#1WE BUILT NOVEMBER 2016 Vous êtes plus m.. SERVICE COMPLET Investor Presentation COMPLET C SECOND QUARTER 2017 Scotiabank®#2Disclaimer and Caution Regarding Forward-Looking Statements Disclaimer This presentation is only for wholesale investors and represents information of a public nature. It does not constitute an invitation, offer, solicitation or inducement to buy or sell any securities of The Bank of Nova Scotia in any jurisdiction. This presentation does not constitute investment advice or any form of recommendation, and should not be construed as such. Caution 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 document, the Management's Discussion and Analysis in the Bank's 2016 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 as described in the Bank's annual financial statements (See "Controls and Accounting Policies-Critical accounting estimates" in the Bank's 2016 Annual Report) and updated by this document; 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 financial services sector in Canada and globally; 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 of the Bank's 2016 Annual Report. Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2016 Annual Report under the heading "Overview-Outlook," as updated by this document; and for each business segment "Outlook". The "Outlook" sections 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. 2 Scotiabank®#3Table of Contents • • • • • • • Scotiabank Overview.......... Scotiabank Strategy & Financial Objectives - Key Strategic Priorities.......... Medium-Term Financial Objectives... 2017 Business Line Outlook....... Scotiabank Business Line Overview Canadian Banking............ International Banking... Global Banking and Markets........ Scotiabank Key Issues Energy Exposure....... - Digital Focus......... - Domestic Retail Exposure... - Canadian Household Debt.......... - Canadian Household Credit Growth - Canadian Household Debt Comparison.... - Canadian Mortgage Market Canadian Residential Mortgage Portfolio...... Scotiabank Track Record Funding............ Appendix 1: Canadian Housing Market... Appendix 2: Canada & Select International Economies... Appendix 3: Latin America Overview........... • Appendix 4: Tangerine Overview........... • Appendix 5: PCL Ratios............ Appendix 6: Covered Bonds..... 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 29 41 45 50 54 56 58 3 Scotiabank®#4Scotiabank Overview 4 Scotiabank®#5Canada's International Bank History • 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 Pacific Alliance countries of Mexico, Peru, Colombia and Chile Franchise in attractive markets Q2 2017 (C$) Scotiabank Scotiabank Credit Ratings (1) Total Assets $922B CET1 Risk Weighted Assets $375B Moody's S&P Fitch DBRS Market Capitalization $91.2B Senior Rating A1 A+ AA- AA Net Income $2.1B Outlook Negative Stable Stable Negative ROE 14.9% Covered Bonds Aaa Not Rated AAA AAA Productivity Ratio 54.7% CET 1 Capital Ratio (2) 11.3% # of Employees 88,679 (1) A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revisions or withdrawals at any time (2) Basel III "all-in" basis 5 Scotiabank®#6Diversified and Profitable Businesses Business Line Earnings (Q2/17)(1) • Well diversified across business segments Approximately 80% from stable, high quality personal and commercial banking earnings in Canada and International markets International Banking representing 29% of earnings, are in regions with higher growth potential (Appendix 3), such as our Pacific Alliance countries of Mexico, Peru, Colombia and Chile Pacific Alliance represents two thirds of International Banking earnings 24% 29% Canadian Banking 47% International Banking Global Banking and Markets Personal & Commercial Banking (~80%) Geographic Segment Average Assets (Q2/17)(1) 18% Canada 10% 60% . Global Banking and Markets accounts 12% for 24% of the Bank's earnings United States Pacific Alliance Other International (2) Diversified by products, customers and geographies, creating stability and lower risk Centralized control over key functions: capital, expense and risk management (1) Excludes Other segment (2) Pacific Alliance includes Mexico, Peru, Colombia and Chile Scotiabank®#7Financial Highlights - Q2/17 Net Income ($m) A strong earnings and operating quarter for Scotiabank, with net income of $2.1 billion, up 11% Y/Y(1). 2,100 2,061 Strong earnings growth across all three business lines: 2,011 2,009 2,000 1,959 Canadian Banking net income of $971 million, up 11% (of which 6% was attributed to higher real estate gains), adjusting for the gain on disposition of a non-core lease finance business in Q2/16. 1,900 1,862(1) 1,800 1,700 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 International Banking net income of $595 million, up 19% Y/Y or 23%, adjusting for foreign currency translation. This reflects higher net interest margin, lower provision for credit losses, and positive operating leverage. Global Banking and Markets net income of $517 million, up 60% Y/Y, driven mainly by higher contributions from equities, fixed income, U.S lending business, and lower provision for credit losses. The higher income from equities related primarily to certain equity trading transactions, which contributed approximately 40% of the Y/Y growth. Revenue was in line with prior year, or up 4% on a TEB basis, driven by higher asset growth in Canadian and International Banking and increased contributions from asset/liability management activities. This was offset by lower trading revenues, reduced net gain on investment securities and impact of foreign currency translation Expenses grew 5% Y/Y(1) as a result of continued investment in business initiatives, which drove higher digital and technology related expenses Productivity Ratio (2) is 54.7%, or 52.1% on a TEB basis Positive operating leverage on a TEB basis PCL ratio improved 15 bps Y/Y to 49 bps Productivity Ratio (2) 54.7% 55.0% 54.1% 53.7% 54.0% 52.8% 53.0% 52.2% 52.0% 51.0% 50.0% Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 PCL Ratio Strong CET1 ratio of 11.3%, unchanged Q/Q and Leverage ratio of 4.4% 0.70% 0.60% 0.59% 0.47% 0.45% 0.49% Realized $155 million in savings from the structural cost transformation in Q2/17. Year-to-date realized savings of $250 million, or ~70% of the Bank's $350 million guidance for 2017 0.50% 0.45% 0.40% 0.30% 0.20% (1) Adjusts for restructuring charge of $278 million after-tax ($378 million before-tax) in Q2/16 0.10% (2) Effective Q3/16, the taxable equivalent adjustment is no longer included in the calculation. Prior period amounts have been restated for all the banks. 