#1apn NOVEMBER 2016 Vous tres plus SERVICE COMPLET Investor Presentation FIRST 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........ - Scotiabank Business Line Overview - - Canadian Banking........... International Banking...... Wholesale Banking…………………………….. Scotiabank Key Issues 4 9 10 13 14 15 - Energy Exposure…........ - Digital Focus............... - Domestic Retail Exposure...... Canadian Household Debt... • Scotiabank Track Record Funding............ Canadian Covered Bonds Appendix 1: Canadian Housing Market Appendix 2: Canada & Select International Economies.......... Appendix 3: Latin America Overview........ Appendix 4: Tangerine Overview........ Appendix 5: PCL Ratios............ 17 18 19 20 21 .24 29 33 38 43 47 49 3 Scotiabank®#4Scotiabank Overview 4 Scotiabank®#5Canada's International Bank History • Global footprint in over 55 countries 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 Q1 2017 (C$) Scotiabank Scotiabank Credit Ratings (1) Total Assets $887B Moody's S&P Fitch DBRS CET1 Risk Weighted Assets Market Capitalization $360B $93.9B Senior Rating Aa3 A+ AA- AA Net Income $2.0B Outlook Negative Stable Stable Negative ROE 14.3% Covered Bonds Aaa Not Rated AAA AAA Productivity Ratio 53.7% (2) CET 1 Capital Ratio 11.3% # of Employees 88,804 (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 (Q1/17) (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 28% 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 Global Banking and Markets accounts • for 23% of the Bank's earnings 23% 28% Canadian Banking 49% International Banking ■Global Banking and Markets Personal & Commercial Banking (~80%) Geographic Segment Average Assets (Q1/17)(1) 9% 19% Canada United States 60% ■Pacific Alliance (2) 12% Other International 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 6 Scotiabank®#7Financial Highlights - Q1/17 • • • A strong earnings and operating quarter for Scotiabank, with net income of $2.0 billion, up by 11% Y/Y. Double digital earnings growth across all three business lines: Canadian Banking net income of $981 million, up 12% Y/Y (or 7% excluding real estate gains) reflecting an increase in NIM, solid asset and deposit growth, as well as higher gains on the sale of real estate. International Banking net income of $576 million, up 14% Y/Y or 18% on a constant currency basis. This reflects good retail loan and deposit growth, strong NIM, and good expense control. Global Banking and Markets net income of $469 million, up 28% Y/Y. This was driven mainly by higher contributions from Fixed Income, Canadian lending businesses, and lower provisions for credit losses. Net Income ($m) 2,100 2,011 2,009 2,000 1,959 1,900 1,862 1,814 1,800 1,700 (1) Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Productivity Ratio (2) 60% 56.1% 52.2% 52.8% 54.1% 53.7% Revenue growth of 8% Y/Y (or 11% when adjusting for foreign currency translation), driven by higher asset growth and wider margins across all business lines. 40% 20% Expenses growth up 3% Y/Y (or 6% when adjusting for foreign currency translation) as a result of continued investment in business initiatives 0% (1) Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 which led to higher technology and professional services. Productivity (2) improved by 240 basis points Y/Y to 53.7% PCL Ratio Positive operating leverage in Q1 2017 of 4.5% 0.80% • PCL ratio remains unchanged Y/Y at 45 bps 0.59% Capital remains strong with a CET1 Capital Ratio of 11.3%, up 30 bps Q/Q. Leverage ratio of 4.5%, unchanged Q/Q 0.60% 0.45% 0.47% 0.45% 0.45% 0.40% 0.20% འསེ (1) Adjusts for restructuring charge of $278 million after-tax ($378 million before-tax) in Q2/16 0.00% (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. (3) Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 (3) Adjusts for collective allowance increase; including collective allowance increase, All Bank PCL ratio was 0.64% 7 Scotiabank®#8Scotiabank Strategy & Financial Objectives 8 Scotiabank®#9Key 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, and we aspire to become a digital leader in all of our major