Bank of Nova Scotia (BNS) 2022 Q1 法說會逐字稿

Good morning, and welcome to Scotiabank's 2022 First Quarter Results Presentation. My name is John McCartney. I'm Head of Investor Relations here at Scotiabank. Presenting to you this morning are Brian Porter, Scotiabank's President and Chief Executive Officer; Raj Viswanathan, our Chief Financial Officer; and Phil Thomas, our Chief Risk Officer. Following our comments, we'll be glad to take your questions. Also present to take questions are the following Scotiabank executives: Dan Rees from Scotia -- from Canadian Banking; Glenn Gowland from Global Wealth Management; Nacho Deschamps from International Banking; and Jake Lawrence from Global Banking and Markets.

Before we start, and on behalf of those speaking today, I'll 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.

Thank you, John, and good morning, everyone. Before I speak to our first quarter results, I would be remiss if I didn't take a moment to acknowledge the recent invasion of Ukraine. The attack on a sovereign nation at this scale has serious and far-reaching implications for people everywhere. We stand unequivocally with the people of Ukraine and with our large and vibrant Ukrainian community here in Canada.

Turning to our Q1 results. We are very pleased with our start to fiscal 2022 as strong loan growth and fee income resulted in solid earnings contribution from each of our 4 business segments. Strong Q1 earnings of $2.7 billion represent a 14% year-over-year increase and a return on equity of 15.9%. We are delivering on all of our commitments in terms of earnings growth, return on equity, expense control, and balance sheet management while deploying capital in support of future earnings growth and executing on our share repurchase program. Double-digit loan growth continued in Canadian Banking while International Banking and Global Bank and Markets also delivered accelerating loan growth in conjunction with improving margin performance. Credit trends remained favorable, a result of our high-quality portfolio.

Our common equity Tier 1 capital ratio remained strong at 12%, representing excess capital of approximately $4 billion relative to a common equity Tier 1 ratio of 11%, providing us with significant optionality. Internally generated capital was approximately 60 basis points in the quarter, 29 basis points of which was deployed in support of organic growth. We also returned approximately $2.3 billion or 53 basis points to our shareholders who are mostly Canadian-based institutions or retail shareholders through dividends and the repurchase of 12.4 million shares.

Our results and continued growth have been led by organic initiatives that enhance our service levels, convenience and connectivity for our customers. In Canadian Banking, we created Scene+ the merger of our Scotia Rewards and SCENE loyalty programs. In the 2 months since the launch, we have seen approximately 2 million members log on to the new SCENE-Digital site of whom 1.5 million did so from their mobile app. Activity levels in terms of both point transactions and redemptions are up substantially since the mid-December launch, and we have added an additional 95,000 new members to the combined program.

In Canadian Wealth, we have continued to build momentum in advice delivery and investment sales. In partnership with SigFig, a U.S.-based enterprise financial technology firm we recently launched a new hybrid digital advice platform, Scotia Smart Investor. This platform provides a digitally enabled investment option for customers and will empower them to seamlessly invest digitally at home or with an adviser across all our channels in branch, online or through contact centers. This initiative is another example of our Canadian Banking and Global Wealth business lines working together to bring the whole bank to our customers.

Overall, digital adoption through the bank's footprint continues with active mobile users increasing 13% year-over-year and the percentage of self-serve transactions increasing to 91%. Our digital metrics in the Pacific Alliance continue to track at a strong pace as we capitalize on the behaviors of the younger demographic, embracing digital first approach to banking. These strong trends clearly validate our initiatives to accelerate our customer experience-driven digital first model and improve efficiencies in our international business. Yesterday, we were pleased to announce an agreement to purchase the remaining 16.8% minority interest in Scotiabank Chile, from our local partner. This purchase will add approximately $35 million per quarter to our earnings in International Bank upon closing. The transaction allows us to further invest in a business and an economy we know very well.

