Gabriel Dechaine: Right.
Raj Viswanathan: The DRIP definitely increases the share count as you point out, Gabe. That’s inclusive on the comment that I made. If you just look at net income growth, it’ll be greater than the EPS growth because the DRIP contribution, which tends to be between 8 million and 9 million shares a quarter this year, and I suspect it will continue through in 2024, will be an offset. But offsetting that we think we’ll have marginal growth in the EPS.
Gabriel Dechaine: Okay, great. And then…
Scott Thomson: Gabe, let me — just let me make a couple of comments on that. I mean, recognizing this has been a difficult year, it’s I think the one year anniversary, and we wanted to move quickly to address a lot of these issues around capital, liquidity, costs through the restructuring charge, allowances, and we’ve done that. And that gets you to $6.54. And the guidance we’re giving is conviction around growing earnings from here. And that’s an important message to take away.
Gabriel Dechaine: Okay. And then, well, on the building allowances front, I mean, one way to look at it is you’re being, “conservative”, and I think the investors appreciate that. But the other way to look at it is that from a performing ACL ratio standpoint, if I look at it including mortgages or excluding mortgages, you’re just at your pre-COVID level. So, it’s a bit of a catch up in that regard. As the outlook, or if the outlook remains challenging, which undoubtedly will be, could we see additional uptick to your performing ACL like, beyond the run rate we had before Q4?
Phil Thomas: Thanks, Gabe. It’s Phil here. Great to hear you, and thanks for the question. The — we’re — if I look forward to 2024, we’ve — we’re guiding towards, and I had said it in my prepared remarks, 45 basis points to 55 basis points.
Gabriel Dechaine: Yeah.
Phil Thomas: The portfolio that we have today, we like, and we’ve done a great job over the last few years, really building a strong portfolio. There’s still pockets where we need to focus on in the International bank, but we’ve really turned. A lot of the portfolio that we had pre-pandemic is not the portfolio that we have now, especially with the strong focus on affluent growth in the International Banking platform, and the change in mix shift from unsecured to secured. And so that is giving a different profile. We built these allowances because we were thoughtful about the macroeconomic outlook. We wanted to continue to strengthen the balance sheet, as both Scott and Raj said. And it’s really a forward-looking perspective for us. But I’m not seeing a ton of weakness in our portfolios. We’re going to be mindful of the macroeconomic shifts throughout the year, and if we need to build further performing allowances, we will, but the portfolio is strong.
Gabriel Dechaine: Right. No, I’m not suggesting otherwise. Just from a management standpoint, where do you see the increase in your ratio next year? Is it more from the impaired or more from the performing?
Phil Thomas: It’d be more from the impaired with the usual run rate of our performing allowances.
Gabriel Dechaine: Got it. Thank you, and happy holidays coming up.
Phil Thomas: Thanks, Gabe.
Operator: Thank you. Following question is from Mario Mendonca from TD Securities. Please go ahead.
Mario Mendonca: Good morning. This might be too simple, Raj, so maybe you could help me. The fundamental review of the trading book was meaning — is going to be meaningful at 45 basis points. The next two years, should we — is it appropriate to assume that the hit would also be about 45 basis points each year for the next two years as we get to the full 72.5% in 2026, or is that too simple an approach to the equation?
Raj Viswanathan: No, I think the fundamental review of the trading book should not repeat, right? So, it’s a one-time hit like you…
Mario Mendonca: I’m sorry, I was referring to the floors. Sorry, Raj, I meant the floors. My mistake.
Raj Viswanathan: Got it. No problem. I think the floors, the mathematical calculation will tell you that. In Page 96 [reg-sup] (ph) pack, we disclose what is our standardized risk weighted assets. If it remained at those levels, yeah, 2.5% of that will be around the 45 basis points that you’re referring to in ’25 and ’26, Mario. The flip side to it is, Mario, we’ll continue to work on optimizing the portfolio. That’s what we’ve been doing through 2023, frankly, and we’ll make some deliberate choices on how we allocate capital to the various portfolios to ensure we’re getting paid for the additional capital that we have to put up. But at this time, that’s probably the best estimate you have.
Mario Mendonca: Okay. This next question might be more for Jake, either Raj or for Jake. The fundamental review of the trading book, it’s in the title, it’s fundamental, is there any thing in there that has you rethink Scotia’s product throughout the company, LatAm or Canada? Does the fundamental review book — fundamental review of the trading book have an effect on your appetite in that business?
Jake Lawrence: Yeah. I think you’ve heard it a couple of times, Mario, the new regulatory changes, whether it’s FRTB or the floor is making us be more thoughtful about how we allocate capital. And Scott may want to add in, whether it’s by business, by product, by customer, by segment, that disciplined capital allocation, and very thoughtful will be a plan moving forward. It doesn’t lead to any exit of products at this stage, though. So, we won’t be changing the product suite materially.
Mario Mendonca: So Jake, you wouldn’t then — the weakness in trading this quarter, you wouldn’t tie that into the fundamental review of the trading book in any way then?
