#1Scotiabank Investor Presentation Third Quarter, 2006 August 29, 2006 1 Scotiabank This document includes forward-looking statements which are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. These statements include comments with respect to 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. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intent," estimate," "plan," "may increase," "may fluctuate," and similar expressions of future or conditional verbs such as "will," "should," "would" and "could." By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. The Bank cautions readers not to place undue reliance on these statements, as a number of important factors could cause actual results to differ materially from the estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere; operational and reputational risks; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank's ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; global capital markets activity; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; consolidation in the Canadian financial services sector; changes in tax laws; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; and the Bank's anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements. For more information, see the discussion starting on page 59 of the Bank's 2005 Annual Report. The Bank cautions that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the foregoing factors, other uncertainties and potential events. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Bank. The "Outlook" section that follows 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. 2#2Scotiabank Scotiabank EPS ($) Overview Rick Waugh President & Chief Executive Officer 3 Earnings growth 0.89 0.93 0.84 0.80 0.77 ROE (%) 23.2 22.8 - 21.6 20.5 19.9 Net Income* ($millions) 928 887 844 803 775 ■ Record results EPS: $0.93 vs. $0.77 in Q3/05 ROE: 22.8% vs. 19.9% in Q3/05 Strong revenue growth significant asset growth across all businesses ■ Favourable credit quality Strong capital position Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 * Net income available to common shareholders 4#3Scotiabank Solid contributions from all business lines net income available to common shareholders, $ millions 319 319 296 Domestic Q3/05 Q2/06 Q3/06 285 278 276 268 234 International 200 Scotia Capital ■ Domestic: Solid results due to significant growth in retail and commercial lending and and business deposits as well as higher transaction-based revenue. ■ International: Strong underlying asset growth across the division, led by Mexico, which saw significant increases in retail and commercial lending. Solid contribution from Peru and other recent acquisitions. ■ Scotia Capital: Underlying growth in loan portfolio; also benefited from loan loss and interest recoveries, and securities gains, which more than offset a drop in trading revenues. 5 Scotiabank Expect to achieve upper range of 2006 financial performance objectives ROE 2006 YTD Objective 22.5% VS. 18-22% EPS Growth 13% VS. 5-10% Productivity 54.7% VS. <58% 6#4Scotiabank Performance Review Luc Vanneste Executive Vice-President & Chief Financial Officer 7 Scotiabank Strong revenue growth year over year revenues (TEB), $ millions 11% 2,989 2,830 2,689 1,816 1,644 1,561 1,128 1,186 1,173 Q3/05 Q2/06 ☐ Net Interest Income (TEB) Q3/06 Net interest income up $255 mm yr/yr ■ Strong asset growth in all businesses - average earning assets up 15% Net interest margin up slightly: 1 bp Other income: up $45 mm yr/yr ■ Positive impact of acquisitions Higher credit card and transaction-based banking revenues: $26 mm ■ Higher retail brokerage, mutual fund revenues: $24 mm ■Lower trading results: ($34) mm ■Lower securitization revenues: ($16) mm Other Income 8#5Scotiabank Significant asset growth average earning assets (incl. acceptances), $ billions 15% 289 99 66 332 C82: 74 93 75 72 22 Q3/05 83 Q3/06 Other ■Business & government (includes acceptances) Securities Residential mortgages Scotiabank % All Bank 1.97 1.97 Residential mortgages up 16% ■ Securities up 24% ■ Business & government up 12% 9 All-Bank margin stable 1.97 1.97 1.98 Domestic 2.88 2.89 2.78 2.74 International 3.98 3.93 2.67 4.15 4.19 4.06 Scotia Capital ■ All-Bank margin up 1 bp qtr/qtr ■ Underlying Domestic margin stable (excluding impact of Maple acquisition, ACG 13) ■ International - margin increases in several countries Scotia Capital margin benefited from interest recoveries 0.70 0.70 0.72 0.73 0.76 