFRS 9 bowl Mario, these forward-looking indicators come into our unsecured lines disproportionately. So as we look to conservatively reserve against our future loan losses and we look at a point in time where the Canadian economy was at the end of the quarter, those forward-looking indicators for disproportionately through to the card lines, if I take that number out Mario and I look at the core underlying impaired PCL metrics for cards, that is declining, has been declining for a number quarters, and we anticipate we'll continue to see this decline as we exercise more advanced analytics, de-risking strategies, origination strategies, and collection strategy across the bank. So that has been declining for six quarters now across the bank.

So just sort of final point on this, this sequential change we're seeing now on this page doesn't affect your strategy in domestic retail lending. Maybe James, maybe you want to comment on that? James O’Sullivan: Yes, no, not at all. I mean, we’ve spent a lot of time on this and the bulk of this was driven by FLI. So in cards Mario, as you know, we've identified that as one of two areas where we are not a solidly a top three bank in this country. And over time, we're determined to be. So cards continues to be a growth focus with an emphasis on A and B customers, given where we are in the cycle.

And James if I could hit on that one more time. I think the -- you'll see that feeds Mario through to the top-line PCL ratio for Canadian Banking, as we have grown 7%, almost 7% year-over-year in the current portfolio. But as I said that PCL ratio in that line item is declining and as we look through all our line items, PCL ratios are flat to declining through Canadian Banking. So our delinquency trends continue to perform very well on cards down 15% year-over-year.

Okay, a quick question for Nacho then. Is there anything going on in Mexico from a regulatory perspective that you want to highlight either as it relates to restrictions on fees or rates or anything, has there have been any change or anything you anticipate?

No, Mario, there have been no changes, the fee proposal by Congress was negotiated with the banks and it’s a reasonable proposal. It has no material impact for the financial system or for us. We actually -- we continue to see Mexico performing very well on the top-line Q-over-Q, wholesale loans grew 4% and retail loans grew 2.5%, revenues grew 9%. So Mexico, we have to remember it's a 120 million population, and even with a lower GDP forecast we see banking and lending penetration relatively low at 40% levels. So we expect Mexico to continue growing, bolting the business and retail market.

Our next question comes from Doug Young of Desjardins Capital Markets. Please go ahead.

Hi. Just on expenses, I mean, the expense trend looks favorable in the quarter. I guess the question is, is this sustainable? And I gather from your comments that you do believe that, that this is and we should be expecting mix growth to be more in line with revenue growth going forward. So just want to get a little more detail on that? And then the SCT program, I think your plan was to remove 750 million in fiscal '19. Just wondering where you are with that? And then just kind of maybe pegged on, Brian, I guess the 52% mix target is what you put in for fiscal '19. I assume that you still think that's more than achievable. Thanks.

Okay, thanks Doug. I'll start on the expenses and see if I can cover the SCT as well as your last question on the mix rate. I'll start with the SCT. As you know, the SCT program has been around since 2016. It was a concerted effort to help the bank take our structural cost over $1 billion and it's been very successful if I can add. The effort is mostly complete on the structural cost side. About 80% of savings has been redeployed back into the bank and all the initiatives we’ve talked about in the past, digital banking, data analytics, as well as strengthening the control functions of the bank including risk management, AML, et cetera. The teams that were part of the successful effort are now focused on improving the enterprise productivity as we call, which is primarily looking at revenue initiatives across all the business lines to see how we can assist the business lines in enhancing the revenue growth pace that the bank has had across the business. So bulk of the redeployment has happened in the technology space, we’d say SCT program has delivered on and you can see it in the productivity ratio improvements across the years. We're getting closer to our 52% target as we committed for 2019. Based on our expectation for the balance of the year, we should be pretty close to that, if not at that rate to answer your third question. But in general on expense run rate, I would say that we expect to have a run rate, which should be in the low-single-digit growth, completely guided by our revenue growth, so that we expect to generate profitable operating leverage for the bank. Both International Banking had strong positive operating leverage, as you've probably seen, the 5% year-over-year, Canadian Banking is now generating positive operating leverage for this quarter, and be expect it to finish with positive operating leverage for the year. The GBM business once revenue gets to more normalized levels, we expect that they would contribute to the operating leverage as well. But the bank as a whole we expect that end of the year, we would be delivering positive operating leverage.

And that's for the full year positive operating leverage.

