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Scotiabank reports strong third quarter performance
Third quarter highlights compared to the same period a year ago:
- Earnings per share (diluted) of $1.02, an increase of 10% from $0.93
- Net income of $1.03 billion, up 10% from $936 million
- Return on equity of 22.7%, versus 22.8%
- Productivity ratio of 53.0%, improved from 53.8%TORONTO, Aug. 28 /CNW/ - Scotiabank today reported near record third
quarter net income of $1,032 million compared with $936 million the same
period last year. Quarter over quarter, net income was down slightly from
$1,039 million, due largely to the unfavourable impact of foreign currency
translation and lower interest and loan loss recoveries.
Earnings per share (diluted) increased 10% to $1.02 from $0.93 in the
same period a year ago, and return on equity remained strong at 22.7%.
Excluding a recovery of value added tax in International Banking recorded in
the third quarter last year, earnings per share (diluted) was up 16%.
"Our third quarter saw continued contributions across all three of our
platforms for growth," said Rick Waugh, Scotiabank President and CEO. "This
performance underscores our diversification and ability to invest in long-term
growth initiatives while continuing Scotiabank's record of achieving strong
quarterly results.
"Domestic Banking, including wealth management, had a very strong quarter
characterized by significant asset and revenue growth. This improvement in our
results was especially satisfying as we continued to make investments aimed at
attracting and retaining customers to promote future growth. These included
marketing initiatives, new branches, and significant training and expansion of
our sales and service staff. We are very pleased with the increasing
contribution that wealth management is making to our overall domestic results.
"Scotia Capital's diversified businesses combined for a strong third
quarter performance, led by significantly improved trading results, and strong
loan demand from our U.S. and Canadian clients.
"International Banking achieved positive underlying growth excluding the
value added tax recovery in the same quarter a year ago. Solid results were
reported by operations in Peru, the Caribbean and Central America, and Chile.
We continue to move forward with our strategy to grow and invest in our
international business, and over the quarter we opened new branches in several
countries, introduced new products, and completed our investment in Thailand.
"Although the economic environment and financial markets are more
uncertain than at the beginning of the year, the Bank is well positioned to
manage through any uncertainty and pursue our current and long-term growth
strategies. This confidence is based on our high levels of profitability and
capital, access to multiple sources of liquidity, our proven competence in
risk management and our significant diversification of operations.
Accordingly, the Bank should be able to achieve the upper range of its key
performance objectives for the year and is well positioned for continued
growth in the future."Year-to-date performance versus key 2007 financial and operational
objectives was as follows:
1. TARGET: Earn a return on equity (ROE)(1) of 20 to 23%. For the nine
months Scotiabank earned an ROE of 23.2%.
2. TARGET: Generate growth in earnings per common share (diluted) of
7 to 12%. Our year-over-year growth in earnings per share was 15%.
3. TARGET: Maintain a productivity ratio(1) of less than 58%.
Scotiabank's ratio was 53.5% for the nine months.
4. TARGET: Maintain sound capital ratios. At 9.7%, Scotiabank's Tier 1
capital ratio remains strong by Canadian and international standards.
(1) Refer to non-GAAP measures discussion further below.
FINANCIAL HIGHLIGHTS
As at and for the For the
three months ended nine months ended
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July 31 April 30 July 31 July 31 July 31
(Unaudited) 2007 2007 2006 2007 2006
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Operating results
($ millions)
Net interest income 1,812 1,794 1,716 5,382 4,756
Net interest
income(TEB(1)) 1,913 1,903 1,816 5,697 5,065
Total revenue 3,201 3,102 2,889 9,412 8,340
Total revenue
(TEB(1)) 3,302 3,211 2,989 9,727 8,649
Provision for
credit losses 92 20 74 175 184
Non-interest
expenses 1,752 1,726 1,608 5,202 4,735
Provision for
income taxes 296 286 244 859 669
Provision for
income taxes
(TEB(1)) 397 395 344 1,174 978
Net income 1,032 1,039 936 3,091 2,682
Net income
available to
common shareholders 1,016 1,028 928 3,056 2,659
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Operating
performance
Basic earnings
per share ($) 1.03 1.04 0.94 3.09 2.69
Diluted earnings
per share ($) 1.02 1.03 0.93 3.06 2.66
Return on equity (%)(1) 22.7 23.4 22.8 23.2 22.5
Productivity ratio(%)
(TEB(1)) 53.0 53.8 53.8 53.5 54.7
Net interest margin
on total average
assets (%)(TEB(1)) 1.86 1.93 1.98 1.90 1.98
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Balance sheet
information
($ millions)
Cash resources
and securities 121,633 131,296 115,506
Loans and
acceptances(2) 233,004 226,310 202,859
Total assets 408,115 411,710 364,981
Deposits 286,985 291,603 255,225
Preferred shares 1,290 1,290 600
Common
shareholders'
equity 18,377 18,705 16,468
Assets under
administration 198,786 208,426 180,941
Assets under
management 31,031 30,448 26,550
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Capital measures
Tier 1 capital
ratio (%) 9.7 10.1 10.0
Total capital
ratio (%) 10.6 11.4 11.6
Tangible common
equity to
risk-weighted
assets(1) (%) 7.7 8.0 8.4
Risk-weighted
assets
($ millions) 219,771 213,078 190,332
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Credit quality
Net impaired
loans(4)
($ millions) 584 579 479
General allowance
for credit losses
($ millions) 1,298 1,298 1,330
Net impaired loans
as a % of loans
and acceptances(2)(4) 0.25 0.26 0.24
Specific provision
for credit losses
as a % of average
loans and
acceptances
(annualized)(2) 0.16 0.08 0.15 0.12 0.13
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Common share
information
Share price ($)
High 54.67 54.73 47.24 54.73 49.80
Low 48.91 49.34 41.55 48.80 41.55
Close 49.45 53.39 45.55
Shares outstanding
(millions)
Average - Basic 988 992 988 990 988
Average - Diluted 996 1,001 999 999 1,001
End of period 982 990 988
Dividends per
share ($) 0.45 0.42 0.39 1.29 1.11
Dividend yield (%) 3.5 3.2 3.5 3.3 3.2
Dividend payout
ratio(5) (%) 43.7 40.6 41.5 41.8 41.3
Market
capitalization
($ millions) 48,578 52,840 45,022
Book value per
common share ($) 18.71 18.90 16.66
Market value to
book value
multiple 2.6 2.8 2.7
Price to earnings
multiple (trailing
4 quarters) 12.4 13.7 13.0
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Other information
Employees 55,994 54,908 52,232
Branches and
offices 2,289 2,242 2,147
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(1) Non-GAAP measure. Refer further below for a discussion of these
measures.
(2) Certain comparative amounts in this quarterly report have been
restated to conform with current period presentation.
(3) Balance sheet figures and related ratios have been restated, where
applicable, for the accounting policy related to stock-based
compensation adopted in 2006. Refer to Note 1 of the interim
consolidated financial statements further below for details.
(4) Net impaired loans are impaired loans less the specific allowance for
credit losses.
(5) Represents common dividends for the period as a percentage of the net
income available to common shareholders for the period.MESSAGE TO STAKEHOLDERS
Strategies for success
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Scotiabank continued its strong record of success this quarter by
maintaining its focus on executing strategies that meet the needs of our
stakeholders - and bring us closer to achieving our goal of being the best
Canadian-based international financial services company.
We are committed to our current business model of three strong business
lines and to growing each of our businesses, while maintaining a high level of
diversification. All of our business lines and key corporate functions made
good progress on our three key priorities for 2007: sustainable revenue
growth, including both organic growth initiatives and acquisitions; effective
management of our capital; and leadership.
In Domestic Banking, we are focused on deepening relationships. We see
good potential for growth in small business and, in May, we launched Scotia
Running Start for business(TM), a comprehensive package of banking solutions
that will help entrepreneurs and small businesses establish new ventures and
support their success.
In International Banking, we continue to complement a strong focus on
organic growth with strategic acquisitions and alliances. We closed the deal
announced in the second quarter to acquire an initial 24.99 per cent stake in
Thanachart Bank, Thailand's eighth-largest bank and leading automobile lender.
This partnership leverages the strengths of both organizations and builds on
our solid track record of strategic investments in high-potential markets. In
Jamaica and the Bahamas, we launched the Scotiabank MasterCard Business Card
and Scotiabank/AAdvantage Business Executive MasterCard, which will make
credit facilities more easily available for small and medium-sized businesses.
In Scotia Capital, we continue to focus on building our NAFTA
capabilities. Scotia Capital Mexico won the mandate to lead a US$900 million
financing for the acquisition of Porcelanite Holding, S.A. de C.V. by Grupo
Lamosa, S.A.B. de C.V. The US$675 million senior secured portion of the
financing is the largest syndicated facility ever led by Scotia Capital in
Mexico.
Our Calgary Customer Contact Centre was recently named a platinum-level
Contact Centre Employer of Choice(R), identifying the site as one of the best
contact centres to work for in the country. The Toronto Customer Contact
Centre earned the same designation last year. Awards such as these affirm our
progress in ensuring that Scotiabank is a great place to work, and our belief
that satisfied employees lead to satisfied customers.
