#1Scotiabank Investor Presentation Third Quarter, 2010 August 31, 2010 Caution Regarding Forward-Looking Statements 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 harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include comments with respect to the Bank's objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), and the outlook for the Bank's businesses and for the Canadian, United States 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," "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 our control, 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; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and 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; 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; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; consolidation in the Canadian financial services sector; 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 62 of the Bank's 2009 Annual Report. The preceding 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 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. The "Outlook" sections in this document are based on the Bank's views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. 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. Scotiabank 2#2Scotiabank Overview Rick Waugh President & Chief Executive Officer Q3 2010 Overview • . Strong quarter - - Net income: $1,062 million EPS up 13% vs. prior year, down 4% vs. Q2 - Strong ROE at 18.2% Continued strong risk management performance All three platforms contributing to success Continued strengthening of capital ratios Scotiabank 4#3Outlook for Balance of 2010 Objective ROE Target YTD Q3/10 16% to 20% 18.5% EPS Growth 7% to 12% 17.3% Productivity Ratio < 58% 50.9% Tier 1 11.7% Capital ratios Strong Capital Ratios TCE = 9.3% . Well positioned to meet full year targets Scotiabank Scotiabank Financial Review Luc Vanneste Executive Vice-President & Chief Financial Officer 5#4Strong Quarter Q3/10 Q2/10 Q/Q Q3/09 Y/Y 1,062 1,097 (3)% Net Income ($MM) 931 14% $0.98 $1.02 (4)% EPS $0.87 13% 18.2% 19.9% (170) bps ROE 17.3% +90 bps 52.5% 49.9% +260 bps Productivity Ratio 51.0% +150 bps Year-over-year earnings comparison Q3 earnings benefited from... • Stable net interest income • Growth in wealth management revenues • Lower PCLS Scotiabank Partly offset by... ⚫Lower trading revenues ⚫ Lower securitization revenues Higher non-interest expenses 7 Revenues Negatively Impacted by Trading Revenues (TEB) ($ millions) 3,944 3,843 3,854 1,599 1,815 1,611 Year-over-Year ■ Net interest income flat + Asset growth in Canadian and International Banking| - Margin compression and lower lending volumes in Scotia Capital ■ Other income up 1% + Higher net gains on securities + Increase in wealth management revenues - Lower trading revenues - Lower securitization revenues Quarter-over-Quarter 2,244 2,129 2,243 ■ Net interest income up 5% Q3/09 Q2/10 Q3/10 Other Income Net Interest Income (TEB) Scotiabank + Asset growth and longer quarter - Lower net interest margin ■ Other income down 11% + Stronger mutual fund revenues - Lower trading revenue - Lower net gains on securities 8#5Disciplined Expense Management Non-Interest Expenses ($ millions) - 1,959 1,967 2,023 1,093 1,126 1,143 382 384 360 " 484 464 513 Q3/09 Q2/10 Q3/10 Salaries & employee benefits ■Premises & technology Other Scotiabank Year-over-Year Expenses up 3% - Expenses related to acquisition of R-G Premier -Increased remuneration, advertising and professional spending to support business growth + Lower performance based compensation reflecting lower trading revenues Quarter-over-Quarter Expenses up 3% - Acquisition of R-G Premier - Longer quarter - Higher spending in technology, advertising and premises + Lower performance based compensation Strengthened Capital Ratios 11.7 11.2 11.2 10.7 10.4 TCE (%) Tier 1 (%) 9.3 8.8 8.8 8.2 7.9 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 • YTD internal capital generation of $1,484MM • Scotiabank DRIP participation: $166MM (vs. $172MM in Q2) 9 10#6Canadian Banking: Positive Momentum Continues 500 Net Income ($ millions) 584 604 Year-over-Year ■ Revenues up 9% + Volume growth, flat margin + Higher wealth management, commercial and retail banking revenues ■ PCLs down $6MM Expenses up 5% - - Expenses related to growth initiatives - Volume related costs Q3/09 Q2/10 