Thank you, Brian, and good morning, everyone.
Before reviewing our financial results, I would like to start on Slide 6 and provide an update on the material acquisitions, BBVA Chile, MD Financial and Jarislowsky Fraser. These integrations are proceeding very well as reflected in improved market share, very high customer retention rate and strong performance against integration metrics such as synergies which are on track to meet our targets. In International Banking, our operations in Chile have seen an increase in the combined market share, a significantly lower productivity ratio and strong growth in earnings following the acquisition of BBVA Chile. In Wealth Management, both MD Financial and Jarislowsky Fraser have experienced positive asset growth since they were acquired. MD surpassed $50 billion in assets during the quarter for the first time in its history. Customer retention rates are higher quarter-over-quarter and about pre-acquisition levels and we have co-located Scotia Private Banking in all major MD offices in Canada.
This quarter the acquisitions contributed approximately $60 million to the bank's earnings.
We are well on our way to exceed our goal of $0.15 of adjusted diluted EPS accretion in 2020.
Turning to the financial results, I would like to draw your attention to our new disclosure on Slide 20 titled Other Items Impacting Financial Results, we’ve clipped the items we have discussed in prior quarters in our MD&A and investor presentation but did not adjust reported earnings.
Turning now to the Q2 2019 key financial performance on Slide 7. All my comments set follow including the discussion of business line results will be on an adjusted basis that excludes acquisition and divestiture-related amounts. The bank delivered $2.3 billion in earnings and diluted EPS of $1.70 for the quarter, down slightly compared to last quarter -- last year. Revenue increased 8% from last year, primarily driven by the impact of acquisitions. Net interest income was up 6% driven mostly from the impact of acquisitions. Also contributing to the increase was growth in commercial and retail lending in International Banking, solid loan and deposit growth in Canadian Banking as well as higher corporate loans in Global Banking and Markets. These increases were primarily offset by lower contributions from assets liability management activities. The core banking margin declined 2 basis points versus last year, primarily driven by the impact of a flattening yield curve on our asset liability management activities. The bank earned higher margin from International Banking, from change in business mix, driven by the acquisitions and in Canadian Banking primarily from deposits that were partly offset by lower margins in Global Banking and Markets. Non-interest income grew 11% compared to last year to approximately [Technical Difficulty]. Also contributing to the growth was higher banking revenues, wealth management and underwriting fees, higher income from associated corporations, partially offset by the impact of the adoption of IFRS 15. Expenses were up 8% year-over-year. The increase was largely driven by the impact of acquisitions, partially offset by the adoption of IFRS 15 on the expense line.
Excluding the impacts of these items, expense were only up 1% year-over-year, reflecting the bank’s efforts to prudently manage its expense growth by prioritizing its regulatory and business growth related investments. Consequently, the bank's productivity ratio declined to 52.3%, an improvement of 20 basis points year-over-year.
Our PCL ratio on impaired loans was 49 basis points, up 3 basis points from last year. There were net provisions on performing loans of $22 million and then combined with provisions on impaired loans resulted in a total PCL ratio of 51 basis points.
Our tax rate was in line with last year and in line with our outlook of 21% to 25% through 2019. On Slide 8, we provide an evolution of our CET1 capital ratio over the last quarter. The bank reported a Common Equity Tier 1 ratio of 11.1% in line with the last quarter. The bank’s strong internal capital generation of 21 basis points was deployed in organic risk weighted assets growth across the businesses, absorbed by the net impact from the bank's acquisitions which closed during the year and offset by share buybacks activities and increased employee pension and post retirement benefits liability that was impacted by the discount rate changes in the quarter. Risk weighted assets increased by 1.6%.
During the quarter we repurchased 4 million common shares during -- or 7.25 million shares on a year-to-date basis, at an average price of $72.19 per share. In the last 12 months, the bankers repurchased and cancelled 13.25 million shares. The pro forma impact of announced non-core divestitures that are yet to close will increase the CET1 ratio to be approximately 11.3%. The monetization of our significant investment in international bank would further increase our pro forma CET1 ratio approximately 25 basis points.
We are pleased with the pace of capital rebuild driven by strong internal capital generation, prudent management of risk weighted asset growth and the divestitures that will continue to improve the bank’s CET1 ratio.
In addition, the Bank of Xi’an in China, in which we have an 18% ownership position, recently completed its initial public offering.