markets Business Mix Alignment Enhancing our already strong approach to capital allocation, management our capital more efficiently and prudently growing both sides of our balance sheet 9 Scotiabank®#10Medium-Term Financial Objectives Metric All Bank EPS Growth ROE Operating Leverage Capital Canadian Banking (Investor Day - April 2014) Net Income Growth International Banking (Investor Day - January 2016) Net Income Growth Objectives Q1 2017 Results 5-10% 14%+ Positive 10% 14.3% 4.5% Maintain strong ratios 11.3% 6-9% 12% (1 (1) 8-10% 14%2 (2) €2 (1) Canadian Banking net income attributable to equity holders growth is 7% when adjusting for real estate gains (2) International Banking net income attributable to equity holders growth is 18% when adjusting for foreign currency translation 10 Scotiabank®#112017 Business Line Outlook Canadian Banking Expect solid loan growth across retail mortgages, auto lending, commercial loans and credit cards, as well as deposit growth ⚫ Stable to slightly increasing margins 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 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 is expected to drive the bulk of the growth, while Europe faces Brexit uncertainty and high regulatory costs, while 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 11 Scotiabank®#12Scotiabank Business Line Overview 12 Scotiabank®#13Our 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 • Investment, pension and insurance advice and solutions. • Revenue mix: retail (57%), wealth (27%), commercial (16%) Business Performance Q1 2017 Highlights • 49% of consolidated net income • Net income up 12% Y/Y • Higher NIMs (+4 bps Y/Y) . Average loan mix: residential mortgage (62%), personal & credit card loans (24%), business and government loans & acceptances (14%) Strong growth in retail chequing and savings deposits • Solid loan volumes • Positive operating leverage of 4.9% (¹) 2017 Priorities Q1 2017 Key Data In C$ • Deliver an excellent customer experience across our businesses and channels • Optimizing our business mix by growing higher margin assets, building core deposits, and earning higher fee income • Reduce structural costs to build the capacity to invest in our businesses and technology Total Loans (avg.) Total Deposits (avg.) $309B $232B Net Income Productivity Ratio Branches $981MM 51.1% # of Employees 975 25,449 Net Income ($m) • Enhance our digital offering and e-commerce capabilities to drive digital sales and engagement 1000 977(2) 981 954 930 950 900 875 850 800 (1) €2 Adjusting for the real estate gains this quarter, operating leverage is 3.3% (2) Includes gain on sale of a non-core lease financing business of $100 million after-tax 13 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Scotiabank®#14Our Businesses - International Banking • • • Personal & Commercial Banking, Wealth and Insurance Business Overview Operate primarily in Latin America (Mexico, Peru, Chile and Colombia), Central America and the Caribbean, with full range of personal and commercial financial services as well as wealth products and solutions Revenue mix: Latin America (66%), Caribbean & Central America (30%), Asia (4%) (1) Average loan mix: residential mortgage (27%), personal & credit card loans (23%), business and government loans & acceptances (50%) 2017 Priorities Launch Net Promoter System (NPS) across Peru, Chile, Colombia and Mexico to provide our employees and leadership with timely and specific customer feedback • Establish digital banking organizations within our Pacific Alliance operations to drive greater digital adoption and sales • Enhance business mix by growing core deposits to reduce funding costs along with growing in targeted profitable segments/products Continue cost reduction programs to lower expenses and use the savings to fund strategic initiatives, make investments in technology, and improve productivity • Business Performance Q1 2017 Highlights • 28% of consolidated net income Net income up 14% Y/Y (or 18% adjusting for foreign currency translation) Good retail loan and deposit growth, strong net interest margin