Thank you, Daniel, and good morning, everyone. To begin my remarks on slide 19, I would like to again thank our customers for their loyalty and understanding, and our employees for their continued hard work and dedication. I would also like to thank our shareholders for their support as we navigate this environment. It has been a trying time for all that we are beginning to see some positive signs which provide cause for optimism as we look ahead. I would like to frame my comments on our results today by looking back to our Q2 earnings call in late May and focusing on what has changed. At that time, the outlook was highly uncertain, lockdowns were strict, governments were introducing new policy actions almost daily, retail customer assistance programs for highly active and corporate customers have been actively drawing down on their loan facilities, which increased the risk-weighted assets. In this uncertain environment, the Bank was well prepared. We were operationally ready and transitioned quickly to remote work environments while 90 -- while keeping 90% of our branch networks open.
In addition, we had completed all divestitures, which were part of our strategic repositioning. We were also well prepared for the sudden increase in market volatility by being prudent in the amount of market risk we were taking before the pandemic struck. Today, business conditions have begun to slowly improve across our footprint, although many challenges remain due to the timing and uneven impact of the recovery. That’s said, our outlook today is more positive and has improved. In Canada, progress in containing the virus has been steady with all provinces entering Stage 3 of the reopening. A significant amount of COVID-19-related losses in economic output have already been reversed. Household spending has returned to more normal levels. The housing market has experienced strong year-over-year increases in both sales and average sales price. And Canadian auto sales posted a third straight month of recovery in July.
In fact, just under half of the reduction in GDP due to the virus has been reversed.
We are seeing that improvement reflected in our day-to-day banking, with solid 65 growth in mortgages and 10% growth in our Commercial Banking business. From a credit risk perspective, we are well-positioned with our unsecured lending exposure being among the lowest of our peers.
Our current outlook is for the rebound in economic activities that continue for the balance of this year and for GDP growth to average 5.4% in 2021. In the Pacific Alliance, the delayed spread of the virus means a rebound in economic activity is more nascent at this stage, despite substantial policy actions by governments and central banks. Chile has managed to flatten the COVID and the trend improved and Mexico is down, while much has been written about the spread of the virus in Latin America particularly in Brazil. The per capita rates of confirmed cases in the Pacific Alliance are comparable or in some cases less than developed nations including the United States. This is illustrated on slide 20.
As we look ahead, the substantial stimulus provided by policy actions and the steady reopening of economies combined with a strong rebound in prices for important commodities such as oil, copper and gold are all positive to the outlook in the Pacific Alliance. Slide 21 summarizes policy actions and our economic outlook for the Pacific Alliance.
Our current outlook which was updated after Q3 is for a return to positive GDP growth in 2021 with growth rates averaging 5.3%. This represents an improvement from our previous forecasts of 3.7%.
We are confident that the Pacific Alliance countries will prove to be as resilient today as they have been in the past.
Turning now to slide 22, across our business, we are seeing positive trends in both Retail and Wholesale customer activity.
For example we have seen debit and credit card transaction volumes return to more normal levels in several of our core markets.
As Daniel highlighted, we are experiencing a steady decline in customer assistance balances along with positive trends in payment activity.
We are also provisioned conservatively to deal with potential delinquencies with customer assistance programs come to an end. The utilization of corporate loan facilities has largely returned to pre-COVID levels as the bond market has normalized.
We have assisted many corporate customers and taking advantage of record low rates to pay down corporate loan facilities and increased their available liquidity for future growth. The net result is a return to normal lending volumes and improved new issuance. I would now like to close my remarks by focusing on a few key areas from today’s presentation, which highlights the strength of the bank.
The first area is credit risk. I would strongly encourage everybody reviewing our results to focus on the balance sheet where we are very well-provisioned.
As Daniel outlined, our allowances for credit losses now stands at $7.4 billion, an increase of $2.3 billion over the last two quarters and now represent two and a half years of loan loss coverage. Roughly 90% of the increase in allowances is related to performing loans.
Our forward-looking indicators are weighed towards pessimistic scenarios and our assumptions are very conservative. And we have factored in possible delinquencies associated with customers exiting assistance programs and government support programs moderating. In summary, we believe Q3 was the peak for the Bank’s loan loss provisioning.
The second area is capital, as Raj mentioned, the Bank’s common equity Tier 1 ratio improved in Q3 from 10.9% to 11.3%, demonstrating the resiliency of our capital in a stressed operating environment and our prudent approach. It is now 230 basis points above the regulatory minimum.
The third area is expense management. In a challenging revenue environment featuring record-low interest rates, strong expense management is critical.
As Raj highlighted, expenses declined across the Bank quarter-over-quarter and year-over-year.
Our productivity ratio of 51.4% is the lowest in 10 quarters. This reflects our commitment to expense management, our positioning in digital and our substantial investments in technology. In a very challenging environment, the Bank has supported our customers provision conservatively, demonstrated strong expense management and increased its capital and liquidity ratios.
As a result, we are very well-positioned for the economic recovery. With that, I will turn it back to Phil for the Q&A.