#1tiabank nium Ba off Fixed Income Investor Presentation FIRST QUARTER 2016 Scotiabank® This presentation does not constitute an invitation, offer, solicitation or inducement to buy or sell any securities of the Bank of Nova Scotia in any jurisdiction.#2Caution Regarding 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 harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this Management's Discussion and Analysis in the Bank's 2015 Annual Report under the headings "Overview - Outlook," for Group Financial Performance "Outlook," for each business segment "Outlook" and in other statements regarding the Bank's objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results (including those in the area of risk management), and the outlook for the Bank's businesses and for the Canadian, U.S. 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," "may", "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 the Bank's control and the effects of which can be difficult to predict, 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 and funding; significant market volatility and interruptions; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes to, and interpretations of tax laws and risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; changes to the Bank's credit ratings; operational (including technology) and infrastructure risks; 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; critical accounting estimates and the effects of changes in accounting policies and methods used by the Bank (See "Controls and Accounting Policies - Critical accounting estimates" in the Bank's 2015 Annual Report, as updated by quarterly reports); 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; increasing cyber security risks which may include theft of assets, unauthorized access to sensitive information or operational disruption; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; natural disasters, including, but not limited to, earthquakes and hurricanes, and disruptions to public infrastructure, such as transportation, communication, power or water supply; the possible impact of international conflicts and other developments, including terrorist activities and war; the effects of disease or illness on local, national or international economies; 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 "Risk Management" section starting on page 66 of the Bank's 2015 Annual Report. Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2015 Annual Report under the heading "Overview - Outlook," as updated by quarterly reports; and for each business segment "Outlook". 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. The preceding list of factors is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank's results. 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. 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®#3Scotiabank Overview Scotiabank®#4Canada's International Bank History Global footprint in over 55 countries Established on east coast of Canada in 1832 In U.S. and Caribbean 125+ years Representative offices in Asia and Latin America since 1960's Began expanding Caribbean presence into Central and South America in 1990's. Primary focus in the region is on the countries of Mexico, Peru, Colombia and Chile Scotiabank Credit Ratings³ Franchise in attractive markets As at Q1 2016 (C$) Scotiabank Total Assets $920B Moody's S&P Fitch DBRS Risk Weighted Assets $374B Senior Rating Aa3 A+ AA- AA Market Capitalization Q1/16 Net Income $69B 1,814M Outstanding Not Covered Aaa AAA ААА Core Banking Margin 2.38% Rated Bonds ROE 13.8% Outlook Negative Stable Stable Negative Productivity Ratio¹ 54.8% Capital Ratio² 10.1% # of Employees 89,297 (1) Taxable Equivalent Basis (2) Basel III "all-in" Common Equity Tier 1 Ratio (3) A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revisions or withdrawals at any time 4 Scotiabank®#5Scotiabank's Strategy is Clear Maintain High Degree of Diversification¹ Balance Earnings from Canada & International1,2 20% ■Canada Global Banking & Canadian Banking US 