and fee growth Good expense control, with positive operating leverage of 4.2% Q1 2017 Key Data Total Loans (avg.) Total Deposits (avg.) Net Income Productivity Ratio Branches In C$ $104B $91B $576MM 55.3% 1,818 50,908 Net Income ($m) # of Employees 600 576 547 550 527 505 500 500 450 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 (1) Excludes affiliates, includes Mexico 14 Scotiabank®#15Our 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., and South America, Asia, Australia and select markets in Europe Central Revenue mix: Business Banking (48%), Capital Markets (52%) 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 Business Performance Q1 2017 Highlights 23% of consolidated net income Net income up 28% Y/Y Stronger results in Fixed Income, Canadian lending businesses, and lower provision for credit losses Partly offset by lower results in investment banking and the Asia lending business Q1 2017 Key Data # of Employees In C$ Total Loans (avg.) $82B Trading Assets (avg.) Total Deposits (avg.) Net Income Productivity Ratio $108B $75B $469MM 46.1% 2,303 . Shift our business mix to more closely align with our customer-focused strategy and other priorities Net Income ($m) 600 461 469 421 Improve productivity and achieve cost efficiencies Improve automation and embrace disruptive technologies to improve the customer experience and reduce costs 366 400 323 200 0 | || Invest in advanced analytics to drive revenues and optimize the use of capital and funding Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Scotiabank® • • 15#16Scotiabank Key Issues 16 Scotiabank®#17Key Issues - Energy Exposures . Energy exposure is well diversified across sectors and geographies $14 billion drawn energy exposure, is 2.8% of the Bank's total loan book, down 10% Q/Q ~48% is investment grade Drawn Energy Exposure by Sector 15% 10% E&P Midstream 49% Downstream 26% . $10.7 billion of undrawn energy exposure, down $0.4 billion Q/Q Services ~64% is investment grade . We remain committed to our guidance and actively manage our exposures Cumulative PCLs of $325 million from Q1/15 to Q1/17 Cumulative energy loan loss ratio of 2.0% is below our guidance of less than 3% (1) By country of residence 17 (2) Other includes Latin America, Asia and Europe Drawn Energy Exposure by Geography(1) Canada 35% 46% U.S. Other(2) 19% Scotiabank®#18Key Issues - Digital 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 CUSTOMER EXPERIENCE BY OUR CUSTOMERS A leader in our five key markets (measured by NPS) DIGITAL ADOPTION DIGITAL RETAIL SALES At least At least 50% 70% IN-BRANCH FINANCIAL TRANSACTIONS Less than 10% 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: Aspire to 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 Scotiabank®#19Key Issues - Domestic Retail Exposures Retail Loan Portfolio is ~$268 billion (~93% secured - 81% real estate and 12% automotive) Real estate is diversified with a high level of insured mortgages (56%), 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 (7 are exclusive) PCLS remained flat year over year Higher mix of new versus used auto sales Higher mix of subvented business Domestic Retail Loan Book 2% 5% 13% Real Estate Secured Lending Auto 80% Cards Unsecured Canadian Banking - Risk Adjusted 2.20% Margin Lending terms have been declining with contractual terms averaging 72 months but effective terms are 48 months 2.15% 2.09% 2.10% 2.11% 2.09% 2.09% Alberta retail loan book is approximately $40 billion or 15% of the Domestic retail loan book 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 (56% insured) 2.05% 2.00% 19 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Scotiabank®#20Key Issues - Canadian Household Debt Household debt has been increasing since the mid-1980's - Low interest rates, demographics (including immigration), financial innovation and shift in consumer attitude/behaviour Debt increase has largely been driven largely by mortgage debt (represents ~65% of consumer 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 those 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 