Heading into the final quarter of fiscal 2007, we are confident that we
will continue to achieve good earnings performance and meet the financial and
operating objectives we have established for this year and are well positioned
for continued growth in 2008.2007 Objectives - Our Balanced Scorecard
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Financial
- Return on equity of 20-23%
- Diluted earnings per share growth of 7-12%
- Long-term shareholder value through increases in dividends and stock
price appreciation
Operational
- Productivity ratio of less than 58%
- Sound ratings
- Strong practices in corporate governance and compliance processes
- Sound capital ratios
Customer
- High levels of customer satisfaction and loyalty
- Deeper relationships with existing customers
- New customer acquisition
People
- High levels of employee satisfaction and engagement
- Enhance diversity of workforce
- Commitment to corporate social responsibility and strong community
involvement
ACHIEVEMENTS
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Domestic Banking
- We continue to expand our distribution network to better serve
existing customers and attract new ones. We opened an additional
seven new branches in high growth markets during the quarter, in
addition to the nine added in the first half of 2007. We plan to open
35 branches in total this year. Since 2006, our expansion program has
added 31 branches, 71 ABMs and nearly 300 sales and service
positions.
- Our SCENE entertainment program, Canada's first-ever entertainment
loyalty program, has been very successful, greatly exceeding
expectations since its launch in the first quarter. Members use their
Scotiabank SCENE debit and credit cards to earn points redeemable for
free movies and other entertainment-related rewards.
- Scotiabank is committed to helping customers succeed financially, and
launched a market leading program for business start-ups called
Scotia Running Start for business(TM). It helps new enterprises
successfully launch by providing discounted personal and business
banking services, a complimentary copy of QuickBooks EasyStart
accounting software and other practical resources such as a state-of-
the-art business plan writer called Scotia Plan Writer for business.
International Banking
- Scotiabank continues to be honoured for its commitment to excellence
in banking. Scotiabank de Costa Rica received the Best Emerging
Market Bank award from Global Finance magazine. This recognition is
given to banks that continuously provide high levels of service and
have qualities that corporations should look for when choosing a
bank.
- We completed the initial purchase of 24.99% of Thanachart Bank,
Thailand's eighth-largest full service bank and leading automobile
financier. With the bank's full platform of financial services and
over 150 branches throughout the country, this investment opens up
substantial growth opportunities in Thailand.
- Scotiabank Mexico and Global Transaction Banking successfully
launched TRADEXPRESS elite, our trade finance Internet service. It is
now available to all Mexican business clients, along with customers
in 28 other countries.
- Through the joint efforts of Scotiabank de Puerto Rico's Corporate
Banking team and Scotia Capital's Public Finance Group in New York,
Scotiabank was lead arranger for a US$1.5 billion revolving credit
facility for the Commonwealth of Puerto Rico. This is the second
consecutive year that Scotiabank has arranged this revolving credit
facility and it was the fourth billion-dollar mandate awarded to the
Bank by the Commonwealth of Puerto Rico in the last 18 months.
Scotia Capital
- ScotiaMocatta was named one of Canada's Global Leaders by the
Institute for Competitiveness and Prosperity, the research arm of
Ontario's Task Force on Competitiveness, Prosperity and Economic
Progress.
- Scotia Capital acted as financial advisor to CanWest Global
Communications Corp. on its $495 million privatization of CanWest
MediaWorks Income Fund. Related to the transaction, Scotia Capital
successfully syndicated and was also the lead arranger and bookrunner
on $1.3 billion of bank facilities, joint bookrunner on
US$400 million senior subordinated notes and sole hedge advisor.
- Scotia Capital Mexico won the mandate to lead the financing for the
acquisition of Porcelanite Holding, S.A. de C.V. by Grupo Lamosa,
S.A.B. de C.V. The financing includes a US$675 million senior secured
syndicated facility, the largest syndication ever led by Scotia
Capital Mexico.
Employee highlights
- Scotia Applause, our employee recognition program, was honoured at
the Employer of Choice Marketing Awards sponsored by working.com, and
by Recognition Professionals International. These awards affirm our
progress in ensuring that Scotiabank is a great place to work and
build rewarding careers, and our belief that satisfied employees lead
to satisfied customers.
Community involvement
- The Scotiabank Research Centre was unveiled at Pier 21, a national
historic site in Halifax, on June 5. The Bank established the centre
with a donation to Pier 21 to commemorate Scotiabank's 175th year in
business and celebrate the Bank's diversity. With thousands of
immigrants' stories, photographs, documents and oral histories in its
collections, the Scotiabank Research Centre is a place to share and
preserve memories for future generations to enjoy.MANAGEMENT'S DISCUSSION & ANALYSIS
Forward-looking statements
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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 and any applicable Canadian securities
legislation. 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 53 of the Bank's 2006 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 in this document is based on the Bank's views and
the actual outcome is uncertain. Readers should consider the above-noted
factors when reviewing this section.
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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.
Non-GAAP Measures
The Bank uses a number of financial measures to assess its performance.
Some of these measures are not calculated in accordance with Generally
Accepted Accounting Principles (GAAP), are not defined by GAAP and do not have
standardized meanings that would ensure consistency and comparability between
companies using these measures. These non-GAAP measures are used in our
Management's Discussion and Analysis further below, and they are defined
below:
Taxable equivalent basis
The Bank analyzes net interest income and total revenues on a taxable
equivalent basis (TEB). This methodology grosses up tax-exempt income earned
on certain securities reported in net interest income to an equivalent before
tax basis. A corresponding increase is made to the provision for income taxes,
hence there is no impact on net income. Management believes that this basis
for measurement provides a uniform comparability of net interest income
arising from both taxable and non-taxable sources and facilitates a consistent
basis of measurement. While other banks also use TEB, their methodology may
not be comparable to the Bank's. The TEB gross-up to net interest income and
to the provision for income taxes for the three months ended July 31, 2007 is
$101 million versus $100 million in the same quarter last year and
$109 million last quarter. For the nine months ended July 31, 2007, the TEB
gross- up amount is $315 million versus $309 million for the same period last
year.
For purposes of segmented reporting, a segment's net interest income and
provision for income taxes is grossed up by the taxable equivalent amount. The
elimination of the TEB gross-up is recorded in the 'Other' segment.
Productivity ratio (TEB)
Management uses the productivity ratio as a measure of the Bank's
efficiency. This ratio represents non-interest expenses as a percentage of
total revenue on a taxable equivalent basis.
Net interest margin on total average assets (TEB)
This ratio represents net interest income on a taxable equivalent basis
as a percentage of total average assets.
Return on equity
Return on equity is a profitability measure that presents the net income
available to common shareholders as a percentage of the capital deployed to
earn the income. The implementation of the new accounting standards for
financial instruments in the first quarter of 2007 resulted in certain
unrealized gains and losses being reflected in a new component of
shareholders' equity. These items do not have an impact on the reported
earnings in the period. As a result, the Bank calculates its return on equity
using average common shareholders' equity excluding:- unrealized gains/losses on available-for-sale securities, and
- unrealized gains/losses on derivative instruments designated as cash
flow hedges.Economic equity and Return on economic equity
For internal reporting purposes, the Bank allocates capital to its
business segments using a methodology that considers credit, market and
operational risk inherent in each business segment. The amount allocated is
commonly referred to as economic equity.
Return on equity for the business segments is based on the economic
equity allocated to the business segments. The difference between the economic
equity amount required to support the business segments' operations and the
Bank's total equity is reported in the 'Other' segment.
Tangible common equity to risk-weighted assets
Tangible common equity to risk-weighted assets is an important financial
measure for rating agencies and the investing community. Tangible common
equity is total shareholders' equity plus non-controlling interest in
subsidiaries, less preferred shares, unrealized gains/losses on available-for-
sale securities and cash flow hedges, goodwill and other intangible assets.
Tangible common equity is presented as a percentage of risk-weighted assets.
Regulatory capital ratios, such as Tier 1 and Total capital ratios, have
standardized meanings as defined by the Superintendent of Financial
Institutions Canada.
Group Financial Performance and Financial Condition
Scotiabank's earnings momentum continued this quarter, bringing net
income for the nine months to well over $3 billion. Compared to last year,
year-to-date net income grew by $409 million or 15%, driven by strong asset
and revenue growth.
This quarter's net income was $1,032 million, up $96 million or 10% from
the third quarter last year. Excluding the value added tax (VAT) recovery of
$51 million in International Banking included in the third quarter last year,
net income grew 17% year over year.
Net income this quarter was down slightly from the $1,039 million
reported last quarter, due primarily to the negative impact of foreign
currency translation and lower interest and loan loss recoveries.
Total revenue
Total revenue (on a taxable equivalent basis) was $3,302 million this
quarter, up $313 million or 11% above the same period last year and
$91 million or 3% from last quarter. Year-over-year growth reflected higher
net interest income, stronger trading revenues, and broad-based growth across
transaction-based revenue categories, partially offset by the impact of the
foreign currency translation. The increase from last quarter was due primarily
to the higher trading revenues, broad-based asset growth in our lending
portfolio and securities gains, partially offset by lower securitization
revenues and the impact of foreign currency translation.
For the nine months, total revenue of $9,727 million rose $1,078 million
or 12% from the same period last year.
