#1Scotiabank Investor Presentation January 31, 2001 1 Overview of Q1/01 Results Peter Godsoe Chairman & C.E.O. 2#2Q1/01 Performance Highlights ■ Solid earnings momentum A EPS up 23% year-over-year ➤ ROE 17.0% vs. 15.9% Strong top-line revenue growth: up 20% vs. Q1/00 Improved productivity: 51.7% vs. 58.6% ■ Aggressively managing credit quality ➤ $175MM additional credit loss charge in Q1/01 Strong capital ratios and reserves 3 Solid Earnings Momentum Net Income, $ millions 497 510 495 465 416 402 384 397 368 Q1/00 Q2/00 Q3/00* Q4/00 Q1/01 Q1/99 Q2/99 Q3/99 Q4/99 * excludes unusual items 4#3ROE Met or Exceeded Targets Q1/01 Target 17.0% VS. 16-18% EPS Growth 23% VS. 12-15% Productivity 51.7% VS. <60% Tier 1 8.6% VS. 7.5%+ 5 Performance Review Sabi Marwah Executive Vice-President & Chief Financial Officer CO 6#4Minimal Impact of Special Items in Q1/01 $ millions Gain on sale of Quebec branches (after-tax) $21 Deferred income tax adjustment Total impact (after-tax) (24) $(3) Note: Additional $175MM charge for loan losses also taken in Q1/01 7 $ millions Strong Top Line Revenue Growth Revenue up 20% Q1/Q1 - Net Interest Income up 18% - Other Income up 23% 2,024 2,437 2,309 Q1/00 Q4/00 8 Q1/01 Other Income Net Interest Income#5Change in Margins Increase Q1/01 vs. Q4/00 vs. Q1/00 Net interest margin 2.23% (9) bps 15 bps Change due to: Margin - Canada +2 +17 - Foreign (4) +11 Impaired loans/Interest reversals (2) (3) Increase in lower yielding assets Other (2) (10) (3) - (9) 15 9 Broad-Based Growth in Other Income Q1/01 vs. Q4/00 Q1/01 vs. Q1/00 $MM % $MM % 149 17% Other income growth 192 23% (27) Gain on sale of Quebec branches (27) 122 14% 165 20% 51 64% Trading 88 100+% 11 9 Other investment banking 41 45 32 64 Securitization revenues 27 49 13 8 Deposit & payment services 15 10 7 Credit fees 12 8 (5) (6) Retail brokerage (5) (6) 13 Other (13)* (6) 122 14% 165 20% * decrease primarily reflects sale of stock transfer business in Q3/00 10#6Tight Control on Expenses Q1/01 vs. Q4/00 Q1/00 (2.5)% 6.2% Change in expenses Less: - Chile 2.9 - performance-related (1.3) 4.1 - sale of stock transfer business (2.1) - sale of Quebec branches (0.5) (0.6) Base expenses (0.7)% 1.9% 11 Improving Productivity expenses as % of revenues 60 58.6 55 50 52.3* 51.7 Q1/00 Q2/00 Q3/00* Q4/00 Q1/01 excluding special items 12#7Strong Capital Ratios % of risk-adjusted assets 11.7 12.1 Total 8.6 Tier 1 8.0 6.9 Q1/00 Common 7.4 Q1/01 13 Higher Reserves DEM bonds 0.4 $ billions Equities 0.4 Govt/Corp bonds 0.3 2.4 1.1 1.9 1.1 Marketable Securities 1.3 General Provision Q1/00 Q1/01 14#8Business Line Results 15 * Domestic - Solid Fundamentals Net income, $ millions 189 256 233 Q1/00 Q4/00 Q1/01 * includes Wealth Management 16 Ongoing productivity improvements ■ Retail brokerage revenues slightly lower ■ Good credit quality excellent retail - stable commercial#9Domestic Banking Initiatives ■ Retail & Commercial banking ➤ enhancing branch sales capabilities - changing "above-branch" structure all branches broad-banded ■ Electronic banking ➤ Q1/Q1 growth in on-line transactions: 90%+ ➤ on-line customer base doubled • plan to double again in 2001 ■ Wealth Management ➤ new strategic partnership • Capital International Group (10 new funds) 17 Rising International Contribution Net income, $ millions 89 76 115 ■ Caribbean earnings up 22% ➤ revenue growth: +9% ➤ superior ROE ■ Asia steady earnings growth. ■ Latin America A improved earnings at Quilmes and Banco Sud Americano Q1/00 Q4/00 Q1/01 18#10Inverlat: Strong Financial Position Increased ownership from 10% to 55% ➤ total investment: US$215MM ■ Total Assets: $16 billion ☐ Strong capital ratios - Tier 1: 9.9% Fully reserved impaired loans 102% coverage Expected EPS contribution: 2001: 6-10 cents ➤ 1 month earnings included in Q1/01 19 Diversified Earnings from Scotia Capital Net income, $ millions 163 114 Q1/00 Q4/00 120 Q1/01 ■ Broad-based revenue growth: +37% derivatives, forex, fixed income Lending operations T - Institutional equities, underwriting T ■ Credit quality ➤ higher loan losses & impaired loans in U.S. ➤ stable in Canada & Europe 20#11Risk Review John Crean Senior Executive Vice-President Global Risk Management 21 Risk Overview ■ U.S. portfolio weakness - reflects market trends ➤ conservative classification of impaired loans ■ Net impaired loans: $1.1 billion ■ Aggressive provisioning ➤ $1,075 million estimate for year ➤ $400 million in Q1/01 Other portfolios in good shape 22#12Well Diversified by Market % of total loans & acceptances Europe Caribbean U.S.A. Latin America Asia Business Residential Mortgages Personal Canada U.S.A. 15.6% of total 23 $ millions Impaired Loan Formations in Q1/01 Scotia Capital - U.S.A. 1,200 - Canada & Other 149 1,349 Domestic International 126 133 1,608 24#13Source of U.S. Impaired Loan Formations Q1/01 Steel Other Asbestos Related 4% 12% 6% Apparel 10% Utilities 18% Movie Theatres 25% Financial Services 25% 25 NILs to Decline Significantly over 2001 Net impaired loans, $ millions 1200 ୮ 1000 800 I 600 400 200 2001 Forecast O Q1/01 Q2/01 Q3/01 Q4/01 26#14$ millions Specific Provisions by Business Line 2000 2001E Scotia Capital 412 575 Domestic 168 170 International 185 155 765 900 Additional charge in Q1/01 175 (mainly for Scotia Capital) 1,075 27 $ millions Specific Provisions Projection 400 400 300 225 200 100 2001 Forecast 225 225 Q1/01 Q2/01 Q3/01 Q4/01 28#15Other Portfolios in Good Shape ■ Domestic ➤ excellent retail ➤ commercial in good shape ■ International ➤ stabilized Latin American subsidiaries ➤ Caribbean & Asia performing well ■ Scotia Capital ► Canada & Europe stable A 29 Telecom & Cable Exposure Loans & acceptances, $ millions, Jan. 31, 2001 Investment Sector Grade Cable Operators 682 Non-Investment Grade 885 Total U.S. Total Exposure 1,567 683 Regulated Telephone 814 814 Unregulated 1,104 1,106 2,210 854 telephone/wireless Other communications 28 235 263 248 Total 2,628 2,226 4,854 1,785 Of which CLECS 146 85 Net Impaired loans: <$5 million 30#16Low Trading Risk $ millions, Nov. 1, 2000 to Jan. 31, 2001 20 15 10 LO 5 0 ساليابا -5 -10 Actual P&L -15 -VaR 1 day -20 31 Risk Summary Aggressively managing credit quality in the U.S. ➤ exhaustive review of U.S. portfolio ➤ conservative classification ➤ aggressive provisioning ☐ Other portfolios in good shape Expect impaired loans to trend downwards for balance of 2001 32#17Summary Peter Godsoe Chairman & C.E.O. 33 Summary Very good revenue growth & cost control Aggressive action taken on U.S. portfolio Strong capital & reserves ■ On track to achieve targets: ➤ earnings growth 12-15% A ROE 16-18% expect another record year 34#18This presentation includes forward-looking statements about objectives, strategies, and expected financial results. Such forward-looking statements are inherently subject to risks and uncertainties beyond the Bank's control, including but not limited to economic and financial conditions globally, regulatory developments in Canada and elsewhere, technological developments, and competition. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements, and the reader is cautioned not to place undue reliance on such forward-looking statements. 35