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 10#6Scotiabank Higher expenses - Investing for future expenses, $ millions 1,517 1,565 1,608 355 339 355 298 313 288 874 928 940 Q3/05 Q2/06 Q3/06 ☐ Other expenses Premises & technology Salaries & employee benefits growth Expenses up 6% or $91 mm yr/yr ▪ Higher salaries & benefits, due mainly to acquisitions: $66 mm ▪ Higher premises and technology: $25 mm Other expenses up slightly as impact of acquisitions mostly offset by $51 mm VAT recovery Expenses up 3% or $43 mm qtr/qtr ☐ Higher salaries due to acquisitions and longer quarter: $34 mm Higher premises and technology: $15 mm ■ Other expenses up due mainly to the impact of acquisitions and higher business and capital taxes, and litigation costs, partly offset by VAT recovery 11 Scotiabank % of risk-weighted assets Strong capital ratios 11.1 10.2 10.0 9.3 8.5 8.4 Q3/05 Q2/06 Q3/06 Tier 1 ■Tangible Common Equity (TCE) TCE decrease of 12 bps vs. Q2: ■ Risk weighted assets (RWA) growth: (46) bps - $10 billion increase in RWA driven by strong loan growth ■ Retained earnings growth: 34 bps 12#7Scotiabank Scotiabank $ millions Business Line Results 13 Domestic Banking Solid performance % Change vs. Q3/06 Q3/05 Q2/06 Total revenue $1,412 4% 3% Provision for credit losses 69 10 (22) Non-interest expenses 879 7 4 Net Income available to common $319 8 shareholders Average assets ($B) $139 11 5 Return on Equity 26% Year/Year: Net income unchanged strong retail asset growth offset by higher expenses and margin compression Quarter/Quarter: Net income up 8% ■ 5% asset growth, lower provisions in commercial banking 14#8Scotiabank revenues (TEB), $ millions 1,500 Domestic Banking Revenue growth 227 221 203 219 211 1,200 900 600 1,155 1,176 1,162 1,158 1,191 300 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Commercial Banking Personal Banking Personal Banking Yr/Yr - up 3% ■ 12% increase in retail assets, driven by organic growth and acquisitions of Maple/NBG good personal and small business deposit growth good growth in transaction-based revenues and mutual funds Qtr/Qtr up 3% - ▪ asset growth partly offset by lower Wealth Mgt revenues Commercial Banking Yr/Yr-up 9% ■higher net interest income and fee revenues Scotiabank 15 Domestic Banking Excellent retail asset growth retail lending assets, $ billions 12.1% CAGR 114 108 106 104 101 99 97 94 90 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 16 Q1/06 Q2/06 Q3/06#9Domestic Banking – Higher expenses to - support growth initiatives Scotiabank expenses, $ millions 900 870 879 833 845 Year/Year: up 7% 825 750 600 450 300 150 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 17 Increase due primarily to growth initiatives & acquisitions (Maple, NBG) - higher compensation, premises and technology expenses Quarter/Quarter: up 4% Increase due to growth initiatives International Banking Scotiabank Strong underlying asset growth $ millions % Change vs. Q3/06 Q3/05 Q2/06 Total revenue $ 844 13% 11% Provision for credit losses 24 13 nm* Non-interest expenses 477 7 7 Net Income available to common shareholders $ 285 22 7 Average assets ($B) $ 57 13 7 24% * Not meaningful Return on Equity Year/Year: Net income up 22% strong year-over-year growth in Caribbean/Central America and Mexico, including VAT recovery, and contribution from Peru, partly offset by foreign currency translation Quarter/Quarter: Net income up 7% good organic growth and contribution from Peru acquisitions, partly offset by higher loan losses 18#10Scotiabank International Banking - Higher revenues from strong asset growth revenues (TEB), $ millions 800 13% • 207 170 129 151 124 600 312 332 315 301 308 400 200 278 303 276 296 305 Mexico - up 10% yr/yr • higher retail and commercial loans partly offset by f/x impact ($36 mm) Caribbean & Central America Up 10% yr/yr strong underlying asset growth of 18%, including Jamaica, Trinidad, Bahamas and the Dominican Republic Latin America & Asia Up 22% yr/yr ■ contribution from Peru, partly offset by lower securities gains 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Latin America & Asia Caribbean & Central America ■Mexico 19 International Banking – Expenses support Scotiabank expenses, $ millions - business growth initiatives 500 486 477 452 447 443 400 300 200 100 Year/Year: up 7% ■ due primarily to impact of Peru acquisitions, and higher technology, compensation and premises expenses to support growth initiatives Partly offset by VAT recovery in Mexico, favourable forex