#1Scotiabank Investor Presentation Third Quarter, 2007 August 28, 2007 Scotiabank Caution Regarding Forward-Looking Statements 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 and any applicable Canadian securities legislation. These statements include comments with respect to the Bank's objectives, strategies to achieve those objectives, expected financial results (including those the area of risk management), and the outlook for the Bank's businesses and for the Canadian, United States and global economies. Forward- looking 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," "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; operational and reputational risks; 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; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; 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; consolidation in the Canadian financial services sector; changes in tax laws; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; 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 discussion starting on page 53 of the Bank's 2006 Annual Report. 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 and its securities, 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. 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.#2Scotiabank Scotiabank Overview Rick Waugh President & Chief Executive Officer Strong Financial Performance Q3/07 Yr/Yr Qtr/Qtr Net Income ($ millions) $1,032 +10% (1)% EPS $1.02 +10%* (1)% ROE 22.7% (0.1)% (0.7)% Productivity Ratio 53.0% 0.8% 0.8% Improvement * 16% excluding VAT recovery in Q3/06 4#3Scotiabank Benefiting From Diversification Net Income* ($ millions) Domestic up 22% yr/yr 391 319 270 285 278 276 46 Q3/06 79 Q3/07 Domestic ■International Scotia Capital Other *available to common shareholders Scotiabank International up 15% yr/yr (ex. VAT**) Scotia Capital - strong performance **$51MM VAT recovery in Q3/06 5 Highlights Domestic • • • Expanding distribution - branches, sales people Growing Wealth franchise - #5 in industry for YTD net sales of long-term funds Market share gains in key products International . Investing for organic growth - expanding distribution - product initiatives - e.g. credit cards, small business Making on-strategy accretive acquisitions ■ Scotia Capital . Growing, yet maintaining credit & market risk discipline Leveraging strengths in corporate relationships- lending, energy, derivatives, NAFTA 6#4Scotiabank Scotiabank 936 897 Performance Review Luc Vanneste Executive Vice-President & Chief Financial Officer Net Income ($ millions) Strong Quarter 1,039 1,032 1,020 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Net Income up 17% yr/yr (ex. VAT) + strong asset growth + higher trading revenues and securities - gains higher tax rate Net Income down slightly from Q2 + higher trading revenues and securities gains - - lower interest and loan loss recoveries impact of forex translation 8#5Earning Through Forex Headwinds Scotiabank Impact ($ millions) Revenues Qtr/Qtr Yr/Yr (101) (47) Non-interest expenses Net income 34 15 (50) (23) Earnings per share (diluted) (5) cents (2) cents Scotiabank Average exchange rate $US/$CAD Q3/07 Q2/07 Q3/06 0.93 0.86 0.89 Mexican peso/$CAD 10.07 9.63 9.90 9 Strong Asset Growth average balances, $ billions 12% 409 364 83 37 74 96 40 40 90 00 97 93 77 Q3/06 86 Q3/07 + residential mortgages up 16% + business & government loans up 21% + personal loans up 8% Residential mortgages Personal loans Business & government (includes acceptances) Securities Other 10#6Scotiabank Good Revenue Growth Revenues (TEB) ($ millions) Revenues up 11% yr/yr 3,302 3,214 3,211 2,989 2,999 1,881 1,903 1,913 1,816 1,783 1,173 1,216 1,333 1,308 1,389 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Scotiabank Net interest income (TEB) ☐ Other income 