50% Wholesale Markets 21% Personal & Commercial 79% 54% 19% Pacific Alliance International Banking 29% Generate 70-75% of earnings from Retail and Commercial Pursue Selective Acquisitions Complement organic growth with selective acquisitions • 7% Other International Generate ~50% of earnings from Canada Focus on the Pacific Alliance Deliver Key Priorities • Customer focus Enhance leadership • Reduce structural costs Diversified by products, customers and geographies, creating stability and lower risk Centralized control over key functions: capital, expense and risk management (1) As at Q1/16. Excludes Other segment (2) Pacific Alliance includes Mexico, Peru, Colombia and Chile 5 Scotiabank®#6Business Performance Personal & Commercial Banking, Wealth and Insurance Canadian Banking Business Overview • Full suite of financial advice and banking solutions to retail, small business and commercial customers Investment, pension and insurance advice and solutions • Revenue mix: 56% Retail, 17% Commercial and 27% Wealth International Banking Business Overview Operate primarily in Latin America (Mexico, Peru, Chile and Colombia), Central America and the Caribbean, with full range of personal and Asia in commercial financial services as well as wealth products and solutions • Revenue mix: 66% Latin America, 30% Caribbean/Central America and 4% Wholesale Banking Global Banking & Markets Business Overview • Wholesale banking and capital markets products to corporate, government and institutional clients • • Full service platform in Canada and Mexico. Niche focus in U.S., Central and South America, Asia, Australia and select markets in Europe Revenue mix: 56% Business Banking and 44% Capital Markets Asia Key Data Q1 16 (C$) Key Data Total Loans (avg.) $300B Total Loans (avg.) Q1 16 (C$) $104B Key Data Q1 16 (C$) Total Loans (avg.) $81B Total Deposits (avg.) $221B Total Deposits (avg.) $86B Total Deposits (avg.) $73B Net Interest Margin (%) 2.35 Net Interest Margin (%) 4.57 Net Interest Margin (%) 1.58 Productivity Ratio 53.6% Productivity Ratio 57.6% Trading Assets (avg.) $108B Branches 1,010 Branches 1,831 Productivity Ratio 48.4% # of Employees 27,143 # of Employees 50,908 # of Employees 2,688 Net Income 1,2 (Q1/16) Net Income¹ (Q1/16) Net Income¹ (Q1/16) ($ Million) 815 837 875 ($ Million) 504 505 417 ($ Million) 404 366 325 Q1/15 Q4/15 Q1/16 * Core net income attributable to equity holders of the Bank 2 Adjusted for notable gain and related contribution, as well as a change in effective tax rate Q1/15 Q4/15 Q1/16 Q1/15 Q4/15 Q1/16 Scotiabank®#7Capital Highlights - Strong Capital Position. Basel III Common Equity Tier 1 (%) 10.3 10.6 10.4 10.3 10.1 • Internal capital generation of $0.9 billion Quarterly dividend increased 2 cents to $0.72 per share, up 6% year-over-year CET1 risk-weighted assets were up $16 billion Q/Q • Impact of FX translation Growth in retail and business lending Acquisitions Basel III Leverage ratio of 4.0% IIII Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 CET1 Risk-Weighted Assets ($B) 335 348 358 374 329 7 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Scotiabank®#8Credit Highlights - Well Managed Loans & Acceptances by Category ($491B) • High proportion of assets are residential mortgages Very low exposure to unsecured credit Business & Corporate loan book is diversified with a focus on Gov't - 36% Investment Grade clients 15% Underlying credit fundamentals remain solid Market risk remains well-controlled 93% of Canadian Retail assets are secured (82% by real estate and 11% by automotive) 68% of International Retail assets are secured Manageable energy exposure is diversified across sectors and geographies Provision for Credit Losses Ratio 3.6% 4% 5% 4% 5% 2% 17% Retail - 64% ■Mortgages ($219B) Personal Loans ($83B) ■Credit Cards ($12B) Financial Services ($22B) 45% ■Real Estate ($21B) Wholesale/Retail ($23B) Automotive/Transport ($21B) Oil & Gas ($17.9) Other ($72B) Gross Impaired Loans Ratio 0.45% 0.42% 0.42% 0.42%1 1.01% 0.41% 1.00% 0.97% 0.97% 