#1Scotiabank Scotiabank Investor Presentation Second Quarter, 2004 June 1, 2004 1 Second Quarter Overview Rick Waugh President & Chief Executive Officer 2#2Scotiabank Performance highlights ■ Record earnings - EPS: $0.75 vs. $0.56 - ROE: 21.8% vs. 17.2% Strong contributions from all business lines Large securities' gains this quarter Improving credit quality net impaired loans $(104) mm Strong capital ratios - Tangible Common Equity (TCE): 9.4% ■ Dividend increase - +5 cents/quarter to 30 cents Scotiabank 3 Continued upward trend in earnings EPS, $ adjusted for 100% stock dividend 0.75 0.67 0.63 0.60 0.56 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 4#3Scotiabank Growth across all business lines net income, $ millions 9 Scotiabank 293 264 211 200 171 169 Q2/03 Q2/04 82 (8) Domestic International Scotia Capital Other 5 ROE Exceeding 2004 targets to date Q2/04 YTD/04 Target 21.8% 20.6% VS. 16-19% EPS Growth 34% 28% VS. 10-15% Productivity 54.3% 54.3% VS. <58% 6#4Scotiabank A strong record of dividend growth Annual dividend, cents/share adjusted for 100% stock dividend 110 95 80 65 50 35 29¢ 20 1994 1996 * based on current rate Scotiabank $1.10* +36% vs. Q3/03 1998 2000 2002 2004 7 Performance Review Sabi Marwah Senior Executive Vice-President & Chief Financial Officer 8#5Scotiabank $ millions, after tax Q2/04 vs. Q1/04 81 (24) Items in the quarter Shinsei gain Revaluation of tax assets 555 57 Total 6c 90 Q2/04 vs. Q2/03 81 81 EPS impact (cents) 8c 9 Scotiabank Impact of stronger Canadian dollar Foreign exchange impact, $ millions Q2/04 vs. Q1/04 Q2/04 vs. Q2/03 11 Net interest income (96) 10 Other income (79) 21 Total revenue (175) (7) Expenses 62 11 Net income (86) 10#6€ Scotiabank Net interest margin Margin Canadian currency (ex AcG 13) Foreign currency (ex ACG 13) ACG 13/Other Q2/04 vs. Q1/04 vs. Q2/03 2.21% 3 bps (4) bps 11 (4) (11) 7 7 3 bps (4) bps Scotiabank - $ millions Growth in other income large investment gains this quarter Change Q2/04 vs. Q1/04 Change Q2/04 vs. Q2/03 $ 209 % $ 20 Reported 284 29 22 % (10) Impact of stronger Canadian dollar 79 199 19 Underlying 363 38 175 Investment securities' gain 216 18 Underwriting fees & other 42 11 Retail brokerage 34 6 Deposit & payment services 24 12 Securitization revenues 20 (9) Card revenues (4) Credit fees Nō 15 (21) 40 (50) Other Trading revenue (20) 53 12#7Scotiabank $ millions Higher expenses - mainly due to performance- based compensation and pensions & benefits Change Q2/04 vs. Q1/04 Change Q2/04 vs. Q2/03 $ % $ % 117 8 Reported 94 7 (7) Impact of stronger Canadian dollar 62 110 8 Underlying 156 11 48 48 Performance/stock-based compensation 17 Pension & staff benefits Mortgage acquisition/Dominican 3 Republic 58 46 24 29 22 13 Salaries 19 Other 9 13 Scotiabank 60 55 Continued productivity leadership expenses as % of revenues 54.3% 50 50 99 00 01 02 03 YTD/04 14#8Scotiabank Scotiabank Very strong capital ratios % of risk-weighted assets $ millions 10.3 10.9 11.2 Tier 1 9.4 9.2 8.4 Q2/03 Q1/04 Q2/04 15 Tangible Common Equity Large securities' surplus position - notwithstanding realized gains Q2/04 Q1/04 Q2/03 Securities' Surplus (Deficit) - Equities 518 536 (22) - Emerging market debt 489 554 432 - Fixed income 67 8 1,007 1,157 418 16#9寫 Scotiabank Business Line Results 17 5 Domestic continuing solid performance Scotiabank net income, $ millions 264 ◉ 299 293 Q2/03 Q1/04 Q2/04 ■ Net income: up 11% vs. Q2/03 - down 2% qtr/qtr due to higher expenses Revenue up 9% year over year - higher net interest income due to strong volume growth good year over year growth in retail brokerage and mutual funds Good retail asset and core deposit growth residential mortgages up 15% vs. Q2/03 - revolving credit up 16% vs. Q2/03 core deposits up 19% vs. Q2/03 18#10S Scotiabank Gaining market share in Canada Canadian bank market share VS. VS. March March December 2004 2003 2003 (%) (bps) (bps) Residential mortgages 15.76 +41 +3 Chequing & savings 13.52 +92 +33 Lending to Canadian 13.65 +14 +13 businesses Business current accounts 14.19 +155 +36 Scotiabank 19 Scotia Capital – benefiting from - lower loan losses net income, $ millions 211 203 169 Q2/03 Q1/04 Q2/04 Lower provisions - down $139 million vs. Q2/03 Revenues down 9% yr/yr: lower asset levels - non-lending revenues up 16% Higher expenses - performance- related compensation ROE 20% in Q2/04 20#11Scotiabank International – improved earnings - net income, $ millions. 