impact Quarter/Quarter: up 7% ☐ impact of Peru acquisitions ▪ higher compensation, premises, advertising and litigation expenses 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 20#11Scotiabank $ millions Scotia Capital - record net income % Change vs. Q3/06 Q3/05 Q2/06 Total revenue $ 613 18% 6% Provision for (recovery of) credit losses (19) nm* (65) Non-interest expenses 232 9 (8) Net income available to common $ 278 39 1 shareholders Average assets ($B) $136 19 6 32% * Not meaningful Return on Equity Year/Year: Net income up 39% ■ asset growth, securities gains and higher loan loss recoveries, partly offset by lower trading results and higher expenses Quarter/Quarter: Net income up 1% ■ securities gains, interest recovery, lower expenses offset by lower loan loss recoveries and trading revenues 21 Scotia Capital - Strong C&l banking revenue offsets lower trading Scotiabank $ millions, TEB 700 18% 600 500 400 260 288 300 250 268 369 200 370 312 258 251 244 100 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Global Corporate & Investment Banking Global Capital Markets Global Corporate & Investment (C&I) Banking - up 42% yr/yr ■ record M&A revenues ■ increased lending volumes higher interest recoveries and securities gains Global Capital Markets Down 22% qtr/qtr ■ lower derivatives, institutional equity trading and fixed income revenues ■ stable precious metals, foreign exchange revenues 22#12Scotiabank $ millions Scotia Capital Expenses well controlled 300 200 100 214 198 254 253 232 0 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 ต Scotiabank Year/Year: up 9% ■ higher performance-related compensation, salaries and benefits ■ Waterous & Co. acquisition Quarter/Quarter: down 8% lower performance-related compensation 23 Risk Review Brian Porter Chief Risk Officer 24#13Scotiabank $ millions Stable credit quality Q3/06 Q2/06 Q3/05 Provision for Credit 74 35 85 Losses (PCL) PCL as % of Loans & 0.13% 0.07% 0.17% Acceptances: Net Impaired Loans*: 479 579 573 No change in General Allowance: $1,330 mm ■ US$1.2 billion in credit protection outstanding after specific allowance for credit losses Scotiabank $ millions Domestic: 25 Credit losses remain low Q3/06 Q2/06 Q3/05 - Retail & Small Business - Commercial International: - Scotiabank Mexico - Caribbean & Central America - Latin America & Asia 65 4 18 300 3 Scotia Capital: Global Corp.&Inv. Banking: - U.S. (16) - Canada & Other (3) Other - Total 74 (11) 8མ་རྗེས་སྐྱེ88 83 60 9 184 (30) 1 (24) 1 (1) 85 ■ Domestic: Retail credit quality remains stable. Lower Commercial PCLs qtr/qtr primarily due to provisions taken against two accounts in Q2/06. ■ International: Provisions of $24 mm, up $23 mm qtr/qtr due to higher retail provisions in the Caribbean & Central America. ■ Scotia Capital: Loan loss recoveries: higher yr/yr, but lower qtr/qtr. 26#14Scotiabank $ millions Domestic Minimal net impaired loan formations - Retail 76 - Commercial 20 96 International - Scotiabank Mexico 30 - Caribbean & Central America - Latin America & Asia (9) Scotia Capital: Global Corp. & Inv. 21 Domestic Retail: net formations of $76 mm reflect strong volume growth - underlying credit trends remain stable Domestic Commercial: net formations of $20 mm, due to classification of several small accounts International: net formations were $21 mm, with formations in Mexico partially offset by declassifications in Latin America and Asia Scotia Capital: net declassifications of $98 mm, largely in the U.S. Banking - U.S. (90) - Canada & Other (8) (98) Total 19 27 Scotiabank Low variability of trading revenue trading revenue, third quarter 2006 # days 14 12 10 8 60 4 2 0 (8) (7) (6) (5) (4) (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 $ millions ■ 85% days had positive results in Q3/06 ■ 10 days of trading losses in Q3/06 vs. 8 days in Q2/06 28#15Scotiabank $ millions 20 10 10 Market risk well controlled May 1, 2006 to July 31, 2006 нами Actual P&L 1 day VAR (10) (20) • Average 1 day VAR: $9.2 mm, up $1.2 mm qtr/qtr, up $1.5 mm yr/yr ■ Qtr/Qtr: higher interest rate and equities exposures; lower forex and commodities ■ No loss days exceeded the 1 day VAR Scotiabank 29 Outlook Rick Waugh President & Chief Executive Officer 30#16Scotiabank 287 279 Strong growth in assets and earnings Total Assets ($ billions) Net Income* ($ millions) 12.8% CAGR 357 365 325 301 309 318 314 727 701 928 13.0% 887 CAGR 844 822 803 784 775 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 * available to common