Net interest income
Net interest income (on a taxable equivalent basis) was $1,913 million,
up $97 million or 5% from the same quarter last year and slightly higher than
last quarter.
The increase from last year was driven by strong asset growth,
particularly in Domestic retail lending, and the positive impact of net gains
from derivatives used for asset/liability management. Partially offsetting the
increase were lower interest recoveries and the impact of foreign currency
translation this quarter.
Quarter over quarter, the benefit of continued asset growth, three extra
days in the quarter and the positive impact of gains from derivatives used for
asset/liability management was mostly offset by the impact of foreign currency
translation and lower interest recoveries.
Year-to-date net interest income was $5,697 million up 12% from the
$5,065 million for the same period last year. The increase was driven by the
contribution of recent acquisitions and growth across most businesses.
The Bank's interest margin was 1.86% this quarter, a reduction from 1.98%
last year and 1.93% last quarter. This was due to lower interest recoveries,
rising wholesale funding costs, and a change in the asset mix, primarily from
very strong growth in both the lower-yielding Canadian mortgage portfolio and
trading assets.
Other income
This quarter's other income was $1,389 million, $216 million or 18%
higher than the same period last year. This growth was primarily in trading
revenues, which were particularly strong this quarter. There were also higher
retail brokerage revenues and broad-based increases in other customer-driven
revenues. As well, there were higher securities gains, primarily in equity
investments, which were partially offset by the change in fair value of
certain securities resulting from widening credit spreads.
Compared to the previous quarter, the increase of $81 million or 6% was
due primarily to higher trading revenues and net securities gains, partially
offset by lower securitization revenues and the impact of foreign currency
translation.
For the nine-month period, other income was $4,030 million, up 12% from
the $3,584 million in the same period last year. The growth was spread across
all income categories, partly from the contribution of recent acquisitions.
The increases were also from higher customer-driven activities in retail
brokerage, investment banking, mutual funds and transaction-based services,
reflecting in part the growth in the Bank's customer base.
Provision for credit losses
The provision for credit losses was $92 million this quarter, compared to
$74 million in the same period last year and $20 million last quarter. The low
levels in the second quarter were due to the combination of a reduction in the
general allowance of $25 million and higher net provision reversals and
recoveries in the Scotia Capital portfolio. Further discussion on credit risk
is provided further below.
Non-interest expenses and productivity
Non-interest expenses of $1,752 million this quarter rose $144 million or
9% from the same period last year. Excluding the $51 million value added tax
(VAT) recovery recorded last year, non-interest expenses grew 6% year over
year.
The increase over the same period last year was broad-based to support
the Bank's ongoing business and growth initiatives. There was higher
performance- based compensation this quarter, in line with the Bank's strong
results.
As well, salaries, premises, and technology costs, advertising and
business development expenses rose from expansion and promotional activities
both in Canada and internationally.
Quarter over quarter, non-interest expenses were up $26 million or 2%.
There were increases in salaries, reflecting the three additional days this
quarter, and higher performance-based compensation and other expenses to
support ongoing business expansion initiatives. Partly offsetting were the
impact of foreign currency translation and lower stock-based compensation due
to a reduction in the Bank's share price.
For the nine-month period, non-interest expenses were $5,202 million, up
10% from $4,735 million reported last year. The growth was primarily from the
recent acquisitions, as well as increases in salaries and employee benefit
costs from revenue initiatives and higher performance-based compensation.
There was also growth in advertising and promotional expenses. Excluding the
VAT recovery last year, expenses were up 9% over the same period last year.
The productivity ratio was 53.0% this quarter, an improvement over the
53.8% reported for the same period last year and the second quarter. The
Bank's operating leverage this quarter - the rate of growth in total revenue
on a taxable equivalent basis less the rate of growth in expenses - was 1.6%
compared to the same period last year, and 1.4% over the second quarter. The
year-to-date operating leverage was 2.6%, or 3.8% excluding the VAT recovery
last year.
Taxes
The effective tax rate for this quarter was 21.8%, up from 20.2% in the
same quarter last year and 21.1% last quarter. The higher effective tax rate
was mainly from lower tax savings from foreign operations.
The year-to-date effective tax rate was 21.3% compared to 19.6% for the
same period last year, as the Bank had a larger benefit from the utilization
of tax loss carryforwards in Mexico last year.
Risk management
The Bank's risk management policies and practices are unchanged from
those outlined in pages 53 to 63 of the 2006 Annual Report.
Credit risk
The provision for credit losses was $92 million in the third quarter,
compared to $74 million in the same period last year and $20 million in the
previous quarter. Last quarter's provision comprised $45 million in specific
provisions, partially offset by a reduction of $25 million in the general
allowance for credit losses.
Scotia Capital had a net reversal of $10 million in the third quarter,
compared to a net reversal of $19 million in the same quarter last year and
reversals and recoveries totaling $51 million in the previous quarter. The net
reversal in the current quarter related primarily to provision reversals in
the European and U.S. portfolios.
Credit losses of $77 million in the Domestic Banking portfolios were up
from both $69 million in the same quarter last year and $66 million in the
prior quarter. The year-over-year increase arose from higher retail provisions
in line with the strong growth in retail lending volumes. The increase from
the prior quarter was due mainly to provision reversals in the commercial
portfolio last quarter.
International Banking's provision for credit losses was $25 million in
the third quarter, compared to $24 million in the same period last year and
$30 million in the prior quarter.
Total net impaired loans, after deducting the allowance for specific
credit losses, were $584 million as at July 31, 2007, in line with
$579 million last quarter.
The general allowance for credit losses was $1,298 million, unchanged
from last quarter.
Market risk
Value at Risk (VaR) is a key measure of market risk in the Bank's trading
activities. In the third quarter the average one-day VaR was $15.6 million
compared to $9.2 million for the same quarter last year and $11.3 million in
the previous quarter, with increased exposure across most risk factors. The
increase in Equity risk reflected certain trading opportunities as well as an
increase in market volatility. These changes also led to an increase in the
average one-day VaR from the previous quarter.Average for the three months ended
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Risk factor July 31 April 30 July 31
($ millions) 2007 2007 2006
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Interest rate $ 9.0 $ 7.2 $ 7.2
Equities 8.7 5.2 6.2
Foreign exchange 2.0 1.2 1.1
Commodities 1.3 1.5 1.0
Diversification (5.4) (3.8) (6.3)
-------------------------------------------------------------------------
All-Bank VaR $ 15.6 $ 11.3 $ 9.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------There were six trading loss days in the third quarter, compared to three
in the previous quarter. The losses were all within the range predicted by
VaR.
Liquidity risk
The Bank maintains large holdings of liquid assets to support its
operations. These assets generally can be sold or pledged to meet the Bank's
obligations. As at July 31, 2007, liquid assets were $107 billion or 26% of
total assets compared to $117 billion or 28% of total assets at April 30,
2007. These assets consist of securities, 72%, and cash and deposits with
banks, 28% (April 30, 2007 - 73% and 27%, respectively).
In the course of the Bank's day-to-day activities, securities and other
assets are pledged to secure an obligation, participate in clearing or
settlement systems, or operate in a foreign jurisdiction. Securities may also
be sold under repurchase agreements. As at July 31, 2007, total assets pledged
or sold under repurchase agreements were $74 billion, compared to $71 billion
at April 30, 2007. The quarter-over-quarter increase was attributable to
higher levels of pledges for securities sold under repurchase agreements and
securities borrowing transactions.
Related party transactions
There were no changes to the Bank's procedures and policies for related
party transactions from those outlined on pages 67 and 114 of the 2006 Annual
Report. All transactions with related parties continued to be at market terms
and conditions.
Balance sheet
The Bank's total assets at July 31, 2007, were $408 billion, up
$29 billion or 8% from October 31, 2006, or $37 billion or 10% excluding the
impact of foreign currency translation. Compared to the prior quarter, total
assets were down $4 billion or 1%, as the significant growth in residential
mortgages and other loans was more than offset by the negative impact of
foreign currency translation and lower trading securities.
Total securities were $93 billion, a decline of $3 billion from
October 31, 2006. Trading securities increased $1 billion to support
customer-driven activity and trading operations. More than offsetting the
growth in trading securities was a decline of $4 billion in available-for-sale
securities since year end. This reduction was due primarily to the
deconsolidation of a variable interest entity that was restructured in the
previous quarter.
As at July 31, 2007, the unrealized gains on available-for-sale
securities were $960 million, compared to $1,091 million at October 31, 2006,
a reduction of $131 million. Compared to the previous quarter, unrealized
gains declined by $248 million, mainly from a reduction in the value of
certain debt securities resulting from recent market volatility, and gains
realized in the quarter.
The Bank's loan portfolio grew $20 billion or 10% from October 31, 2006.
Mortgages were up a very strong $9 billion, driven by Domestic residential
mortgages, which rose $11 billion or 14% (before securitization of $3 billion)
from market share gains as well as the continued demand arising from the
strong domestic housing market. Business and government loans rose $8 billion,
with $1 billion in commercial loans in Domestic Banking and $2 billion from
International Banking, primarily from the Pacific Region. As well, Scotia
Capital's lending and trading portfolio was up $4 billion.