11 + higher net interest income +higher trading revenues and securities gains + higher transaction-based revenues Revenues up 3% qtr/qtr + loan growth + higher trading revenues and securities gains impact of forex translation lower securitization revenues Expenses Well Controlled Non-Interest Expenses ($ millions) 1,708 1,724 1,726 1,752 1,608 966 1,003 1,004 1,013 940 322 327 329 335 313 355 420 394 393 404 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Salaries & employee benefits Premises & technology Other 12 Expenses up 6% yr/yr (ex. VAT) + business growth initiatives + higher performance-based compensation Expenses up 2% qtr/qtr + longer quarter + higher performance-based compensation - impact of forex translation - lower stock-based compensation#7Scotiabank Scotiabank Positive Operating Leverage Domestic Year-to-Date 5% International (ex. VAT) 4% Scotia Capital All Bank (ex. VAT) 4% 13 Effective Capital Management YTD 2007 Strong internally generated capital $1.8 billion Robust growth in RWA 12% Increasing share buybacks Dividend payout ratio $629 million 42% - maintaining 35-45% target range Strong TCE ratio 14 7.7%#8Scotiabank Scotiabank Domestic Banking Chris Hodgson Executive Vice President Domestic Personal Banking 15 Net Income* ($ millions) Domestic Banking Strong Performance + revenues up 9% 391 Net income up 22% yr/yr 361 364 - 335 • 319 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 expenses up 1% • business growth initiatives partly offset by lower pension and benefits costs - higher PCLs in line with loan growth Net Income up 7% qtr/qtr + strong volume growth + longer quarter * available to common shareholders 16#9Scotiabank Revenues (TEB) ($ millions) Domestic Banking Good Revenue Growth 1,543 1,412 1,455 1,471 1,472 1,023 953 984 980 977 237 255 282 288 283 222 216 209 207 237 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Retail & Small Business Wealth Management ■Commercial Banking/Other Revenues up 9% yr/yr Retail & Small Business +7% + strong asset and deposit growth lower margin mainly due to change in mix and higher funding costs Wealth Management + 19% + retail brokerage up 15% + mutual funds fees up 34% + Private Client Group up 12% Commercial + 7% + strong loan and deposit growth Revenues up 5% qtr/qtr + longer quarter + asset and deposit growth 17 Scotiabank International Banking Rob Pitfield Executive Vice President International Banking 18#10Scotiabank 285 268 51** 234 International Banking Solid Operating Performance Net Income* ($ millions) 316 Q3/06 Q4/06 Q1/07 *available to common shareholders **VAT recovery in Mexico 293 270 Net income up 15% yr/yr (ex. VAT) + revenues up 13% expenses up 6% . business growth initiatives • normal salary increases higher tax rate Net income down 8% qtr/qtr + higher retail volumes in Caribbean, Mexico and Peru MTM writedown in securities portfolio impact of forex translation Q2/07 Q3/07 higher tax rate - 19 Scotiabank International Banking Good Revenue Growth Revenues (TEB) ($ millions) 979 967 953 895 844 387 394 393 349 331 303 339 342 322 305 208 243 241 243 238 Q3/06 Q4/06 Q1/07 Q2/07 ■Caribbean & Central America Mexico Latin America/Asia/Other Revenues up 13% yr/yr C&CA up 19% + strong asset and deposit growth + higher fee revenues + impact of acquisitions Mexico up 6% + strong retail loan growth + higher card, mutual fund fees - lower trading revenues LatAm/Asia/Other up 14% + higher loan volumes in Peru/Chile MTM writedown in securities portfolio Revenues down 3% qtr/qtr + higher retail loan volumes - Q3/07 MTM writedown - impact of forex translation 20#11Scotiabank Scotiabank Net Income* ($ millions) 318 278 294 235 Scotia Capital Steve McDonald Co-Head Scotia Capital 21 Scotia Capital Strong Quarter 276 - Net income flat yr/yr + revenues up 5% • higher