Raj Viswanathan: Yes. I think like Scott referenced in his remarks, too, I think expense management is a cornerstone of this bank. I think we’ve been proving it over many, many years. Paul, as you know, this quarter is just a reflection of how we manage it in line with revenue. We’ve talked about it before where we’d like to generate positive operating leverage this year, as you point out, likely not, probably not. It’s probably a more accurate way of saying it. Quarter-over-quarter, you should see our expenses being moderated the way you saw this quarter. I wouldn’t talk about 2024 at this time. I think it’s a little early. We’ll talk about it in our outlook call in November. But prioritizing our spend, investing appropriately where we need to invest.
And as you point out, managing our staffing costs and two staffing numbers has been an approach we’ve taken in the past. The Canadian banks reduction in employee count that you point out is something that we decided we needed to do in the right spots within the Canadian bank. So it doesn’t impact revenue. It doesn’t impact customers, how can we manage it prudently, and I think Dan has done a great job of that in the last 3 quarters. International Bank has always been great in managing their expenses because many times we forget they operate in an exceptionally high inflationary environment even in normal times. And to have a 5% expense growth year-over-year, I think it’s very credible of how we pay attention to those lines in that segment as well.
So you should expect us to continue doing that. And our expectation is always to generate positive operating leverage every year, and we hope to start doing that again in 2024, what we mentioned ’23.
Paul Holden: Okay. And so – sorry, I guess, just a final point on it, to get to that positive operating leverage in 2024, you believe you’re on the right path today? Or do you think additional actions might be required?
Raj Viswanathan: I think we are on the right path. We always look at what additional actions we need to take every year. We took Q4, if you look at last year, we rationalized some of the expenses in the technology teams as well as in international banking. We always look at that call. We look at it again. So we set ourselves in the right path before we start the year. And I suspect ’24 [ph] to be the same as we have done in prior years.
Paul Holden: Okay. Thanks for that.
Operator: Thank you. Our next question is from Mike Rizvanovic with KBW Research. Please go ahead.
Mike Rizvanovic: Good morning. A quick question for Dan on your mortgage growth. I’m just wondering – I’m not sure if there’s a way to basically remove the impact of the fact that you don’t have negative amortization in that DRM product. What’s your sense of what your true market share trend is here? I know you’ve been losing some share. I feel like it’s largely related to that factor. I’m not sure if you’re able to split that out. But what’s your sense in terms of what you guys are doing on the origination side versus industry right now?
Dan Rees: Yes. Thanks, Mike. I don’t think that the new booking mix VRM [ph] versus fixed is affecting the total new originations in the quarter. I would just reinforce the points I made earlier, which is we’re being more deliberate with regards to efficient needs of capital, pricing to the full customer relationship and potential and taking this time given a slow housing market to put those plans into effect. And that the pickup on cross-sell of that product is very encouraging. We like the mortgage business. We know it’s important to our customers. And I think the VRM dynamic is more around client preference for moving into fixed, which we’re supportive of, from a financial advice standpoint as opposed to anything around volume or market share.
Mike Rizvanovic: Okay. So you don’t think it’s having an impact on the market share losses that you’ve had the last few quarters, just that negative amortization dynamic that some of the other banks have, which you don’t?
Dan Rees: That’s possible. I mean, we certainly – we are – we deliberately slowed the mortgage book as we signaled some time ago, and so that’s intentional as an outcome. So we’re actually pleased by that. I think the VRM dynamic might be showing up more fill [ph] in Gils. We do have customers who are seeing our payments rise faster than peers. And so we’re – we’ve been saying for at least a year now that we’ve been proactive with those customers. So the VRM mix is more around managing credit, which we’re pleased with, than it is around market share or volume. And I would just say on the back of Raj’s comments on expenses, we’re really pleased with how we’ve been decelerating quickly. And in Q3, we printed positive operating leverage for the big retail bank, which was our ambition, and we that a quarter ahead of schedule.