1.03% Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 (1) Excludes the increase in Collective Allowance for Performing Loans (PCL ratio including the increase in Collective Allowance for Performing Loans is 47 bps in Q4/15) 80 Scotiabank®#9Canadian & Select International Economies Scotiabank®#10Canadian Economy and Financial System Canadian Economy The 15th largest economy in the world, with a large export orientation Economy is diversified, with a focus on services, manufacturing, primary and construction & utilities industries Manageable Canadian government deficits Proactive government and central bank Moderate growth forecast affected by slowdown in commodity sectors balanced by lower dollar stimulating exports in manufacturing and services sectors Strong Financial System Effective regulatory framework Principles based regime - - Single regulator for major banks Conservative capital requirements Proactive policies and programs Risk management practices - - - - Conservative lending standards Few sub-prime mortgages Relatively little securitization Primarily originate to hold model Canadian banks well capitalized and profitable Canadian Banking System ranked World's Soundest by World Economic Forum for 7th consecutive year Global Competitiveness Report (2014 - 2015) 10 Scotiabank®#11Canadian Economy Real GDP Growth annual % change 3 2 1 0 U.S. U.K. Euro zone Canadian GDP by Industry November 2015 Finance, Insurance & Real Estate Health & Education 2000-2014 ■2015F-2016F 15% 20% 4% 5% Wholesale & Retail Trade Manufacturing Mining and Oil & Gas Extraction 12% Construction 7% 7% 11% 8% Public Administration Professional, Scientific & Technical Services Transportation & Warehousing 11% Other Canada Japan Source: Statistics Canada, Scotiabank Economics. Forecasts as at February 1, 2016. Source: Scotiabank Economics. General Government Net Financial Liabilities 140 % of GDP 120 100 80 88 60 60 40 10 45.9 40.8 87.1 80.7 71.7 73.6 Government Financial Deficits 128.7 131.3 0.3 0 -1 -2 -1.6 -3 20 0 Canada Germany OECD France U.K. U.S. Japan Source: OECD (2014 estimates); Scotiabank Economics. As at February 22, 2016. -5 4 5 6 -4 -6 -7 % of GDP -8 Italy Germany Canada 11 -3.0 -4.0 -4.1 Italy France U.S. -5.7 -7.3 U.K. Japan Source: IMF (2014 estimates), Scotiabank Economics. As at February 22, 20166. Scotiabank®#12Stable Economic Fundamentals Canada Economy has moderated in 2015 due to persistently weak commodity prices Household spending remains reasonably buoyant underpinned by relatively low and stable unemployment as well as low borrowing costs Population and labour force growth supported by strong immigration Stable inflation expectations within Bank of Canada target Band Non-resource exports are improving supported by competitive Canadian dollar, improving US demand Inflation 6 y/y % change 5 4 3 2 1 0 -1 -2 00 02 04 90 06 08 80 Bank of Canada Target Inflation Band A 10 12 14 14 % 12 10 Unemployment Rate Canada 8 6 4 2 0 U.S. 90 92 94 96 98 00 02 04 06 08 10 12 14 Source: Statistics Canada, BLS, Scotiabank Economics. Data through January 2016. Labour Force Participation Rate 2228 2222222 61 60 90 70 % 69 68 67 66 Canada 65 64 63 62 U.S. Source: Statistics Canada, BLS, Scotiabank Economics. Data through January 2016. 160 12 92 92 94 96 98 g 00 02 U.S. Canada 10 04 06 08 10 12 14 16 Source: Statistics Canada, BLS, Scotiabank Economics. Data through January 2016. Scotiabank® 16#13Economic Outlook in Key Markets Canada / U.S. 2015 and 2016 Real GDP Growth Forecast Scotiabank's Key International Markets 1.2% 1.1% 2.5% 2.5% 2.4% 2.2% 2.1% 1.9% 3.5% 3.2% 3.2% 3.0% 2.9% 2.7% Canada Canada U.S. 2015 2016 2015 U.S. 2016 Chile Chile Mexico Mexico Colombia Colombia Thailand Thailand 2015 2016 2015 2016 2015 2016 2015 2016 Peru Peru 2015 2016 No Significant Exposure to the BRICS Source: Scotiabank Economics, as of February 1, 2016 13 Scotiabank®#14Canadian Housing Market Scotiabank®#15• Canadian Housing Fundamentals Remain Sound Steady population growth (including a high rate of immigration), household income gains and low interest