#1Scotiabank Investor Presentation Second Quarter, 2010 June 1, 2010 Caution Regarding Forward-Looking Statements Forward-looking statements Our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include comments with respect to the Bank's objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), and the outlook for the Bank's businesses and for the Canadian, United States and global economies. Such statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intent," "estimate," "plan," "may increase," "may fluctuate," and similar expressions of future or conditional verbs, such as "will," "should," "would" and "could." By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond our control, could cause actual results to differ materially from the estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and reputational risks; the risk that the Bank's risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank's ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; global capital markets activity; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; and the Bank's anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements. For more information, see the discussion starting on page 62 of the Bank's 2009 Annual Report. The preceding list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf. The "Outlook" sections in this document are based on the Bank's views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. Additional information relating to the Bank, including the Bank's Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov. Scotiabank 2#2Scotiabank Overview Rick Waugh President & Chief Executive Officer Q2 2010 Overview . Record quarter - Net income: $1,097 million EPS up 26% vs. prior year, and 12% vs. Q1 Strong ROE: 19.9% Continued strong risk management performance Continuing to make accretive & disciplined acquisitions Thanachart Bank acquisition of Siam City Bank - Acquisition of R-G Premier Bank in Puerto Rico - Both have very attractive risk/return profiles Scotiabank 4#3Scotiabank Financial Review Luc Vanneste Executive Vice-President & Chief Financial Officer Very Strong Quarter Q2/10 Q1/10 Q2/10 vs. Q1/10 Q2/10 vs. Q2/09 Q2/09 1,097 988 11% Net Income ($MM) 872 26% $1.02 $0.91 12% EPS $0.81 26% 19.9% 17.4% +250 bps ROE 16.8% +310 bps 49.9% 50.5% (60) bps Productivity Ratio 51.4% (150) bps Year-over-year earnings comparison Q2 earnings benefited from... • Significantly lower PCLS • Strong contributions from personal & commercial banking, wealth management • Higher securities gains & trading Scotiabank Partly offset by... • Negative impact of FX ⚫ Lower securitization revenues Higher expenses 6#4Solid Revenues Revenues (TEB) ($ millions) Q2/10 vs. Q2/09 Revenues ■ Net interest income down 2% Negative impact of FX + Asset growth, 2 bps increase in margin ■ Other income up 20% 3,981 3,944 3,673 1,759 1,509 1,815 - 2,164 2,222 2,129 Q2/09 Q1/10 Q2/10 Other Income Net Interest Income (TEB) + Higher securities gains, fewer write-downs + Increase in trading & wealth management revenues Lower securitization revenues vs. record Q2/09 Negative impact of FX Q2/10 vs. Q1/10 Revenues ■ Net interest income down 4% - Shorter quarter - Slight decrease in margin ■ Other income up 3% + Higher securities gains + Stronger trading & wealth management revenues - Lower underwriting & transaction-based fees - Negative impact of FX Scotiabank Disciplined Expense Management Non-Interest Expenses ($ millions) Q2/10 vs. Q2/09 Expenses " Expenses up 4% 2,009 1,967 1,886 1,024 1,187 1,143 379 371 360 483 451 464 Q2/09 Q1/10 " Higher performance & stock-based compensation Increase in advertising & promotion spending Impact of acquisitions + Positive impact of FX Q2/10 - Salaries & employee benefits ■Premises & technology Other Scotiabank Q2/10 vs. Q1/10 Expenses Expenses down 2% + Lower stock-based