Thanks, Brian. I’ll begin on Slide 8, which shows our key financial performance metrics for fiscal 2018.
All of my comments will be on an adjusted basis, which excludes acquisition-related costs. The Bank ended the year with diluted earnings per share of $7.11, up 9% in 2018.
Our P&C businesses that comprised approximately 80% of the Bank’s earnings, delivered a strong performance for the year up 11% collectively. Canadian Banking was up 8% in 2018, reflecting strong growth in assets, continued momentum in deposit gathering, margin expansion, prudent cost management and lower provisions for credit losses. Lower gains on sale of real estate and the impact from last year’s gain on the sale of HollisWealth were partially offset by the current year acquisitions and the alignment of reporting period impacted net income growth by 4%. International Banking delivered stronger results up 16% compared to last year. The results were driven mainly by the Pacific Alliance countries, where we experienced high net interest income growth and fees from good loan growth. The impact of recent acquisitions and the benefit of one additional month of earnings from the alignment of the reporting period in Chile and Thailand contributed 3% to the adjusted earnings growth. Global Banking and Markets declined 3% from last year, driven by lower capital markets revenue in the fixed income and commodities businesses, as well as higher non-interest expenses. These were partly offset by lower provisions for credit losses and higher lending and deposit revenues.
We are actively focused on up-tiering our corporate lending relationships, strengthening our investment banking franchise and growing our customer base in Latin America. Operating leverage was solid for 2018 at positive 3.7%, or 2.4% if we exclude the first quarter 2018 benefits from remeasurement gains. This reflects very strong performance in our P&C businesses, with positive 1.9% operating leverage in Canadian Banking and a positive 3.1% operating leverage in the International Banking. The productivity ratio improved 190 basis points to 51.7%.
Excluding the Q1 2018 benefit remeasurement gain, the productivity ratio declined 120 basis points to 52.4%.
As Brian mentioned earlier, we remain focused on driving further productivity improvements across the Bank.
Turning to the Q4 results. The Bank reported diluted earnings per share of $1.77, up 7% year-over-year.
Our core personal and commercial banking businesses reported very strong earnings growth. Revenues increased 9% from last year, driven by solid growth in both net interest and non-interest income. Net interest income was up 10% from strong commercial and retail lending growth in International Banking, which included the impact of acquisitions and strong retail and business loan growth in Canadian Banking. The core banking margin was up 3 basis points versus last year, as the change in business mix from the impact of International Banking acquisitions and higher margins in Canadian Banking was partly offset by lower margin in Global Banking and Markets and asset liability management activities. Non-interest income grew 8% compared to last year. The impact of acquisitions, net of the gain on sale of HollisWealth last year was approximately 2% of this growth. The remaining 6% growth was due mainly to higher banking and credit card fees, trading revenues and income from associated corporations. Partly offsetting were lower gains on the sale of real estate and investment securities, as well as a negative impact of foreign currency translations. Expenses were up 9% year-over-year, or 3% excluding acquisitions. The 3% increase was due primarily to increased investments in technology and regulatory initiatives, business growth-related expenses and the negative impact of foreign currency translations. Partly offsetting were the impact of further savings from cost reduction initiatives. The Bank improved its productivity ratio to 53.2%, down 40 basis points year-over-year on an adjusted basis. The credit quality of our portfolios remained solid, with the PCL ratio on impaired loan of 42 basis points, in line with last year. There were net reversals of provisions on performing loans of about $48 million and then combined with provisions on impaired loans resulted in an adjusted total PCL ratio of 39 basis points. On Slide 10, we provide an evolution of our common equity Tier 1 capital ratio over the last quarter. The Bank reported a CET1 ratio of 11.1%, down approximately 30 basis points from last quarter. The decrease was driven by the completion of acquisitions, which reduced the CET1 ratio by approximately 65 basis points. Partly offsetting the decrease was strong internal capital generation and lower risk-weighted assets.
This quarter risk-weighted assets declined by approximately $11 billion, or 3%, due primarily to reduced positioning in the trading book and other market risk changes that were elevated last quarter.
Foreign exchange translation impacts, fewer defaulted loans and other favorable increases in credit quality partly offset by organic asset growth.
During the quarter, we repurchased $5 million common shares for a total of 8.3 million shares in 2018. The CET1 impact of transactions closing in 2019 is expected to be offset by selective non-core divestitures and strong internal capital generation.