Scotiabank Chile has exceeded pre-COVID levels of profitability since Q1 2021 and is very competitively positioned locally in terms of scale and profitability. Our Global Banking and Markets business has great client franchise momentum, GBM recently launched Scotia Red, a series of state-of-the-art electronic trading tools that provide high-quality electronic execution solution for our capital markets clients. Importantly, GBM also continued to build its leadership around ESG and sustainable finance. Year-to-date and including 2021, GBM was ranked #1 for ESG bond issuance here in Canada and #2 in Latin America. Recently, GBM was also awarded its first ESG mandate in the U.S. which supports our continued growth in that area.

We also continue to be a leader in advancing our own ESG efforts focused on climate, community and diversity initiatives. Our pathways to net 0 project with interim targets and time lines is largely complete and will be released shortly. We recently announced that Scotiabank's global operations will be carbon neutral by 2030.

In year 1 of Scotia Rise, our 10-year $500 million initiative to promote economic resilience, we supported over 200 organizations throughout our footprint. We were also recently included in the 2022 Bloomberg Gender Equality Index and recognized as one of the best places to work for the LGBTQ plus equality by the Human Rights Campaign Foundation in the U.S., Mexico and Chile.

Our industry leadership on the ESG front has not gone unnoticed. Having recently been named Best Corporate sustainability strategy at the ESG Investing Awards 2022 for our work addressing climate risk and promoting racial and gender equality. And finally, for the third consecutive year, Scotiabank was named Bank of the Year in Canada by Banker Magazine, acknowledging excellence in providing customers with exceptional advice and a great banking experience while delivering for our shareholders and our communities.

Q1 was an excellent quarter in terms of both financial performance and progress on our initiatives to continue to enhance the customer experience and further invest in scale and product capability within our simplified geographic footprint.

With that, I will turn the call over to Raj for the financial review.

Thank you, Brian, and good morning, everyone. Before I begin, I'd like to note that all my comments on the bank and business line results will be on an adjusted basis. As I did in the past few quarters, in select sections, I will refer to quarter-over-quarter performance as for certain metrics, we feel it is relevant to discuss those trends. I'll also refer to numbers excluding the impact of FX in many areas as this continues to be an important factor for evaluating particularly the year-over-year competitors. You will recall in Q3, we added Slide 38, which discloses the impact of FX to key income lines. We believe this continues to be a relevant disclosure.

With that, I'll begin the review of the performance for the quarter on Slide 5. The bank reported another strong quarter with earnings of $2.7 billion and diluted earnings per share of $2.15, an increase of 14% year-over-year and 2% quarter-over-quarter. All 4 business lines reported strong results again this quarter, reinforcing the strength of our diversified platform. Return on equity improved to 15.9% this quarter, while pretax pre-provision earnings increased a strong 6% compared to the previous quarter. Revenues were also up 3%, excluding the impact of FX.

In addition, lower investment gains and the high performance fees earned in Global Wealth Management last year impacted the revenue growth by an additional 2%. Quarter-over-quarter revenues increased 5%, with strong growth in all 4 business lines. Net interest income was up 3%, excluding the impact of FX. Net interest income was also up 3% compared to last quarter, driven by strong loan growth across all the business lines. Quarter-over-quarter net interest margin was relatively stable at 216 basis points. On Slide 6, you can see the drivers of the quarter-over-quarter change in net interest margin at the all bank level as well as for the Canadian and International Banking segments. Our balance sheet is naturally positioned to benefit from administrated interest rate increases that are expected to commence in Canada in the next quarter.

There have been significant rate increases across the Pacific Alliance that will benefit earnings through the remainder of 2022, more specifically in Mexico and Chile. This quarter, we have provided additional interest rate sensitivity disclosures on Slide 22. Year-over-year, noninterest income was up 2%, excluding the impact of FX. Higher banking and Wealth Management fees and higher income from associated corporations were offset by lower investment gains trading revenues and insurance income.