0.00% (3) Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 (3) Adjusts for collective allowance increase; including collective allowance increase, All Bank PCL ratio was 0.64% 7 Scotiabank®#8Strong Capital Levels 14.6% 14.8% 14.7% 14.1% 13.6% Significantly above regulatory 13.4% 2.2% 2.2% 2.2% 2.3% minimums 2.2% 2.2% 1.4% 1.3% 1.2% 1.3% 1.3% 1.1% Strong capital levels with CET1 at 11.3% Significant capacity for 10.1% 10.1% 10.5% 11.0% 11.3% 11.3% internal capital generation Q2/17 leverage ratio of 4.4% Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 CET1 AT1 Tier 2 80 Scotiabank®#9Scotiabank Strategy & Financial Objectives 6 Scotiabank®#10Key Strategic Priorities Customer Focus Evolve culture and operating models to become truly customer-centric by delivering an excellent customer experience and growing the number of primary customer relationships Leadership Enhance the depth, diversity and deployment of our leadership teams Structural Cost Transformation Become more efficient while continuing to improve our customers' experience Digital Transformation Continue to develop our digital capabilities across the Bank, to become a digital leader in all of our major markets Business Mix Alignment Enhance our already strong approach to capital allocation, manage our capital more efficiently and prudently grow both sides of our balance sheet 10 Scotiabank®#11Medium-Term Financial Objectives Metric All Bank Objectives Q2 2017 Results Q2 2017 YTD Results (Y/Y) (Y/Y) EPS Growth 5-10% +11% (1) +10% (1) ROE 14% + +14.9% +14.6% Operating Leverage Positive -0.6% (1) (2) +1.1% (1)(2) Capital Maintain strong ratios 11.3% 11.3% Canadian Banking Net Income Growth International Banking Net Income Growth 6-9% 8-10% +11% (3) +11% (3) +19% (4) +17% (1) Adjusting for the Q2/16 restructuring charge of $278 million (after-tax) or $378 million (before tax) (2) Taxable equivalent basis (3) (4) Adjusting for the gain on sale of non-core lease financing business in Q2/16. Excluding real estate gains as well, net income is up 5% Y/Y or 6% YTD International Banking net income attributable to equity holders growth is 23% when adjusting for foreign currency translation 11 Scotiabank®#122017 Business Line Outlook • Expect solid loan growth across retail mortgages, auto lending, commercial loans and credit cards, as well as deposit growth • Stable to slightly increasing margins Canadian Banking • Higher PCLs driven by change in business mix, but risk adjusted margin should remain stable • • An improvement in productivity will continue to be an area of focus Key priorities include: deepen primary relationships and strengthen customer experience, optimize business mix, focus on cost initiatives and drive digital transformation International Banking Global Banking and Markets Good momentum and continue to leverage diversified footprint, with particular focus on the Pacific Alliance • Expect low double digit growth in the Pacific Alliance, with stable margins and credit quality • Expense management and delivering positive operating leverage remains a key priority, along with strategic investments that will help deliver a stronger customer experience • Focused on organic growth, but will consider acquisition opportunities in our existing footprint • Key priorities include: Improving customer experience and implementing Net Promoter Score, build digital banking organizations in the Pacific Alliance, enhance business mix by growing core deposits and lower expenses to fund technology investments and improve productivity Business conditions and financial results should continue to improve in 2017 • Expect higher revenues from focus clients, GTB, Corporate Banking and Investment Banking Expense management should provide cost savings and loan losses are expected to moderate toward historic levels • U.S. and Canada are expected to drive the bulk of the growth, while Europe faces Brexit uncertainty and high regulatory costs, and Asia rebuilds after repositioning its asset base Key priorities include: Increase our customer focus and deepen relationships, align business mix more closely to our customers, improve resource productivity and transform digitally 12 Scotiabank®#13Scotiabank Business Line Overview 13 Scotiabank®#14Our Businesses - Canadian Banking • • Personal & Commercial Banking, Wealth and Insurance Business Overview Full suite of financial advice and banking solutions to retail, small business and commercial customers • Revenue mix: retail (56%), wealth (27%), commercial (17%) • Investment, pension and insurance advice and solutions Average loan mix: residential mortgage (62%), personal & credit card loans (24%), business and government loans & acceptances (14%) Business Performance Q2 2017 Highlights • 47% of consolidated net income¹ Net income is up 11%², adjusting for the gain on disposition of a non-core lease finance business Stable NIM Strong growth in retail chequing accounts, 10%, and savings deposits, 11% Loan growth of 5%³ Positive operating leverage YTD 2017 Priorities • Deliver an excellent customer experience across businesses and channels Optimize business mix by growing high-return assets, building core deposits, and earning higher fee income Continue focus on operational improvement to reduce structural costs and improve productivity Q2 2017 Key Data In C$ Total Loans (avg.) Total Deposits (avg.) Net Income Productivity Ratio Branches $312B $231B $971MM 50.9% # of Employees 971 25,774 Net Income ($m) . Enhance our digital offering and e-commerce capabilities to drive digital sales and engagement 1000 980 977(4) 981 971 954 960 Continue focus on operational improvement to reduce structural costs and improve productivity 940 930 920 (1) Excludes Other segment 900 (2) Real estate gains contributed to 6% of the 11% growth in Q2/17 (3) Excluding Tangerine mortgage run-off portfolio (4) Includes gain on sale of a non-core lease financing business of $100 million after-tax 14 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Scotiabank®#15Our Businesses - International Banking . Personal & Commercial Banking, Wealth and Insurance Business Overview Operate primarily in Latin America (Mexico, Peru, Chile and Colombia), Central America and the Caribbean, with full range of personal and commercial financial services, as well as wealth products and solutions Revenue mix: Latin America" (66%), Caribbean & Central America (30%), Asia (4%) (2) Average loan mix: residential mortgage (27%), personal & credit card loans (23%), business and government loans & acceptances (50%) 2017 Priorities Launch Net Promoter System (NPS) across Peru, Chile, Colombia and Mexico to provide our employees and leadership with timely and specific customer feedback • Leverage digital banking organizations within