compensation + Positive impact of FX & shorter quarter Higher performance-based compensation 7 8#5Maintained Capital Ratios 11.2 11.2 10.4 10.7 TCE (%) 9.6 Tier 1 (%) 8.8 8.8 8.2 7.9 7.2 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 • • • YTD internal capital generation of $980MM Increased DRIP participation: $172MM (vs. $132MM in Q1) $265MM preferred share issue Investments in Thailand, Puerto Rico Scotiabank Canadian Banking: Positive Momentum Continues Net Income ($ millions) 560 584 Q2/10 vs. Q2/09 ■ Revenues up 17% + 17 bps increase in margin, volume growth + Higher wealth management revenues ■ PCLs flat " Expenses up 6% - - Volume related costs Performance-based compensation 410 Q2/09 Q1/10 Q2/10 Scotiabank Q2/10 vs. Q1/10 ■ Revenues up 2% + Increase in margin + Higher wealth management revenues ▪ PCLs up $9MM, delinquencies trending down Expenses down 1% + Shorter quarter Discretionary & growth related expenses 9 10#6International Banking: Earning Through Challenges Net Income ($ millions) 332 294 288 Q2/10 vs. Q2/09 ■ Revenues down 3% (up 10% ex. FX) + Wider loan spreads in Latin America + $36MM gain on sale of shares in Siam City Bank Negative impact of FI ■ PCLs up $58MM Expenses down 7% (up 4% ex. FX) - Higher compensation costs - Increased professional fees & business taxes Q2/10 vs. Q1/10 Revenues down 8% (down 6% ex. FX) Margin compression in the Caribbean - Lower treasury results in Mexico & Chile - Negative impact of financial instruments (FI) + Higher insurance revenues in Caribbean + $36MM gain on sale of shares in Siam City Bank ■ PCLs down $4MM " Q2/09 Q1/10 Q2/10 " Significantly lower tax rate Expenses down 4% + Positive impact of FX + Lower professional fees & seasonality Scotiabank 11 Scotia Capital: Strong Quarter, Excellent Credit Performance Net Income ($ millions) 328 381 Q2/09 Q1/10 391 Q2/10 Q2/10 vs. Q2/09 ■ Revenues up 1% + Higher trading revenues · Significantly lower loan volumes PCLs down $183MM (1) Expenses up 29% - Higher performance-based compensation - Increased salaries & technology expenses Q2/10 vs. Q1/10 Revenues down 5% - Lower loan volumes & slightly reduced spreads - Continued strong trading revenues, but slightly lower than Q1/10 ■ PCLs down $38MM (1) Expenses down 3% + Lower performance-based compensation (1) Q2/10 included an auto sectoral reversal of $19MM. Q2/09 included an auto sectoral provision of $50MM. Scotiabank 12#7Other Segment (1) ($ millions) Funding Net Interest Income Broker Deposits (2) Net Securitization Revenues (3) AFS Securities Writedowns Financial Instruments (4) Q2/10 Q1/10 Q2/09 (105) (114) (67) -- -- (48) (112) (135) 67 (11) (36) (97) 24 17 -- General Provision Expenses & Net Other Items Taxes (Excl. TEB Offset) 36 -- -- 21 355 (27) (35) 55 59 9 Sub-Total (166) (192) (198) Ontario Tax writedown Total Other (166) (55) (247) -- (198) (1) Includes Group Treasury and other corporate items, which are not allocated to a business line (2) Effective Q1/10, Broker deposits were transferred to Canadian Banking (3) Represents the impact to the Other segment of CMB securitization revenues recognized in other income, and the reduction in mortgage net interest income earned as a result of removing the mortgages from the Balance Sheet (4) In Q2/09 Financial Instruments was reported in Funding Net Interest Income, as well as Net Other Items Scotiabank Scotiabank Risk Review Brian Porter Group Head, Risk & Treasury 13#8Q2/10 Risk Overview • • • Risk in credit portfolios continues to be well-managed Further decline in specific provisions - Net impaired loan formations slowing - Reversed $19 million of sectoral provision set up in 2009 Improved coverage ratios Limited downside risk to loans from R-G Premier Bank acquisition Negligible exposure to European Sovereigns - Portugal, Ireland, Italy, Greece, Spain Trading risk & VaR