rates support demand in the near future High household debt supported by continuing low debt service costs, low unemployment and significant home equity Structural considerations, strong underwriting discipline and conservative lending policies resulting in low delinquency Unemployment rate remains low and stable Marginal affordability strain observed in select markets Residential Unit Sales to New Listings 1.0 ratio 0.9 0.8 0.7 0.6 0.5 0.4 MM 0.3 0.2 0.1 0.0 Balanced Market Seller's Market Buyer's Market Mortgage Debt Service Ratio 7 % of disposable income 6 LO 5 4 3 2 1 0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Source: CREA MLS, Scotiabank Economics. Data through January 2016. High Percentage of Equity Residential Mortgages Arrears 80 6 real estate equity as % of real estate assets Canada 75 % of mortgages in arrears 3 months or more 5 70 Mortgage Interest Payments 65 60 4 U.S. 3 U.S. 55 2 50 45 1 Canada 40 0 35 90 92 94 96 98 00 02 04 06 08 10 12 14 16 90 92 94 96 98 00 02 04 06 08 10 12 14 16 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Source: Statistics Canada, Scotiabank Economics. Data through 2015Q3. Source: Statistics Canada, U.S. Federal Reserve, Scotiabank Economics. Data through 2015Q3. 15 Source: CBA, MBA, Scotiabank Economics. Data through 2015 Q4. Scotiabank®#16Scotiabank's Canadian Residential Mortgage Portfolio . • • Mortgage business model is originate to hold 48% of the mortgage portfolio is insured 52% is uninsured and has an average loan-to-value (LTV) of 53% Majority is freehold properties; condominiums represent approximately 11% of the portfolio Good diversification across Canada with approximately half of the portfolio anchored in Ontario Loans to Canadian condominium developers were $816 MM at Q1/16 ($927 MM at Q4/15) High quality portfolio of well known developers with longstanding relationships with Scotiabank Canadian Mortgage Portfolio: $190B (spot balances as at Q1/16, C$B) $92.8 $9.6 ■Condominium $21B $169B ■Freehold $83.2 Insured 48% 52% Uninsured (avg. LTV = 53%¹) $31.0 $30.1 $5.9 $3.5 $15.2 $25.1 $26.6 $1.6 $13.6 $12.0 $11.8 $0.2 $8.9 $0.6 $8.3 Ontario B.C. & Territories Alberta Quebec Atlantic Provinces Manitoba & Saskatchewan (1) LTV calculated based on the current outstanding balance secured by the estimated value of the underlying property using Teranet sub- index data (2) Some figures on bar chart may not add due to rounding 16 Scotiabank®#17Funding Scotiabank®#18Funding Strategy Build core deposits in all of our key markets Achieve appropriate balance between cost and stability of funding Maintain pricing relative to peers Diversify funding by type, currency, program, tenor and markets Regular issuance in all markets executed via wholesale funding centers in Toronto, New York, London and Singapore • Funding strategy and associated risk management are managed centrally from Toronto within framework of policies and limits approved by Board of Directors For countries where we operate a branch banking subsidiary, strategy is for it to be substantially self-funded in the local market 18 Scotiabank®#19Wholesale Funding Composition Wholesale Funding Diversified by Instrument and Maturity¹ Subordinated Debt5 Mortgage Securitization4 Covered Bonds 3% 2% 8% 10% Asset Backed Securities 1% Medium Term Notes and Deposit Notes 33% Deposits from Banks² 40% 3% ABCP3 Bearer Deposit Notes, Commercial Paper & Certificate of Deposits $ CDE, BN Maturity Tableɓ 30 20 20 10 10 T < 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years > Senior Debt ABS Covered Bonds 1) Wholesale funding sources exclude repo transactions and bankers acceptances, which are disclosed in the contractual maturities table in Note 20 of the Condensed Interim Consolidated Financial Statements. Amounts are based on remaining term to maturity. 2) Only includes commercial bank deposits raised by Group Treasury. 3) Wholesale funding sources also exclude asset-backed commercial paper (ABCP) issued by certain ABCP conduits that are not consolidated for financial reporting purposes. 