our Pacific Alliance operations to drive greater digital adoption and sales • • Enhance business mix by growing core deposits to reduce funding costs along with growing in targeted profitable segments/products Business Performance Q2 2017 Highlights 29% of consolidated net income¹ Net income up 19% Y/Y, or 23%, adjusting for foreign currency translation Good retail loan and deposit growth, lower provision for credit losses, higher net interest margin and fee growth Positive operating leverage YTD Q2 2017 Key Data Total Loans (avg.) Total Deposits (avg.) Net Income Productivity Ratio Branches In C$ $109B $96B $595MM 53.3% 1,807 51,362 Net Income ($m) # of Employees 650 595 600 576 Continue cost reduction programs to lower expenses and use the savings to fund strategic initiatives, make investments in technology, and improve productivity 547 550 527 500 500 450 (1) Excludes Other segment (2) Excludes affiliates, includes Mexico 15 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Scotiabank®#16Our Businesses - Global Banking and Markets Wholesale Banking 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: Business Banking (45%), Capital Markets (55%) Business Performance Q2 2017 Highlights 24% of consolidated net income¹ Net income up 60% Y/Y² Strong results in equities from Corporate Banking businesses primarily in the U.S. and Canada, as well as lower provision for credit losses • . • 2017 Priorities Improve our customer coverage and deepen relationships with our most important customers Increase our emphasis on investment banking and other fee-based activities that strengthen customer relationships Leverage our global platforms to serve the strategic and financial objectives of our customers Shift our business mix to more closely align with our customer-focused strategy and other priorities • Improve productivity and achieve cost efficiencies Improve automation and embrace disruptive technologies to improve the customer experience and reduce costs Q2 2017 Key Data In C$ Total Loans (avg.) $80B Trading Assets (avg.) $105B Total Deposits (avg.) Net Income Productivity Ratio $76B $517MM # of Employees 41.7% 2,281 Net Income ($m) 600 517 461 469 421 400 323 200 Invest in advanced analytics to drive revenues and optimize the use of capital and funding 0 1 Excludes Other segment 16 2 Higher levels of client activity in equity trading, contributing 40% of the year-over-year earnings growth Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Scotiabank®#17Scotiabank Key Issues 17 Scotiabank®#18Energy Exposures Energy exposure is well diversified across sectors and geographies $14.6 billion drawn energy exposure, is 2.9% of the Bank's total loan book, increased 0.5% Q/Q¹ ~52% is investment grade Drawn Energy Exposure by Sector 10% 25% Midstream Downstream ■ E&P 46% 19% Services $12.4 billion of undrawn energy exposure, increased 12% Q/Q¹ ~68% is investment grade We remain committed to our guidance and actively manage our exposures Drawn Energy Exposure by Geography(2) Cumulative PCLs of $326 million from Q1/15 to Q2/17 Cumulative energy loan loss ratio of 2.1% is below our guidance of less than 3% (1) Quarter-over-quarter impact is calculated on a constant currency basis (2) By country of residence (3) Other includes Latin America, Asia and Europe 188 31% ■Canada 49% ■U.S. 20% ■Other (3) Scotiabank®#19Digital Focus Digital Transformation Strategy Aspire to become a digital leader in the financial services industry ALIGNMENT CUSTOMER EXPERIENCE CULTURE & TALENT TECHNOLOGY MODERNIZATION OPERATIONAL EFFICIENCY Medium Term Digital Objectives DIGITAL ADOPTION CUSTOMER EXPERIENCE BY OUR CUSTOMERS A leader in our five key markets (measured by NPS) DIGITAL RETAIL SALES IN-BRANCH FINANCIAL TRANSACTIONS At least At least Less than 50% 70% 10% Priority: One of the Bank's key strategic priorities is digital transformation, which we believe is a key enabler of the Bank's overall strategy Digital Strategy: Become a digital leader in the financial services industry by focusing on the customer experience, operational efficiency, modernization of our technology and platforms, top-to- bottom organizational alignment, and developing a performance oriented culture with strong talent. Digital Banking Update: On February 2, 2017 the Bank hosted a Digital Banking Update, a first of its kind among the Canadian Banks, to update the investment community on the plans to digitize the Bank and provided directional digital objectives. These efforts will help improve the all-bank productivity ratio to less than 50% by 2021. WILL IMPROVE ALL-BANK PRODUCTIVITY RATIO 19 Scotiabank®#20Domestic Retail Exposures Retail Loan Portfolio is ~$271 billion (~93% secured: 81% real estate and 12% automotive) Real estate is diversified with a high level of insured mortgages (54%), while uninsured has significant equity (~51% LTV) Credit card portfolio is approximately $6.8 billion, reflecting ~2.5% of Domestic retail loan book or 1.3% of the Bank's total loan book Organic growth strategy that is focused on payments and deepening customer relationships ~80% of growth is from existing customers (penetration rate low-30s versus peers in the low-40s) Strong risk management culture with specialized credit card teams, customer analytics and collections focus Auto Loan book is approximately $33 billion Market leader and portfolio is structurally different than peers with 9 OEM relationships (5 are exclusive) PCLs increased 1% year-over-year Domestic Retail Loan Book¹ 3% 5% Real Estate Secured Lending 13% Automotive Credit Cards 79% Unsecured Canadian Banking - Risk Adjusted Margin • Prime Auto and Leases, driven by growth in assets SDA, driven by improved risk performance and sufficient ACL coverage 2.20% Lending terms have been declining with contractual terms averaging 72 months but effective terms are 48 months Alberta retail loan book is approximately $40 billion or 15% of the Domestic retail loan book 2.15% 2.10% 2.11% 2.07% 2.09% 2.09% 2.10% • No signs of material credit stress or drawdown on lines Credit trends have moved up to/through national levels Majority of exposure is residential mortgages (54% insured) 2.05% 2.00% Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 1 Excludes multi-unit residential properties 20 Scotiabank®#21Canadian Household Debt Household debt has been increasing since the mid-1980s Low interest rates, demographics (including immigration), financial innovation and shift in consumer attitude/behaviour Debt increase has largely been driven by mortgage debt (represents ~72% of total household credit) Household debt to disposable income is only one metric to analyze While debt growth is not fast by historical