well controlled and within limits Scotiabank Further Decline in Specific Provisions 15 ($ millions) Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Canadian Retail 126 137 159 140 149 Canadian Commercial 52 33 33 41 40 178 170 192 181 189 International Retail 125 146 122 130 125 International Commercial (10) 33 45 47 48 115 179 167 177 173 Scotia Capital Total 109 117 65 14 (5) 402 466 424 372 357 PCL ratio (bps) Scotiabank 4 54 64 63 55 55 55 559 16#9Net Impaired Loan Formations Slowing ($ millions) Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Canadian Retail 246 167 205 184 154 Canadian Commercial 98 67 24 42 15 344 234 229 226 169 International Retail 264 276 254 259 184 International Commercial 93 232 5 135 15 357 508 259 394 199 Scotia Capital 303 161 139 (109) (68) Total 1,004 903 627 511 300 Scotiabank Improved Coverage Ratios Q2/10 Q1/10 Q2/09 Earnings coverage of PCL (1) 5.6x 5.1x 3.5x Total Allowance as a % of GIL - ex. R-G Premier Bank acquisition 81% 71% 79% 75% Total Allowance as a % of Loans & BAS - ex. R-G Premier Bank acquisition 1.52% 1.06% 0.92% 1.04% (1) Pre-tax, pre-provision income to total PCL Scotiabank 17 18#10Limited Downside Risk to Loans from R-G Premier Bank Acquisition Gross Net Allowance ($ millions) Loans Allowance Loans Coverage Residential mortgages 3,352 711 2,641 21% Business loans 2,031 711 1,320 35% 5,383 1,422 3,961 26% Scotiabank 80% FDIC loss coverage under loss-sharing agreement Negligible Exposure to European Sovereigns (balances at Q2/10, US$ millions) Country Portugal Exposure Ireland 122 Italy Greece Spain 102 Scotiabank 19 20 20#11Risk Outlook - Second Half 2010 • Asset quality remains strong Retail and commercial portfolios performing as expected Corporate portfolios performing better than expected Second Half 2010 provisions Expect credit trends to improve but with some degree of variability Scotiabank Scotiabank Canadian Banking Second Half 2010 Outlook Chris Hodgson Group Head, Canadian Banking 21#12Canadian Banking: Second Half 2010 Outlook • • Core businesses continue to grow and benefit from strategic investments Stable margins Provisions for credit losses to remain elevated but will reflect declining delinquencies Expenses remain well managed but will increase with investment in selective growth opportunities Scotiabank Scotiabank International Banking Second Half 2010 Outlook Rob Pitfield Group Head, International Banking 23#13International Banking: Second Half 2010 Outlook Asset and revenue growth as economies rebound • Mixed outlook for margin • Continued focus on risk management, expenses Acquisitions accretive to earnings Scotiabank Scotiabank Scotia Capital Second Half 2010 Outlook Steve McDonald Group Head, Global Corporate & Investment Banking & Co-CEO, Scotia Capital 25#14Scotia Capital: Second Half 2010 Outlook • • • • Loan portfolio continues to perform well and improve Loan volumes contracting but at a slower pace Loan loss provisions were better than expected, but unlikely to remain this low Capital markets may be more challenging but should benefit from initiatives underway Scotiabank Scotiabank Appendix 27#15Stable Net Interest Margin (%) 1.76 1.76 1.71 1.74 1.73 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q2 margin benefited from... • Wider spreads on retail assets in Canadian Banking Offset by... • Lower spreads in International & Corporate Banking • Increase in low yielding DWBs Scotiabank 29 Canadian Banking: Strong Y/Y Performance in Retail & Wealth Mgmt. Revenues (TEB) ($ millions) Q2/10 vs. Q2/09 Revenues Retail & Small Business 1,951 1,921 + Higher margin 1,671 1,192 1,201 1,045 408 407 382 + Asset & deposit growth Commercial Banking + Net gain on investment securities + Widespread growth in fee based revenues Wealth Management + Full service brokerage & mutual fund fees + Increased contributions