Dear fellow shareholders,
For nearly two years, we have been navigating through an unprecedented global health crisis that has continued to challenge all of us, both personally and professionally. As society begins to emerge from the pandemic, it is our hope that you and your loved ones are staying healthy and safe.
This year marks the Bank’s 189th anniversary. We are, in fact, older than the country of Canada itself. Our present strength has been earned by generations of Scotiabankers, working together to deliver for our customers and shareholders, through good and challenging times. Generations of Scotiabankers have dedicated themselves to building a better bank over the longer term, and we, the stewards of this tremendous institution, work each and every day to ensure that the Bank will continue to prosper.
Over the past several years, we have been delivering on our forward-looking plan to give our customers a great experience, ensuring that they have the right tools and advice to succeed, while creating value for our shareholders. We strengthened the Bank’s foundation through significant investments in people, processes, technology, and products. Our team is as strong and diverse as it has ever been. At the same time, we simplified our footprint, reducing risk and focusing on the countries where we could build scale and deliver real value for our customers and shareholders.
While it is impossible to predict events like a global pandemic, geopolitical instability, or intense market volatility, the steps we took over the past several years—independent of any crisis—to build a stronger and more resilient bank that is focused on the Americas, enabled us to weather the COVID-19 storm, operationally and financially.
As we reflect on the past year, we are exceedingly proud of the ways in which we supported our employees, customers, and communities. The vast majority of our branches stayed open for business throughout the pandemic to continue to serve our customers. We supported our employees with new benefits, health and wellness support, and frequent communication to help them manage through this challenging period. As a result, our internal employee engagement scores are higher than they were even before the pandemic.
Scotiabank was proud to be a leader in society’s broader response to COVID-19, which has demonstrated the impact of individual acts of heroism, the power of corporate, public, and not-for-profit collaboration, and the unwavering determination of the human spirit in the face of adversity. We partnered with Toronto-based organizations in a record-setting effort to get our community vaccinated. We were a founding partner of a rapid screening consortium that now supports screening efforts at more than 1700 organizations across Canada. We supported vaccination efforts in Peru with a donation to a local non-profit business association to finance the arrival of the country’s first million doses. These are just a few examples of how we played our part in helping to lift the communities in which we operate out of the pandemic.
At the same time, the pandemic has surfaced and solidified gaps and disparities that touch many corners of our society. Through the past year, we have similarly been witness to extreme weather and other natural events that have served to underscore the climate crisis. Transitioning to a net zero economy in the fight against climate change will take time, and we are supporting our clients as they move towards net zero emissions. We know that companies and organizations from across sectors, including the financial sector, have a role to play in tackling these issues, and the Bank has taken important measures over the past year to turn the dial on environmental, social, and governance (ESG) challenges facing people and communities across our footprint.
The past two years have been the truest test of our long-term strategy and we have gained even greater confidence in the investments and decisions we made to focus our footprint and strengthen our business mix. We have stood by our customers throughout these challenging times, and we are grateful for the confidence that they have shown in us. Looking forward, we are emerging from the pandemic even more resilient, aligned, and stronger than before.
FINANCIAL PERFORMANCE
This year, the Bank’s earnings demonstrated the power of our repositioned, well-diversified businesses, and we exceeded our medium-term objectives, rebounding strongly in EPS growth, return on equity, operating leverage, and capital ratios. Our performance validates the benefits of the significant investments we have made in our businesses over the last few years.
Our Canadian Banking business continues to deliver very strong results for the Bank, with strong performance in business banking, a high-quality residential mortgage portfolio, and a market-leading position in automotive finance. Canadian Banking reported adjusted earnings of $4,171 million in 2021, an increase of 60% compared to the prior year due to lower provision for credit losses and higher revenues driven by strong asset growth, which is expected to remain strong into 2022.
Global Wealth Management reported adjusted earnings of $1,592 million in 2021, up 23% compared to the prior year. This was driven by strong results across our Canadian advisory and asset management businesses. Global Wealth Management is focused on delivering comprehensive wealth management advice and solutions to clients across Scotiabank’s footprint, and is now ranked second in terms of retail mutual funds market share in Canada and is the third largest wealth management business in Canada.
