#1Scotiabank Scotiabank Investor Presentation First Quarter, 2004 March 2, 2004 1 First Quarter Overview Rick Waugh President & Chief Executive Officer 2#2寫 Scotiabank ■ Performance highlights Record earnings - EPS: $1.33 vs. $1.11 ROE: 19.4% vs. 16.6% Good underlying revenue growth, excluding foreign exchange impact Improvement in credit quality - Specific provisions: $170 mm, down $155 mm vs. Q1/03 Leading productivity ratio: 54.3% - lower expenses vs. Q4/03 Strong capital ratios and reserves - Tier 1: 10.9% - Tangible Common Equity (TCE): 9.2% Unrealized Securities' Surplus: $1.157 billion 3 Scotiabank EPS, $ Continued upward trend in earnings 1.33 1.26 1.20 1.11 1.12 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 4#3Scotiabank Steady performance across business lines net income, $ millions Scotiabank 294 299 Q1/03 Q1/04 167 163 138 203 Domestic International Scotia Capital 5 Good start to 2004 - meeting targets ROE Q1/04 Target 19.4% VS. 16-19% EPS Growth 20% VS. 10-15% Productivity 54.3% VS. <58% 6#4寫 Scotiabank Performance Review Sabi Marwah Senior Executive Vice-President & Chief Financial Officer 7 Scotiabank $ millions, after tax Q1/04 vs. Q4/03 Items in the quarter Q1/04 vs. Q1/03 24 Revaluation of tax assets 24 New CICA guideline 10 10 (Section 1100) (10) Premium on preferreds (1) 201 (16) Stronger Canadian dollar (95) 8 Total (62) 2c EPS impact (cents) (12c) 8#5€ Scotiabank Results negatively impacted by stronger Canadian dollar Foreign exchange impact, $ millions Q1/04 vs. Q4/03 Q1/04 vs. Q1/03 (29) Net interest income (143) (14) Other income (96) (43) Total revenue (239) 22 Expenses 106 (16) Net income (95) 9 Scotiabank Underlying revenue growth - adjusting for impact of Canadian dollar $ millions (TEB) 2,645 Impact of Stronger Canadian dollar Reported Revenue 239 2,588 Q1/03 Q1/04 10#6€ Scotiabank Compression in Canadian currency margin Q1/04 vs. Q4/03 vs. Q1/03 Net interest margin 2.18% (4) bps 1 bps Canadian currency (ex. AcG-13) (4) (8) Global funding 1 6 Other (1) 3 (4) bps 1 bps 11 Scotiabank $ millions Strong underlying growth in Change Q1/04 vs. Q4/03 other income Change Q1/04 vs. Q1/03 $ % $ % 33 3 Reported 6 1 14 Impact of stronger Canadian dollar 96 12 47 5 Underlying 102 10 8 Investment securities' gain 62 44 Trading revenue 24 8 Retail brokerage 21 7 Underwriting fees & other 9 2 Securitization revenues (23) (9) Credit fees (7) (13) Other 16 12#7(6) Reported Impact of stronger Canadian dollar Scotiabank $ millions Lower expenses versus Q4/03 Increase versus Q1/03 mitigated by foreign exchange translation Change Q1/04 vs. Q4/03 $ (88) 22 % Change Q1/04 vs. Q1/03 $ 51 4 106 (66) (4) Underlying 157 12 18 300 Performance/stock-based compensation 56 Pension & employee future benefits 21 (24) Technology 19 (29) Severance costs (25) Litigation (6) Business growth - mortgage acquisition, Dominican Republic, business taxes Reclassification of card reward points 18 8 (3) Other 35 Scotiabank 60 60 13 Continued productivity leadership expenses as % of revenues 55 559 50 50 99 99 -54.3% 00 01 02 03 Q1/04 14#8Scotiabank 10 Strong capital ratios - particularly Tangible Common Equity % of risk-weighted assets 10.9 10.8 Tier 1 10.0 8 + 2 0 8.5 A Q1/03 Scotiabank $ millions 9.2 8.9 Tangible Common Equity Q4/03 15 Q1/04 Significant improvement in securities' surplus Q1/04 Q4/03 Q1/03 Securities' Surplus (Deficit) - Equities 536 164 (114) - Emerging market debt 554 512 343 - Fixed income 67 27 15 1,157 703 244 16#9寫 Scotiabank Business Line Results 17 9 Scotiabank Earnings well diversified across business lines % of net income, excluding Other Q1/04 Scotia Capital International 30% 25% 45% Domestic 18#10✔ Domestic - continuing solid performance Scotiabank net income, $ millions 294 264 299 " Net income growth: 13% vs. Q4/03 Revenue up 4% year over year Good retail asset and core deposit growth - residential mortgages up 13% vs. Q1/03 revolving credit up 16% vs. Q1/03 core deposits up 17% vs. Q1/03 Net interest margin compression Good growth in retail brokerage revenues Expenses well controlled Higher loan losses - mainly 2 accounts in Commercial Q1/03 Q4/03 Q1/04 19 Scotiabank Domestic – increased emphasis on - saving & investing Highly successful Money Master® High Interest Savings Account multi-billion dollar increase in balances in two years, mostly new to bank expanded to include small business, RSPS and RIFS ■ New The Ultimate® GIC lengthening term, flexible reinvestment options ▪ican Invest™ Program · helps customers identify financial goals regular investment in "one-stop" mutual fund solutions through Scotia Partners Portfolios® and Scotia Selected™ Funds ■ Increase in market share market share of personal core deposits above 10% for first time, up 67 bps yr/yr - higher market share for commercial current accounts 20#11International - stable earnings Scotiabank notwithstanding foreign currency translation net income, $ millions 167 156 160 163 Q1/03 Q4/03 Q1/04 Revenue growth: up 8% yr/yr (ex. forex) ■ Caribbean " net income • down 11% vs. Q1/03 - impact of foreign currency translation up 21% vs. Q4/03 - lower loan losses broad-based asset growth Latin America Asia Inverlat up 63% vs. Q1/03 lower net income - impact of new accounting rules for hedging 21 Scotiabank Inverlat - growing contribution Scotiabank $ millions 32 32 43 52 Net contribution rose to $52 million, up 63% yr/yr Strong asset and deposit growth (yr/yr): retail loans up 47% high-margin credit card & auto loans up 83%, including purchase of auto loan portfolio in Q4/03 core deposits up 23% commercial lending up 14% Margin up year over year some compression versus Q4/03 Q1/03 Q4/03 Q1/04 22#12€ Scotiabank - Scotia Capital – improving results net income, $ millions 138 221 203 Lower provisions - down $153 million vs. Q1/03 Continued reduction in U.S. lending Stronger results - - improved funding spreads ScotiaMocatta - near record strength in foreign exchange and securities trading Expenses well controlled Q1/03 Q4/03 Q1/04 23 Scotiabank Risk Review Warren Walker Executive Vice-President Global Credit Risk Management 24#13€ Scotiabank Credit risk overview Specific provisions: $170mm - down $155 mm vs. Q1/03 - up $50 mm vs. Q4/03 ■ Net impaired loans: $12 mm - down $547 mm vs. Q1/03 - down $35 mm vs. Q4/03 25 Scotiabank Net formations by business line net formations, $ millions - Q1/04 Domestic - Retail - Commercial $$ 56 69 125 International 51 Scotia Capital - Canada - U.S. 20 20 66 - Europe Total (79) 7 183 26#14Scotiabank Positive trend in net impaired loans net impaired loans, $ millions 559 12 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 27 9 Scotiabank Lower specific provisions specific provisions, $ millions Domestic: Change Q1/04 vs. Q1/03 Change vs. Q4/03 92 16 44 International: 7 (21) (38) Scotia Capital: - Canada - U.S. 18 16 (18) 26 (98) (23) - Europe 27 (71) 90 71 (153) 49 Other I 3 (5) Total 170 (155) 50 28 NNN 30#15S Positive trend in specific provisions Scotiabank specific provisions, $ millions 325 275* 224* Other ■Scotia Capital 170 133* Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 excluding Argentina 29 Lower cable & telecom exposure Scotiabank Loans & acceptances, $ millions Investment Sector Grade Non-Investment Grade Total Q1/04 Q4/03 Q1/04 Q4/03 Q1/04 Q4/03 Cable operators 27 131 1,443 1,441 1,470 1,572 Regulated telephone 416 420 91 113 507 533 Unregulated telephone 47 56 164 186 211 242 Wireless 115 172 502 501 617 673 Long-haul fibre cable 30 47 30 47 CLECS - 48 50 48 50 Total 605 779 2,278 2,338 2,883 3,117 Gross Impaired Loans: $360mm, Net $283mm 30#16Scotiabank Lower power & energy trading exposure Loans & acceptances, $ millions Sector Investment Grade Non-Investment Grade Total Q1/04 Q4/03 Q1/04 Q4/03 Q1/04 Q4/03 Regulated Utilities 757 542 445 494 1,202 1,036 Diversified Generation 63 25 192 338 255 363 Independent Power 314 437 305 272 619 709 Projects with PPAs* Other Power Projects 45 45 517 631 562 676 Total 1,179 1,049 1,459 1,735 2,638 2,784 Impaired Loans: Gross $439mm, Net $268mm * Power Purchase Agreements 31 9 Scotiabank # days 12 Low variability of trading revenue... trading revenue, first quarter 2004 93%+ days = positive 10 10 8 60 4 2 wlw.. 0 (2) (1) 01 2 3 4 $ millions 32 56789 10 11#17寫 Scotiabank ...reflecting moderate market risk $ millions, November 1, 2003 to January 31, 2004 20 10 0 -10 -20 9 Scotiabank Actual P&L VaR 1 day Average 1 day VaR = $10.3 mm 33 Risk summary ■ Credit markets continue to improve ― outlook is relatively positive ■ Stable portfolios ◉ Expect lower credit losses in 2004 34#18寫 Scotiabank 9 Scotiabank Outlook Rick Waugh President & Chief Executive Officer 35 Outlook ☐ Positive outlook on global economy Solid contribution from all business lines - some challenges remain Strong capital and reserves provides flexibility ■ Confident in achieving 2004 performance targets - EPS: 10-15% - ROE: 16-19% 36#19Scotiabank This document includes forward-looking statements which are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. These statements include comments with respect to our objectives, strategies, expected financial results (including those in the area of risk management), and our outlook for our businesses and for the Canadian, U.S. and global economies. 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. The Bank cautions readers not to place undue reliance on these statements, as a number of important factors 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, regulatory developments in Canada and elsewhere, technological developments, consolidation in the Canadian financial services sector, competition, judicial and regulatory proceedings, the possible impact of international conflicts and other developments including terrorist acts and the war on terrorism, 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, financial condition or liquidity. The Bank cautions that the foregoing list of important factors is not exhaustive. When relying on forward- looking statements to make decisions with respect to the Bank, investors and others should carefully consider the foregoing 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 behalf of the Bank. 37