4) Represents residential mortgages funded through Canadian Federal Government agency sponsored programs. Funding accessed through such programs does not impact the funding capacity of the Bank in its own name. 5) Although subordinated debentures are a component of regulatory capital, they are included in this table in accordance with EDTF recommended disclosures. 6) As per Wholesale Funding Sources Table in MD&A. As of Q1/16. 19 Scotiabank®#20Diversified Wholesale Funding Programs Short-Term Funding USD 25 billion Bank CP program • USD 3 billion Subsidiary CP program CD Programs (Yankee/USD, EUR, GBP, AUD, HKD) Term Funding & Capital • CAD 7 billion ABS shelf (unsecured lines of credit) • CAD 10 billion shelf (preferred shares, subordinated debt, common equity) Canada Mortgage Bonds and Mortgage Back Securities USD 3 billion Singapore MTN program AUD 4 billion Australian MTN program USD 25 billion global registered covered bond program (uninsured Canadian mortgages) USD 25 billion shelf (senior notes, preferred shares, subordinated debt, common equity) USD 20 billion global public covered bond shelf (in run-off, CMHC insured mortgages) USD 20 billion EMTN shelf 20 20 Scotiabank®#21Contact Information Michael Lomas Managing Director, Treasury Sales & Market Development, Group Treasury 416 866 5734 | [email protected] Mark Michalski Director, Strategy & Market Development, Group Treasury 416 866 6905 | [email protected] Jake Lawrence Senior Vice President, Investor Relations 416 866 5712 | [email protected] For additional public information, including our Annual Report and Quarterly Results please visit: http://www.scotiabank.com/investorrelations 21 Scotiabank®#22Appendix 1: Canadian Covered Bonds Scotiabank®#23Scotiabank's Covered Bond Program Global Program • USD 25 billion global registered covered bond program (uninsured Canadian mortgages) Active in multiple currencies: USD, EUR, GBP and AUD Covered Bond Legislation • Framework passed into law in 2012 • Only uninsured mortgages allowed Statutory protection for the covered bond investor and, as a result, in the event of issuer default, increased certainty for investors with respect to the cover pool of collateral Extensive regulatory oversight and pool audit requirements Mandatory property value indexation • Established high level of safeguards and disclosure requirements 23 Scotiabank®#24Canadian Legislative Covered Bonds (CMHC Registered) Issuance Framework Eligible Assets Mortgage LTV Limits • Canadian Registered Covered Bond Programs' Legal Framework (Canadian National Housing Act) • Canadian Registered Covered Bond Programs Guide issued by Canada Mortgage and Housing Corporation (CMHC) Uninsured loans secured by residential property ⚫LTV limit of 80% Basis for Valuation of Mortgage Starting in July 2014, issuers are required to index the value of the property underlying mortgage loans in the Collateral covered pool while performing various tests Substitute Assets Substitute Assets Limitation • Securities issued by the Government of Canada • Repos of Government of Canada securities having terms acceptable to CMHC • 10% of the aggregate value of (a) the loans (b) any Substitute Assets and (c) all cash held by the Guarantor Cash Restriction Coverage Test Credit Enhancement Swaps Market Risk Reporting • The cash assets of the Guarantor cannot exceed the Guarantor's payment obligations for the immediately succeeding six months • Asset Coverage Test • Amortization Test • Overcollateralization ⚫ Reserve Fund • Prematurity Liquidity •Covered bond swap, forward starting • Interest rate swap, forward starting • Valuation calculation Mandatory property value indexation Covered Bond Supervisory Body • CMHC Requirement to Register Issuer and Program Registry Disclosure Requirements • Yes; prior to first issuance of the covered bond program • Yes • Monthly investor report with prescribed disclosure requirements set out by CMHC • Investor reports must be posted on a program website • Required to meet disclosure requirements in the jurisdictions in which