standards, income growth has not kept up, leading to increasing household debt to income ratio Household debt to income ratio mixes a balance sheet measure "debt" with an income statement measure "disposable income". Borrowers are not expected to pay off their debts with one year's income Other considerations regarding consumer indebtedness and consumer resilience to shocks: Housing affordability - Mortgage debt-service ratios are in line with historical averages at the national level Interest and principal mortgage debt payments steady at ~6% of disposable income since 2008 Consumers prudently taking advantage of low rates to repay more principal ☐ ■ Net worth – Net asset levels (assets less debt) are at an all-time high of more than 8 times disposable income ■ About half of these assets are financial (not real estate) Asset growth has outpaced debt growth Interest rate shocks - Despite expectations for higher rates, there are mitigating factors ■ Canadians have substantial equity in their homes The majority of mortgage holders are locked in at fixed rates, with the 5-year term the most popular ■ Variable rate borrowers are qualified at the 5 year posted rate to provide a buffer against interest rate shocks. These borrowers have the option to switch into fixed rates Unemployment rate - A key driver of delinquencies and losses that determines borrowers' ability to pay debt ☐ Levels are expected to remain fairly stable over the next 2-3 years 21 Scotiabank®#22Canadian Household Credit Growth is Steady Total household credit growing 5% y/y in nominal terms vs 2008 peak of 12% y/y Consumer loans excluding mortgages (cards, HELOCs, unsecured lines, auto loans, etc.) are growing 3.5% y/y, vs. 11% in late 2007 and prior peaks in the high-teens • Mortgage credit growing 6% y/y, vs 2008 peak 13% Consumer Loan Growth Residential Mortgage Growth %, 3-month moving average 20 %, 3-month moving average 18 y/y % change 16 y/y % 14 change 12 10 Ними 8 m/m % change SA 6 0 m/m % change, SA 4 2 0 18 Household Credit Growth %, 3-month moving average 20 20 16 15 14 y/y % change 12 10 m/m % change, SA 10 10 8 сл 5 6 4 2 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Bank of Canada. 0 -5 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Source: Scotiabank Economics, Bank of Canada. 22 22 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Bank of Canada. Scotiabank®#23Household Debt Comparison In methodologically comparable terms, Canadian debt-to-income is 12% below where it peaked in the US In the last 5 years, increases in Canadian debt-to-income ratio has slowed vs 2000-10 - On same terms, Canada's debt-to-income is 155% vs 139% in the US Canadian debt-to-assets ratio remains below US - U.S. households have incentive to pursue higher asset leverage in light of mortgage interest deductibility Debt is a stock concept, to be financed over one's lifetime. Income is a flow concept measuring one single year's earnings. Debt should be compared to lifetime or permanent income, or assets Household Credit Market Debt to Disposable Income Household Liabilities as % of Total Assets 180 household credit liabilities 160 as % of disposable income 140 120 100 80 60 30 25 20 Adjusted Canadian Adjusted US 15 Official Canadian 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada, BEA, Federal Reserve Board. 23 10 household debt as % of assets US Canada 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada, Federal Reserve Board, Scotiabank®#24Canadian Mortgage Market Canadian housing market is less expensive on a global scale, particularly for buyers with U.S dollars Two-thirds of Canadian households do not have a mortgage - One-third of households rent One-third own their homes, but have no mortgage Two-Thirds of CDN Households do not have a Mortgage 40 40 % 35 30 25 20 20 Mortgage holders 15 No negative equity mortgages in Canada 10 89% of borrowers have 75% or less LTV. Significant price decreases required to reach a negative equity position 5 0 - Amount of non-recourse mortgages are low (~6-7% of total Canadian mortgages at most) and isolated to only Alberta (excluding high-LTV mortgages) and Saskatchewan. Owned dwelling Owned dwelling with a mortgage without a Rented mortgage Sources: Scotiabank Economics, Statistics Canada. High Percentage of Equity High amount of equity: average equity ratio is 74% On average, 40% of available HELOC credit is drawn, 60% is undrawn Approximately half of first-time home buyers in Canada are able to source their down payments from their personal savings 2014-16 data shows 75% of buyers from that period have 25% or more equity Partly reflects speed of rising house prices, but also increased emphasis on down payment requirements and tightened mortgage rules 2014-16 data indicates 39% of first-time home buyers had less than 20% down-a low point historically Reflects movement away from non-conforming low down-payment loans Efforts to cool the housing market are working, as British Columbia is showing signs of stabilization after foreign buyers' tax was enforced. Absent better data, foreign ownership in the GTA is estimated to be <3%. 80 real estate equity as % of real estate assets Canada 75 70 65 60 55 50 445 40 35 US 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada, U.S. Federal Reserve. Data through 2016Q4. 24 Scotiabank®#25Scotiabank's Canadian Residential Mortgage Portfolio • • • Mortgage business model is originate to hold 54% of the mortgage portfolio is insured 46% is uninsured and has an average loan-to-value (LTV) of 51% • New originations¹ has an average LTV of 63% in Q2/17, with Ontario and BC at 62% • • Majority is freehold properties; condominiums represent approximately 12% of the portfolio The mortgage portfolio is well managed and has good diversification across Canada with approximately half of the portfolio anchored in Ontario Canadian Mortgage Portfolio: $197B (spot balances as at Q2/17, $B) $96.2 10.5 Condominium $24B $173B Freehold Insured 54% 46% Uninsured (avg. LTV = 51% (2)) 85.7 $33.4 7.0 $30.5 -$3.7 $15.7 $11.8 -$1.7 26.4 26.8 - $0.2 $9.2 $0.7 14.0 11.6 8.5 Ontario B.C. & Territories Alberta Quebec Atlantic Provinces Manitoba & Saskatchewan % of 48.9% 17.0% 15.5% 8.0% 6.0% 4.7% portfolio (1) New originations defined as newly originated uninsured residential mortgages and have equity lines of credit, which include mortgages for purchases, refinances with a request for additional funds and transfer from other financial institutions. 23 (2) (3) LTV calculated based on the total outstanding balance secured by the property. Property values indexed using Teranet HPI data. Some figures on bar chart may not add due to rounding. 