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 20 Scotiabank®#21Scotiabank Track Record 21 Scotiabank®#22Solid 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 4.7% 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 22 22 +7% Y/Y $2.88 11 12 13 14 15 2016 Scotiabank®#23Why 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 23 Scotiabank®#24Funding 24 24 Scotiabank®#25Funding 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 $31B to $217B Y/Y Wholesale funding as % of total assets down to 24% from 27% Y/Y Asset growth funded through deposits Money market funding as % of total WSF down to 39% from 44% 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 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 25 25#26Personal Deposits DEPOSIT OVERVIEW • Important for both relationship purposes and regulatory value 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 ~11% CAGR $150 Business & Government share of deposits Leveraging relationships to increase $170 • 13% CAGR over the last 3 years $150 • Focusing on operational, regulatory $130 friendly deposits $110 $90 26 Personal Deposits (Spot, CDE, $Bn) $210 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 3Y CAGR - 5% Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Bus. & Gov't Deposits (Spot, CDE, $Bn)¹ Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 1 Calculated as Bus& Gov't deposits less Wholesale Funding, adjusted for Sub Debt Q3/15 Q4/15 Q1/16 3Y CAGR 13% Q2/16 Q3/16 Q4/16 Q1/17#27Wholesale Funding Composition Wholesale Funding Diversified by Instrument and Maturity(1 Mortgage Securitization (4) Subordinated Debt (5) Deposits from Banks (2) 2% 4% 8% Covered Bonds 13% Asset Backed Securities 2% Medium Term Notes and Deposit Notes Maturity Table (ex-Sub Debt) $ CDE, BN $30 Bearer Deposit 33% Notes, $20 Commercial Paper & Certificate of Deposits $10 35% 4% ABCP(3) < 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 Q1/17 7) Wholesale funding sources may not add to 100% due to rounding 27#28Diversified 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 5 billion ABS shelf (credit cards) . CAD 15 billion ABS program (indirect auto loans) • • CAD 7 billion ABS shelf (unsecured lines of credit) CAD 15 billion shelf (senior debt, preferred shares, subordinated debt, common equity) Canada Mortgage Bonds and Mortgage Back Securities USD 5 billion Singapore MTN program AUD 4 billion Australian MTN program CAD 36 billion global registered covered bond program (uninsured Canadian mortgages) USD 20 billion shelf (senior notes, preferred shares, subordinated debt, common equity) USD 20 billion EMTN shelf CAD 2 billion Principal at Risk (PAR) Note shelf 28#29Canadian Covered Bonds 29#30Scotiabank 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 requirement 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 will be irrevocably guaranteed by the Guarantor. The obligations of the Guarantor under the Covered Bond Guarantee constitute direct obligations of the Guarantor secured against 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% 93% (7% minimum overcollateralization) Ontario, Canada Asset Percentage Law Issuance Format 144A/Reg S (UKLA Listed) 30#31Portfolio Details: Scotiabank Global Registered Covered Bond Program (¹) Loan-to-Value Ratios(2) 1% 5% Credit Scores 1% 2% 5% ■0% - 20% ■599 and Below 12% 19% ■20%-40% 600 650 39% ■40%-60% ■651 - 700 160%-80% ■701 - 750 57% ■80% and Above 23% ■751 - 800 ■801 and Above 36% Remaining Term Distribution (months) Provincial Distribution 3% 0% 0% 8% 14% 21% 33% ■Less than 12.00 12.00 - 23.99 24.00 -35.99 15% ■36.00 41.99 42.00 47.99 ■48.00 and Above 51% 11% 10% 10% 22 (1) As at January,2017 (2) Uses indexation methodology as outlined in Footnote 1 of the Scotiabank Global Registered Covered Bond Monthly Investor Report 31 Alberta 17% ■■British Columbia ■Manitoba New Brunswick ■Newfoundland ■Northwest Territories Nova Scotia ■Nunavut ■Ontario ■Prince Edward Island ■Quebec 1% .1% 2% \0% 0% ■Saskatchewan 3% ■Yukon#32Details: 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 a program website • Required to meet applicable