the program is registered (US) or listed (UK) 24 Scotiabank®#25Scotiabank Registered Covered Bond Program Issuer Guarantor Guarantee Status Program Size Ratings Cover Pool The Bank of Nova Scotia Scotiabank Covered Bond Guarantor Limited Partnership Payment of interest and principal in respect of the covered bonds will be irrevocably guaranteed by the Guarantor. The obligations of the Guarantor under the Covered Bond Guarantee constitute direct obligations of the Guarantor secured against the assets of the Guarantor, including the Portfolio The covered bonds will constitute legal, valid and binding direct, unconditional, unsubordinated and unsecured obligations of the Bank and will rank pari passu with all deposit liabilities of the Bank without any preference among themselves and at least pari passu with all other unsubordinated and unsecured obligations of the Bank, present and future US$15bn Aaa/AAA/AAA (Moody's / Fitch / DBRS) First lien uninsured Canadian residential mortgage loans Asset Percentage Law 93.5% (7% minimum overcollateralization) Ontario, Canada SEC Registered Issuance Format 144A/Reg S (UKLA Listed) Scotiabank® 25#26Portfolio Details: Scotiabank Global Registered Covered Bond Program¹ Loan-to-Value Ratios² Credit Scores 21% 0% 4% 2% 4% 9% ■599 and Below 18% ■0% - 20% 34% ■600 - 650 ■20%-40% ■651 - 700 ■40%-60% 15% 51% ■701 - 750 ■60%-80% ■751 - 800 ■80% and Above ■801 and Above 44% 19% Remaining Term Distribution Provincial Distribution 3% 2% 2% 3% 6% 10% 2% 2% 5% 13% ■Less than 12.00 12.00-23.99 ■24.00 35.99 36.00 41.99 42.00 47.99 56% ลล (1) As at January 28,2016 (2) Uses indexation methodology as outlined in Footnote 1 of the Scotiabank Global Registered Covered Bond Monthly Investor Report 26 50% 17% ■ Alberta ■British Columbia ■ Ontario ■Quebec ■Manitoba ■New Brunswick ■Newfoundland ■Nova Scotia ■Saskatchewan Scotiabank®#27Appendix 2: Additional Housing Information Scotiabank®#28Housing Market Structural Differences vs. U.S. Regulation and taxation Product . Canada Mortgage interest not tax deductible Full recourse against borrowers in most provinces (in Alberta and Saskatchewan, recourse is only to the value of property) • Ability to foreclose on non-performing mortgages with no stay periods Mandatory default insurance for any mortgage with Loan-to-value >80% CMHC insurance backed by the government of Canada (AAA). Private insurers are 90% government backed - Insurance available for homes up to $1 million - Minimum down payment of 10% for properties valued $0.5-$1 million, 5% for properties <$0.5 million Premium is payable upfront by the customer Covers full amount for life of mortgage • Customers with LTV > 80% must qualify at a 5-year fixed rate for variable or less than 5-year term mortgages • Re-financing cap of 80% on non-insured mortgages • Maximum 25-year amortization on mortgages with LTV > 80% • Maximum 30-year amortization on conventional (LTV < 80%) mortgages . . Down payment of > 20% required for non-owner occupied properties Conservative product offerings, fixed or variable rate options Underwriting • Terms usually 3 or 5 years, renewable at maturity Extensive documentation and strong standards U.S. • Tax deductible mortgage interest creates incentive to borrow and delay repayment . Lenders have limited recourse in most states 90 day to 1 year stay period to foreclose on non-performing mortgages • No regulatory LTV limit • Private insurers are not government backed • Can include exotic products (adjustable rate mortgages, interest only) . 