25 Scotiabank®#26Scotiabank Track Record 26 Scotiabank®#27Solid Track Record of Earnings and Dividend Growth Earnings Per Share (C$)(1)(2) Focused strategies to drive long-term growth Canadian Banking: Target 6-9% earnings growth Focused on customer experience, business mix shift and distribution network/digitization to improve costs International Banking: Target 8-10% earnings growth and positive operating leverage - Attractive, higher growth and underpenetrated banking markets Global Banking and Markets Focused on strategic agenda to generate continued momentum • • Dividend per Share (C$) Strong track record of consistent dividends (and increases) with a current yield of approximately 4% The Bank has never cut its dividend Dividend increases are driven in line with earnings growth and subject to Board approval Dividend payout ratio target range of 40- 50% Annual dividend of $2.88 per share implies a dividend payout ratio of 49.6% in 2016, or 48% adjusting for the restructuring charge The Bank has strong capital levels to support capital initiatives including dividend increases and share buybacks +6% Y/Y $6.00 $4.53 $2.05 11 12 13 14 15 2016 (1) Reflects adoption of IFRS in Fiscal 2011 (2) Excludes notable items 27 +7% Y/Y $2.88 11 12 13 14 15 2016 Scotiabank®#28Why Invest in Scotiabank? • • A unique, stable, straightforward and successful bank model Diversified by business and geography providing long-term sustainable earnings Approximately 80% of earnings from stable retail, commercial and wealth management businesses Strong risk management culture in Canada, with the growth potential of International Clearly defined strategy and well positioned for growth • Focused on organic growth across business lines, with the potential for select tuck-in acquisitions across existing markets that make the Bank better Significant potential for synergies across a clearly defined restructuring program and digital initiatives, including Tangerine The Bank has significant history in Latin America which is expected to provide better and more attractive growth prospects over the long-term Attractive valuation on a P/E and P/B basis Strong track record of delivering consistent earnings and dividend growth Dividend yield in the mid-single digits and dividend has never been cut Mid-teens ROEs and strong capital levels 28 Scotiabank®#29Funding 29 Scotiabank®#30Funding Strategy • Build customer deposits in all of our key markets • • • Continue to reduce wholesale funding and shift mix towards longer term funding Absolute level of wholesale funding down $14B to $219B Y/Y Wholesale funding as % of total assets down to 24% from 26% Y/Y Asset growth funded through deposits Money market funding as % of total WSF down to 37% from 42% Y/Y Achieve appropriate balance between cost and stability of funding Maintain pricing relative to peers Diversify funding by type, currency, program, tenor and markets 1 Regular issuance in all markets executed via wholesale funding centers in Toronto, New York, London and Singapore New credit card and auto securitization programs launched in 2016 Look to pre-fund at least one quarter ahead, market permitting Funding strategy and associated risk are managed centrally from Toronto within framework of policies and limits approved by Board of Directors • Branch banking subsidiaries are largely self-funded in the local market 30 Scotiabank®#31Consistent Loan Growth $166 $143 $140 $149 $154 $159 $160 $162 $171 $160 $86 $86 $90 $91 $95 $96 $98 $100 $98 $101 $215 $214 $216 $217 $219 $217 $219 $223 $224 $228 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 I Business and Government Loans Q3/16 Personal Loans and Credit Cards Q4/16 Q1/17 Q2/17 Residential Mortgages Core P&C loan growth has ben steady over the last 10 quarters . Loans constitute 52% of the balance sheet 31 Scotiabank®#32Deposit Overview Personal Deposits Important for both relationship purposes and regulatory value . $210 5% CAGR over the last 3 years $190 - 83% of personal deposits are in Canada, growing at ~4% CAGR $170 17% of personal deposits are outside Canada and growing at ~10% CAGR $150 Business & Government Leveraging relationships to increase $190 share of deposits $170 • 15% CAGR over the last 3 years $150 Focusing on operational, regulatory friendly deposits $130 $110 $90 32 Q2/14 Personal Deposits (CDE, $Bn) Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Bus. & Gov't Deposits (CDE, $Bn)¹ Q2/16 Q3/16 Q4/16 3Y CAGR 5% - Q1/17 Q2/17 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 1 Calculated as Bus& Gov't deposits less Wholesale Funding, adjusted for Sub Debt Q4/15 3Y CAGR 15% Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Scotiabank®#33Wholesale Funding Utilization Reducing reliance on wholesale funding (WSF) and continuing to close the gap vs. peers - BNS WSF is up $3B Q/Q to $219B Deposits displacing wholesale funding Continuing to focus on term funding and reducing concentration of money market instrument funding 33 29.9% WSF/Total Assets 28.4% 27.0% 26.1% 25.9% 25.2% 24.5% 23.8% Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 50% Money Market WSF/Total WSF 46% 44% 42% 41% 39% 38% 37% Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 BNS MMF Money Market WSF = Deposits from Banks, CDs, CP, BDNS, ABCP Scotiabank®#34Liquidity Metrics Liquidity Coverage Ratio HQLA (C$ billions) $145.9 $143.8 $144.5 $140.1 $138.5 132% $137.4 127% 127% 123% 124% 124% 125% 126% 121% $136.4 $125.1 $122.9 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Consistently strong performance NSFR implementation postponed to 2019 Efficiently managing LCR and optimizing HQLA 34 54 Scotiabank®#35Wholesale Funding Composition (1)(7) Wholesale Funding Diversified by Instrument and Maturity (¹) (7 Mortgage Securitization (4) Subordinated Debt (5) Deposits from Banks (2) 2% $ CDE, BN Maturity Table (ex-Sub Debt)6 4% $30 8% 32% Bearer Deposit Notes, Commercial $20 Paper & Certificate of Deposits $10 Covered Bonds 12% Asset Backed Securities 2% Medium Term Notes and Deposit Notes 37% 4% ABCP(3) Մ < 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 the MD&A of the 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 Q2/17 7) Wholesale funding sources may not add to 100% due to rounding 35 Scotiabank®#36Diversified 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 15 billion debt & equity shelf (senior debt, subordinated debt, preferred shares, common shares) • CAD 2 billion Principal at Risk (PAR) Note shelf • CAD 15 billion START ABS program (indirect auto loans) • CAD 7 billion Hollis ABS shelf (unsecured lines of credit) • CAD 5 billion Trillium ABS shelf (credit cards) • • Canada Mortgage Bonds and Mortgage Back