171 163 200 Q2/03 Q1/04 Q2/04 Caribbean net income up 39% yr/yr and 37% qtr/qtr - higher asset volumes - good credit quality - partly offset by foreign currency translation ◉ Latin America Inverlat up 25% vs. Q1/04 - partly offset by lower securities gains vs. last year 21 Scotiabank Inverlat - growing contribution Scotiabank $ millions 20 20 65 52 52 Q2/03 Q1/04 Q2/04 Net contribution rose to $65 million - up 25% qtr/qtr Strong asset growth (yr/yr): retail loans up 46% - high-margin credit card and auto loans up 67% - commercial lending up 9% 22#12寫 Scotiabank 9 Scotiabank Risk Review Warren Walker Executive Vice-President Global Credit Risk Management 23 22 Credit risk overview ■ Specific provisions: $130 mm - down $40 mm vs. Q1/04 - down $118 mm vs. Q2/03 ■ Net impaired loans: $(104) mm - down $116 mm vs. Q1/04 - down $482 mm vs. Q2/03 24#13Scotiabank Minimal net formations this quarter Domestic - Retail 64 - Commercial 29 93 International (55) Scotia Capital - Canada (32) - U.S. (32) - Europe 31 (33) Total 5 LO 25 Scotiabank Positive trend in net impaired loans net impaired loans, $ millions 559 Q1/03 Q2/03 Q3/03 26 Q4/03 Q1/04 (104) Q2/04#14Lower specific provisions Scotiabank specific provisions, $ millions Q2/04 Q1/04 Q2/03 Domestic: 81 92 77 International: 18 7 3 Scotia Capital: - Canada (2) 18 65 - U.S. 18 26 12 - Europe 16 27 94 32 71 171 Other (1) (3) Total 130 170 248 27 Scotiabank Positive trend in specific provisions specific provisions, $ millions 325 275* 224* 133* 170 ☐ Other ■Scotia Capital 130 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 excluding Argentina 28#15Scotiabank Continued decrease in cable & telecom exposure Loans & acceptances, $ millions Sector Investment Non-Investment Grade Grade Q2/04 Q1/04 Q2/04 Total Q1/04 Q2/04 Q1/04 Cable operators 20 27 1,251 1,443 1,271 1,470 Regulated telephone 397 416 96 91 493 507 Unregulated telephone 53 47 148 164 201 211 Wireless 92 115 453 502 545 617 Long-haul fibre cable 17 30 17 30 CLECS 28 48 28 48 Total 562 605 1,993 2,278 2,555 2,883 Impaired Loans: Gross $320mm, Net $235mm 29 Scotiabank Large decrease in power & energy trading exposure Loans & acceptances, $ millions Sector Investment Grade Non-Investment Grade Total Q2/04 Q1/04 Q2/04 Q1/04 Q2/04 Q1/04 Regulated Utilities 577 757 174 445 751 1,202 Diversified Generation 0 63 249 192 249 255 Independent Power 309 314 294 305 603 619 Projects with PPAs* Other Power Projects 46 45 373 517 419 562 Total 932 1,179 1,090 1,459 2,022 2,638 Impaired Loans: Gross $456mm, Net $289mm * Power Purchase Agreements 30#16Scotiabank Low variability of trading revenue... trading revenue, second quarter 2004 # days 12 10 8 6 4 2 0 87%+ days = positive (2) (1) 012 3 456789 $ millions 31 10 11 9 Scotiabank ...reflecting moderate market risk $ millions, February 1, 2004 to April 30, 2004 20 Actual P&L 10 My -10 -20 Average 1 day VaR = $8.2 mm 32 VaR 1 day#17€ Scotiabank Risk summary ■ Credit markets continue to improve ■ Stable portfolios ■ Continue to expect lower credit losses in 2004 Scotiabank 33 Outlook Rick Waugh President & Chief Executive Officer 34#18Scotiabank Outlook ■ Positive outlook on global economy ■ 3 strong growth platforms Challenges remain – margin compression - ― sluggish business lending Strong capital and reserves – increase returns to shareholders Fully expect to meet 2004 performance targets 35 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. 36