Global Banking and Markets delivered another strong year with earnings of $2,075 million, with strong performance in corporate banking and capital markets. Our Global Banking and Markets business is the second largest wholesale banking business amongst Canadian peers. We are the only full-service corporate and commercial bank with local presence in all of our core Latin American markets, and we are a top-10 foreign bank in the United States.
International Banking reported adjusted earnings of $1,855 million, an increase of 62% compared to the prior year due to lower provision for credit losses and prudent expense management. Earnings are expected to grow through 2022 from good loan and revenue growth as most of our core markets in the region are recovering toward their pre-pandemic levels of activity.
We expect to deliver solid performance across all our businesses in 2022 as economic conditions continue to improve. Our focus on gaining scale in our core markets and businesses has provided us with optionality, and we have delivered solid growth while earning through the approximately $750 million of cumulative earnings that we gave up as a result of divestitures since 2019. Our diversified business model has shown resilience through the pandemic, and the Bank is well positioned to achieve its full earnings power in the upcoming year.
PUTTING OUR CUSTOMERS FIRST
We have long believed that the best relationships are forged during challenging times, and I am exceedingly proud of the ways in which our team stepped up to put our customers first over the past year, as they have for the last 189 years. In the face of uncertainty, building on last year’s introduction of the most ambitious relief program in the Bank’s history, this year we responded with new products and more support for our customers.
We endeavoured to make banking with us even more convenient in order to help our customers manage through uncertainty and enable them to thrive. We continued to make substantial investments in our branches and contact centres to better serve our customers. At the same time, we have invested in our digital platforms in order to simplify the customer experience, implement the highest level of security standards, and improve stability.
Let me outline a few recent examples of investments we have made to help our customers succeed:
In Canada, new tools and resources have empowered our financial advisors to have deeper, more meaningful conversations with our customers, in order to provide them with the right advice to meet their complex and evolving financial needs. Through our Advice+ program, financial plan completion has increased 28% year-over-year, and visits to our online Advice+ centre are also up significantly. We also introduced new and improved ways to connect our customers to a dedicated Scotiabank advisor through our mobile app and online banking platforms, to discuss their banking needs.
Across our international footprint, we introduced new products and services to support how and where our customers want to bank. In Chile, this included the launch of 100% digital plans, giving customers flexibility to choose the products and benefits that are right for them, and the launch of ScotiaPay, which allows customers to shop online and in-person using their smartphones at thousands of companies across the country.
For our Wealth clients, we launched solutions to help them manage through the current low interest rate environment. For example, we introduced the MD Platinum Global Private Credit Pool for physicians and their families, and the JF Partners Private Equity Fund for eligible clients—which is a turnkey global private equity solution—to enhance potential returns on their portfolios.
For our Equities, Fixed Income, and FX clients, we introduced ScotiaRED—a series of state-of-the-art electronic trading tools that deliver high-quality execution using advanced analytics and artificial intelligence. ScotiaRED marks the next generation of electronic trading tools, both enhancing performance and providing a superior client experience across our footprint.
The Scotiabank Women Initiative surpassed its target of deploying $3 billion to women-owned or women-led businesses—and we did it ahead of schedule. Our highly-successful, globally-expanding initiative helped support thousands of women entrepreneurs and women-led businesses across Canada. The success of women-led businesses is essential to the health of the Canadian economy and we are proud to support them through access to capital, mentorship, and education.
This year we were proud to receive the #1 ranking in the J.D. Power 2021 Canada Online Banking Satisfaction Study for the second year in a row, as well as #1 in the J.D. Power 2021 Canada Credit Card Mobile App Satisfaction Study, and placed 2nd in Customer Experience in Competitive NPS for the first time since the study was launched in 2017. This is in addition to a number of recognitions across different channels, including our branch channel, where we have demonstrated strong results. Our commitment to delivering an exceptional customer experience, and our focus on providing fast, easy-to-use, and secure online banking services, were driving forces behind these recognitions.
Following Scotiabank’s second consecutive recognition as the Canadian Bank of the Year in December 2020, The Banker magazine—a Financial Times publication—also named Scotiabank the Most Innovative in Data in its Global Innovation in Digital Banking Awards for the Bank’s use of data and analytics to support vulnerable customers.
