#1ด Scotiabank Scotiabank Investor Presentation First Quarter, 2005 January 31, 2005 1 First Quarter Overview Rick Waugh President & Chief Executive Officer 2#2Scotiabank Performance highlights ■ Record earnings ☐ ◉ - · EPS: $0.77 vs. $0.67 last year - ROE: 21.0% vs. 19.4% last year Earnings well diversified across business lines Improving credit quality net impaired loans down $725 mm vs. last year - specific provisions $74 mm this quarter ☐ Strong capital ratios - Tangible Common Equity (TCE): 9.5% 3 Growth across major business lines Scotiabank net income available to common shareholders, $ millions 329 289 Q1/04 Q1/05 206 190 154 247 Domestic International Scotia Capital 4#3Scotiabank ROE ด 2005 performance targets Q1/05 Target 21.0% VS. 17-20% EPS Growth 15% VS. 5-10% Scotiabank Productivity 55.7% VS. <58% 5 Performance Review Sabi Marwah Senior Executive Vice-President & Chief Financial Officer 6#4Scotiabank $ millions Reported Solid underlying revenue growth Change Q1/05 Q1/04 $ % 2,538 2,468 70 293 Less: Impact of stronger Canadian $ (69) New CICA standard-loss on impaired loan (23) Premium on preferred shares redeemed (15) Impact of VIES Underlying 2,630 2,483 147 Co 6 Other income 1,162 1,040 122 12 Net interest income 1,468 1,443 25 2 7 Scotiabank Continued pressure on margins Q1/05 vs. Q4/04 vs. Q1/04 Net interest margin 2.00% (6) bps (11) bps Canadian currency (ex ACG 13) (3) (7) Foreign currency (ex ACG 13) 1 ACG 13/VIES (3) (5) (6) bps (11) bps 8#5Scotiabank millions Other income - good growth Change Q1/05 vs. Q4/04 Change Q1/05 vs. Q1/04 $ 126 13 293 % % Underlying 97 9 (11) Impact of stronger Canadian dollar (26) 115 12 Reported 71 7 92 221 ± E ∞ E I Trading revenues 58 28 Retail brokerage 17 7 Deposit & payment services 13 34 Underwriting fees & other 13 (7) Securitization revenues 8 Securities' gains (7) (40) Credit fees Other (9) (8) (10) (3) 9 Moderate rise in expenses Scotiabank $ millions Change Q1/05 vs. Q4/04 Change Q1/05 vs. Q1/04 $ % $ % 10 1 Underlying 80 60 (14) Impact of stronger Canadian dollar (29) (4) Reported जु 51 4 56 ❁ 。$ Performance/stock-based compensation 45 (6) Professional fees 13 (54) Other (7) 10#6Scotiabank 65 99 60 55 50 Strong productivity expenses as % of revenues 55.7 45 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Scotiabank 12 11 Very strong capital ratios % of risk-adjusted assets 10.9 10 11.5 11.2 Tier 1 8 9.5 9.7 Tangible 9.2 Common CO 6 Equity 4 2 ○ Q1/04 Q4/04 12 Q1/05#7Scotiabank Increase in unrealized securities' gains $ millions Q1/05 Q4/04 Q1/04 - Emerging Market Debt 575 507 554 - Fixed Income 45 39 67 - Equities 554 502 536 1,174 1,048 1,157 13 Change in CICA accounting standards Reclassification of liabilities & equity and Deconsolidation of VIES Scotiabank $ millions Change Balance Sheet Q1/05 Q1/04 Deposits 1,500 Subordinated debt & capital instruments 750 2,250 Non-controlling interest (2,000) (2,000) Preferred shares (250) (250) Net Impact Nil Nil Income Statement Q1/05 Q1/04 Interest expense 37 52 Provision for income taxes (2) (2) Non-controlling interest (33) (34) Preferred dividends (2) (16) Net Impact Nil Nil 14#8New CICA accounting standards Consolidation of VIES Scotiabank Balance Sheet, $ billions Change Q1/05 Assets Investment securities 5 Personal & credit card loans 3 Total 8 Liabilities Other liabilities 8 Income Statement, $ millions Scotiabank Interest income Interest expense Net interest income Other income Net Impact 15 Q1/05 50 (48) 2 སྱེརྗ (2) Nil Business Line Results 16 16#9Scotiabank Domestic - continued asset growth, net income available to common shareholders, $ millions 289 248 expenses well controlled Net income: 329 - up 14% yr/yr, 33% qtr/qtr Revenue up 4% yr/yr Good retail asset