Q3/10 Scotiabank Quarter-over-Quarter ■ Revenues up 1% + Higher wealth management revenues - Decrease in margin ■ PCLs down $26MM Expenses up 3% - Longer quarter - Volume related costs + Lower performance-based compensation 11 International Banking: Earning Through Challenges Net Income ($ millions) 312 317 288 Year-over-Year ■ Revenues up 9% (up 16% ex. FX) + Wider loan spreads in Mexico and Central America + Net gains on securities FX impact - Decline in commercial lending volumes ■ PCLs down $41MM - Expenses up 5% - Higher compensation costs - Increased marketing expenses & business taxes Quarter-over-Quarter ■ Revenues up 9% (up 8% ex. FX) + Benefit of acquisitions + Margin improvements - Lower gains on securities ■ PCLs down $35MM Q3/09 Q2/10 Q3/10 " Expenses up 11% - Impact of R-G Premier acquisition Scotiabank 12#7Scotia Capital: Solid Quarter, Challenging Trading Environment 470 Net Income ($ millions) 391 305 Year-over-Year ■ Revenues down 37% - Lower trading revenues - Significantly lower loan volumes - Lower MTM gains PCLs down $131MM (1) Expenses flat Quarter-over-Quarter Q3/09 Q2/10 Q3/10 ■ Revenues down 19% - Lower revenues in fixed income and institutional equity - Lower loan volumes - Lower MTM gains ■ PCLs down $1MM (1) Expenses down 11% + Lower performance-based compensation (1) Includes reversal of Scotia Capital portion of auto sectoral provisions of $19MM in Q2/10 and $18MM in Q3/10. Scotiabank Other Segment (1) ($ millions) Q3/10 Q2/10 Q3/09 Funding Net Interest Income (117) (105) (94) Broker Deposits (2) -- (57) Net Securitization Revenues (3) (110) (112) (96) AFS Securities Writedowns 5 (11) (95) Financial Instruments (4) (6) 24 -- General Provision -- (100) Expenses & Net Other Items 20 36 (41) TEB Offset (70) (71) (68) Taxes 124 72 200 Total Other (164) (166) (351) (1) Includes Group Treasury and other corporate items, which are not allocated to a business line (2) Effective Q1/10, Broker deposits were transferred to Canadian Banking 13 (3) Represents the impact to the Other segment of CMB securitization revenues recognized in other income, and the reduction in mortgage net interest income earned as a result of removing the mortgages from the Balance Sheet (4) In Q3/09 Financial Instruments was reported in Funding Net Interest Income, as well as Net Other Items Scotiabank 14#8• Scotiabank Risk Review Brian Porter Group Head, Risk & Treasury Q3 2010 Risk Overview Risk in credit portfolios continues to be well-managed Significant decline in specific provisions - Reversed remaining $24 million of auto sectoral provision set up in Q2/09 - General downward trend in net impaired loan formations Strong coverage ratios Market risk well controlled - Greater variability in trading revenues from higher volatility in credit markets Scotiabank 16#9Significant Decline in Specific Provisions ($ millions) Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Canadian Retail 137 159 140 149 145 Canadian Commercial 33 33 41 40 24 170 192 181 189 169 International Retail 146 122 130 125 118 International Commercial 33 45 47 48 48 20 179 167 177 173 138 117 65 14 (5) (7) 466 424 372 357 300 Scotia Capital Total PCL ratio (bps) 64 Scotiabank 63 63 55 55 55 55 General Downward Trend in Net Impaired Loan Formations 43 17 ($ millions) Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Canadian Retail 167 205 184 154 147 Canadian Commercial 67 24 42 15 47 234 229 226 169 194 International Retail 276 254 259 184 211 International Commercial 232 5 135 15 (12) 508 259 394 199 199 Scotia Capital Total Scotiabank 161 139 (109) (68) (10) 903 627 511 300 383 18#10Strong Coverage Ratios Q3/10 Q2/10 Q3/09 (1) Earnings coverage of PCL 6.4x 5.6x 3.3x Total Allowance as a % of GIL 79% 81% 75% - ex. R-G Premier Bank acquisition 73% 75% Total Allowance as a % of Loans & BAS 1.47% 1.52% 1.07% - ex. R-G Premier Bank acquisition 1.02% 1.04% (1) Pre-tax, pre-provision income to total PCL Scotiabank Risk Outlook • Asset quality remains strong Retail and Commercial portfolios performing as expected Continued strength in corporate portfolios Credit trends have stabilized - Further improvements dependent on economic conditions Scotiabank 19 20#11Scotiabank Canadian Banking Outlook - Balance of 2010 Chris Hodgson Group Head, Canadian Banking Canadian Banking: Balance of 2010 Outlook • • • Core businesses continue to