30-year term most common Wide range of documentation and underwriting requirements 28 Scotiabank®#29Scotiabank Canadian Mortgage Product Offerings Fixed Rate Mortgages Key Features Fixed rate and payment for a specific term Target Market Want rate stability for a period of time Delivery Channels Mortgage Terms Eligible loan purpose LTV Amortization Prepayment Options Variable Rate Mortgages Interest rate that changes with Scotiabank Prime, low payment based on current rate that changes with each interest rate change Take advantage of short term market rates over the longer term All channels (branch, Scotia Mortgage Authority (SMA), Home Financing Solutions (HFS)) 6 month, open and closed 1-to-5 years, 7-year closed 10-year closed 5-year closed and open, 3-year capped closed New home purchase, resales, renewals/early renewals, switches, refinances Maximum 80% ( on uninsured mortgages) & maximum 95% (on insured) Maximum 25 year amortization on LTV ≥ 80% and maximum 30 years if LTV < 80% Up to 15% of the amount of the original mortgage per year and increase payments by up to 15% of the payment set for the current term Open variable rate mortgage only; prepay any amount at any time without penalty 29 29 Scotiabank®#30Mortgage Policy Developments in Canada 2015 • 2014 • 2012 Minimum down payment on insured mortgages on homes valued $0.5 - $1 million increased from 5% to 10% CMHC discontinued offering mortgage insurance on second homes and to self employed individuals without 3rd party income validation . • • Maximum amortization on insured mortgages reduced to 25 years (from 30) Maximum amount borrowed on insured mortgages at refinancing reduced to 80% (from 85%) CMHC insurance availability is limited to homes with purchase price < $1 million • 2011 . For insured mortgages, maximum gross debt service ratio of 39% and maximum total debt service ratio of 44% Maximum LTV for HELOCS lowered to 65% (from 80%) Maximum amortization on insured mortgages reduced to 30 years (from 35) . 2010 • Maximum amount borrowed on insured mortgages at refinancing reduced to 85% (from 90%) Maximum amount borrowed on insured mortgages at refinancing reduced to 90% (from 95%) • 2008 5-year fixed rate mortgage used for qualifying rate for conventional mortgages (LTV < 80%) with variable rates or term less than 5 years Minimum 20% down payment to qualify for insured mortgages for non-owner occupied properties Maximum amortization on insured mortgages reduced to 35 years (from 40) Minimum 5% down payment to qualify for insured mortgages 30 Scotiabank®#31Appendix 3: PCL Ratios Scotiabank®#32PCL Ratios Total PCL as % of average net loans & BAS Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Canadian Banking Retail 0.24 0.25 0.26 0.26 0.28 Commercial 0.12 0.13 0.08 0.15 0.14 Total PCL 0.23 0.24 0.23 0.24 0.26 Net Interest Margin (%)² 2.16 2.26 2.25 2.26 2.35 International Banking Retail1 2.37 2.28 2.37 2.18 2.09 Commercial¹ 0.35 0.19 0.26 0.26 0.28 Total PCL 1.33 1.19 1.27 1.17 1.14 Net Interest Margin (%)² 4.71 4.67 4.77 4.70 4.57 Global Banking & Markets Total PCL 0.08 0.08 0.08 0.14 0.27 Net Interest Margin (%) 2,3 1.72 1.64 1.62 1.60 1.58 All Bank Total PCL Ratio 0.42 0.41 0.42 0.424 0.45 Core Banking Margin (%) 2.41 2.41 2.40 2.35 2.38 1234 (1) (2) (3) (4) Excludes collective allowance increase; including collective allowance increase, All Bank PCL ratio was 0.47 32 Colombia small business portfolio reclassed to Retail from Commercial - prior periods have been restated Net Interest Income (TEB) as % of Average Earning Assets excluding Bankers Acceptances Corporate Banking only Scotiabank®#33Appendix 4: Energy Exposures Scotiabank®#34Energy Exposures • • • Energy exposure reflects a well diversified book across sectors and geographies $17.9B of drawn energy exposure, reflecting 3.6% of the Bank's total loan book ~60% is investment grade $14.1B of undrawn energy exposure, slightly down from $14.3B in Q4/15 ~75% is investment grade Large portion of upstream non-investment grade drawn portfolio is controlled by borrowing based advances The Bank continues to evaluate exposures through various stress tests, and we have conducted them at current and realistic oil prices with consideration of secondary impacts The stress tests indicate that any potential losses are very manageable and within our risk expectation Drawn Energy Exposure by Sector 11% 12% E&P Midstream 58% 19% Downstream Services Drawn Energy Exposure by Geography¹ 47% Canada 31% U.S. Other² 22% (1) By country of residence (2) Other includes Latin America, Asia and Europe 34 Scotiabank®