The primary purpose of our Bank is to meet the needs of our customers and future customers, by providing exceptional advice and a great banking experience, and standing by them in both good and challenging times. As our customers’ banking needs are evolving, it is clear that they are seeing the value of our investments to evolve with them.
At Scotiabank, we are building a winning team that is highly tuned in to the needs of our customers, and who bring an intimate knowledge of the markets and businesses in which we operate
BUILDING A WINNING TEAM
At Scotiabank, we are building a winning team that is highly tuned in to the needs of our customers, and who bring an intimate knowledge of the markets and businesses in which we operate.
I am particularly proud of the ways in which our team has managed over the past two years. Whether they have been on site in a customer-facing role or critical function, or working from home, they have shown remarkable adaptability in continuing to deliver for the Bank and for our customers. As more of our team starts to return to the workplace, we will be leveraging what we have learned over the past two years working under these unique conditions to drive some change in how we work, as we continue to evolve the employee experience—from ensuring our benefits offering is the right one, to providing more flexibility.
It is important to us as an organization that we represent the diverse communities that we serve. Building a workplace that fully enables a diverse community of employees to thrive—and in turn a stronger and more inclusive work environment—means more of the best apply, and more of the best stay. While our work to build a truly inclusive organization is never complete, we are pleased with the progress we have made, including the introduction of renewed diversity and inclusion goals that were developed to further increase the diversity of our employee population in the coming years.
We were proud to be named one of the top 25 most Diverse and Inclusive companies globally by Refinitiv in 2021. We received this recognition for the fourth year in a row, after a comprehensive analysis conducted by Refinitiv of more than 11,000 companies globally, and it was awarded in part due to our bold commitments, industry leading performance and positive social impact.
In recognition of the way that our employees feel about working and belonging at Scotiabank, we were also pleased to have been named a Best Workplace by Great Place to Work in countries across our footprint in 2021, including in Canada and Latin America. Great Place to Work also named us a Best Workplace for Women in Canada.
LEADING IN THE AMERICAS
Geographic diversification is a part of our DNA. We followed our customers across Canada, into the United States, the Caribbean and Central and South America because that is where they expanded their businesses. Our long history across the Americas has given us a deep understanding of how these countries operate, the strengths of their economies, and the aspirations of the people who live and work there.
Clearly, economies around the world have been impacted by COVID-19, and some Americas economies have faced particularly strong headwinds. Today, while Mexico and Chile are very much on the mend, Peru and Colombia still have some ways to go. We remain, however, confident in the rebound of these economies over the coming quarters.
The reality is that when you are operating in younger democracies with developing economies there will be periods of uncertainty. What is more important is how you are positioned to win over the longer term. As we have demonstrated throughout these unprecedented times, the strategic decisions we made to focus our footprint on countries with young, dynamic, growing, and relatively unbanked populations—countries with significant untapped potential—were the right decisions, regardless of the circumstances.
Today, approximately 95% of our earnings come from our six core markets of Canada, the U.S., Mexico, Peru, Chile and Colombia. We are the third largest in bank by loans in Canada, Peru, and Chile; the fifth largest in Mexico; the sixth largest in Colombia; and a top 10 foreign bank in the U.S.
This year, we furthered our strategic focus on operations across our footprint where we can achieve greater scale and deliver the highest value for customers, increasing our ownership stake in our Chilean operations by 7%. Scotiabank's presence in Chile is a key pillar of our strategy, and we look forward to building on our momentum in Chile over the coming years. As our Global Wealth business continues to perform very well, we are keeping an eye on opportunities for further growth, including expanding our U.S. offering. We recognize that a stronger U.S. dollar management capability is important to our customers, particularly in Latin America. Growing that business is something we will do thoughtfully, in the same way we built our business in Canada.
OUR RESPONSIBILITY TO OUR COMMUNITIES
Being a leader, however, is about more than just our financial metrics. It is also about how we lead by example in the communities in which we operate.