Quarter-over-quarter noninterest income was up a strong 7% driven by higher trading revenues, banking and wealth management fees and underwriting and advisory fees. The PCL ratio of 13 basis points for the quarter was a decline of 36 basis points from last year, but a modest increase of 3 basis points from last quarter. Year-over-year adjusted expenses were up 2%, excluding the impact of FX, the increase related to growth in performance and share-based compensation and other discretionary costs such as advertising and technology to support business growth. On an adjusted basis, the productivity ratio was 52.2% this quarter compared to 51.8% a year ago, while operating leverage was negative 0.7%.

On Slide 7, we provide an evolution of our common equity Tier 1 ratio over the quarter as well as changes in risk-weighted assets. The bank reported a strong common equity Tier 1 ratio of 12%, down 24 basis points compared to the prior quarter. The decrease was due primarily to buyback of approximately 12.4 million shares during the quarter under the bank's novel course issuer bid. Strong internal capital generation of 32 basis points was offset by organic business growth in risk-weighted assets of $12 million or 29 basis points across all business lines. At these levels, compared to 11% CET1 ratio, the bank will have excess capital of approximately $4 billion to support continued organic growth while continuing its share buyback program. As Brian mentioned, we have agreed to purchase the remaining 16.8% of Scotiabank Chile from our local partner. The transaction is valued at $1.3 billion and upon closing will have an impact on capital of approximately 10 basis points. The transaction remains subject to customer closing conditions and regulatory approvals.

Turning now to the business line results beginning on Slide 8. Canadian Banking reported very strong earnings of $1.2 billion, up 32% year-over-year. Pretax pre-provision earnings grew 10% year-over-year as strong revenue growth outpaced expense growth. Revenue increased 9% year-over-year as net interest income and noninterest income grew by 8% and 12%, respectively. Net interest income growth was driven by a strong year-over-year loan growth of 12%, including 15% growth in mortgages and 16% growth in business loans and acceptances. Net interest margin declined 7 basis points year-over-year, impacted by shifts in business mix, in particular, the continued strong growth in mortgages. The margin was, however, stable quarter-over-quarter.

The noninterest income year-over-year increase of 12% was driven by higher banking and mutual fund distribution fees. Expenses increased 6%, the increase was driven by higher personnel costs as we continue to build teams in the retail and business banking businesses, along with technology and other discretionary costs to support business growth. Operating leverage continued to be positive for the fourth quarter in a row at 2.1%. The PCL ratio was negative 3 basis points compared to 23 basis points a year ago and negative 10 basis points in the prior quarter.

Turning now to Global Wealth Management on Slide 9. Earnings of $419 million were up 13%, excluding the seasonally elevated performance fees in the prior year and up a strong 7% quarter-over-quarter. Canadian Wealth Management earnings grew 14%, excluding the mentioned performance fees, driven by higher investment fund fees from AUM growth, double-digit balance sheet growth in private banking and strong fee-based asset growth. International Wealth Management grew a strong 19% on a constant dollar basis. Revenue grew 6% quarter-over-quarter underpinned by higher investment fees, net interest income growth and higher fee-based revenues. AUM and AUA both increased 11% to $345 billion and $601 billion compared to last year with strong net sales and market appreciation. We continue to generate positive net sales, along with strong investment results for our clients. with Dynamic Funds ranked #1 among independent in 5-year returns.

Referring to Slide 10, Global Banking and Markets. Global Banking and Markets generated earnings of $561 million this quarter, up 3% year-over-year and a strong 12% quarter-over-quarter. Pretax pre-provision income increased 25% quarter-over-quarter and 2% year-over-year. Revenue increased 19% quarter-over-quarter and 5% year-over-year, driven by strong performance across most of GBM's business lines. Quarter-over-quarter capital markets revenue was up 33% with strong growth in FICC and equities. Corporate and Investment Banking also experienced a very strong quarter with loan growth of 5% quarter-over-quarter and 8% year-over-year combined with margin expansion.