interest recoveries and securities gains in Q3/06 strong underlying growth expenses up 15% . • higher performance-based compensation higher technology costs - lower loan loss recoveries Net income down 13% qtr/qtr + higher trading, M&A revenues significantly lower interest and loan loss recoveries Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 * available to common shareholders 22#12Scotiabank Scotia Capital Higher Trading Revenues Revenues (TEB) ($ millions) 656 630 644 613 575 244 322 331 371 307 369 334 299 268 273 Revenues up 5% yr/yr GCM + higher trading, including record derivatives revenues GC&IB + stronger M&A advisory fees + good lending growth - lower interest recoveries & securities gains Revenues down 2% qtr/qtr + underlying revenues up: higher trading • higher M&A advisory Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Global Capital Markets (GCM) • wider loan spreads lower interest recoveries Global Corporate & Investment Banking (GC&IB) 23 ต Scotiabank Risk Review Brian Porter Chief Risk Officer 24#13Scotiabank Risk Overview ☐ ☐ ☐ Stable credit quality . • underlying credit losses stable net impaired loans flat Some increase in VaR market risk well controlled Asset classes of current focus ■ Credit portfolios well positioned 25 Scotiabank Underlying Credit Losses Stable Specific Provision for Credit Losses ($ millions) 92 45 74 92 63 8 25 24 19 24 30 30 69 69 58 26 74 66 949 25 77 Specific provision + $47MM qtr/qtr + lower recoveries in Scotia Capital + increase in Domestic due mainly to Commercial provision reversals in Q2/07 (10) (19) (30) (51) Q4/06 Q1/07 Q2/07 Q3/07 Q3/06 Scotia Capital Domestic International 26#14Scotiabank Net Impaired Loans Flat Net Impaired Loans ($ millions) 579 579 584 570 479 207 239 329 357 158 245 211 245 215 208 110 118 95 35 19 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 International Domestic Scotia Capital 27 Some Increase in VaR Scotiabank Average 1 day VaR, $ millions Risk Factor Q3/07 Q2/07 Q3/06 Interest rate 9.0 7.2 7.2 Equities 8.7 5.2 6.2 Foreign exchange 3.3 2.7 2.1 & Commodities Diversification (5.4) (3.8) (6.3) All-Bank VaR 15.6 11.3 9.2 28#15Scotiabank ($ millions) Trading Results Within 1 Day VaR May 1, 2007 to July 31, 2007 25 15 5 пили (5) (15) (25) ■ Q3/07: Average 1 day VaR: $15.6 vs. $11.3 in Q2/07 29 Actual P&L 1 day VaR Scotiabank Asset Classes of Current Focus Canadian non-Scotia ABCP conduits U.S. sub-prime exposure LBO underwriting commitments ⚫no holdings in Scotia Money Market Funds • liquidity backup exposure - not significant ⚫ holdings in the bank - not significant • no direct exposure ⚫ indirect exposure - not significant ⚫0.2% of total assets Hedge fund counterparties ⚫ transactions collateralized ⚫ no credit issues with counterparties 30#16Scotiabank Credit Portfolios Well Positioned ■ Enhanced underwriting and execution standards ■ Lower single name hold limits, greater diversification ■ Better mix of assets - higher % of retail loans ■ Proactive management of portfolios improved pricing and returns through Loan Portfolio Management - portfolio management through loan sales, credit protection Much improved credit quality ➤ Corporate/commercial portfolio: 77% investment grade ต Scotiabank 31 Outlook Rick Waugh President & Chief Executive Officer 32#17Scotiabank Positive Outlook ■ Maintain strong capital position and liquidity Benefiting from diversified business platforms ■ Continue to invest for future growth organic growth - acquisitions ■ On track to meet 2007 objectives ด Scotiabank 33 Q & A 34#18Scotiabank Scotiabank Appendix 35 Good Underlying Growth EPS Impact (cents) Qtr/Qtr Trading revenues 4 Yr/Yr 8 Securities gains 3 0 2 Longer quarter (3 days) 2 Higher tax rate (1) Interest recoveries (3) (1) Provisions for credit losses (5) VAT Recovery Forex