Thank you, Phil and good morning everyone. I would like to begin my remarks today by discussing the COVID-19 pandemic and the impact it has had on our employees, our customers and the communities we serve.
Firstly, I would like to sincerely thank our customers for their loyalty, patience and understanding.
As your bank, we are here to support you. I would also like to recognize our employees for their dedication and commitment and support of our customers, whether it is in our branches, call centers or operation centers, Scotiabank employees have gone above and beyond to provide service, advice and relief to millions of loyal Scotiabank customers. On behalf of the bank’s leadership team, I would like to extend my sincere thanks to all our employees for providing customers with the critical banking services they need.
We are proud and appreciative of their efforts.
I would also like to recognize the very strong policy response from the Bank of Canada and the Government of Canada. The response to the crisis has been swift and characterized by a high level of coordination and cooperation between policymakers in the banking sector. Since the pandemic began, the bank was quick to recognize the threat and adapt quickly. We maintained a close to normal operations as possible to support our customers, while also ensuring the safety of our employees.
We have a business continuity planning beginning in late February as the threat of the pandemic became more apparent.
Our considerable technology investments in recent years, has played a key role in our response to the crisis and our operational resilience. It has allowed over 80% of our employees, excluding branch staff to shift quickly and smoothly to remote work environments, while our technology teams have rapidly developed new online tools to assist customers with relief programs. The net result is that digital banking has emerged as the most popular service channel for our customers during the pandemic.
We have also supported our customers by keeping approximately 90% of our global branch network open with appropriate safety measures and by adding capacity through our call centers.
I have often said the role of banking is to act as a shock absorber in times of crisis that was true in previous times of difficulty and it is certainly true today. To-date, we have provided financial relief to over 300,000 customers here in Canada on loans totaling over $40 billion. In the Pacific Alliance, we have processed over 2 million customer assistance applications on loans totaling approximately $20 billion. To support businesses, we have provided additional loans of over $45 billion to small businesses and to corporate and commercial clients across our footprint. The growth in loans represents an increase of 6% in our loan book in the quarter.
Our total lending support to customers totals over $100 billion.
We have also facilitated access to capital markets financing for businesses totaling an additional $300 billion. I would like to point out that request for payment deferrals peaked in the first week of April here at Canada and we are now tracking at significantly lower levels.
We have witnessed a similar pattern in Latin America depending on the timing of deferral programs in each country. Consumer spending in Canada as measured by daily credit and debit card spending has also improved towards pre-pandemic levels. Draw-downs on business lending facilities peaked in late March and we are now back, to normal pre-pandemic levels. A significant percentage of funds that were drawn down on business lending facilities have returned to the bank as wholesale deposits.
We are also beginning to see repayments as debt capital markets remains very active.
We are also proud to support our communities across our footprint by committing over $15 million to support people who are most at risk during the pandemic, including our ongoing support of hospitals and healthcare professionals. They deserve our gratitude for their courage in the face of this unprecedented public health crisis.
For the bank to support its customers and communities, it must be financially strong.
While our second quarter results were significantly impacted by COVID-19, the bank and all its operating divisions continue to be profitable.
We are well-positioned from a capital and liquidity perspective and we are appropriately reserved for potential credit losses.
Our common equity Tier 1 ratio was 10.9% in the quarter, which is comfortably in excess of the regulatory minimum and more than enough to accommodate expected customer demand and RWA inflation. With OSFI’s 125 basis point reduction in the domestic stability buffer, the 1.9% excess common equity Tier 1 ratio represents over $8 billion of additional capital or $90 billion of additional RWA growth from current levels.
The bank’s liquidity position is also strong with our liquidity coverage ratio at 132%, which is well above recent quarters. The bank’s pool of high-quality liquid assets stands at $188 billion, which is well above the level of recent years and appropriate for the current market conditions.
We also carry high levels of liquidity across our Pacific Alliance countries with liquidity coverage ratios between 150% and 200%. The bank continues to be well funded with strong growth in deposits and with steady access to wholesale funding.
While funding markets were volatile at the outset of the pandemic, we have been able to maintain a robust funding program across multiple currencies in both secured and unsecured markets.
In addition, it is worth noting that funding spreads have been narrowing since the end of March as the pandemic has become better understood and policy actions by central banks and governments have begun to take effect.
In terms of credit, the bank is appropriate to reserve for potential credit losses.
We have added over $1 billion or 19% to total allowances this quarter, which now stands at over $6 billion. Recall that we added a fourth more pessimistic scenario in Q1, which added over $150 million to allowances.
We continue to provision early and conservatively.
Our asset quality remains strong with high levels of secured and investment grade assets.
We are also highly diversified by product, by sector and by geography.
Our exposure to sectors most impacted by COVID-19 is limited at 4.7% of total loans reflecting substantial de-risking efforts in prior years. Daniel will provide further details on our loan exposures.
Revenue growth in the quarter was slowed by lower retail customer activity due to the shutdowns related to the pandemic.
However, strong results in GBM and very good results in wealth management helped to partially offset this weakness. This highlights the benefits of our diversified business model. Expenses were higher as we made certain investments to support our employees with higher compensation, enhanced workplace safety measures, and remote work environments. Raj will discuss our financial results in detail following my remarks.
I have commented many times on the positive qualities of our six core markets of Canada, the United States and the Pacific Alliance countries. The response to the pandemic has illustrated these positive qualities further as each country was quick to introduce similarly substantial fiscal and monetary policy actions to mitigate the economic impact of the virus. This came in the form of lower interest rates, fiscal stimulus and other support measures. Critically, these countries have the fiscal capacity and the institutional strength to respond quickly and effectively.
Over the long-term, their resilience, young populations and the increasing importance of diversified supply chains will prove to be beneficial for their future economic growth.
As we have strived to support our customers through our channels during the pandemic, digital banking has emerged as the preferred channel for our customers. Over 40% of payment deferral requests in Canada and 80% of payment deferral requests in international have been processed online.
We have also seen strong growth at Tangerine and iTRADE. This has also helped to drive an acceleration in digital adoption by our customers.
While the current environment makes the outlook highly uncertain, our current expectation is for negative economic growth in our core markets for the balance of 2020 followed by a return to stronger levels of economic growth in 2021. This reflects both the gradual abatement of the pandemic, an orderly reopening of economies and the positive impact of unprecedented relief programs across our core markets.
Although we expect revenue in P&C banking to be lower in Q3 and that loan loss provisions will be elevated from normal levels for the balance of the year, we also expect all four business lines to remain profitable.
I will now pass the call to Raj who will review our financial results and I will return with some closing remarks at the end of Q&A. Thanks.