Total liabilities were $388 billion as at July 31, 2007, $27 billion or
7% higher than October 31, 2006, partially offset by the impact of foreign
currency translation of $9 billion. There was $23 billion growth across
deposit categories, including in wholesale deposits to fund the growth in
banking and trading assets. As well, securities sold short, which are used in
the trading book activities of Scotia Capital, rose $8 billion.
During the quarter, the Bank redeemed all of its $500 million 6.25%
subordinated debentures due July 2012.
Total shareholders' equity rose $2 billion from October 31, 2006. The
increase was due primarily to the strong internal capital generation, and the
change in accounting standards for financial instruments, which resulted in
after-tax fair value adjustments of $741 million relating primarily to
available-for-sale securities, and $690 million of non-cumulative preferred
shares issued in the nine-month period. These increases were partly offset by
the impact of foreign currency translation.
Capital management
The Bank continues to maintain a strong capital position and resulting
capital ratios.
The Tier 1 ratio was 9.7% this quarter, down from 10.2% at October 31,
2006, as strong levels of internally generated capital, as well as the
issuance of $690 million non-cumulative preferred shares, were more than
offset by growth in risk-weighted assets across the business lines.
The tangible common equity (TCE) ratio, which represents common equity
less goodwill and other intangible assets as a percentage of risk-weighted
assets, continued to be strong. This ratio was 7.7% at July 31, 2007, down
from 8.3% at October 31, 2006, as the Bank continues to invest its capital in
various growth initiatives.
During the quarter, the Bank purchased 7.7 million common shares at an
average price of $51.47, pursuant to the normal course issuer bid initiated in
the first quarter of 2007. This compares to 1.3 million shares purchased in
the third quarter of last year at an average cost of $44.84.
Financial instruments
Given the nature of the Bank's main business activities, financial
instruments make up a substantial portion of the balance sheet and are
integral to the Bank's business. There are various measures that reflect the
level of risk associated with the Bank's portfolio of financial instruments.
Further discussion of some of these risk measures is included in the Risk
Management section above.
Commencing November 1, 2006, the Bank adopted three new accounting
standards issued by the Canadian Institute of Chartered Accountants (CICA),
which are discussed more fully in Note 1 to the interim consolidated financial
statements further below.
The methods of determining the fair value of financial instruments, as
detailed on page 65 of the 2006 Annual Report, are also applicable to
financial instruments not previously carried at fair value. Management's
judgment on valuation inputs is necessary when observable market data is not
available and management applies judgment in the selection of valuation
models. Uncertainty in these estimates and judgments can affect fair value and
financial results recorded.
During this quarter, changes in the fair value of financial instruments
generally arose from normal economic, industry and market conditions.
Total derivative notional amounts were $1,237 billion at July 31, 2007,
compared to $1,045 billion at October 31, 2006, with growth in most derivative
categories. The percentage of those derivatives held for trading and those
held for non-trading or asset/liability management was generally unchanged.
The credit equivalent amount after taking into account master netting
arrangements was $22 billion as at July 31, 2007, compared to $14 billion last
year end, primarily due to growth in the portfolio and higher interest rates,
partially offset by the unfavourable impact of foreign currency translation.
Off-balance sheet arrangements
In the normal course of business, the Bank enters into contractual
arrangements that are not required to be consolidated in its financial
statements. These arrangements are primarily in three categories: Variable
Interest Entities (VIEs), securitizations, and guarantees and loan
commitments. No material contractual obligations were entered into this
quarter that are not in the ordinary course of business. Processes for review
and approval of these contractual arrangements are unchanged from last year.
During the quarter, the Bank did not enter into any significant new
arrangements with VIEs that are not consolidated by the Bank in its balance
sheet. In the second quarter, as a result of a change in the structure of one
of the multi-seller conduits administered by the Bank, it was determined that
the Bank was no longer the primary beneficiary of the VIE. Accordingly, the
VIE was no longer included in the Bank's consolidated balance sheet effective
April 30, 2007. The deconsolidation resulted in a decrease to available-for-
sale securities and other liabilities of $7 billion, with a net increase in
guarantees and other indirect commitments of $8 billion from the year end.
The Bank provides liquidity facilities, as well as partial credit
enhancements in certain instances, to commercial paper conduits administered
by the Bank and by third parties. These facilities provide an alternate source
of financing, in the event a conduit cannot issue commercial paper or, in some
cases, when certain specified conditions or performance measures are not met.
Liquidity facilities to commercial paper conduits totaled $24 billion as at
July 31, 2007, of which $21 billion were to commercial paper conduits
administered by the Bank. As at July 31, 2007, total commercial paper
outstanding in conduits administered by the Bank was $17 billion. Liquidity
facilities provided by the Bank to non-Scotiabank sponsored Canadian conduits
are nominal.
The Bank may securitize residential mortgages as a means to diversify its
funding sources, as it represents a cost-effective means to fund the growth in
this portfolio. A further $1,351 million in residential mortgages were
securitized this quarter, bringing the balance of outstanding mortgages
securitized to $11,651 million as at July 31, 2007, versus $11,913 million at
October 31, 2006.
Excluding the impact of the deconsolidation discussed above, guarantees
and other indirect commitments increased 11% from October 31, 2006. Pursuant
to the new CICA accounting standards relating to financial instruments, a
liability is now recorded for the fair value of the obligation assumed at the
inception of certain guarantees. As at July 31, 2007, the Bank has recorded an
increase in other liabilities of $79 million and a corresponding increase in
other assets relating to the implementation of the new accounting standards as
they apply to guarantees. Fees from guarantees and loan commitment
arrangements recorded in other income were $55 million for the three-month
period ended July 31, 2007, compared to $57 million for the same period a year
ago.
Common dividend
The Board of Directors, at its meeting on August 28, 2007, approved a
quarterly dividend of 45 cents per common share. This quarterly dividend
applies to shareholders of record as of October 2, 2007 and is payable
October 29, 2007.
Recent market developments
During July and August, the global financial markets have exhibited
considerable volatility and stress. The stress included decreases in equity
values, widening of credit spreads and difficulties experienced by some asset
backed commercial paper conduits in re-issuing their commercial paper at its
maturity. The market behaviour has had minimal impact on the Bank in terms of
trading revenues and values of financial instruments held by the Bank. At this
point, it is not evident that the stress in the financial markets will
translate into weakness in the global economy, and therefore, we do not see
any significant near-term impact on our portfolios.
The Bank has no direct exposure to U.S. subprime mortgages, and only
minimal indirect exposure. While the Bank trades and invests in Collateralized
Debt Obligations (CDO's), none of the CDO's include assets based on U.S.
subprime mortgages. The Bank's positions in Canadian third party asset backed
conduit commercial paper are not significant.
Outlook
Global growth remains broadly based, led by China, India and other
emerging nations. The pace of expansion has moderated in the developed
economies, particularly in the U.S., where declining housing activity, more
cautious consumer spending and recent market volatility has undercut momentum.
Canada and Mexico are expected to continue to outperform the United States,
based on the ongoing strength of commodity markets. In recent months, in many
countries, including Canada, central banks had moved interest rates slightly
higher in reaction to tight labour markets, strong commodity markets and a
moderate increase in consumer price inflation. However, a gradual moderation
in economic activity among developed nations and concerns about the potential
fallout from renewed financial market volatility may temper further increases.
Although the economic environment and financial markets are more
uncertain than at the beginning of the year, the Bank is well positioned to
manage through any uncertainty and pursue our current and long-term growth
strategies. This confidence is based on our high levels of profitability and
capital, access to multiple sources of liquidity, our proven competence in
risk management and our significant diversification of operations.
Accordingly, the Bank should be able to achieve the upper range of its key
performance objectives for the year and is well positioned for continued
growth in the future.Business Segment Review
Domestic Banking
-------------------------------------------------------------------------
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited)($ millions)
(Taxable equivalent July 31 April 30 July 31 July 31 July 31
basis)(1) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment
income
Net interest
income $ 1,006 $ 942 $ 932 $ 2,901 $ 2,725
Provision for
credit losses 77 66 69 217 221
Other income 537 530 480 1,585 1,437
Non-interest
expenses 892 870 879 2,632 2,557
Provision for
income taxes 179 169 143 512 434
-------------------------------------------------------------------------
Net income $ 395 $ 367 $ 321 $ 1,125 $ 950
Preferred
dividends paid 4 3 2 9 6
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 391 $ 364 $ 319 $ 1,116 $ 944
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures
Return on
equity(1) 31.8% 32.0% 26.3% 31.6% 28.0%
Average assets
($ billions) $ 156 $ 149 $ 139 $ 151 $ 134
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer above for discussion of non-GAAP measures.Domestic Banking, which includes Wealth Management, reported strong net
income available to common shareholders of $391 million this quarter, an
increase of $72 million or 22% from the third quarter last year and
$27 million or 7% higher than last quarter. The segment contributed 38% of the
Bank's total quarterly net income. Return on equity increased to 31.8% from
26.3% last year.