Underwriting and advisory fees were up 4% year-over-year and 19% quarter-over-quarter. Expenses were up 13% sequentially due to seasonally higher personnel costs. The year-over-year expenses rose 9% due to increase in technology costs to support business development. The productivity ratio of GBM remained strong at 47.7% for the quarter. GBM LatAm, which is reported as part of International Banking had a record quarter with $200 million of earnings, an increase of 15% from last year and 11% over the prior quarter.

Revenues grew strongly in both Business Banking and Capital Markets, up 18% and 46%, respectively, from the prior quarter. Again, this quarter, we maintained our #1 position in Bloomberg's loan syndication lead tables. Slide 11 shows the International Banking results. My comments that follow are on an adjusted and constant dollar basis. International Banking reported net income of $552 million up 50% over Q1 last year and 5% quarter-over-quarter. Pretax pre-provision earnings grew 4% year-over-year and 7% quarter-over-quarter. Pretax pre-provision earnings in the Pacific Alliance grew a strong 9% quarter-over-quarter. While pretax pre-provision earnings in Mexico and Chile are well above pre-COVID levels, while Peru's pretax-free provision earnings grew 15% quarter-over-quarter. The segment's net income continues to grow in line with economic recovery and has steadily delivered improving results for the last 6 quarters.

Quarter-over-quarter, loans grew 3% with commercial up 2% and mortgages up a strong 5%, while personal loans and credit card balances increased 2% for the first time in 8 quarters. Revenue was up 5% over the prior quarter as the positive trend in net interest income continued. NII increased 5% quarter-over-quarter, driven by strong loan growth and margin expansion. Net interest margin improved 7 basis points from the prior quarter to 3.76% driven by spread increases, offset slightly by business mix changes.

Noninterest revenue was up 4% year-over-year and 5% over the prior quarter, mainly driven by strong capital markets results, banking and card fees across the Pacific Alliance and the Caribbean. Provisions for credit losses ratio declined quarter-over-quarter by 14 basis points to 77 basis points, driven primarily by lower provisions for unpaid loans resulting from lower formations mainly in Peru and Mexico. Noninterest expenses declined 2% year-over-year but increased 3% quarter-over-quarter due to higher seasonal expenses in the Caribbean and due to higher performance-based compensation. This was partly offset by the benefits of the Q4 2021 restructuring charge. The business generated positive operating leverage of 1.8%.

Now turning to the Other segment. We reported an adjusted net loss of $67 million as compared to a loss of $35 million in the prior quarter and a gain of $47 million in the prior year. Year-over-year, the change was a result of significantly lower investment gains and lower contribution from asset liability management activities partially offset by the SCENE loyalty program payment in 2021.

I'll now turn the call over to Phil to discuss risk.

Good morning, Good. Thank you, Raj, and good morning, everyone. Credit performance has trended better than expectations we laid out at fiscal 2021 year-end. Our credit portfolio is healthy and well-balanced driven by a favorable business mix shift towards more secured and higher-quality affluent customers, especially in International Banking. Our focus will continue to be our customers with strong individual balance sheets and investment-grade corporate clients. I'm pleased to outline the details for the quarter, beginning on Slide 14.

Gross impaired formations and net write-offs continued to decline. We continue to see a positive trend with lower impairments across all portfolios and quarter-over-quarter, the GIL ratio has improved 3 basis points to 64 basis points. Our net write-off ratio also improved 27 basis points, down by 7 basis points quarter-over-quarter. Additionally, write-offs were $457 million, mainly driven by improved performance in underlying credit quality in International Banking and are expected to be stable for the remainder of the year. From a balance sheet perspective, we ended the quarter with allowances for credit losses of $5.6 billion, down approximately $150 million from the prior quarter. We are suitably provisioned, and our coverage ratio reflects the high-quality nature of our portfolio, including a higher mix of secured lending. Our ACL ratio will continue to improve and is now 80 basis points, this is down 6 basis points compared to the prior quarter.