disclosure requirements in Canada, the U.S. and UK 32#33Appendix 1: Canadian Housing Market 33 33 Scotiabank®#34• 320 300 to Canada, 000s 280 260 Unemployment rate remains low and stable Strong underwriting discipline and 240 220 conservative lending policies are reflected in 200 low delinquency rates Mortgage rules progressively tightened since 2008 180 160 Affordability strains observed in select 140 Canadian Housing Fundamentals Remain Sound Steady population and household income gains, low interest rates, and increased immigration are underpinning demand High household debt supported by stable debt-service costs, low unemployment, and significant home equity International Immigration чий Residential Unit Sales to New Listings Ratio 1.0 number of immigrants ratio 2016/2017 0.9 Target = 300K 0.8 Sellers' Market 0.7 0.6 Balanced 0.5 Market 0.4 0.3 Buyers' Market 0.2 0.1 0.0 markets, primarily in B.C.'s Lower Mainland and Southern Ontario 90 95 00 05 10 15 Sources: Scotiabank Economics, Statistics Canada. 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, CREA MLS. Data through Jan. 2017. Mortgage Debt Service Ratio High Percentage of Equity Residential Mortgages Arrears 8 % of disposable income 80 real estate equity as % of real estate assets 6 % of mortgages in arrears Canada Interest + Required 75 3 months or more 7 5 Principal Payments 70 1990-2015 00 6 65 4 4 average 60 5 U.S. 3 55 4 50 2 Interest Only 45 3 1 40 2 35 U.S. Canada 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada. Data through 2016Q3. 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 2016Q3. 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Sources: Scotiabank Economics, CBA, MBA. Data through Q4 and October 2016. 34#35Scotiabank's Canadian Residential Mortgage Portfolio • Mortgage business model is originate to hold 56% of the mortgage portfolio is insured 44% is uninsured and has an average loan-to-value (LTV) of 51% 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: $195B (spot balances as at Q1/17, $B) $95.1 10.2 Condominium $23B $172B Freehold Insured 56% 44% Uninsured (avg. LTV = 51% (¹)) 84.9 $32.8 6.7 $30.5 -$3.7 $15.7 $11.9 -$1.7 - $0.2 $9.1 26.1 26.8 -$0.6 14.0 11.7 8.5 Ontario B.C. & Territories Alberta Quebec Atlantic Provinces Manitoba & % of 48.8% 16.8% 15.6% portfolio (1) (2) 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. Saskatchewan 4.7% 8.0% 6.1% 35 Scotiabank®#36Mortgage Policy Developments in Canada 2016 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 amortization on insured mortgages reduced to 25 years (from 30) • Maximum amount borrowed on insured mortgages at refinancing reduced to 80% (from 85%) • 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%) 36#37Housing Market Structural Differences vs. U.S. Regulation and taxation . • Canada Mortgage interest not tax deductible Full recourse against borrowers in most provinces (in Alberta and Saskatchewan, 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 U.S. 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 Product • Conservative product offerings, fixed or variable rate options Underwriting • Terms usually 3 or 5 years, renewable at maturity Extensive documentation and strong standards 37 • Can include exotic products . (adjustable rate mortgages, interest only) 30-year term most common Wide range of documentation and underwriting requirements Scotiabank®#38Appendix 2: Canada & Select International Economies 38 38 Scotiabank®#39Canadian 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 39#40Canadian Economy Real GDP Growth 3 annual % change 2 1 0 U.S. Canada Eurozone Canadian GDP by Industry November 2016 Finance, Insurance, & Real Estate Health & Education ■ 2000-2016 14.7% ■2017f-2018f 20.3% 4.5% 5.4% 12.0% 6.4% 7.0% 11.3% 8.2% 10.3% U.K. Japan Wholesale & Retail Trade ■Manufacturing ■Mining and Oil & Gas Extraction ■Construction Public Administration Professional, Scientific, & Technical Services ■Transportation & Warehousing Other Sources: Scotiabank Economics, Statistics Canada. Source: Scotiabank Economics. Forecasts as of January 17, 2017. General Government Net Financial Liabilities 140 % of GDP 120 100 88 80 90.6 81.2 77.4 72.3 Government Financial Deficits 132.2 132.3 1 0.1 0 -1 -1.4 -2 60 40 40 40.9 33.1 -3 -4 20 -2.5 -2.5 -3.3 -3.3 -4.1 % of GDP -5 0 Canada Germany OECD France U.K. U.S. Japan Italy Germany OECD* Italy Canada U.K. France U.S. *Arithmetic mean. Sources: Scotiabank Economics, OECD (2016 estimates). As of February 21, 2017. Sources: Scotiabank Economics, IMF (2016 estimates). As of February 21, 2017. 