Average assets before securitization rose $17 billion or 12% from the
same quarter last year, due primarily to growth of $13 billion or 16% in
residential mortgages. Strong mortgage growth was recorded in all sales
channels, and resulted in increased market share. Personal revolving credit
and business lending volumes also grew. Market share of retail deposits, which
includes savings and chequing accounts and term deposits, continued to
increase as volumes rose 6%. Non-personal deposits grew 13%, mainly in current
accounts and non-personal term. Quarter over quarter, average assets before
securitization rose 4% and deposits increased 2%.
Total revenue was up $131 million or 9% from the same quarter last year,
mainly as a result of strong volume growth and higher fee income related to
wealth management activities. Revenues rose $71 million or 5% from the second
quarter due to volume growth and three additional days in the quarter.
Net interest income of $1,006 million was up $74 million or 8% from the
same period last year, driven by strong volume growth in both assets and
deposits. Average volume growth was reported for most products, including
mortgages, personal lines of credit, personal deposits, small business
deposits, commercial loans, acceptances, and nonpersonal deposits. Partially
offsetting was a decline in the interest margin from increasing consumer
demand for lower risk, lower spread products, competitive pressures and
somewhat higher funding costs due to recent rate increases. Quarter over
quarter, net interest income rose by $64 million or 7%, due in part to three
additional days this quarter and strong asset and deposit growth.
The provision for credit losses was $77 million this quarter, up from
$69 million reported in the same quarter last year and $66 million last
quarter. Retail provisions increased year over year from growth in the
portfolio, while the previous quarter benefited from provision reversals in
the commercial portfolio.
Other income was $537 million this quarter, an increase of $57 million or
12% compared to the same quarter last year, reflecting strong growth in wealth
management revenues, as well as increases in retail, small business and
commercial banking. Wealth management revenues grew primarily from higher
retail brokerage customer activity and increased mutual fund revenues from
higher average balances, resulting from strong net sales, particularly in
longer term products. Private Client revenues rose from growth in estate and
trust fees and Managed Account fees. In addition, there were increases in
personal and nonpersonal transaction service revenues and card revenues. On a
quarter-over-quarter basis, other income increased 1%.
Non-interest expenses rose 1% from the third quarter last year due mainly
to business growth, including additions to the branch network and sales force.
There were also normal salary increases, higher expenses for performance-based
compensation, and increases in advertising expenditures. Partly offsetting
were lower pension and employee benefits costs. Quarter over quarter, expenses
increased 2% due to three more days in the quarter, and expenses related to
growth initiatives, partially offset by lower stock-based compensation.International Banking
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited)($ millions)
(Taxable equivalent July 31 April 30 July 31 July 31 July 31
basis)(1) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment
income
Net interest
income $ 703 $ 679 $ 607 $ 2,052 $ 1,678
Provision for
credit losses 25 30 24 74 52
Other income 250 300 237 847 672
Non-interest
expenses 558 577 477 1,697 1,372
Provision for
income taxes 65 44 29 152 64
Non-controlling
interest in net
income of
subsidiaries 29 31 27 85 70
-------------------------------------------------------------------------
Net income $ 276 $ 297 $ 287 $ 891 $ 792
Preferred
dividends paid 6 4 2 12 6
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 270 $ 293 $ 285 $ 879 $ 786
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures
Return on equity(1) 16.1% 18.7% 23.9% 18.8% 24.3%
Average assets
($ billions) $ 65 $ 69 $ 57 $ 66 $ 54
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer above for discussion of non-GAAP measures.International Banking's net income available to common shareholders in
the third quarter of 2007 was $270 million, a decrease of $15 million or 5%
from the same period last year and $23 million or 8% from last quarter.
Excluding the $51 million value-added tax recovery in Mexico in the third
quarter last year, net income available to common shareholders increased
$36 million or 15% from last year, despite the impact of foreign currency
translation. The decline relative to the prior quarter was 3% excluding
foreign currency translation, due mainly to the change in fair value of
certain securities resulting from widening credit spreads. International
Banking accounted for 27% of the Bank's total net income and had a return on
equity of 16.1%.
Average asset volumes were $65 billion this quarter, up $8 billion or 14%
from last year, $10 billion or 17% excluding the impact of foreign currency
translation. This was a result of organic loan growth of 19%, driven by an
increase of 26% in credit cards, 24% in mortgages and 12% in other retail
loans. In addition, commercial loans rose 19% from strong growth in Asia, the
Caribbean and Central America, Chile and Mexico. Compared to last quarter,
average assets decreased $4 billion or 6%, but were in line with last quarter
excluding the unfavourable impact of foreign currency translation. Retail
loans continued their steady growth trend with an increase of 3% over last
quarter.
Total revenues were $953 million this quarter, an increase of
$109 million or 13% from last year, but $26 million or 3% below last quarter.
Excluding the impact of foreign currency translation, revenue increased
$140 million from last year and $29 million from last quarter. Major
contributors to the year-over-year growth were Peru, our acquisitions in
Caribbean and Central America, as well as strong organic asset and deposit
growth in the Caribbean and Asia. The quarter-over-quarter increase was
primarily in the Caribbean and Peru.
Net interest income was $703 million this quarter, up $96 million or 16%
from last year, or 19% excluding the impact of foreign currency translation.
This increase was due primarily to very strong loan and deposit growth across
the segment. Net interest income grew $24 million or 4% compared to the
previous quarter, or 9% excluding the impact of foreign currency translation.
This increase was driven by strong organic loan growth in Peru, Mexico, the
Caribbean and Asia. Interest margins were up seven basis points from last year
and 25 basis points above last quarter. However, excluding the net gains from
derivatives used for asset/liability management and other timing differences,
margins were almost flat with last quarter, but down six basis points from
last year due to a change in asset mix.
The provision for credit losses was $25 million in the third quarter,
compared to $24 million last year and $30 million last quarter.
Other income was $250 million, up $13 million or 6% from last year.
Excluding the impact of foreign currency translation, other income increased
$21 million from last year. This increase resulted from our acquisitions and
growth in customer-driven transaction revenues in the Caribbean and Central
America, Chile and Peru, partly offset by the change in fair value of certain
securities from widening credit spreads. Quarter over quarter, other income
fell $50 million or $33 million excluding foreign currency translation, due
primarily to the change in fair value of certain securities and lower trading
revenue in Mexico.
Non-interest expenses were $558 million this quarter, up 17% or
$81 million from last year, but $19 million or 3% lower than last quarter.
After adjusting for the impact of foreign currency translation and the $51
million VAT recovery in Mexico in the third quarter last year, expenses rose
$43 million or 8% from last year and 1% from last quarter. The year-over-year
growth was due to acquisitions in the Caribbean and Central America, normal
salary increases, higher pension costs and ongoing business growth initiatives
in the Caribbean and Mexico.
The effective tax rate this quarter was 18%, up from 8% in the same
period last year and higher than the 12% last quarter. The increases were due
to lower earnings in low tax jurisdictions, primarily in Asia, and a higher
effective tax rate in Mexico from lower tax loss carryforwards available for
utilization.Scotia Capital
-------------------------------------------------------------------------
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions)
(Taxable equivalent July 31 April 30 July 31 July 31 July 31
basis)(1) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment
income
Net interest
income $ 231 $ 296 $ 262 $ 796 $ 700
Provision for
credit losses (10) (51) (19) (91) (89)
Other income 413 360 351 1,134 1,113
Non-interest
expenses 267 262 232 788 739
Provision for
income taxes 107 125 120 337 346
-------------------------------------------------------------------------
Net income $ 280 $ 320 $ 280 $ 896 $ 817
Preferred
dividends paid 4 2 2 8 5
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 276 $ 318 $ 278 $ 888 $ 812
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures
Return on equity(1) 27.7% 33.4% 31.9% 30.5% 33.1%
Average assets
($ billions) $ 156 $ 153 $ 136 $ 153 $ 126
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer above for discussion of non-GAAP measures.Scotia Capital earned net income available to common shareholders of
$276 million, down slightly from the same period last year and $42 million or
13% lower than last quarter due primarily to less interest and loan loss
recoveries in the third quarter. Excluding the impact of foreign currency
translation, net income available to common shareholders was an 8% decrease
quarter over quarter. This represents a contribution of 27% to the Bank's
overall results this quarter. Return on equity at 27.7% was slightly lower
than the strong results achieved in the third quarter last year and last
quarter.
Total average assets increased 15% over last year to $156 billion.
Securities and loans in our trading business increased $17 billion to support
both client-driven activity and trading opportunities. In addition, there was
a $5 billion or 19% increase in corporate loans and acceptances across all
businesses, with the vast majority of the growth in investment grade loans.
The increase in total average assets compared to the prior quarter was due to
higher securities and loans in our trading business and a modest increase in
corporate loans and acceptances.
Total revenues of $644 million were $31 million or 5% higher than the
same quarter last year due mainly to growth in Global Capital Markets, driven
primarily by record revenues in our derivatives business. Global Corporate and
Investment Banking revenues decreased from last year due mainly to higher
securities gains and interest recoveries on impaired loans in the prior year.
The $12 million or 2% decrease in revenues from last quarter reflected the
impact of higher interest recoveries on impaired loans in the second quarter,
substantially offset by stronger trading revenues.