grow and benefit from strategic investments Slowing asset growth in retail and small business offset by growth opportunities in commercial, payments and wealth Margins to remain under pressure from increased competition and higher wholesale funding costs • Provisions for credit losses stabilized and expected to decline Scotiabank 22#12Scotiabank International Banking Outlook - Balance of 2010 Rob Pitfield Group Head, International Banking International Banking: Balance of 2010 Outlook Retail growth as economies improve Some margin compression expected Continued focus on risk management and expenses Sustainable contribution from acquisitions Scotiabank 24#13Scotiabank Scotia Capital Outlook - Balance of 2010 Mike Durland Group Head, Global Capital Markets & Co-CEO, Scotia Capital Scotia Capital: Balance of 2010 Outlook • • Expect solid trading performance from diversified client-driven businesses, although not at the level seen in first half of the year Continue to benefit from very low loan loss provisions in portfolios that continue to perform well • Trend in contracting loan volumes to moderate • New business initiatives should continue to offset decline from peak capital markets activity Scotiabank 26#14Scotiabank Net Interest Margin (%) Appendix 1.76 1.76 1.74 1.73 1.68 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q3 margin benefited from... • Wider spreads on retail assets in International Banking Offset by... • Lower spreads in Canadian Banking & Scotia Capital Scotiabank 28#15Canadian Banking: Strong Y/Y Performance in Wealth Management 1,805 Revenues (TEB) Year-over-Year ($ millions) ■ Retail & Small Business 1,951 1,971 1,201 1,192 1,125 407 409 388 292 343 370 Q3/09 Q2/10 Q3/10 Retail & Small Business ■Commercial Banking Wealth Management Scotiabank + Asset and deposit growth + Higher credit card revenues ■ Commercial Banking + Deposit growth + Higher fee based revenues and securities gains ■ Wealth Management + Increased contributions from CI & DW (including positive adjustment) + Growth in interest income and mutual fund fees Quarter-over-Quarter + Asset and deposit growth + Higher wealth management contribution from Cl and DW, higher fees - Lower margin Canadian Banking: Volume Growth Average Balances ($ billions) Q3/10 Q2/10 Q3/09 Y/Y Q/Q Residential Mortgages (1) 130.9 126.8 119.9 11.0 4.1 Personal Loans 38.5 38.0 35.6 2.9 0.5 Credit Cards (2) 9.1 9.2 9.2 (0.1) (0.1) Business Loans & 24.7 24.1 25.0 (0.3) 0.6 Acceptances Personal Deposits (3) 105.6 104.6 93.8 11.8 1.0 Non-Personal Deposits 58.5 57.7 52.5 6.0 0.8 Wealth Mgmt. AUA (Spot) 147.6 148.9 126.8 20.8 (1.3) (1) Before securitization (2) Includes ScotiaLine VISA (3) Effective November 1, 2009, $10 billion of broker sourced deposits were transferred from the Other segment into Canadian Banking. Scotiabank 29 30#16Canadian Banking: Market Share Market Share (%) 1 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Residential Mortgages 20.06 20.14 20.23 20.28 20.40 Total Personal Lending 18.29 18.30 18.29 18.26 18.27 Total Personal Deposits 11.13 10.89 10.84 10.89 10.83 Mutual Funds 7.93 8.35 8.84 9.10 9.18 (1) Market share statistics are issued on a one-month lag basis. (Q3 10: June 2010) Total Personal Lending market share is based on a comparison of the big six banks. Total Personal Deposits market share is based on a comparison of the total industry. Mutual Funds market share is based on a comparison with total banks. Sources: Mutual Funds - IFIC; Personal Lending and Personal Deposits - Bank of Canada Scotiabank International Banking: Improving Economic Environment Revenues (TEB) ($ millions) 1,384 1,275 1,269 311 292 300 509 395 437 588 532 564 Q3/09 Q2/10 Mexico Q3/10 ■Caribbean & Central America Latin America & Asia Scotiabank Year-over-Year 31 Mexico + Higher commercial banking fees ■ Caribbean & Central America + Impact of R-G Premier acquisition + Writedown of an equity investment in Q3/09 ■ Latin America & Asia - Fair value changes in financial instruments + Increased contribution from T-Bank ■ Mexico Quarter-over-Quarter + Higher trading revenues and retail deposit spreads ■ Caribbean & Central America + Impact of R-G Premier acquisition ■ Latin America & Asia + Fair value changes in financial instruments + Higher gains on securities - Gain on sale of shares in Siam City Bank in Q2 32#17Scotia Capital: Lower