Turning to Slide 16. I will speak to our PCL performance this quarter. For Q1 2022, all bank PCL is $222 million or 13 basis points, driven by net reversals from performing loan PCLs and lower formations. International retail continues to improve, mostly driven by personal loans and credit card performance. Performing PCL had a net reversal of $183 million and impaired PCLs reported $405 million in Q1, down $106 million from last quarter. Overall, our credit portfolio remains strong, and we continue to thoughtfully expand our balance sheet with a focus on high-quality credit customers. Our provisioning approach incorporates multiple scenarios for economic factors such as GDP growth, inflation and changes in rates, thus providing us with comfort with our provisioning and our total allowances for credit losses.

I will now turn the call over to Brian for closing remarks.

Thank you, Phil. We are encouraged by our start to 2022 and we are confident in our ability to exceed our medium-term objectives. We expect the earnings growth in our Canadian Banking business to continue, driven by loan growth and additional fee income as the year progresses. We expect the strong momentum in our International Banking business to accelerate in the Pacific Alliance countries and the renewed growth in the Caribbean to continue for the balance of the year. We expect pretax pre-provision growth to continue from higher revenue and our ongoing focus on cost efficiencies. Strong franchise momentum continues in our Global Wealth businesses, resulting from industry-leading investment management performance and gains throughout our advice channels and our private banking businesses.

GBM's earnings continue to grow with strong contributions from capital markets businesses and Corporate and Investment Banking results driven by loan and advisory revenue growth. Our advisory pipelines remain strong. The benefits of our diversified trading businesses, a strong advisory pipeline and a rebound in financing activity throughout our footprint support our constructive outlook. We are confident that each of our 4 business lines are well-positioned to deliver growth and continue to believe that 2022 will be a year that clearly demonstrates the full earnings power of Scotiabank.

With that, I'll turn the call back to John for Q&A.

Thank you, Brian. We'll now be pleased to take your questions. (Operator Instructions). Operator, can we have the first question on the poll, please.

The first question is from Doug Young Desjardin Capital Markets.

Just wanted to go to the International Banking side, and I guess this is a 2-part question. I think, Raj, you mentioned rate increases in Mexico and Chile should benefit international banking for the rest of the year. Can you put this into context in terms of what the NIM impact could be or in terms of dollar figures? And then -- the second part of the question on International Banking is we did see a sequential increase in pretax pre-provision earnings in Peru and Colombia. And I get the last quarter was low, but it is still encouraging to see the sequential increase. Have we made that pivot, should we expect that momentum sequentially to continue? And what are some of the drivers?

Yes. Sure, Doug. I'll start about rate increases. Like we indicated last quarter, 25 basis points is roughly about $20 million of NIAT in the International Bank but that assumes a reasonable change in the slope of the rate curve. As we've disclosed this year -- sorry, this quarter in our prepared analyst deck, the rate situation, both in Chile and Mexico, which is where we are most rate sensitive. Now the long end of the curve has remained flat. We've seen significant improvement in the short end of the curve and we have also seen significant rate increases, which you have seen 475 basis points in Chile and 175 basis points in Mexico and so on. So this quarter, we did benefit because the 7 basis points equates as you can tell, if you did this, the math to the earning assets and so on, $23 million of net interest income that has come through.

As we see the rate curve move up, we should see significant benefits happening for the rest of the year. It's a little difficult to give you specific guidance by country because there's multiple factors that moved the rates and therefore, the impact on NII. Nacho, you want to take the question on Colombia, Mexico.

And Peru, Yes. Yes, it's really good to see Peru and Colombia recovering, had a strong recovery in the quarter. It is coming on the back of very strong GDP growth, over 10% in 2021 in both countries, and we are seeing that reflected in strong loan growth of 3% in Peru, 5% in Colombia, margin expansion. And what I'm very pleased is to see the overall performance of all geographies in International Banking this quarter because strong loan growth was 3% for the second consecutive quarter, with also revenue acceleration of 5% Q-over-Q both in net interest income and net interest revenue NIM expansion, as you have lighted of 7 bps this quarter and strong PTPP growth in all geographies improved credit quality and a positive operating leverage.