Net interest income of $231 million was $31 million below last year, due
mainly to higher interest recoveries from impaired loans in the third quarter
last year and lower loan origination fees. Partially offsetting were the
benefit of higher interest from trading operations, and growth in loan
volumes, though somewhat mitigated by tighter credit margins. The substantial
decrease from the last quarter primarily reflects higher interest recoveries
from impaired loans last quarter and lower interest from trading operations.
This quarter net loan loss reversals were $10 million compared to
reversals of $19 million in the same period last year and reversals of
$51 million last quarter. Net reversals were realized primarily in Europe and
the U.S. this quarter.
Other income was $413 million or 17% higher than last year. Global
Capital Markets increased 85% primarily reflecting higher trading revenues,
particularly in our derivatives business. Global Corporate and Investment
Banking decreased 22% from last year, due mainly to gains on the sale of
securities realized last year. Compared to last quarter, other income
increased by 15% due to significantly higher derivatives revenues and merger
and acquisition advisory fees, partly offset by lower equity trading results.
Non-interest expenses were $267 million, a 15% increase from the same
quarter last year, due primarily to higher performance-based compensation,
salaries and technology costs. Compared to last quarter, expenses were up
$5 million, mainly in higher performance-based compensation, partially offset
by lower salary costs.Other(1)
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions)
(Taxable equivalent July 31 April 30 July 31 July 31 July 31
basis)(2) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment
income
Net interest
income(3) $ (128) $ (123) $ (85) $ (367) $ (347)
Provision for
credit losses - (25) - (25) -
Other income 189 118 105 464 362
Non-interest
expenses 35 17 20 85 67
Provision for
income taxes(3) (55) (52) (48) (142) (175)
-------------------------------------------------------------------------
Net income $ 81 $ 55 $ 48 $ 179 $ 123
Preferred
dividends paid 2 2 2 6 6
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 79 $ 53 $ 46 $ 173 $ 117
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures
Average assets
($ billions) $ 32 $ 33 $ 32 $ 32 $ 29
-------------------------------------------------------------------------
(1) Includes all other smaller operating segments and corporate
adjustments, such as the elimination of the tax-exempt income gross-
up reported in net interest income and provision for income taxes,
differences in the actual amount of costs incurred and charged to the
operating segments, and the impact of securitizations.
(2) Refer above for a discussion of non-GAAP measures.
(3) Includes the elimination of the tax-exempt income gross-up reported
in net interest income and provision for income taxes for the three
months ended July 31, 2007 ($101), April 30, 2007 ($109), and
July 31, 2006 ($100), and for the nine months ended July 31, 2007
($315), and July 31, 2006 ($309), to arrive at the amounts reported
in the Consolidated Statement of Income.Net income available to common shareholders for Other was $79 million in
the third quarter, $33 million higher than the same period last year, and
$26 million above last quarter. The increase was primarily from higher
securities gains.
Total revenues increased $41 million from the same quarter last year and
$66 million from last quarter. The increase was driven by higher gains on
equity investments, partially offset by lower net interest income and
securitization revenues.
Net interest income and the provision for income taxes include the
elimination of tax-exempt income gross up. This amount is included in the
operating segments, which are reported on a taxable equivalent basis. The
elimination was $101 million in the third quarter, compared to $100 million
last year, and $109 million in the second quarter.
Non-interest expenses were $15 million higher than the same period last
year and up $18 million from last quarter due to small increases across a
number of categories.Total
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited) July 31 April 30 July 31 July 31 July 31
($ millions) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment
income
Net interest
income $ 1,812 $ 1,794 $ 1,716 $ 5,382 $ 4,756
Provision for
credit losses 92 20 74 175 184
Other income 1,389 1,308 1,173 4,030 3,584
Non-interest
expenses 1,752 1,726 1,608 5,202 4,735
Provision for
income taxes 296 286 244 859 669
Non-controlling
interest in net
income of
subsidiaries 29 31 27 85 70
-------------------------------------------------------------------------
Net income $ 1,032 $ 1,039 $ 936 $ 3,091 $ 2,682
Preferred
dividends paid 16 11 8 35 23
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 1,016 $ 1,028 $ 928 $ 3,056 $ 2,659
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures
Return on equity(1) 22.7% 23.4% 22.8% 23.2% 22.5%
Average assets
($ billions) $ 409 $ 404 $ 364 $ 402 $ 343
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer above for a discussion of non-GAAP measures.
Geographic Highlights
-------------------------------------------------------------------------
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31
(Unaudited) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Net income
available
to common
shareholders
($ millions)
Canada $ 639 $ 561 $ 495 $ 1,744 $ 1,501
United States 98 139 108 400 285
Mexico 112 124 162 383 431
Other
international 201 211 174 624 493
Corporate
adjustments (34) (7) (11) (95) (51)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 1,016 $ 1,028 $ 928 $ 3,056 $ 2,659
-------------------------------------------------------------------------
Average assets
($ billions)
Canada $ 270 $ 256 $ 233 $ 260 $ 221
United States 25 32 33 30 31
Mexico 21 22 21 21 21
Other
international 86 85 69 83 64
Corporate
adjustments 7 9 8 8 6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 409 $ 404 $ 364 $ 402 $ 343
-------------------------------------------------------------------------
Quarterly Financial Highlights
For the three months ended
-------------------------------------------------------------------------
July April Jan. Oct. July April Jan. Oct.
31 30 31 31 31 30 31 31
2007 2007 2007 2006 2006 2006 2006 2005
-------------------------------------------------------------------------
Total revenue
($ millions) $3,201 $3,102 $3,109 $2,868 $2,889 $2,717 $2,734 $2,660
Total revenue
(TEB(1))
($ millions) 3,302 3,211 3,214 2,999 2,989 2,830 2,830 2,735
Net income
($ millions) 1,032 1,039 1,020 897 936 894 852 811
Basic earnings
per share ($) 1.03 1.04 1.02 0.90 0.94 0.90 0.85 0.81
Diluted earnings
per share ($) 1.02 1.03 1.01 0.89 0.93 0.89 0.84 0.80
-------------------------------------------------------------------------
(1) Refer above for a discussion of non-GAAP measures.
Share Data As at
-------------------------------------------------------------------------
July 31
(thousands of shares outstanding) 2007
-------------------------------------------------------------------------
Common shares 982,368(1)
-------------------------------------------------------------------------
Preferred shares Series 12 12,000(2)
Preferred shares Series 13 12,000(3)
Preferred shares Series 14 13,800(4)
Preferred shares Series 15 13,800(5)
-------------------------------------------------------------------------
Class A preferred shares issued by
Scotia Mortgage Investment Corporation 250(6)
-------------------------------------------------------------------------
Series 2000-1 trust securities issued by
BNS Capital Trust 500(7)
Series 2002-1 trust securities issued by
Scotiabank Capital Trust 750(8)
Series 2003-1 trust securities issued by
Scotiabank Capital Trust 750(8)
Series 2006-1 trust securities issued by
Scotiabank Capital Trust 750(8)
-------------------------------------------------------------------------
Outstanding options granted under the Stock Option Plans
to purchase common shares 28,942(1)(9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) As at August 17, 2007, the number of outstanding common shares and
options were 982,397 and 28,913, respectively. The number of other
securities disclosed in this table were unchanged.
(2) These shares are entitled to non-cumulative preferential cash
dividends payable quarterly in an amount of $0.328125 per share.
(3) These shares are entitled to non-cumulative preferential cash
dividends payable quarterly in an amount of $0.30 per share.
(4) These shares are entitled to non-cumulative preferential cash
dividends payable quarterly in an amount of $0.28125 per share,
except for the initial dividend paid on April 26, 2007, which was in
an amount of $0.28356 per share.
(5) These shares are entitled to non-cumulative preferential cash
dividends payable quarterly in an amount of $0.28125 per share,
except for the initial dividend paid on July 27, 2007, which was in
an amount of $0.34829 per share.
(6) Reported in capital instrument liabilities in the Consolidated
Balance Sheet. On August 9, 2007, Scotia Mortgage Investment
Corporation announced its intention to redeem all its 250,000 Class A
non-cumulative preferred shares (Scotia BOOMS) on October 31, 2007.
(7) Reported in capital instrument liabilities in the Consolidated
Balance Sheet.
(8) Reported in deposits in the Consolidated Balance Sheet.
(9) Included are 16,246 stock options with tandem stock appreciation
right (SAR) features.Further details, including convertibility features, are available in
Notes 13, 14 and 15 of the October 31, 2006 consolidated financial statements
presented in the 2006 Annual Report and Note 6 further below.
Accounting Policies and Estimates
The interim consolidated financial statements have been prepared in
accordance with Canadian Generally Accepted Accounting Principles (GAAP). See
Note 1 to the 2006 annual consolidated financial statements for more
information about the significant accounting principles used to prepare the
financial statements.
The Bank's interim consolidated financial statements have been affected
by the implementation of three new CICA accounting standards, namely Financial
Instruments - Recognition and Measurement, Hedges and Comprehensive Income.
The changes, and the impact of these changes on the Bank's consolidated
financial statements, are described in Note 1 to the interim consolidated
financial statements. Consistent with the requirements of the new accounting
standards, the Bank has not restated any prior period as a result of adopting
the accounting changes, but has recorded certain transitional amounts that
represent the cumulative effect of adjustments relating to prior periods. As
required, unrealized foreign currency translation losses have been
reclassified to accumulated other comprehensive income (loss) within
shareholders' equity for prior periods.