growth yr/yr residential mortgages up 16% - revolving credit up 17% Q1/04 Q4/04 Q1/05 - core deposits up 13% Lower interest margin yr/yr Expenses down qtr/qtr lower performance and stock-based compensation, severance and advertising Provisions down $16 mm yr/yr 17 Scotiabank Scotia Capital – record trading results, good credit quality net income available to common shareholders, $ millions 190 237 247 Q1/04 Q4/04 Q1/05 Net income - up 30% yr/yr, 4% qtr/qtr Low provisions - net recovery of $9 mm vs. $25 mm Q4/04, net provisions of $71 mm Q1/04 Revenue down 3% yr/yr, up 14% qtr/qtr - higher revenues in several areas lower lending volumes Expenses up 8% yr/yr, 29% qtr/qtr - higher performance-based compensation 18#10Scotiabank International – improved credit quality, strong retail loan growth net income available to common shareholders, $ millions 159 154 206 " Net income ◉ " · up 34% yr/yr, 30% qtr/qtr - foreign currency translation reduced net income by $17 mm yr/yr Caribbean - growth in retail lending volumes lower provisions qtr/qtr higher insurance, foreign exchange and credit card revenues Latin America - Inverlat & Chile up yr/yr Asia 19 net income up yr/yr Q1/04 Q4/04 Q1/05 ◉ Scotiabank contribution, $ millions Scotiabank Inverlat - another strong quarter 52 52 83 79 Q1/04 Q4/04 Q1/05 Contribution of $79 mm ■ Underlying revenues up 11% yr/yr - growth in retail & commercial lending - - higher margins Expenses well controlled 20#11Scotiabank Scotiabank Risk Review Warren Walker Executive Vice-President Global Credit Risk Management 21 Credit risk overview ■ Lower gross impaired loans: $2.0 B - down $172 mm vs. Q4/04 ■ Lower net impaired loans: $762 mm (after specific allowance) - down $117 mm vs. Q4/04 - down $725 mm vs. Q1/04 ■ Lower specific provisions: $74 mm - down $16mm vs. Q4/04 - down $96mm vs. Q1/04 22#12Scotiabank $ millions Negative net formations this quarter Domestic - - Retail 75 - Commercial 10 85 12 International Scotia Capital - U.S. - Other Total (156)* (1) (157) (60) *Includes $103 mm transfer to Other Assets as a result of the new CICA accounting standard effective November 1, 2004 23 Continuing positive trend in impaired loans Scotiabank $ millions 3,269 3,199 3,015 Gross Impaired Loans Net Impaired Loans* 2,200 2,028 1,487 1,371 1,198 879 762 Q1/04 after specific allowance Q2/04 Q3/04 Q4/04 Q1/05 24#13Scotiabank $ millions Lower specific provisions Q1/05 Q4/04 Q1/04 Domestic: 76 74 92 International: 7 43 7 Scotia Capital: - Canada (1) (20) 18 - U.S. (19) (10) 26 - Europe 11 5 27 (9) (25) 71 Other I (2) I Total 74 90 170 25 Scotiabank $ millions - Scotia Capital – positive trend in net formations and provisions 275 225 175 125 75 25 -25 -75 -125 -175 Net Formations Provisions IT Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 26#14Scotiabank Low variability of trading revenue... trading revenue, first quarter 2005 # days 10 98%+ days = positive 9 8 7 6 5 ++ 4 3 2 1 0 (4) (3) (2) (1) 01234 lu 5 6 7 8 9 10 11 12 13 14 $ millions 27 Scotiabank ...reflecting moderate market risk $ millions, November 1, 2004 to January 31, 2005 20 10 -10 - Actual P&L - VaR 1 day -20 Average 1 day VaR = $8.4 mm 28#15Scotiabank Risk summary ■ Continued improving credit performance ■ Market risk well contained ■ Specific provisions for credit losses should be below 2004 ■ Possible future reduction in general allowance ด Scotiabank 29 Outlook Rick Waugh President & Chief Executive Officer 30 50#16Scotiabank Outlook ◉ ■ Challenges remain - strong Canadian dollar - low corporate loan demand - margin compression ■ Strength from diversification - 3 strong growth platforms ■ Expect to meet 2005 performance targets 31 Scotiabank 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. 32