So that, in addition to the acquisition of the Scotiabank Chile shares of our parties there is going to also add around $35 million in incremental NIAT in international banking when we close this transaction. So looking forward, I see very good momentum for growth based on the macro outlook and the business performance.

The next question is from Gabriel Dechaine, National Bank Financial.

Sticking with International, the margin was up. There was a bit of a headwind from mix. And I know mortgage growth, commercial growth is outpacing other categories. But I also want to revisit the whole strategy to downsize or exit certain lending activities. And if we can talk a bit about exactly what those are, how big they are and what sort of financial impact you expect from them?

Well, I would follow up on what I was saying, Gabe. We are seeing a very positive growth. We grew 3% in the quarter in International Banking, very strong growth, 5% in mortgages, 2% in commercial. And for the first time, we also saw a growth of 2% in personal loans and credit cards. So overall, we see within our risk appetite, it's a very positive momentum for growth, also positive in terms of revenues NIM expansion that we increased 7 bps, this is equivalent to $30 million in net interest income. And as we mentioned the last time, we expect to continue growing our net interest income, Raj, if you would like to...

Yes, sure. Gabe, if you go to the outlook that we talked about asset growth in International Banking, and we talked about high single-digit growth, primarily in commercial, right, with, call it, 6% to 9% in that range, likely double-digit growth in mortgages and unsecured lending, we said will be in the mid-single-digit growth. That's exactly how this quarter has played out with momentum, like Nacho mentioned, we're seeing growth in the unsecured lending space, which is Personal and credit card. We expect that to actually accelerate for the rest of the year. So the risk appetite hasn't had a big change other than, like Phil mentioned, we have a lot of what we call affluent customers. So we're originating better quality and our stock is of better quality, too. So you're seeing the effects of that on [ACL,] unlikely you'll see the effect on growth but not to mute in any factor other than metrics like NIM and so on, like we mentioned earlier, like we will not get to the 450 basis point range, but you're going to see NIM expansion throughout the year.

So there's nothing changing in the -- I mean, I thought I heard last quarter, there was some -- and I wanted to revisit that?

Yes. Gabe, it's Brian. Last call, we made a comment about a consumer finance business in Peru. As you know, we were in the business in the DR, we exited, we sold the business and the same thing in Chile. Peru was the last business we had outstanding. We were close to having it sold pre-pandemic. That process is ongoing. It's relatively small. It's not material for the bank. We -- having said that, we didn't like how it performed throughout the pandemic, but it would be roughly $400 million of outstanding. So it's relatively small. So that's the only change in the product lineup.

Okay. All right. I thought it could be something more substantial, but that's not the case.

Yes.

The next question is from Scott Chan, Canaccord Genuity.

Brian, you talked about in your earlier comments that you got full earnings power into 2022. And if I look at your adjusted ROE this quarter at 15.9%, it continues to improve sequentially every quarter since the start of the pandemic. So when I think about ROE potential in '22, '23, considering [the project is] slow. Is it feasible that your ROE trajectory continues to improve?

Yes. Look, Scott, thank you for the question. The answer is yes. And it's we're very bullish about the outlook of the bank. And if you look at it by business line, I'll give you a couple of samples in Dan's business in Canadian Banking, auto is improving, but it's still not where you expect it to be, and there's issues there around supply chain and availability of cars and things like that. The credit card business is coming back, and you're seeing that in our numbers. But you'll see the full earnings power of the Canadian bank as well. As it pertains to international banking, Nacho has articulated how business in the Pacific Alliance continues to improve. The Caribbean is still playing catch up here a bit. We're a major bank in the Caribbean as tourism improves, fee business improves for our credit card business there and day-to-day banking will improve. So there's lots of things that will leverage the ROE going forward, and you'll see our ROE through 16%.

16%? Good. And then maybe, Dan, just on the auto loans in Canada, obviously, supply chain issue, seems significantly higher used car prices. Just wondering on that growth out -- front -- it's kind of paused right now. And as your underwriting standards changed recently?