GG5 (5) (5) (2) (5) (1) Business growth Change in reported EPS 4 10 (1) cent 9 cents 36#19Scotiabank All-Bank Margin Net interest margin (%) 1.98 1.93 1.91 1.89 1.86 All-bank margin: - 12 bp yr/yr - Lower interest recoveries in Scotia Capital - Change in asset mix - ■ very strong growth in Canadian mortgage portfolio; higher proportion of retail loans higher levels of low-yielding trading assets, driven by client activity Higher funding costs Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Scotiabank 37 International Banking Changing Regional Mix 21% 2007 YTD Net Income* - $879 million 2006 YTD Net Income - $786 million * available to common shareholders 38 35% 12% 44% Mexico Caribbean and Central America Latin America/Asia/Other 55% 33%#20Scotiabank Scotiabank Mexico Earnings Contribution ($ millions) Q3/07 Q2/07 Q3/06 Net income in pesos, excluding inflation accounting 927 1,084 1,487 MXP/CAD exchange rate 10.1 9.6 9.9 Net income in CAD, excluding inflation accounting $92 $113 $151 BNS' share (97%) $89 $110 $147 Canadian GAAP and acquisition adjustments $11 $1 $13 Scotiabank Mexico contribution in CAD $100 $111 $160 Excl. VAT $109 Scotiabank 39 Diversification: Higher % of Retail Loans Loans and Acceptances by type of borrower 52% 14% Q4/02 34% Residential Mortgages Personal 40% 42% Business & Government Loans and Acceptances by geography 10% 7% 8% 13% 2002 18% Q3/07 7% 6% Canada 9% U.S. Latin 7% 62% America Caribbean Other 40 2006 71%#21Scotiabank Stronger Balance Sheet Stronger capital ratio Q4/99 Q3/07 Tier 1 capital ratio 8.1% 9.7% Higher level of liquidity ($ billions) Liquid assets Total assets $222.7 $43.9 $107.0 $408.1 Q4/99 Q3/07 Liquid assets as % of total assets 20% 26% 41 Scotiabank Moderate Net Impaired Loan Formations (Q3/07, $ millions) Domestic Domestic Retail: formations reflect growing portfolio size; underlying credit trends remain strong - Retail 77 - Commercial 1 78 Domestic Commercial: stable credit quality International - Mexico 48 - Caribbean & 16 Central America - Latin America & Asia 29 93 International: formations primarily in retail portfolios across division, largely mirroring underlying asset growth Scotia Capital: repayment on two accounts in Europe Scotia Capital - U.S. - Canada & Other (1) (23) (24) Total 147 42#22Scotiabank ($ millions) Trend in Net Impaired Loan Formations Domestic Retail by Business Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Commercial 628 76 77 20 29 96 106 818 81 78 (20) 87 58 74-18 77 International Retail 52 70 74 87 94 Commercial (31) (43) (9) 41 (1) 21 27 65 128 93 Scotia Capital (98) 36 (75) (121) (24) 19 169 77 65 147 Scotiabank 43 Market Risk - Trading Controls ◉ ☐ Board-approved policies and limits - Active, independent oversight – risk management staff physically located on trade floors Independent validation of models and market data used for valuation ■ Valuation reserves for risk concentrations, market ☐ illiquidity Daily P&L analysis Regular stress-testing of portfolios 44#23Scotiabank # days 10 8 6 + 2 Trading Revenue Trading Revenues ($ millions) امل 0 Λ (14) (5) (4) (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 91% days had positive results in Q3/07 vs. 95% in Q2/07 45 Strong Capital Ratios, Growth in Risk-Weighted Assets % of Risk-Weighted Assets Scotiabank Risk-Weighted Assets ($ billions) 10.0 10.2 10.4 219.8 213.1 10.1 206.8 9.7 197.0 190.3 8.4 8.3 8.4 8.0 7.7 Q4/06 Q1/07 Q2/07 Q3/07 Loans & acceptances Residential mortgages Securities Cash, Other assets & Off balance sheet Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Tier 1 Q3/06 Tangible Common Equity (TCE) 46#24Scotiabank High Level of Unrealized Securities Gains ($ millions) Q3/07 Q2/07 Q3/06 Emerging Market Debt 527 676 593 Fixed Income (103) (33) (153) Equities 47 536 565 457 960 1,208 897