from CI & DW Q2/10 vs. Q1/10 Revenues +5 bps increase in margin, asset growth 321 343 244 + Higher wealth management revenues: Q2/09 Q2/10 Q1/10 + Increased contribution from CI, benefiting from tax recovery Retail & Small Business Commercial Banking Wealth Management Scotiabank 30#16Canadian Banking: Volume Growth Average Balances ($ billions) Q2/10 Q1/10 Q2/09 Y/Y Q/Q Residential Mortgages (1) 126.8 125.1 118.0 8.8 1.7 Personal Loans 38.0 37.5 34.1 3.9 0.5 Credit Cards (2) 9.2 9.3 9.1 0.1 (0.1) Business Loans & 24.1 24.0 25.7 (1.6) 100 0.1 Acceptances Personal Deposits (3) 104.6 104.3 92.3 12.3 0.3 Non-Personal Deposits 57.7 58.4 48.9 8.8 (0.7) Wealth Mgmt. AUA (Spot) 148.9 141.6 116.0 32.9 7.3 (1) Before securitization (2) Includes ScotiaLine VISA (3) Effective November 1, 2009, $10 billion of broker sourced deposits were transferred from the Other segment into Canadian Banking. Scotiabank Canadian Banking: Market Share Market Share (%) 1 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Residential Mortgages 20.02 20.06 20.14 20.23 20.28 Total Personal Lending 18.37 18.29 18.30 18.29 18.26 Total Personal Deposits 11.21 11.07 10.85 10.87 10.87 Mutual Funds 7.63 7.93 8.35 8.84 9.10 (1) Market share statistics are issued on a one-month lag basis. (Q2 10: March 2010) Total Personal Lending market share is based on a comparison with the big six banks. Total Personal Deposits market share is based on a comparison with the total industry. Mutual Funds market share is based on a comparison with total banks. Sources: Mutual Funds - IFIC; Personal Lending and Personal Deposits - Bank of Canada Scotiabank 32 32 31#17International Banking: Challenging Economic Environment Revenues (TEB) ($ millions) 1,374 1,308 1,269 336 295 300 480 503 437 510 558 532 Q2/09 Q1/10 Mexico Q2/10 Mexico Q2/10 vs. Q2/09 Revenues + Loss on sale of credit card portfolio in Q2/09 - Decrease in Commercial loan volumes ■ Caribbean & Central America - Lower loan balances + Higher margins ■ Latin America & Asia + $36MM gain on sale of shares in Siam City Bank + Increased contribution from T-Bank ■ Mexico Q2/10 vs. Q1/10 Revenues - Lower Commercial credit fees - Gain from sale of pension business in Q1 ■ Caribbean & Central America - Margin compression + Increased insurance revenues ■ Latin America & Asia - Negative impact of FI Caribbean & Central America Latin America & Asia Scotiabank + $36MM gain on sale of shares in Siam City Bank + Loss on investment in Venezuelan affiliate in Q1 33 Scotia Capital: Strong Trading Revenues Revenues (TEB) ($ millions) 900 847 858 400 503 500 447 397 358 Q2/09 Q1/10 Q2/10 Global Capital Markets Global Corporate & Investment Banking Scotiabank Q2/10 vs. Q2/09 Revenues Global Capital Markets - + Higher derivatives & institutional equity revenues Lower fixed income & precious metals revenues Global Corporate & Investment Banking - Significantly lower loan volumes, lower fee income + Wider lending spreads, increased loan origination fees Q2/10 vs. Q1/10 Revenues Global Capital Markets + Strong quarter for institutional equity + Higher fixed income & FX revenues - Lower derivatives & precious metals revenues Global Corporate & Investment Banking - - Lower loan volumes & slightly reduced spreads Decreased other income + Higher loan origination fees 34#18Economic Outlook in Key Markets Real GDP (Annual % Change) 2010F 2009 2008 2000-07 Avg. Mexico 4.8 (6.5) 1.3 2.9 Peru 6.6 0.9 9.8 5.1 Chile 4.2 (1.5) 3.7 4.4 Jamaica (0.5) (2.8) (0.9) 1.5 Trinidad & Tobago 2.0 (3.0) 2.3 8.2 Costa Rica 3.0 (1.3) 2.9 4.7 Dominican Republic 3.5 3.0 5.3 5.4 Thailand 4.5 (2.3) 2.9 4.9 2010E 2009F 2008 2000-07 Avg. Canada 3.6 (2.5) 0.4 2.9 U.S. 3.4 (2.4) 0.4 2.6 Source: Scotia Economics, as of June 1st Scotiabank 35 Unrealized Securities Gains ($ millions) Q2/10 Q1/10 Emerging Market Debt Other Debt Equities 