#1ด Scotiabank Scotiabank Investor Presentation Third Quarter, 2004 August 31, 2004 1 Third Quarter Overview Rick Waugh President & Chief Executive Officer 2#2Scotiabank Performance highlights ■ Solid earnings ☐ ◉ - - EPS: $0.71 vs. $0.60 - ROE: 19.4% vs. 17.7% Earnings well diversified across business lines Improving credit quality net impaired loans $(227) mm - specific provisions $100 mm Scotiabank - reduction in general allowance of $50 mm Strong capital ratios - Tangible Common Equity (TCE): 9.5% 3 EPS, $ adjusted for 100% stock dividend Solid earnings 0.75 0.71 0.67 0.63 0.60 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 4#3Scotiabank Growth across all business lines net income, $ millions Scotiabank 289 272 218 193 196 175 Q3/03 Q3/04 30 (14) Domestic International Scotia Capital Other 5 ROE Exceeding 2004 targets to date Q3/04 YTD/04 Target 19.4% 20.2% VS. 16-19% EPS Growth 18% 25% VS. 10-15% Productivity 57.3% 55.3% VS. <58% 6#4Scotiabank Performance Review Sabi Marwah Senior Executive Vice-President & Chief Financial Officer 7 Scotiabank Impact of Canadian dollar Foreign exchange impact, $ millions Q3/04 vs. Q2/04 Q3/04 vs. Q3/03 Net interest income (38) 6 Other income (29) 00 6 Total revenue (67) 2 Expenses 82 30 6 Net income (28) 1c EPS impact (cents) (3c) 8#5Scotiabank Continued pressure on margins Q3/04 vs. Q2/04 vs. Q3/03 Net interest margin 2.15% (6) bps (13) bps Canadian currency (ex AcG 13) (6) (20) Foreign currency (ex ACG 13) (1) 7 ACG 13/Other 1 (6) bps (13) bps Scotiabank $ millions 9 Other income Change Q3/04 vs. Q2/04 Change Q3/04 vs. Q3/03 $ % $ IGA % (214) (17) Reported 26 3 6 Impact of stronger Canadian dollar (29) (220) (18) Underlying 55 5 (145) Investment securities' gain 77 8 Deposit & payment services 19 5 Card revenues 11 (16) Retail brokerage 7 LO 5 Credit fees (28) (22) Securitization revenues (26) (21) Underwriting fees & other (22) (34) Other 17 10#6Expense reduction in 3rd Quarter Scotiabank $ millions Change Q3/04 vs. Q2/04 Change Q3/04 vs. Q3/03 $ % $ (51) (3) Reported 19 1 2 Impact of stronger Canadian dollar 30 (49) (3) Underlying 49 3 (17) Pension & other staff benefits 21 24 9 Mortgage acquisition/Dominican Republic 15 Salaries (23) Performance/stock-based compensation (18) Other 10 (9) 12 Scotiabank 60 60 55 11 Continued productivity leadership expenses as % of revenues 50 50 99 00 01 02 60 12 55.3% 03 YTD/04#7Scotiabank Scotiabank Very strong capital ratios % of risk-weighted assets 11.2 11.3 10.6 Tier 1 9.4 9.5 8.7 $ millions Q3/03 Q2/04 Q3/04 13 Tangible Common Equity Large securities' surplus Securities' Surplus (Deficit) Q3/04 Q2/04 Q3/03 - Equities 438 518 155 - Emerging market debt 451 489 477 - Fixed income (2) 27 887 1,007 659 14#8Scotiabank Scotiabank Business Line Results 15 Domestic another solid quarter - net income, $ millions Net income: up 6% vs. Q3/03 293 289 - down 1% qtr/qtr 272 Revenue up 3% yr/yr Strong retail asset and core deposit growth residential mortgages up 17% vs. Q3/03 - revolving credit up 16% vs. Q3/03 Q3/03 Q2/04 Q3/04 - core deposits up 22% vs. Q3/03 Higher expenses yr/yr - merit-based salary growth, higher pension costs higher mortgage acquisition & processing costs 16#9Scotiabank Market share gains in Canada Canadian bank market share June vs. June 2004 2003 (%) (bps) Residential mortgages 16.0 +60 Chequing & savings 13.5 +70 Business current accounts 13.8 +140 Scotiabank 17 Scotia Capital - credit quality continues to improve ■ Lower provisions net income, $ millions 211 193 196 Q3/03 Q2/04 Q3/04 - down $104 million vs. Q3/03 Revenues down 17% yr/yr, 9% qtr/qtr - - lower drawn loan asset levels good capital markets revenues ◉ Decline in expenses - lower performance-related compensation ROE 19% in Q3/04 Best Investment Bank in Canada - Global Finance magazine 18#10Scotiabank - International – growing contribution net income, $ millions 218 200 175 ◉ Caribbean net income up 21% yr/yr - growth in retail loans and deposits - offset by foreign currency translation · Latin America - Inverlat up significantly yr/yr © partly offset by lower securities gains Asia net income up yr/yr due to lower credit losses - Q3/03 Q2/04 Q3/04 19 Scotiabank $ millions Scotiabank Inverlat - continued growth 36 65 99 71 ☐ " Net contribution rose to $71 million - nearly double Q3/03 levels - – recognition of tax loss carry forwards High ROE 25% - ■ Strong asset growth (yr/yr): - retail loans up 42% – high-margin credit card and auto loans up 54% commercial lending up 6% Deposits up 6% yr/yr Q3/03 Q2/04 Q3/04 ☐ 20#11Scotiabank Scotiabank Risk Review Warren Walker Executive Vice-President Global Credit Risk Management 21 Credit risk overview ■ Lower net impaired loans: $(227) mm - down $123 mm vs. Q2/04 - down $544 mm vs. Q3/03 ■ Lower specific provisions: $100 mm - down $30 mm vs. Q2/04 - down $100 mm vs. Q3/03 Release of $50 mm from general allowance 22#12Negative net formations this quarter Scotiabank $ millions Domestic - Retail 53 - Commercial 5 58 International (24) Scotia Capital - Canada (10) - U.S. (30) - Europe (1) (41) Total (7) Scotiabank $ millions 317 23 Positive trend in net impaired loans Q3/03 Q4/03 Q1/04 Q2/04 (227) Q3/04 24#13Scotiabank $ millions Lower specific provisions Q3/04 Q2/04 Q3/03 Domestic: 70 81 71 International: 2 18 (3) Scotia Capital: - Canada - U.S. - Europe €222 (11) 18 32 2862 (2) 20 22 85 16 25 132 Other (1) Total 100 130 200 25 Scotiabank $ millions Scotia Capital - positive trend in net formations and provisions 300 250 200 150 100 50 50 0 Net Formations PCL -50 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 26#14Scotiabank $ millions General Allowance Released to Income 50 General Allowance 1,475 1,425 Q2/04 Q3/04 % of risk-assets 0.95% 0.92% 27 Continued decrease in cable & telecom exposure Scotiabank Loans & acceptances, $ millions Investment Non-Investment Sector Grade Grade Total Q3/04 Q2/04 Q3/04 Q2/04 Q3/04 Q2/04 Cable operators 18 20 1,188 1,251 1,206 1,271 Regulated telephone 388 397 123 96 511 493 Unregulated telephone 11 53 126 148 137 201 Wireless 194 92 220 453 414 545 Long-haul fibre cable 15 17 15 17 CLECS 28 28 28 28 Total 611 562 1,700 1,993 2,311 2,555 Impaired Loans: Gross $299 mm, Net $218 mm 28#15Scotiabank Stable power & energy trading exposure Loans & acceptances, $ millions Investment Sector Grade Non-Investment Grade Total Q3/04 Q2/04 Q3/04 Q2/04 Q3/04 Q2/04 Regulated Utilities 705 577 146 174 851 751 Diversified Generation 176 249 176 249 Independent Power 361 309 291 294 652 603 Projects with PPAs* Other Power Projects 46 380 373 380 419 Total 1,066 932 993 1,090 2,059 2,022 Impaired Loans: Gross $444 mm, Net $258 mm * Power Purchase Agreements 29 Scotiabank # days Low variability of trading revenue... trading revenue, third quarter 2004 95%+ days = positive 14 12 10 8 CO 6 4 2 0 (4) (3) (2) (1) 01 2345678 $ millions 30#16Scotiabank ...reflecting moderate market risk $ millions, May 1, 2004 to July 31, 2004 20 10 -10 -20 Actual p&l VaR 1 day Average 1 day VaR = $10.2 mm 31 Risk summary Scotiabank ☐ Improving credit performance Domestic Retail - Excellent Domestic Commercial - Stable International - Good Scotia Capital - Continues to improve ■ Market risk well contained ■ Possible future reduction in general allowance 32#17Scotiabank Scotiabank ■ Outlook Rick Waugh President & Chief Executive Officer 33 Outlook Challenges remain - strong Canadian dollar - low corporate loan demand - margin compression Strength from diversification – 3 strong growth platforms Strong capital and reserves Expect to meet 2004 performance targets 34#18Scotiabank 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. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intent," "estimate," "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. 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; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services; the Bank's ability to complete and integrate acquisitions; 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; consolidation in the Canadian financial services sector; changes in tax laws; competition; judicial and regulatory proceedings; acts of God, such as earthquakes; the possible impact of international conflicts and other developments, including terrorist acts and 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, 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. 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. 35