Mike Rizvanovic: Got it. Thanks for that. And then just a quick one for Jake. Just thinking back in the fact that Scotia had maybe been under investing a little bit in the cap markets business heading into the pandemic and you didn’t have the same upward sort of trajectory during that time. I’m just wondering where you currently sit with respect to your – just the full platform, the capabilities? And do you see any pockets where maybe you want to allocate more capital and invest in maybe [Technical Difficulty] any thoughts on that just in terms of where you sit today and where you will on your capabilities?
Jake Lawrence: Yes. Thanks for the question, Mike. You’re right, heading into the pandemic and if in back to our Investor Day in Chile, we weren’t where we wanted to be. We’ve definitely grown to our natural share here in Canada, which has been really positive, but the U.S. market continues to be a good opportunity. There’s opportunities to invest there by sector, by product and really attract into some new areas. We’re not terribly large in non-investment grade at this stage. That’s an area we can look to add value. Our U.S. loan book is at zero deals for the past six quarters. So there’s an opportunity to grow in some different segments there. I’d also say we’re underrepresented in private capital. You’ve seen we’ve launched a CLO practice that’s been positive to access the private credit growth we’ve seen.
And then when we look further into our platform, Mexico has been really promising with a strong quarter. So we think there’s real opportunity across that network in North America as we build out further capabilities, whether it’s treasury services, cash management, et cetera.
Mike Rizvanovic: Got it. Is it fair to say that there is some low-hanging fruit in your business at this point in time?
Jake Lawrence: Without a doubt. And as we move forward, it will be key that we allocate the capital that the bank has to generate the most profitable returns we can across our footprint, whether it’s in GBM or other parts of the organization.
Mike Rizvanovic: Got it. Thanks for the color. Appreciate it.
Operator: Thank you. Our next question is from Lemar Persaud with Cormark Securities. Please go ahead.
Lemar Persaud: Thanks. Maybe for Phil. I’m probably front-running the Q4 here. But just help me think through PCLs for a moment. So steady climb in the PCL ratio is – the total PCL ratio over the last 5 quarters, the challenges in Chile and Colombia and the domestic, it looks like this trend could continue. So perhaps, should we expect continued sequential increases in the total PCLs sale? Or is there some reason where why we should expect it to kind of move down from the 42 basis points this quarter?
Phil Thomas: Thanks, Lemar. I appreciate the question. Yes, this is how I would think about it. There’s a lot of moving parts in our portfolio. I think as I said in my prepared remarks and in the answer to the last question, Chile and Colombia remain an area of great focus for us. And so I would probably look to Q4 to be at or maybe slightly elevated above where we are today, but then and then I’ll come back to you next quarter with an outlook for 2024.
Lemar Persaud: Okay. I’ll leave it there.
Operator: Thank you. Our next question is from Joo Ho Kim with Credit Suisse. Please go ahead.
Joo Ho Kim: Hi, good morning. Thank you. Just one quick one for me and a question on International Banking in Chile specifically. With the country in a recession, and I know this quarter was impacted by impaired losses and potential for more as we go forward. But I’m trying to get a sense of whether it’s possible to grow that business in Chile in an environment like this? And maybe if you can speak to on a pre-tax, pre-provision basis. Thanks.
Phil Thomas: Well, thank you very much for the question. As you said, we’re going through a cycle. And when we look at our retail business, for example, in Chile is performing quite well from the PCL perspective outside of the commercial space. Similarly, on the GBM space. So we are growing quite significantly year-on-year on a PTPP basis. So we are optimistic on how the business is performing even on a very difficult year where we’re seeing an economic contraction. As we look at 2024, we see Chile coming back to GDP growth, and that will play strong to our positioning in the market. So we remain optimistic with Chile – are positioning actually the commercial space.
Joo Ho Kim: Got it. Thank you. That’s it from me.
Operator: Thank you. Our next question is from Sohrab Movahedi with BMO Capital Markets. Please go ahead.