As a result, the common equity Tier 1 ratio is expected to remain about 11% through 2019.
Turning now to the business line results beginning on Slide 11. Canadian Banking reported net income of $1.1 billion, up 4% year-over-year, or 7% adjusting for the impact of acquisition-related costs. The results reflect solid asset and deposit growth, margin expansion, improved credit performance and positive operating leverage. The results of revenues were up 5% from last year, driven by net interest income growth of 6%. The net interest margin was up 4 basis points year-over-year, primarily due to the impact of Bank of Canada rate increases. Sequentially, margins were down 1 basis point, reflecting lowest spreads on residential mortgages and deposits, partly offset by higher credit card spreads. Non-interest income was up 5% due to increases in credit card revenues and credit fees, partly offset by lower real estate gains. Non-interest income from acquisitions was offset by the gain on sale of HollisWealth last year. Loans and acceptances increased 5% from last year, residential mortgages grew 3%, credit card 7% and business loan growth remained strong at 13%. Deposit growth was strong this quarter at 6% year-over-year surpassing loan growth. Full-year residential mortgage growth of 5% was in line with the mid single-digit growth that we previously indicated. The provision for credit losses on impaired loans improved 5 basis points year-over-year, but increased marginally by 1 basis point quarter-over-quarter. On an adjusted basis, expenses increased 5% year-over-year, due to continued investments in technology and regulatory initiatives. The division’s adjusted productivity ratio of 49.5% improved 20 basis points year-over-year. Full-year adjusted operating leverage was strong at 1.9%.
Turning to the next slide on International Banking. Earnings of $712 million in Q4 2018 were up 18% year-over-year on a reported basis and adjusted earnings of $746 million were up 22% year-over-year. 7% of the adjusted earnings growth related to the incremental impact of the business combinations and the alignment of reporting period with the Bank. My comments which follow are on an adjusted and constant currency basis. Q4 results reflected strong asset and deposit growth in the Pacific Alliance, positive operating leverage and good credit quality bolstered by the benefit of the recent acquisitions. The Pacific Alliance had very strong net income growth of 17%. Revenues grew 22%, or 10% adjusting for the benefits of recently closed acquisitions. The Pacific Alliance saw an increase of 28% in revenue year-over-year, or 10% adjusting for the benefits of acquisitions. Loans grew by 29% compared to a year ago, or 10% excluding M&A. Loans in the Pacific Alliance region increased 42% year-over-year, or a strong 13%, excluding acquisitions in both retail and commercial. Net interest margin of 4.52% was down 15 basis points year-over-year, primarily due to the business mix impact of the BBVA acquisition, as we indicated last quarter. The provision for credit loss ratio on impaired loans was up 6 basis points year-over-year. Adjusting for the credit card benefits last year, the PCL ratio improved 14 basis points. Expenses were up 19%, or 7% adjusting for the impact of M&A. The 7% increase was driven by the impact of strong business volume growth, inflation and higher technology costs. Operating leverage was a strong positive 3.1% for the full-year, leading to an improvement in the productivity ratio of approximately 150 basis points.
Moving to Slide 13, Global Banking and Markets. Net income of $416 million was up 6% year-over-year. The benefit of credit recoveries, lower non-interest expenses and the favorable impact of foreign currency translation were partly offset by lower net interest income. Revenues were down marginally 1% year-over-year, mainly reflecting lower net interest income. Net interest income was down 4% year-over-year, primarily due to lower loan fees, as well as lower deposit and lending margins. Non- interest income was in line with last year. Stronger trading revenues were offset by lower underwriting and advisory fees. The PCL ratio improved 13 basis points year-over-year. The improvement was driven by impaired loan provision reversals in Europe, partly offset by new provisions in the United States. Expenses were down 3% year-over-year, driven by lower performance-related compensation, partly offset by higher regulatory and technology investments. The year-over-year pace of growth on regulatory and technology costs have moderated in line with our expectations. I’ll now turn to the other segment on Slide 14, which incorporates the results of group treasury, smaller operating units and certain corporate adjustments. The results also include the net impact of asset-liability management activities.
The other segment reported a net loss of $64 million this quarter. The net loss in the segment increased year-over-year due to significantly lower net gains on the sale of investment securities and lower net interest income from asset-liability management activities, partly offset by lower non-interest expenses. This completes my review of our financial results. I’ll now turn it over to Daniel, who’ll discuss risk management.