40 40#4114 % 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 6 y/y % change 5 4 3 2 1 0 -1 -2 00 02 04 Inflation Bank of Canada Target Inflation Band Canada 06 08 10 12 10 Unemployment Rate Canada 8 6 4 2 0 U.S. 90 92 94 96 98 00 02 04 06 08 10 12 14 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through January 2017. Labour Force Participation Rate 70 % 69 68 67 66 65 64 63 62 2 223 2222 U.S. 61 14 16 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through 2016Q4. 41 60 90 92 94 44 96 96 98 00 00 02 42 Canada U.S. 04 06 08 10 12 14 16 Sources: Scotiabank Economics, Statistics Canada, BLS. Data through January 2017. 16#42Economic Outlook in Key Markets Canada / U.S. 2016 and 2017 Real GDP Growth Forecast Scotiabank's Key International Markets 1.4% 2.0% 1.6% 2.3% 2.1% 2.0% 1.5% 2.4% 1.9% 1.5% 3.8% 3.8% 2016 Canada Canada 2017 U.S. U.S. Chile Chile 2016 2017 2016 2017 Mexico 2016 Mexico Colombia Colombia 2017 2016 2017 Peru Peru 2016 2017 No Significant Exposure to the BRICS Source: Scotiabank Economics. Forecasts as of January 17, 2017. 42#43Appendix 3: Latin America Overview 43 43 Scotiabank®#44Latin 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 44 Scotiabank®#45Latin America - Why The Pacific Alliance? Presents an Attractive Long-Term Opportunity • . • • Reflects the 6th largest economy in the world and 7 th 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 45 Scotiabank®#46Pacific Alliance Details Mexico Peru Chile Colombia Total/Average (6) Annual GDP Growth (1) 2016F 2017F 2016F 2017F 2.1% 1.5% 3.8% 3.8% 2016F 1.5% 2017F 2016F 2017F 2.0% 1.9% 2.4% 2016F 2017F 2.3% 2.4% 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) 5.7% #7 17.2% #3 6.2% #7 5.1% #7 8.6% #6 (Total Loans) Country Credit Rating (4) (S&P) BBB+ BBB+ AA- BBB- BBB+ Population (4) 128.6M 32.4M 18.2M 48.8M 228M Median Age 27 27 33 29 29 (1) As of January 31, 2017 as per Scotiabank (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 46 46 Scotiabank®#47Appendix 4: Tangerine Overview 47 Scotiabank®#48Tangerine Overview Attractive Client Profile . Transitioning from mono-line (savings-only) to multi-product offering Strategy offers superior growth opportunities . Canada's leading direct bank, a low cost, scalable, digital approach 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% 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 Client Sources Tangerine Clients Indexed to other Financial Institutions 59% - 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 48 48 21% 7% 3% BIG FIVE (EX BNS) CREDIT UNIONS BNS OTHER Scotiabank®#49Appendix 5: PCL Ratios 49 49#50PCL Ratios Total PCL as % of average net loans & BAS Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Canadian Banking Retail 0.28 0.30 0.30 0.31 0.32 Commercial 0.14 0.14 0.20 0.14 0.21 Total PCL 0.26 0.28 0.29 0.28 0.30 Net Interest Margin (%) (2) 2.35 2.38 2.38 2.39 2.39 International Banking Retail(1) 2.09 2.09 2.13 2.01 2.10 Commercial (1) 0.28 0.97 0.47 0.33 0.35 Total PCL 1.14 1.50 1.26 1.15 1.21 Net Interest Margin (%) (2) 4.57 4.69 4.79 4.77 4.73 Global Banking & Markets Total PCL 0.27 0.57 0.19 0.19 0.04 Net Interest Margin (%)(2)(3) 1.58 1.60 1.72 1.78 1.63 0.45 0.59(4) 0.47 0.45 0.45 2.38 2.38 2.38 2.40 2.40 All Bank Total PCL Ratio Core Banking Margin (%) (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 50#51Notes 51 Scotiabank®#52Investor Relations Contact Information Jake Lawrence 416-866-5712 Senior Vice President [email protected] Steven Hung Director 416-933-8774 [email protected] For further information, please contact: www.scotiabank.com/investorrelations 52 52 Scotiabank®