The key assumptions and bases for estimates that management has made
under GAAP, and their impact on the amounts reported in the interim
consolidated financial statements and notes, remain substantially unchanged
from those described in our 2006 Annual Report.INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------
Consolidated Statement of Income
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
(Unaudited) July 31 April 30 July 31 July 31 July 31
($ millions) 2007(1) 2007(1) 2006 2007(1) 2006
-------------------------------------------------------------------------
Interest income
Loans $ 3,536 $ 3,404 $ 3,098 $ 10,317 $ 8,321
Securities 1,192 1,286 1,113 3,609 3,008
Securities
purchased under
resale agreements 325 283 284 938 776
Deposits with banks 292 266 230 809 624
-------------------------------------------------------------------------
5,345 5,239 4,725 15,673 12,729
-------------------------------------------------------------------------
Interest expense
Deposits 2,756 2,600 2,275 7,882 6,007
Subordinated
debentures 30 30 32 93 98
Capital instrument
liabilities 14 13 14 40 40
Other 733 802 688 2,276 1,828
-------------------------------------------------------------------------
3,533 3,445 3,009 10,291 7,973
-------------------------------------------------------------------------
Net interest income 1,812 1,794 1,716 5,382 4,756
Provision for
credit losses
(Note 3) 92 20 74 175 184
-------------------------------------------------------------------------
Net interest income
after provision
for credit losses 1,720 1,774 1,642 5,207 4,572
-------------------------------------------------------------------------
Other income
Card revenues 92 89 78 274 224
Deposit and payment
services 208 199 198 613 570
Mutual funds 77 73 60 218 178
Investment
management,
brokerage and
trust services 192 195 159 575 495
Credit fees 143 129 140 404 403
Trading revenues 217 151 99 517 499
Investment banking 184 195 167 573 484
Net gain on
available-for-sale
securities(2) 134 79 105 340 307
Other 142 198 167 516 424
-------------------------------------------------------------------------
1,389 1,308 1,173 4,030 3,584
-------------------------------------------------------------------------
Net interest and
other income 3,109 3,082 2,815 9,237 8,156
-------------------------------------------------------------------------
Non-interest
expenses
Salaries and
employee benefits 1,013 1,004 940 3,020 2,802
Premises and
technology 335 329 313 991 892
Communications 76 75 70 224 201
Advertising and
business
development 71 70 59 217 159
Professional 53 48 46 146 116
Business and
capital taxes 37 34 37 110 97
Other 167 166 143 494 468
-------------------------------------------------------------------------
1,752 1,726 1,608 5,202 4,735
-------------------------------------------------------------------------
Income before the
undernoted 1,357 1,356 1,207 4,035 3,421
Provision for
income taxes 296 286 244 859 669
Non-controlling
interest in net
income of
subsidiaries 29 31 27 85 70
-------------------------------------------------------------------------
Net income $ 1,032 $ 1,039 $ 936 $ 3,091 $ 2,682
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Preferred dividends
paid 16 11 8 35 23
-------------------------------------------------------------------------
Net income
available
to common
shareholders $ 1,016 $ 1,028 $ 928 $ 3,056 $ 2,659
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of
common shares
outstanding
(millions):
Basic 988 992 988 990 988
Diluted 996 1,001 999 999 1,001
-------------------------------------------------------------------------
Earnings per
common share
(in dollars):
Basic $ 1.03 $ 1.04 $ 0.94 $ 3.09 $ 2.69
Diluted $ 1.02 $ 1.03 $ 0.93 $ 3.06 $ 2.66
-------------------------------------------------------------------------
Dividends per
common share
(in dollars) $ 0.45 $ 0.42 $ 0.39 $ 1.29 $ 1.11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with
current period presentation.
(1) Refer to Note 1 for impact of new accounting policies related to
financial instruments adopted in the first quarter of 2007.
(2) Prior to November 1, 2006, the net gain was related to securities
classified as investment securities. Refer to Note 1 for further
details.
The accompanying notes are an integral part of these interim consolidated
financial statements.
Consolidated Balance Sheet
As at
-------------------------------------------------------------------------
July 31 April 30 October 31 July 31
(Unaudited) ($ millions) 2007(1) 2007(1) 2006 2006
-------------------------------------------------------------------------
Assets
Cash resources
Cash and non-interest-bearing
deposits with banks $ 2,370 $ 2,532 $ 2,280 $ 2,013
Interest-bearing deposits
with banks 23,048 23,967 17,734 18,412
Precious metals 3,358 4,623 3,362 3,756
-------------------------------------------------------------------------
28,776 31,122 23,376 24,181
-------------------------------------------------------------------------
Securities
Trading 63,797 71,547 62,490 57,600
Available-for-sale(2) 29,060 28,627 33,012 33,725
-------------------------------------------------------------------------
92,857 100,174 95,502 91,325
-------------------------------------------------------------------------
Securities purchased under
resale agreements 26,834 25,867 25,705 22,535
-------------------------------------------------------------------------
Loans
Residential mortgages 99,000 94,706 89,590 85,541
Personal and credit cards 41,360 40,408 39,058 38,245
Business and government 84,778 83,424 76,733 72,568
-------------------------------------------------------------------------
225,138 218,538 205,381 196,354
Allowance for credit
losses (Note 3) 2,423 2,505 2,607 2,695
-------------------------------------------------------------------------
222,715 216,033 202,774 193,659
-------------------------------------------------------------------------
Other
Customers' liability under
acceptances 10,289 10,277 9,555 9,200
Trading derivatives' market
valuation 14,407 14,313 10,369 11,929
Land, buildings and equipment 2,296 2,308 2,256 2,209
Goodwill 1,140 1,176 873 688
Other intangible assets 287 301 294 267
Other assets 8,514 10,139 8,302 8,988
-------------------------------------------------------------------------
36,933 38,514 31,649 33,281
-------------------------------------------------------------------------
$ 408,115 $ 411,710 $ 379,006 $ 364,981
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and
shareholders' equity
Deposits
Personal $ 98,171 $ 97,218 $ 93,450 $ 91,904
Business and government 156,668 157,919 141,072 135,249
Banks 32,146 36,466 29,392 28,072
-------------------------------------------------------------------------
286,985 291,603 263,914 255,225
-------------------------------------------------------------------------
Other
Acceptances 10,289 10,277 9,555 9,200
Obligations related to
securities sold under
repurchase agreements 31,223 29,577 33,470 29,117
Obligations related to
securities sold short 21,322 21,521 13,396 14,663
Trading derivatives'
market valuation 12,780 12,214 11,211 11,815
Other liabilities 22,820 22,976 26,457 24,457(3)
Non-controlling interest
in subsidiaries 505 496 435 411
-------------------------------------------------------------------------
98,939 97,061 94,524 89,663(3)
-------------------------------------------------------------------------
Subordinated debentures
(Note 5) 1,774 2,301 2,271 2,275
-------------------------------------------------------------------------
Capital instrument liabilities 750 750 750 750
-------------------------------------------------------------------------
Shareholders' equity
Capital stock
Preferred shares 1,290 1,290 600 600
Common shares and
contributed surplus 3,521 3,539 3,425 3,393
Retained earnings 16,967 16,763 15,843 15,372(3)
Accumulated other
comprehensive income
(loss)(1) (2,111) (1,597) (2,321) (2,297)
-------------------------------------------------------------------------
19,667 19,995 17,547 17,068(3)
-------------------------------------------------------------------------
$ 408,115 $ 411,710 $ 379,006 $ 364,981
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with
current period presentation.
(1) Refer to Note 1 for impact of new accounting policies related to
financial instruments adopted in the first quarter of 2007.
(2) Prior to November 1, 2006, these securities were classified as
investment securities. Refer to Note 1 for further details.
(3) Refer to Note 1 for the accounting policy related to stock-based
compensation adopted in 2006.
The accompanying notes are an integral part of these interim consolidated
financial statements.
Consolidated Statement of Changes in Shareholders' Equity
For the nine months ended
-------------------------------------------------------------------------
July 31 July 31
(Unaudited) ($ millions) 2007 2006
-------------------------------------------------------------------------
Preferred shares
Balance at beginning of period $ 600 $ 600
Issued 690 -
-------------------------------------------------------------------------
Balance at end of period 1,290 600
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common shares and contributed surplus
Common shares:
Balance at beginning of period 3,425 3,316
Issued 139 99
Purchased for cancellation (43) (23)
-------------------------------------------------------------------------
Balance at end of period 3,521 3,392
Contributed surplus: Fair value of stock options - 1
-------------------------------------------------------------------------
Total 3,521 3,393
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings
Balance at beginning of period 15,843 14,126
Cumulative effect of adopting new
accounting policies (61)(1) (25)(2)
-------------------------------------------------------------------------
15,782 14,101
Net income 3,091 2,682
Dividends: Preferred (35) (23)
Common (1,278) (1,097)
Purchase of shares (586) (291)
Other (7) -
-------------------------------------------------------------------------
Balance at end of period 16,967 15,372
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other comprehensive income (loss)(1)
Balance at beginning of period (2,321) (1,961)
Cumulative effect of adopting new
accounting policies 683 -
Other comprehensive income (loss) (473) (336)
-------------------------------------------------------------------------
Balance at end of period (2,111) (2,297)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total shareholders' equity at end of period $ 19,667 $ 17,068
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income(1)
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
July 31 July 31 July 31 July 31
(Unaudited) ($ millions) 2007 2006 2007 2006
-------------------------------------------------------------------------
Comprehensive income
Net income $ 1,032 $ 936 $ 3,091 $ 2,682
-------------------------------------------------------------------------
Other comprehensive income
(loss), net of income taxes:
Net change in unrealized
foreign currency
translation gains (losses) (465) 161 (531) (336)
Net change in unrealized
gains on available-for-sale
securities (146) - (81) -
Net change in gains on
derivative instruments
designated as cash
flow hedges 97 - 139 -
-------------------------------------------------------------------------
Other comprehensive income
(loss) (514) 161 (473) (336)
-------------------------------------------------------------------------
Comprehensive income $ 518 $ 1,097 $ 2,618 $ 2,346
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with
current period presentation.