That's correct Doug.

Our next question comes from Gabriel Dechaine of National Bank Financial. Please go ahead.

Just a couple of quick questions. One on the international business, the -- trying to peel away into the organic growth here looks like Asia had a big quarter. And I'm wondering what is underlying that? And then the other one is on the corporate side, you were helpful in your comments there on what's behind the negative carry item and you said it could persist. I'm just trying to figure out which sections of the yield curve I should be looking at and what your outlook for that drag to persist is and if there's anything you can do about it in the interim?

Okay, Gabe I will start on Asia relating to International Banking and address the corporate segment negative numbers as well. As far as ratio goes, the biggest contribution to us is Thanachart Bank equity pickup that we have, the 49% that we hold. It tends to be lumpy, and it tends to move around quarter-over-quarter, because it's an equity accounted investment. We don't get too far down to figuring out is it a higher PCL or is it expensed, we have some visibility. This quarter, you notice we picked up $130 million. This is kind of consistent with if you go back Q4 was a high number too. Before that, it tends to be $80 million, $90 million. The point, I'm trying to make is, you'll see a level of volatility in those numbers that is driven by the equity pick up based on the operations that happened in Thailand. A couple of years back, if you remember, they had a lot of provisions relating to floods that they had in Thailand. So it could be impacted by that. And this quarter certainly was a pick-up, which was greater than our normal run rate attached to the Thai investment.

Okay, while I have you on the international, so the Mexico, if I look at one of your disclosures it shows Mexico is down year-over-year, I know stage two editions are part of that. Is that the main issue?

I think it was stage issue but it was also the tax benefits that we’ve had in prior years in Mexico Gabe, which has gone away and that contributes to the negative role but like Nacho mentioned Mexico has grown 9% year-over-year if I exclude the tax benefits. Part of the corporate segment growth which is the other half of your question, in the corporate segment we had indicated in the past, we tend to have between $50 million and $100 million of losses in the corporate segment depends a bit on how our investment securities moves as well on the realized gains. This quarter was slightly elevated at a $121 million primarily driven by the yield curve as you mentioned. We expect that Q3 might not be too dissimilar to Q2 but we expect it to gradually improve as the yield curve gets to a more normalized level, if I can use the term a better slope but these are HQLA assets which are high quality liquid assets we maintained for liquidity purposes and LCR ratio purposes, they tend to be US T-bills, Government of Canada bonds as you know as low yielding and that will have an impact through the Other segment.

If the yield curve doesn’t normalize, is there anything you can do to just reduce liquidity, is there an impact that that causes anywhere else?

No, I wouldn’t say that usually liquidity would, as some of these securities mature and some tend to be fixed rate securities that we hold in the portfolio, they will reset at higher rates which should improve the spread.

Our next question comes from Darko Mihelic of RBC Capital Markets. Please go ahead.

I just wanted to go back a little bit to the discussion around the provisioning for credit losses, I just want to make sure that I understand this, the commentary is that in auto loans there was a little bit of seasonality and I just want to make sure that I understand that comment because you are the only bank actually to highlight auto as an area that’s sort of impacted. Was there also an element on the auto portfolio of forward-looking information or was it purely just actual delinquency?

So Darko, we addressed the -- this was in the context of the question, we don't see material change in our portfolio. There’s been a slow uptick but auto portfolio continues to perform generally very, very well. There is a of course in retail some element of forward-looking material that delves into all the retail lines particularly the -- what we think of as the unsecured lines, which includes autos, HELOCs and credit cards. So there’s some element to that but if you look through to the core underlying delinquency there is not any material change there.

And then with respect to your discussion on what you're going through on the risk side you mentioned analytics, improved recoveries and so on. Is it just an ongoing -- or this a new sort of initiative, or is it ongoing improvement the way you manage your credit risk?

So this has been something we have been undertaking with the velocity now for about six to eight quarters Darko. And as we get improved access to data, improved analytics practices, we're seeing this really start to create some traction. We're doing this in partnership with the business line across all elements of the primarily retail life cycle through strategies around A, B origination and focus through de-risking strategies, through credit line management, through the life cycle credit and better segmentation strategies on the collections portfolio. And we're seeing that really start to impact the overall numbers of the bank. And those initiatives will continue in flight as we continue to stand up and improve the overall bank and its capabilities and you'll see more from us on that.