Securities · CAD 36 billion global registered covered bond program (uninsured Canadian mortgages) USD 20 billion debt & equity shelf (senior debt, subordinated debt, preferred shares, common shares) USD 20 billion EMTN shelf USD 5 billion Singapore MTN program AUD 4 billion Australian MTN program 36 Scotiabank®#37Canadian Regulatory Environment: Bail-In and TLAC • • October 2011; Financial Stability Board (FSB) drafted recommendations regarding resolution regimes for global systemically important banks 2014; Canadian consultation process began. In 2016, amendments to CDIC Act, Bank Act and other statutes were passed to allow for a bank recapitalization (bail-in) regime Provided CDIC statutory power to convert specified eligible liabilities of domestic systemically important banks (DSIBS) into common shares in the event such banks become non-viable Extended existing CDIC powers with respect to managing the unlikely scenario of a bank failure 2017-2018; final bail-in regulations and the related Total Loss Absorbing Capital "TLAC" guideline published for public consultation (ends July 17, 2017) Expect regulations to be applied in early 2018 2021; TLAC compliance for DSIBS required by Nov 1, 2021 (i.e. Q1/2022) - Minimum TLAC ratio of 21.5% of RWA and minimum TLAC leverage ratio of 6.75% Banks likely to maintain buffers above the minimum requirements Banks to begin reporting TLAC measures in November 2018 37 Scotiabank®#38Canadian Bail-In Resolution Framework • Eligibility criteria for bail-in debt and conversion into common shares under the CDIC Act - - Senior unsecured debt with original term to maturity > 400 days, issued or re-opened by a D-SIB after regulations come into force Tradeable and transferable; assigned a CUSIP, ISIN or similar designation Excludes deposits, secured liabilities (e.g. covered bonds), eligible financial contracts (i.e. derivatives) and structured notes • Mechanism - designed using no creditor worse off principle - - Upon determination by OSFI that a bank has ceased to be viable, CDIC will take temporary control/ownership and carry out bail-in conversion and/or other restructuring activities Creditors should not incur greater losses through bail-in resolution than if institution had been wound-up under normal insolvency proceedings Respects relative creditor hierarchy; complete write-off of all subordinate ranking claims before converting any bail-in securities (including legacy non-NVCC capital securities) Legacy debt not subject to the bail-in regime but subject to other resolution regimes available to CDIC Senior creditors should receive relatively better conversion terms vs. junior creditors Bail-in risk mitigated by extremely low probability of event Principles based approach to bail-in conversion No explicit conversion ratio 38 Scotiabank®#39TLAC Requirements and Eligibility Two concurrent minimum TLAC compliance requirements Risk-based TLAC ratio > 21.5% of RWA & TLAC leverage ratio > 6.75% TLAC eligibility Tier 1 and 2 regulatory capital as per CAR guideline + Bail-in debt Eligibility criteria for bail-in debt to qualify as TLAC Subject to permanent conversion into common shares in whole or in part pursuant to CDIC Act Directly issued by Canadian parent operating company Not secured or covered by a guarantee of the issuer or related party Perpetual or have remaining term >365 days No acceleration rights outside of bankruptcy, insolvency, wind-up, liquidation or failure to make principal or interest payments for 30 days or more Callable without OSFI prior approval if, following the transaction, the minimum TLAC requirement is satisfied 39 Scotiabank®#40Total Loss Absorbing Capital (TLAC) 28.0% - TLAC today if senior debt maturing to Q2/2021 was refinanced to bail-in 21.5% estimated TLAC requirement $49B of senior debt 13.2% maturing to Q2/2021 $ CDE, BN $30 $20 $57B of total capital 14.8% $10 Q2/2017 TLAC Stack Senior Debt Maturity Table (at Q2/17) $49 billion $ < 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years > • $49B of senior debt maturing over the next four years to Q2/2021 Will exceed estimated 21.5% TLAC requirement well before the Q1/2022 deadline based on maintaining current capital levels and refinancing upcoming senior maturities with bail-in 40 Scotiabank®#41Appendix 1: Canadian Housing Market 41 Scotiabank®#42• Canadian Housing Fundamentals Remain Sound Steady population and household income gains, low interest rates, and increased immigration are underpinning demand Unemployment rate remains low and stable Strong underwriting discipline and conservative lending policies are reflected in low delinquency rates 320 International Immigration number of immigrants 2017 Target = 300K чий 300 to Canada, 000s High household debt supported by stable debt-service costs, low unemployment, and significant home equity 280 260 240 220 200 180 160 140 90 95 00 05 10 15 • Mortgage rules progressively tightened since 2008 Affordability strains observed in select markets, primarily in BC's Lower Mainland and Southern Ontario Residential Unit Sales to New Listings Ratio 1.0 ratio 0.9 0.8 0.7 0.6 0.5 Balanced Market 0.4 0.3 0.2 0.1 0.0 Mortgage Debt Service Ratio Sources: Scotiabank Economics, Statistics Canada. Residential Mortgages Arrears 8 % of disposable income 6 % of mortgages in arrears Sellers' Market Interest + Required 3 months or more 7 5 Principal Payments CO 1990-2015 average 4 5 3 4 Buyers' Market 3 2 Interest Only 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, CREA MLS. Data through April 2017. 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada. Data through 2016Q4. 42 2 0 US Canada 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, CBA, MBA. Data through Q1 and February 2017. Scotiabank®#43Mortgage Policy Developments in Canada 2017 2016 • Ontario government imposed 16 measures aimed to cool the rate of house price appreciation. Key aspects include: 15% non-resident speculation tax imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations - Expanded rent control that will apply to all private rental units in Ontario Legislation to allow for a vacant home tax $125 million five-year program to encourage construction of new rental apartment buildings by rebating a portion of development charges CMHC qualifying stress rate for all new mortgage insurance must be the greater of the contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate, currently at 4.64% CMHC updated low-ratio mortgage insurance eligibility requirements for lenders wishing to use portfolio insurance - Maximum amortization 25 years $1 million maximum purchase price Minimum credit score of 600 Property must be owner occupied • • 2015 • 2014 • 2012 