Our current market valuations, our equity stake stands at over $1.2 billion and provides additional flexibility for capital over the medium-term.
Turning now to the business lines results beginning on Slide 9. Canadian Banking reported adjusted net income of $1.1 billion, up 4% year-over-year. The Q2 2018 benefit from aligning the reporting of our Canadian insurance business and higher level of real estate gains and reduced the division’s earnings growth by approximately 4%.
As you can see on Slide 20, the earnings growth rate in the second half of 2019 will benefit from lower real estate gains in the same period last year. In retail lending, residential mortgages grew 2%, personal loans 3% and credit cards 6%. Meanwhile, business lending grew 9%.
Given a slower start to the housing market in 2019, we would expect low single-digit volume growth for the year in mortgages. Deposits grew a strong 11% and for the third straight quarter outpaced the asset growth. The net interest margin was up 3 basis points year-over-year and 2 basis points quarter-over-quarter driven by higher deposit subscribers.
We expect margins to be stable to modestly higher for the balance of the year. Non-interest income was up 5% due to higher fee income from banking, wealth management business and higher credit fees. The lower level of real estate gains and the alignment of the reporting of our Canadian insurance business last year reduced this growth by 4%. Wealth management adjusted earnings increased a strong 26% year-over-year, driven by contributions from recent acquisitions, as well as the core businesses. AUM growth was strong at 6.3% quarter-over-quarter, reflecting positive net sales and market appreciation. We delivered positive operating average of 1.1% this quarter through prudent expense management. Consequently, the productivity ratio improved 60 basis points to 50%.
Turning to the next slide on International Banking. My comments are based on results on a constant dollar basis. Adjusted earnings of $787 million were up 14% year-over-year, driven by strong contributions from organic and acquisition-related asset growth, well above our medium-term adjusted net income growth target of 9% plus.Q2 results reflected strong asset growth in the Pacific Alliance, positive marketing leverage, good credit quality and growing digital sales. The Pacific Alliance had very strong net income growth of 11% driven by strong performance in Chile, double-digit growth Peru and improved portfolio quality in Colombia.
Our GBM operations in Latin America were also very strong, up more than 25% year-over-year, driven by both by our capital markets and corporate banking businesses. Revenue grew 22% with net interest income up 20% and non-interest income growing at 26%. Net interest income growth was driven by loan growth in the Pacific Alliance region which increased 42% year-over-year, including our acquisitions in Chile and Colombia. Non-interest income growth was driven by higher banking and credit card fees and increased contributions from associated corporations. More than three quarters of the expense growth was from acquisitions, with the remaining growth in line with business volume growth and impact of inflation. Prudent expense management contributed to the productivity ratio improving by 210 basis points year-over-year. Operating leverage was strong at positive 5% for the quarter, marking the 18th straight quarter of positive operating leverage.
Moving to Slide 11, Global Banking and Markets. Net income of $420 million was up a strong 25% from Q1 due primarily to better market conditions. Net income was down 6% year-over-year while revenues were in line with last year, higher non-interest expenses and lower credit loss recoveries impacted the net earnings. Corporate loan growth was strong up 16% year-over-year reflecting strong growth in the US and Canada. Overall the M&A and corporate lending pipelines remained strong. Lending margins remained stable while deposit margins were lower compared to last year. Non-interest income grew mainly due to higher trading revenues and fixed income and improved underwriting and credit fees. Expenses were down 8% quarter-over-quarter and up a modest 5% year-over-year. The year-over-year increase was driven by higher regulatory and technology investments, partially offset by lower performance-related compensation. The productivity ratio improved by 840 basis points versus last quarter to 51.6%. I will turn now to the Other segment on Slide 12, which incorporates the results of group treasury, smaller operating units and certain corporate adjustments. The results also include the net gain on divestitures and the net impact of asset and liability management activities. The Other segment reported lower revenues from asset liability management activities and lower returns from our holdings of high quality liquid assets that were negatively impacted by the flattening yield curve.
Some pre-funding done late last quarter of TLAC eligible instruments to meet the 2021 TLAC requirements also impacted the results this quarter.
Given the current shape of the yield curve, we expect continued margin compression on our high quality liquid asset portfolio. This completes my review of our financial results. I’ll now turn it over to Daniel who will discuss risk management.