Okay. And if I can just sneak one last question and I apologize, but on the international side, the discussion was that 75% of the expense growth was due to acquisitions. For my modeling purposes, do you have a similar number for the revenue impact of the acquisitions?

Yes, I'll try to give you some perspective on that. Darko, it's Raj. I think from the revenue side we see almost $1 billion growth across the acquisitions, which includes our wealth acquisitions. And I would say, of that growth, about 60% comes from our International Banking business. So it gives you a good understanding of how much was contributed from the international business, primarily in net interest income.

Our next question comes from Scott Chan of Canaccord Genuity. Please go ahead.

Just sticking to international maybe going better the other way. Total loan growth is up 29%, Pacific Alliance was 42% and that was similar to last quarter. As you kind of strip out or exclude acquisitions, can you provide like an organic growth rate perhaps this quarter or year-to-date?

Sure, if you exclude acquisition impacting the Pacific Alliance or loan growth, is 12%. And this is double-digit growth both in retail and commercial. And we're seeing this as a very positive trend. Even in Chile, where is the most materially impact, excluding acquisition, we have double-digit growth in retail and commercial. And this is driving revenue growth and 500 basis points positive operating leverage in the quarter.

That's helpful. Maybe sneaking one more Nacho just on the international margin side, it was up 8 bps quarter-over-quarter and kind of in line with your prior guidance of 4.5 plus minus 10 bps. Is there anything to change within that guidance you provided last quarter?

No, we see our margin stables and due basically to business mix, this is plus, minus 10 bps and we will remain around that level of 450 basis points and plus, minus 10 bps.

Our next question comes from Sohrab Movahedi of BMO Capital Markets. Please go ahead, sir.

Just wanted to stay with international again with Nacho. Nacho the international expense to revenue ratio has improved steadily and now you're just around 50% or maybe a trifle below that. Is this the byproduct that’s building scale and how sustainable is it as you kind of think over the next 12 to 18 months?

I would say, Sohrab, this is the opportunity that we have especially driven by Pacific Alliance countries, some solid loan deposit and revenue growth and a very focused plan in International Banking at the bank to capture cost savings as part of our performance. And this is driving not only the operating leverage that has been for the last 18 quarters positive but also consistent improvement in the productivity index, which has been improving international 200 basis points year-over-year. And this is our business to which we’re very focused both on our revenue growth and on our efficiency improvements.

And maybe a question for Brian just when you stand back, and you think about it Brian, I mean, obviously the acquisitions have helped in international. But the growth, the earnings contribution growth in international, even on based on the Investor Day targets, is larger, greater than domestic banking operations. I guess domestic is slowing. Is there any limitation as to how much of the overall bank can come from International Banking over the medium-term?

Look, it's a good question, Sohrab. And thank you. We're very proud of what the International Bank has delivered for our shareholders. We see a very positive outlook for the balance of this year and into 2020. And you can see as Nacho just answered the benefits of scale in these markets is critically important. The other point I’d make is that, I was in Mexico the week after last and there's been lots of news about Mexico. But sometimes you have to pull yourself away from a Bloomberg screen. And then when it comes to some of these countries, and as Nacho said, Mexico is a country of 120 million people, the biggest driver for the economy is how the US is doing, point one. There's a huge growing middle class and they're consuming. So you can't mix that up with GDP forecast or outlook from time-to-time. So and you're seeing that in our Mexican numbers which were up 9% year-over-year, despite all the noise and rhetoric about what's going on a political level. So we see stronger performance that improved this year, great performance out of Chile or integration both on a financial and an operational basis ahead of schedule. Colombia is performing much better as a country, and our integration there is going exceedingly well. So, the Pacific Alliance countries are performing very well and we'll continue to deliver for our shareholders.

Well, thank you, everyone for participating in our call today. We delivered solid second quarter results. And on behalf of the management team, I want to thank all of our employees for their hard work. The bank has made good progress towards strengthening our businesses and offering a superior customer experience. Looking ahead to the second half of 2019, we expect to deliver a stronger performance. We remain focused on delivering against our differentiated strategy and achieving consistent long-term growth. I also want to remind investors that we will be hosting an International Banking Investor Day on October 24th and 25th in Santiago, Chile. We hope you can join us to learn more about our bank. In closing, we look forward to speaking with everyone in late August and have a great summer.