Trading Revenues 1,104 614 Revenues (TEB) ($ millions) 858 697 500 387 490 358 310 Q3/09 Q2/10 Q3/10 Global Capital Markets Global Corporate & Investment Banking Scotiabank Year-over-Year ■ Global Capital Markets - Lower derivatives, fixed income & institutional equity revenues compared to prior year's record revenues + Precious metals revenues ■ Global Corporate & Investment Banking - Significantly lower loan volumes, modestly lower spreads and lower loan origination fees Quarter-over-Quarter ■ Global Capital Markets - Lower derivatives, fixed income & institutional equity revenues + Precious metals revenues ■ Global Corporate & Investment Banking - Lower loan volumes and loan origination fees - Lower MTM gains 33 Economic Outlook in Key Markets Real GDP (Annual % Change) 2000-08 Avg. 2009 2010F 2011F Mexico 2.8 (6.5) 4.8 3.5 Peru 5.6 0.9 7.0 5.4 Chile 4.3 (1.5) 4.2 5.8 Jamaica 1.4 (3.0) (0.5) 1.5 Trinidad & Tobago 7.5 (3.2) 2.0 2.5 Costa Rica 4.5 (1.3) 3.5 3.0 Dominican Republic 5.4 3.0 4.5 4.0 Thailand 4.6 (2.3) 5.5 4.0 2000-08 Avg. 2009 2010F 2011F Canada 2.6 (2.5) 3.3 2.6 U.S. 2.3 (2.6) 3.0 2.5 Source: Scotia Economics, as of August 30, 2010 Scotiabank 34#18Unrealized Securities Gains ($ millions) Q3/10 Q2/10 Q3/09 Emerging Market Debt 330 375 470 Other Debt 602 255 450 Equities 176 233 (25) 1,108 863 895 Net Fair Value of Derivative Instruments (193) (67) (162) and Other Hedge Amounts Total 915 796 733 Scotiabank Trend in PCL Ratios (Specific PCL as % average of loans & BAS) Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Canadian Banking Retail Commercial Total 0.33 0.37 0.32 0.35 0.32 0.52 0.55 0.68 0.68 0.38 0.36 0.40 0.37 0.39 0.33 International Banking Retail 2.59 2.30 2.41 2.42 1.88 Commercial 0.32 0.48 0.50 0.53 0.20 Total 1.13 1.13 1.19 1.22 0.85 Scotia Capital Corporate Banking 1.01 0.65 0.15 (0.07) (0.09) All Bank 0.64 0.63 0.55 0.55 0.43 Scotiabank 35 36#19Trend in Specific Provisions ($ millions) 500 400 300 200 100 0 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Scotiabank Specific PCLS - Specific PCLls as a % of Avg. Loans & Bas Trend in Net Impaired Loan Formations ($ millions) 1,200 1,000 800 600 400 200 0 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Scotiabank 37 38#20Trend in Gross Impaired Loans ($ millions) 6,000 5,000 4,000 3,000 2,000 1,000 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 GILS ex. R-G IIII R-G Premier Bank -- GILS as a % of Loans & BAs ex. R-G ― GILS as a % of Loans & BAs Scotiabank Canadian Retail: Loans and Provisions (balances at Q3/10, $ billions) 134 Total = $179B; 92% secured 24 12 2.00% 1.50% 1.00% 0.50% 0.00% 9 39 Mortgages(1) % secured PCL 100% Lines of Credit 68% Personal Loans 97% Credit Cards (2) 35% Q3/10 $ millions 1 Q2/10 1 Q3/10 29 Q2/10 30 Q3/10 Q2/10 Q3/10 69 61 46 Q2/10 57 % of avg. <1 <1 49 53 224 208 201 254 loans (bps) (1) Before securitizations of $15 billion & mortgages converted to MBS of $20 billion; 53% insured (including $15 billion portfolio insurance); LTV in mid-50s for uninsured portfolio Scotiabank (2) Includes $6 billion of Scotialine VISA 40#21International Retail: Loans and Provisions (balances at Q3/10, $ billions) 13.3 3.0 Total Portfolio = $25B; 77% secured 0.9 Personal Loans (total = $7.0B) Credit Cards (total = $1.9B) ■Mortgages (total = $16.5B) 5.1 4.5 9.4 1.1 +0.4 1.6 2.5 + 0.1 3.6 1.3 2.8 0.5 0.7 C&CA (1) Mexico Chile Peru % of total 52% 20% 17% 11% PCL Q3/10 Q2/10 Q3/10 Q2/10 Q3/10 Q2/10 Q3/10 Q2/10 $ millions 24 31 46 41 17 22 31 31 % of avg. 83 130 376 346 153 208 500 538 loans (bps) (1) Caribbean and Central America - includes R-G Premier Bank Scotiabank International Commercial: Lending Portfolio Q3/10 = $36 billion Well secured Other 6% Mexico 11% Chile 15% Peru 12% Asia/Pacific -(10 countries) 26% Caribbean & -Central America 30% • Portfolios in Asia/Pacific, Mexico, Chile, Peru and Central America performing well Closely monitoring Caribbean hotel exposures Scotiabank 41 42#222 8 Q3 2010 Trading Results Within One-Day VaR 800 0 40 30 20 20 10 0 (10) (20) Scotiabank Actual P&L 1-Day VaR W Average 1-Day VaR Q3/10: $12.7MM Q2/10: $13.4MM Q3 2010 Trading Revenue Distribution (15) (# days) Jul (13) (11) (9) (8) (7) (6) (5) (4) (3) (2) (1) 0 1 2 3 456789 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 ■ 75% of days had positive results in Q3/10 Scotiabank ($ millions) 44 43