Canada Revenue Agency now requires reporting of a disposition of a property for which the principal residence exception is claimed. Foreign buyers are not able to claim the primary residence tax exemption Ministry of Finance launched a public consultation process regarding lender risk sharing. Comments are required to be submitted by the end of February 2017 B.C. government introduced an additional 15% land transfer tax on non-resident purchases in Metro Vancouver Minimum down payment on insured mortgages on homes valued C$0.5 - C$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 amount borrowed on insured mortgages at refinancing reduced to 80% (from 85%) • Maximum amortization on insured mortgages reduced to 25 years (from 30) • • CMHC insurance availability is limited to homes with purchase price < $1 million . • 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%) 43 Scotiabank®#44Housing Market Structural Differences vs. U.S. Regulation and taxation Product • • • • Canada Mortgage interest not tax deductible Full recourse against borrowers in most provinces (in all of Saskatchewan and for low-ratio mortgages in Alberta, 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 - Premium is payable upfront by the customer Covers full amount for life of mortgage Homebuyers must qualify for mortgage insurance at an interest rate that is the greater of their contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate 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 . • Underwriting • Conservative product offerings, fixed or variable rate options Much less reliance upon securitization and wholesale funding Asset-backed securities not subjected to US-style off-balance sheet leverage via special purpose vehicles Terms usually 3 or 5 years, renewable at maturity Extensive documentation and strong standards 44 US 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 Scotiabank®#45Appendix 2: Canada & Select International Economies 45 Scotiabank®#46Canadian Economy and Financial System • • • • Canadian Economy The 10th largest economy in the world, with a strong export orientation Economy diversified, with particular strength in service, primary, manufacturing, construction, and utility sectors Proactive governments and central bank Manageable government deficits and debt burdens Improving growth outlook, with firmer commodity prices, resilient consumer activity, and strengthening U.S. demand for Canadian goods and services 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 46 Scotiabank®#47Canadian Economy Real GDP Growth 3 annual % change 2 1 0 US Canada Eurozone Canadian GDP by Industry February 2017 Finance, Insurance, & Real Estate Health & Education ■2000-2016 14.5% 2017f-2018f 20.3% 4.5% 5.4% 11.8% 6.3% 7.0% 11.5% 8.3% Wholesale & Retail Trade Manufacturing Mining and Oil & Gas Extraction Construction Public Administration Professional, Scientific, & Technical Services Transportation & Warehousing 10.5% UK Japan Other Sources: Scotiabank Economics, Statistics Canada. Source: Scotiabank Economics. Forecasts as of May 3, 2017. General Government Net Financial Liabilities 140 % of GDP 120 100 00 80 60 40.9 40 33.1 20 20 90.6 81.2 77.4 72.3 Government Financial Deficits 132.2 132.3 0.8 1 0 -1 -1.1 -2 -3 -1.9 -2.4 -3.1 -3.3 -4 % of GDP -4.4 0 -5 Canada Germany OECD France UK US Japan Italy Germany OECD* Italy Canada UK France US Sources: Scotiabank Economics, OECD (2016 estimates). As of May 16, 2017. *Arithmetic mean. 47 Sources: Scotiabank Economics, IMF (2016 estimates). As of May 16, 2017. Scotiabank®#4814 % 12 Stable Economic Fundamentals Canada Strengthening economic growth alongside firmer commodity prices and a gradual rebound in non- energy exports 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 within Bank of Canada target band CO 6 y/y % change 5 4 3. 2 1 0 -1 -2 00 02 04 06 Inflation 08 Bank of Canada Target Inflation Band 10 12 14 Canada 10 6 4 2 0 Unemployment Rate Canada 8 90 92 94 96 98 00 02 04 06 08 10 12 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through April 2017. Labour Force Participation Rate 70 % 69 68 2222 67 66 65 64 63 32 62 US 61 60 16 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through March and April 2017. 48 US US 14 16 Canada 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through April 2017. Scotiabank®#49Economic Outlook in Key Markets 2017 and 2018 Real GDP Growth Forecast Canada / US 2.5 2.4 2.2 2.0 Canada Canada 2017 2018 1.8 Scotiabank's Key International Markets 3.7 2.4 2.0 2.5 2.0 2.8 2.5 US 2017 US 2018 Chile 2017 Chile 2018 Mexico Mexico Colombia Colombia Peru 2017 Peru 2018 2018 2017 2018 2017 No Significant Exposure to the BRICS Source: Scotiabank Economics. Forecasts as of May 3, 2017. 49 Scotiabank®#50Appendix 3: Latin America Overview 50 Scotiabank®#51Latin America - Overview Investment Approach . Scotiabank has a deep history in the Latin American region Our investment approach has remained consistent, in that we start small, understand the market opportunities and build incrementally as the right opportunities present themselves Invested approximately $6.4 billion over the last 2 decades Continue to focus on transactions in our existing markets to build greater scale and long-term sustainable profitability Not looking to enter new markets or "plant new flags" The Pacific Alliance • • Management has identified the Pacific Alliance as a key area of growth for the Bank The Pacific Alliance reflects a trade bloc with a free trade agreement to liberalize commerce and improve integration among Mexico, Peru, Chile and Colombia (and it is expanding) The strategic purpose of the Pacific Alliance is to strengthen trade flows with Asia and to compete with Brazil and Argentina The Pacific Alliance combined, accounts for 40% of Latin America's GDP, comparable to Brazil The Pacific Alliance is a key area of growth for the Bank => through both acquisitions and organically 51 Scotiabank®#52Latin America - Why The Pacific Alliance? Presents an Attractive Long-Term Opportunity • • • • • Reflects the 6th largest economy in the world and 7th largest exporter Trade bloc with respective governments supporting growth/significant infrastructure spending Strong and favourable relative GDP growth rates Considerable room to increase banking penetration (avg. domestic credit/GDP of 64%) Fast-growing middle-class with increasing financial needs (eg. 7/10 Peruvians are middle class) • Favourable demographics for banking needs (median age of 29 years old) • Relatively stable legal, tax and regulatory infrastructure in place • Central bankers have earned credibility and banking system is well-capitalized Recent acquisitions in the