shareholders Scotiabank 31 ☐ Outlook Investing for future revenue growth Organic growth . expanding branch network in Mexico (100+), Canada(50) ☐ ☐ • • upgrading technology to drive sales growth in investment products as well as personal and commercial banking hiring 300+ sales staff in Canada training, marketing, sponsorships/brand development Acquisitions • 6 in the past 12 months, with a total investment of more than $1 billion • strong pipeline, looking at several potential opportunities Maintaining our cost control culture and productivity advantage 32#17Scotiabank Scotiabank Appendix 33 Q3/06 Items of note EPS Impact (cents) Change Change Qtr/Qtr Year/Year VAT recovery 5 Interest recoveries 1 Provision for credit losses Higher tax rate Trading Forex Longer quarter (3 days) 33522 (3) 521 (3) (5) (2) Э (5) (1) Business growth Change in reported EPS 9 17 4 cents 16 cents 34#18Scotiabank $ millions Other Income up year over year on stronger wealth management and acquisitions Q3/06 % Change vs. Q3/05 Q2/06 Deposit & Payment Services $198 8% 8% Investment Banking 167 3 3 Retail Brokerage & Trust 142 11 (10) Credit Fees 140 6 Net Gain on Investment Securities 105 (4) (3) Trading Revenues 99 (26) (37) Other 322 18 12 Total $1,173 4% (1)% Year/Year: up 4% Broad-based growth in several categories, including retail brokerage, mutual funds Positive impact of acquisitions offset by lower trading and securitization revenues ■ Other category higher due mainly to impact of Peru Quarter/Quarter: down 1% ■ Lower trading, retail brokerage and trust revenues partially offset by growth in several categories. Scotiabank 35 Higher Salaries & Employee Benefits due to acquisitions $ millions Q3/06 % Change vs. Q3/05 Q2/06 Salaries Stock-based Compensation $539 9% 7% 22 (42) (19) Other Performance-based 242 16 (3) Compensation Pension & Employee Benefits 137 (7) Total $940 8% 1% Year/Year: up 8% Higher salaries and employee benefits due to acquisitions, as well as increased performance-based compensation due to adjustments to bonus accruals last year. Quarter/Quarter: up 1% Higher salaries due to acquisitions largely offset by lower stock and performance-based compensation and lower benefit costs. 36#19Scotiabank $ millions High level of unrealized securities' gains Scotiabank Q3/06 Q2/06 Q3/05 Emerging Market Debt 536 534 579 Fixed Income (142) (158) 1 Equities 454 519 504 848 895 1,084 $86 mm in unrealized gain on Shinsei investment 37 Domestic Banking Q3/06 Highlights ■ continued gains in market share ✓ residential mortgages up 114 bp* yr/yr ✓ personal term deposits up 68 bp* yr/yr ✓ business lending up 28 bp qtr/qtr ■ retail delinquency improved 15 bp qtr/qtr ■ 81% of Private Client Group clients rate our overall performance as excellent or very good * Including impact of Maple/NBG acquisitions 38#20Scotiabank Scotiabank • • International Banking Q3/06 Highlights Announced purchase of Corporacion Interfin for $330 million - largest private bank in Costa Rica -$1.3 billion in assets - 24 branches, 36 ABMs - combined 13% loan market share ■ Jamaica, Dominican Republic receive Euromoney Award of Excellence ■ Scotiabank Mexico rated #1 employer among banks in Mexico by Great Place to Work Institute 39 Scotiabank Mexico Strong underlying revenue growth Contribution of Scotiabank Mexico ($ millions) Q3/06 Net income in pesos, excluding inflation accounting MXP/CAD exchange rate 1,487 9.9 Net income in CAD, excluding inflation accounting $151 BNS' share (97%) $147 Canadian GAAP and acquisition adjustments 13 Total contribution in CAD* $160 * Excluding impact of loans booked through representative office Total revenue (excluding f/x impact) up 23% yr/yr on strong customer-driven asset growth; personal loans up 34%, commercial loans up 10% Non-interest expenses up 16% yr/yr (excluding tax recovery, f/x impact) due to higher salaries and premises costs related to branch openings, higher profit sharing, increased appraisal and acquisition costs (mainly for credit cards) 40#21Scotiabank Scotia Capital Q3/06 Highlights ■ Record year for M&A business - 60+ advisory mandates year to date - acted as financial advisor to Aliant on a series of transactions that created Bell Aliant Regional Communications Income Fund, the second largest business trust in Canada ■ Good corporate loan growth - Canada - up 20% yr/yr - U.S. - up 11% qtr/qtr, 4% yr/yr Growth in securities balances - GMAC - $7 billion - growth to support trading and derivatives businesses 41