In 2021, Scotiabank deepened its commitment to strengthening communities across our footprint by launching ScotiaRISE—an investment of $500 million over the next ten years to promote economic resilience among disadvantaged groups. As part of ScotiaRISE, we made a landmark commitment to Windmill Microlending—one of the largest of its kind in Canadian history—directed toward programs that provide professionally skilled women immigrants with career mentoring and financial support.
We are leveraging our role as a trusted partner in the community to help drive change. Through our hockey for all program, which launched earlier this year, we are contributing $2 million over the next year towards programs that focus on increasing diversity among community and grassroots hockey organizations across Canada.
We were the first large financial institution to align with Canada Mortgage and Housing Corporation to make an impact on housing affordability. Housing affordability is one of the most pressing issues of our time, as Canada continues to experience population growth, changing demographics, and an evolving relationship between where Canadians live and work. We will mobilize $10 billion in financing over the next ten years to increase affordable housing supply.
We have also made great strides towards our commitment to reach net zero carbon emissions by 2050, including ongoing work to establish Bank-wide, quantitative, time-bound targets for reducing greenhouse gas emissions associated with our lending activities, and launching our inaugural Net Zero Research Fund. This year, we joined the Net-Zero Banking Alliance, reinforcing our commitment to playing a significant role in financing the climate transition through this years-long journey.
For our corporate and commercial clients, our Sustainable Finance Group continues to provide industry-leading advice and expertise to help them achieve strong business growth that is environmentally and socially responsible. In our Global Wealth Management business, consideration of ESG factors as well as leveraging our team of dedicated ESG professionals are important elements in our investment managers’ processes. In 2021, nine more dedicated ESG solutions were launched for investors across our geographical footprint, with additional new launches to come in 2022.
Through our Global Banking Markets team, we further closed a USD 1 billion 3-year Sustainability Bond offering—the largest by a Canadian Corporate or Financial to date—with proceeds funding the financing or refinancing of green or social assets, businesses, and projects. The Bank has now mobilized $58 billion of its $100 billion commitment by 2025 to reduce the impacts of climate change.
In recognition of our ESG efforts, for the fourth consecutive year, the Bank was named to the Dow Jones Sustainability Index North America and ranked in the top 8% of participating financial institutions from around the world for sustainability, while maintaining a top score in Corporate Governance, placing us in the top 1% of our peers. Our strong ESG practices have also been recognized with a “AAA” rating from MSCI, held by only 2% of banks globally. For this, we are extremely proud.
POSITIONED FOR THE FUTURE
As we look forward to the coming year, we continue to find ourselves as a highly competitive player in each of our core markets, with optionality and multiple avenues to grow. Our Canadian Banking business has built very strong momentum, our Global Wealth Management and Global Banking and Markets businesses continue to grow their market share, and our International Banking business has rebounded quickly to exceed pre-pandemic earnings.
One of our key areas of continued focus in 2022 and beyond will be on environmental, social, and governance matters. We have already taken tangible steps, and introduced innovative programs, to make real progress on issues such as climate change and diversity and inclusion. At the same time, we know that there is always more to do, and you will see Scotiabank supporting the fight for a more resilient and more just world.
I would like to recognize and thank Scotiabank’s Board of Directors for their ongoing engagement, counsel, and support over the past year. The leadership team and I benefit immensely from the wealth of knowledge and experience that they bring to the Bank, in good and difficult times.
I would also like to extend a warm welcome to Don Callahan who joined our Board earlier this year. Don is a seasoned executive with a breadth of experience, and we are fortunate to have him around the table. Sincere thanks to Indira Samarasekera and Charles Dallara, who left the Board this year, for their many years of service as Directors. We wish them our best.
Finally, I would like to extend my gratitude to our winning team of 90,000 Scotiabankers for their contributions during another challenging year. Across our footprint, our team has risen to the occasion, continued to put our customers first, and demonstrated time and time again why we are a Leading Bank in the Americas.
Today we have the capital, the reputation, the partnerships, and the team to realise our ambitions for the long term. We are confident in our footprint, and in the strategic decisions we have made to become a more focused bank that is positioned for the very bright future.
Thank you for your trust in the Bank and its leadership team throughout these uncertain times. We are profoundly grateful and we do not take it for granted.