375 383 255 672 233 190 863 1,245 Net Fair Value of Derivative Instruments (67) (217) and Other Hedge Amounts Total 796 1,028 Scotiabank 36#19Trend in PCL Ratios (Specific PCL as % average of loans & BAs) Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Canadian Banking Retail 0.32 0.33 0.37 0.32 0.35 Commercial 0.83 0.52 0.55 0.68 0.68 Total 0.39 0.36 0.40 0.37 0.39 International Banking Retail 2.17 2.59 2.30 2.41 2.42 Commercial (0.09) 0.32 0.48 0.50 0.53 Total 0.69 1.13 1.13 1.19 1.22 Scotia Capital Corporate Banking 0.80 1.01 0.65 0.15 (0.07) All Bank 0.54 0.64 0.63 0.55 0.55 Scotiabank 37 Provisions: Consistently Outperforming Canadian Peers Specific PCL as a % of Average Loans & BAS (basis points) 100 80 60 40 40 20 20 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 - Scotiabank -4 Cdn. Bank Peers 0 Scotiabank 38#20Trend in Specific Provisions ($ millions) 500 400 300 200 100 0 Q2/07 Q3/07 Q4/07 Scotiabank Q1/08 Q2/08 Q3/08 Q4/08 Specific PCLS Specific PCLs as a % of Avg. Loans & BAs Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Trend in Net Impaired Loan Formations ($ millions) 1,200 1,000 800- 600 400 200 0 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Scotiabank 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 40 39#21Trend in Gross Impaired Loans ($ millions). 6,000 5,000 4,000 3,000 2,000 1,000 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 GILS ex. R-G GILS as a % of Loans & BAs ex. R-G IIIIII R-G Premier Bank GILS as a % of Loans & BAS Scotiabank Canadian Retail: Loans and Provisions (balances at Q2/10, $ billions) 128 Total = $173B -- 92% secured 24 12 2.00% 1.50% - 1.00% 0.50% 0.00% 9 41 Mortgages(1) % secured PCL 100% Lines of Credit 69% Personal Loans 96% Credit Cards(2) 36% Q2/10 Q1/10 Q2/10 $ millions 1 1 30 Q1/10 26 Q2/10 60 Q1/10 Q2/10 61 57 Q1/10 52 % of avg. <1 <1 53 45 208 213 254 221 loans (bps) (1) Before securitizations of $16 billion & mortgages converted to MBS of $18 billion; 52% insured (including $11 billion portfolio insurance); LTV in mid-50s for uninsured portfolio Scotiabank (2) Includes $6 billion of Scotialine VISA 42#22International Retail: Loans and Provisions (balances at Q2/10, $ billions) 9.5 Total Portfolio = $21B 2.7 76% secured 0.7 Personal Loans (total = $6.5B) Credit Cards (total = $1.7B) ■Mortgages (total = $12.7B) 4.9 4.2 1.2 -0.4 6.1 14 0.1 2.3 3.3 1.2 2.7 0.5 0.6 C&CA (1) Mexico Chile Peru % of total 46% 23% 20% 11% PCL Q2/10 Q1/10 Q2/10 Q1/10 Q2/10 Q1/10 Q2/10 Q1/10 $ millions 31 35 41 48 22 22 31 25 % of avg. 130 140 346 403 208 205 538 426 loans (bps) (1) Caribbean and Central America - excludes R-G Premier Bank Scotiabank International Commercial: Lending Portfolio Q2/10 = $34 billion Other 7% Mexico 11% Chile 15% Peru 10% Asia/Pacific -(10 countries) 26% Caribbean Central America 31% Well secured Portfolios in Asia/Pacific, Mexico and Peru are performing well Closely monitoring portfolios in the Caribbean Scotiabank 43 44#23International Commercial: Lending Portfolio Q2/10 = $34 billion Transportation 7% Government 8% Wholesale and retail 11% Financial services 11% Hotels and leisure 6% Utilities 6% Oil and gas 4% RG Premier Bank Real estate 11% 6% Telecommunications and cable 4% Mining and primary metals 3% Food and beverage 3% Agriculture 2% Other 18% Good diversification Closely monitoring Caribbean hotel exposures $1.4 billion exposure in the Caribbean, most accounts well secured Tourism remains generally weak; expect gradual improvement in 2010/2011 Scotiabank Trading Results Within One-Day VaR 20 15 250 10 5 0 (5) (10) (15) (20) Scotiabank M -Actual P&L 1-Day VaR 45 Average 1-Day VaR Q2/10: $13.4MM Q1/10: $14.6MM 46#24Trading Revenue Q2/10 Trading Revenue 8 (# days) 2 (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ($ millions) Scotiabank ■ 97% of days had positive results in Q2/10 47