Yes. Thank you. It's Dan here. No, our credit appetite remains open for business, but hasn't changed in the last number of quarters. As you mentioned, given the supply chain issues, there is a greater appetite for used cars, we anticipate to be clear that LGDs for used vehicles will be better in this part of the cycle than they would have been pre-COVID. As Brian mentioned, there's lots of opportunity to come when full supply comes to dealers in Canada. We have seen bookings rise as of Q1, up year-over-year, 7%. So that's a very encouraging trend. Notwithstanding dealers having challenges getting products to their floor plans. So we are seeing some softness on the commercial side. The bulk of our revenue is driven by retail paper, and we had a record revenue year in fiscal '21 in auto. We saw that continue in Q1. And the case really is when are we going to see the full torque of this business? Is it Q3, is it Q4? It's certainly coming -- it's a mainstay of our franchise. -- and we're open for business in auto.

The next question is from Mike Rizvanovic from Stifel GMP.

I had a question for Dan. I wanted to go to Slide 32 in your presentation. So thanks for this additional color. What I wanted to ask about is -- with respect to the mortgage originations that come from the nonbranch channels, is there any way you could give us a little bit of insight into the cross-sell. So if it's coming in from the broker?

Yes. Sorry, I think you may have dropped off there. I think assuming the rest of your question was sources of growth in mortgage, given we had a particularly robust balanced quarter. Our -- one of my primary objectives in retail is to improve our direct ownership over the customer opportunity. And so we've been very intentional about growing the sales force in our proprietary mortgage specialist channel. I'm pleased to say in the last 2 years, we've added 50% more salespeople and dollar balance volume through that channel is up 100%. And so it's been a major source of growth for us over the last number of quarters, and you saw that appear again in Q1.

On the question of cross-sell, I would like to demystify the perspective that market brokers do not offer cross-sell opportunities. The dealt it between our proprietary channel and mortgage broker in cross-sell is indistinguishable. And I think in the last 6 months in particular, our pickup on day-to-day checking and savings accounts of mortgages in general, has been at levels we haven't seen in years. We do believe that we continue to have opportunity to convert more of these net new customers into full franchise Scotia customers, and that's our game plan, and you'll see us continue to invest in this anchor product from here. I hope that answers the full part of your question.

Yes, that's very helpful, Dan. So basically, not much of a difference between what you can cross-sell through a branch originated mortgage versus one that comes to the broker channel?

That's correct. As others have heard me speak of in the past, our unique market-leading step program, Scotia Total Equity Program, the broker channel. I'm pleased to report originates 80% of new product in that step program, which sets us up with a global limit for drawing customers into our revolving product, including the high ROE credit card position.

The next question is from Paul Holden from CIBC.

So going back to International Banking, Nacho. Just a common question I'm hearing is regarding the pace of rate increases in the Pacific Alliance countries and potential for demand destruction as a result of that. So just wondering if you can help us think through demand -- loan demand sensitivity relative to borrowing costs.

Thank you for your question. Well, we have seen increased -- interest rate increases, but I believe this is also at the same time, with a significant change in the economic environment, strong economic growth, credit demand has been low, particularly for some retail products. So we are seeing the opposite at this point pick up in general, in credit demand in all products. I would say that we expect this loan growth momentum to continue also, in the case of interest rates for retail products, there's much less sensitivity to these interest rate increases is more, of course, more relevant on the commercial segment. But overall, I'm very optimistic about loan growth. We are growing at 3%, as I said in this for 2 quarters already. So that is going to -- that is our expectation that we will continue to grow 2% to 3% per quarter, which is similar to pre-COVID loan growth levels.

The next question is from Lemar Persaud from Cormark.

I want to circle back to the discussion on International Banking margin. So -- it feels like you guys can come in above the low end of the 380 to 390 basis point range as offered last quarter quite easily, frankly, considering the 7 basis point increase this quarter and that is the rate -- so maybe provide an update on the 390 basis point range? And then maybe take that discussion up to the all bank level and offer an outlook on NIMs there.