Pacific Alliance . • • • • 51% of Cencosud's credit card and consumer loan unit in Chile Citibank's retail and commercial banking operations in Peru 50% of BBVA's AFP Horizonte, a pension fund management business in Peru 51% of Colfondos AFP, a pension fund management business in Colombia Citibank's Credito Familiar, a consumer finance unit in Mexico The Bank believes in the Pacific Alliance's long-term growth prospects 52 Scotiabank®#53Pacific Alliance Details Mexico Peru Chile Colombia Total/Average (6) Annual GDP Growth (1) 2016A 2017F 2.3% 2.0% 2016A 2017F 3.9% 2.5% 2016A 2017F 1.6% 1.8% 2016A 2017F 2.0% 2.0% 2016A 2017F 2.45% 2.1% Banking Penetration (2) (Loans / GDP) 50% 32% 74% 46% 51% Domestic Credit / GDP (3) 54% 28% 124% 53% 65% Current Account / GDP (4) -2.9% -3.1% -2.5% -5.5% -3.5% Market Share and Rank (5) (Total Loans) 5.7% #7 17.2% #3 6.2% #7 5.1% #7 8.6% #6 Country Credit Rating (4) BBB+ BBB+ AA- BBB- BBB+ (S&P) Population (4) 128.6M 32.4M 18.2M 48.8M 228M Median Age 27 27 33 29 29 (1) Scotia Economics, as of May 3 2017 (2) As of Q4/14 as per Scotiabank (3) As of 2015 (4) As of Q3/16 as per Scotiabank (5) As of September 2016 as per Scotiabank (6) Reflects un-weighted average 53 Scotiabank®#54Appendix 4: Tangerine Overview 54 54 Scotiabank®#55Tangerine Overview Attractive Client Profile Canada's leading direct bank, a low cost, scalable, digital approach Transitioning from mono-line (savings-only) to multi-product offering Strategy offers superior growth opportunities - - Diversified NIAT profile in the face of intensified competition and low interest rates An evolved client experience that positions Tangerine as a financial catalyst instead of a utility Higher client growth from new products/cross-sell Stickier client base due to primary relationship status Enhance position by: - Delivering a unique, transformational client experience Acquiring new clients and deepening existing client relationships Solidifying brand and purpose in the marketplace Leveraging additional opportunities for collaboration between Tangerine and Scotiabank Client satisfaction continues to be the Bank's principal focus Attractive Client Profile Tangerine Forward Banking Big 5 42% Avg. client age (25-44) 38% 35% 24% Have a university degree Household income > $100k 13% 30% Personal income > $100k 5% 13% Investable assets > $500k 5% 11% Client Sources Tangerine Clients Indexed to other Financial Institutions 59% 21% 7% 3% BIG FIVE CREDIT UNIONS (EX BNS) BNS OTHER 55 Scotiabank®#56Appendix 5: PCL Ratios 56 Scotiabank®#57PCL Ratios Total PCL as % of average net loans & BAs Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Canadian Banking Retail 0.30 0.30 0.31 0.32 0.34 Commercial 0.14 0.20 0.14 0.21 0.14 Total PCL 0.28 0.29 0.28 0.30 0.31 Net Interest Margin (%) (2) 2.38 2.38 2.39 2.39 2.38 International Banking Retail (1) 2.09 2.13 2.01 2.10 2.19 Commercial (1) 0.97 0.47 0.33 0.35 0.51 Total PCL 1.50 1.26 1.15 1.21 1.33 Net Interest Margin (%) (2) 4.69 4.79 4.77 4.73 5.00 Global Banking & Markets Total PCL 0.57 0.19 0.19 0.04 0.01 Net Interest Margin (%) (2) (3) 1.60 1.72 1.78 1.63 1.75 All Bank Total PCL Ratio 0.59(4) 0.47 0.45 0.45 0.49 Core Banking Margin (%) 2.38 2.38 2.40 2.40 2.54 (1) (2) (3) 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 (4) Excludes collective allowance increase; including collective allowance increase, All Bank PCL ratio was 0.64 57 Scotiabank®#58Appendix 6: Covered Bonds 58 Scotiabank®#59Scotiabank Global Registered Covered Bond Program • CAD $36 billion global covered bond program • Active in multiple currencies: USD, EUR, GBP and AUD • Extensive regulatory oversight and pool audit requirements • Mandatory property value indexation Established high level of safeguards and disclosure requirements Program carries the ECBC Covered Bond Label Issuer Guarantor Guarantee Status Program Size Ratings Cover Pool The Bank of Nova Scotia Scotiabank Covered Bond Guarantor Limited Partnership Payments of interest and principal in respect of the covered bonds are irrevocably guaranteed by the Guarantor. The obligations under the Covered Bond Guarantee constitute direct obligations of the Issuer and are secured by 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 CAD$36 billion Aaa/AAA/AAA (Moody's / Fitch / DBRS) First lien uninsured Canadian residential mortgage loans with LTV limit of 80% 92% (8% minimum overcollateralization) Ontario, Canada Asset Percentage Law Issuance Format 144A/Reg S (UKLA Listed) 59 Scotiabank®#60Portfolio Details: Scotiabank Global Registered Covered Bond Program (¹) Loan-to-value Ratios (2) 1% 4% Credit Scores 1% 2% 6% 0% - 20% ■599 and Below 18% 20%-40% 14% 600-650 41% ■40%-60% 651-700 701-750 ■60%-80% 55% 751-800 22% 36% 80% and Above 801 and Above Remaining Term Distribution (months) Provincial Distribution 3% 0% 0% ■Less than 12.00 15% 8% 14% 12.00 - 23.99 32% ■24.00 35.99 - 15% 36.00 41.99 42.00 47.99 14% 11% 48.00 and Above 51% 13% (1) As at April, 2017 (2) Uses indexation methodology as outlined in Footnote 1 of the Scotiabank Global Registered Covered Bond Monthly Investor Report 60 17% ■ Alberta ■British Columbia ■Manitoba New Brunswick ■Newfoundland ■Northwest Territories ■ Nova Scotia -1% ■ Nunavut 1% ■ Ontario -2% ■Prince Edward Island 0% .0% ■Quebec .3% Scotiabank®#61Details: Canadian Legislative Covered Bonds (CMHC Registered) Issuance Framework Eligible Assets Mortgage LTV Limits Basis for Valuation of Mortgage Collateral Substitute Assets Substitute Assets Limitation Cash Restriction Coverage Test Credit Enhancement Swaps Market Risk Reporting • 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 in Canada LTV limit of 80% Starting in July 2014, issuers are required to index the value of the property underlying mortgage loans in the covered pool while performing various tests • 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 • 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 the program website • Required to meet applicable disclosure requirements in Canada, the U.S. and UK 61 Scotiabank®#62Notes 62 62 Scotiabank®#63Contact Information Investor Relations Adam Borgatti Vice President Steven Hung Director Funding Andrew Branion Executive Vice President & Treasurer 416 866 5042 [email protected] 416 933 8774 [email protected] 416 933 7458 [email protected] Michael Lomas Managing Director, Treasury Sales and Market Development Dave Tersigni Managing Director, Senior Funding Christy Bunker 416 866 5734 [email protected] 416 863 7080 [email protected] Managing Director, Secured and Capital Funding 416 933 7974 [email protected] For further information, please contact: www.scotiabank.com/investorrelations 63 Scotiabank®