Sure. Thanks, Lemar. Happy to take that question. I'll start with -- in the order that you asked. International Banking margin, as you know, is very complicated. We've got inflation impacts over there. We've got rate caps. We've got obviously big increases that have come through fairly quickly in the administered rates. And we're seeing a flattening rate so. So there's a lot of things going on over there. Product mix is standing from our perspective as well.

So I wouldn't update the outlook that we gave, the 380 to 390 basis points at this time. Likely, we'll talk more about it in Q2 because it's -- more trends. But what I can tell you is it's trending better than what we thought when we gave the outlook in Q4 2021. So I'll leave it at that, specifically to the International Bank. So there's more to come, like I mentioned a little earlier. We think there is more goodness that will come through the process, but it depends a lot about how the rate curve shapes as we go through these months looking forward.

The bank story is slightly different. I think the bank, we manage our net interest margin, as I mentioned before, by actively positioning the balance sheet appropriately. So that continues. And as I mentioned in my prepared remarks, we are positioned to benefit from rate increases across the footprint. And we should see some of that benefit coming through the Canadian banking business, which has had pretty modest margin compression, and that's mostly driven by business mix. As credit cards and personal loans start growing as well, that will have an impact on NIM, like I mentioned in the outlook in November, the bank's margin should grow modestly throughout the year this year. A lot of it will depend on how the business mix shift happens and how soon it happens in our P&C businesses. And of course, the rate curve situation, depending on how soon rate increases come in Canada and how does the long end of the rate curve shape itself.

So I think it will be positive. It won't be a headwind for us for the rest of the year, but it's a little difficult to predict in this environment how soon and how much the rate increases will be at the all bank level.

The next question is from Sohrab Movahedi from BMO Capital Markets.

Glen, it was mentioned that there is some work getting done with Global Wealth and Canadian Banking to generate some, I guess, some new business opportunities. Are there such opportunities also that you could talk about in the International Banking segment between the International Wealth? And then maybe give us an update on plans to add some capabilities, maybe acquire some capabilities in the U.S. Where are you on that filletfile?

Sure. Thanks very much, Rob. I would say if we look at international and the growth we have there. I really think Canada as a blueprint is a good place to look. So we're obviously very proud of the strong results we had this quarter, but the real story is really the breadth across the various business lines. So as I look across the business line before -- beyond the performance fees Raj mentioned, in Asset Management, the industry-leading investment results are helping drive those market share gains and positive net sales across all our internal and external channels. And that's actually moved us to #2 among Canadian banks and retail mutual fund assets in Canada. And that engine is a really important one because our asset management business is quite global by nature. And as we look to build out within our international footprint in conjunction with Nacho, that's going to play a very big role in that.

Similarly, when we look across our advisory businesses and our total wealth offerings in Canada, the growth of our private banking and the advisory businesses more broadly is a really good blueprint that we've already started to launch in international. And so that led to that 19% growth we're already starting to see early results there.

Last thing I'll mention on the U.S., nothing to announce at this point. But certainly, as we look to develop U.S. capability is something that we continue to look in more on that later.

And Glen, just to be abundantly clear, some of the opportunities you were talking about with the International segment, for example, is that contingent on a U.S. capability or will the U.S. capability be additive to that?

Yes, that's an important question, Sohrab. It's actually not. So the biggest opportunity that we have, we've already got existing wealth management businesses in international. But as we build out and leverage our footprint across specifically the Pacific Alliance countries, that's really where the primary benefit is in onshore. So the U.S. capability would help us in the ultrahigh net worth space for that for those clients, both in Latin America as well as Canada, but it's not contingent on that at all.

There are no further questions on the line at this time.

Well, thank you, everyone, for participating in our call today. We're very pleased with the strong start to the year with earnings momentum across all our businesses. On behalf of the entire management team, I want to thank everyone for participating in our call today and look forward to speaking with you again at our Q2 2020 call in May. This concludes the first quarter results call. Have a great day.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.