(1) Refer to Note 1 for impact of new accounting policies related to
financial instruments adopted in the first quarter of 2007.
(2) Refer to Note 1 for the accounting policy related to stock-based
compensation adopted in 2006.
The accompanying notes are an integral part of these interim consolidated
financial statements.
Condensed Consolidated Statement of Cash Flows
For the three For the nine
months ended months ended
-------------------------------------------------------------------------
Sources (uses)
of cash flows July 31 July 31 July 31 July 31
(Unaudited) ($ millions) 2007 2006 2007 2006
-------------------------------------------------------------------------
Cash flows from
operating activities
Net income $ 1,032 $ 936 $ 3,091 $ 2,682
Adjustments to determine
net cash flows from
(used in) operating
activities (7) 40 29 (41)
Net accrued interest
receivable and payable (73) (134) 47 (194)
Trading securities 6,979 1,123 (2,352) (8,208)
Trading derivatives' market
valuation, net 177 853 (2,922) 360
Other, net 2,283 1,956 (72) 400
-------------------------------------------------------------------------
10,391 4,774 (2,179) (5,001)
-------------------------------------------------------------------------
Cash flows from
financing activities
Deposits 314 5,774 28,896 35,870
Obligations related to
securities sold under
repurchase agreements 2,168 (1,191) (1,894) 3,810
Obligations related to
securities sold short 109 3,667 8,458 3,437
Preferred shares issued - - 690 -
Common shares issued 7 29 92 85
Common shares
redeemed/purchased
for cancellation (395) (59) (629) (314)
Subordinated debentures
redeemed (500) - (500) (300)
Cash dividends paid (461) (393) (1,313) (1,120)
Other, net 57 (553) 2,814 343
-------------------------------------------------------------------------
1,299 7,274 36,614 41,811
-------------------------------------------------------------------------
Cash flows from
investing activities
Interest-bearing deposits
with banks 178 1,495 (6,024) (2,587)
Securities purchased under
resale agreements (1,291) (178) (1,587) (2,428)
Loans, excluding
securitizations (11,703) (11,092) (27,934) (22,705)
Loan securitizations 1,321 683 2,764 1,815
Available-for-sale
securities, net(1) (221) (2,942) (1,116) (9,408)
Land, buildings and equipment,
net of disposals (66) (59) (230) (161)
Other, net(2) - (14) (119) (1,773)
-------------------------------------------------------------------------
(11,782) (12,107) (34,246) (37,247)
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents (70) 17 (99) (51)
-------------------------------------------------------------------------
Net change in cash and cash
equivalents (162) (42) 90 (488)
Cash and cash equivalents at
beginning of period 2,532 2,055 2,280 2,501
-------------------------------------------------------------------------
Cash and cash equivalents at
end of period(3) $ 2,370 $ 2,013 $ 2,370 $ 2,013
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash disbursements made for:
Interest $ 3,614 $ 2,807 $ 10,860 $ 7,556
Income taxes $ 220 $ 257 $ 836 $ 824
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with
current period presentation.
(1) Prior to November 1, 2006, this related to securities classified as
investment securities. Refer to note 1 for further details.
(2) For the three and nine months ended July 31, 2007, comprises
investments in subsidiaries, net of cash and cash equivalents at the
date of acquisition of nil and $3, respectively (July 31, 2006 - $21
and $158, respectively), and net of non-cash consideration of common
shares issued from treasury of nil and $15, respectively (July 31,
2006 - nil).
(3) Represents cash and non-interest-bearing deposits with banks.
The accompanying notes are an integral part of these interim consolidated
financial statements.
Notes to the Interim Consolidated Financial Statements (Unaudited)
These interim consolidated financial statements have been prepared in
accordance with Canadian Generally Accepted Accounting Principles (GAAP). They
should be read in conjunction with the consolidated financial statements for
the year ended October 31, 2006. The significant accounting policies used in
the preparation of these interim consolidated financial statements are
consistent with those used in the Bank's year-end audited consolidated
financial statements, except as discussed in Note 1.
1. Changes in accounting policies
Current year changes
Commencing November 1, 2006, the Bank adopted three new CICA
accounting standards: (i) Financial Instruments - Recognition and
Measurement, (ii) Hedges and (iii) Comprehensive Income. The main
requirements of these new standards, the related accounting policies
subsequently adopted by the Bank and the resulting financial
statement impact are further discussed below.
Prior periods have not been restated as a result of implementing the
new accounting standards. As required, unrealized foreign currency
translation gains/losses on net investments in self-sustaining
foreign operations have been reclassified to accumulated other
comprehensive income (loss) for prior periods. The Bank has recorded
a net reduction of $61 million (net of income tax benefit of
$31 million) to opening fiscal 2007 retained earnings for the
cumulative prior period effect arising on adoption of the new
accounting standards. This transition impact arose primarily from
recognizing in retained earnings the deferred gains and losses on
transition date relating to certain previously discontinued hedges.
The impact of the changes to net income for this quarter was a net
decrease of $19 million after tax (April 30, 2007 - decrease of
$8 million after tax). For the nine months ended July 31, 2007, the
impact of the changes to net income was a net decrease of $19 million
after tax.
The most significant balance sheet categories impacted on November 1,
2006, as a result of these new standards were as follows:
---------------------------------------------------------------------
$ millions
Increase/
Balance sheet category (Decrease) Explanation
---------------------------------------------------------------------
Available-for-sale $ 1,091 To record these securities
securities at fair value
---------------------------------------------------------------------
Future tax assets $ (369) To record future taxes on the
(Other assets) components of accumulated
other comprehensive income
---------------------------------------------------------------------
Retained earnings $ (61) After-tax impact on opening
retained earnings resulting
from adoption of new standards
---------------------------------------------------------------------
Accumulated other $ 683 After-tax impact related to net
comprehensive unrealized gains on available-
income for-sale securities and cash
income flow hedges
---------------------------------------------------------------------
(i) Financial Instruments - Recognition and Measurement
The new standards require all financial assets and financial
liabilities to be carried at fair value in the Consolidated Balance
Sheet, except the following, which are carried at amortized cost
unless designated as held for trading upon initial recognition: loans
and receivables, securities designated as held-to-maturity and non-
trading financial liabilities. The methods used by the Bank in
determining the fair value of financial instruments are unchanged as
a result of implementing these new accounting standards.
The standards require unrealized gains and losses on financial assets
that are held as available-for-sale to be recorded in other
comprehensive income until realized, at which time they will be
recorded in the Consolidated Statement of Income. The Bank has
classified all investment securities as at November 1, 2006 as
available-for-sale. As such, the related unrealized gains and losses
on these securities are recorded in accordance with these
requirements. Available-for-sale equity securities which do not have
a quoted market price will continue to be recorded at cost as fair
values cannot be reliably measured. Net gains realized on available-
for-sale equity securities which did not have a quoted market price
were $88 million and $187 million for the three and nine-month
periods ending July 31, 2007. Available-for-sale securities are still
subject to a regular review for losses that are other than temporary.
If a security is assessed to have a loss that is other than
temporary, the security is written down to its fair value. The change
in accounting policy related to other than temporary impairment was
not material. The Bank accounts for the purchase and sale of
securities using settlement date accounting for purposes of both the
Consolidated Balance Sheet and the Consolidated Statement of Income.
Realized and unrealized gains and losses on financial assets and
liabilities that are held for trading will continue to be recorded in
the Consolidated Statement of Income.
All derivatives, including embedded derivatives that must be
separately accounted for, are now recorded at fair value in the
Consolidated Balance Sheet. This primarily impacts asset/liability
management derivatives which meet hedge accounting criteria as these
were previously accounted for on an accrual basis. These hedging
derivatives are now recorded in other assets and other liabilities.
In addition, under the new accounting standards, inception gains or
losses will no longer be recognized on derivative instruments where
the valuation is dependant on unobservable market data. In such
instances, the inception gain or loss will be deferred over the life
of the related contract, or until the valuation inputs become
observable.
Pursuant to the new requirements, a liability will be recorded for
the fair value of the obligation assumed at the inception of certain
guarantees. The guarantees affected include standby letters of
credit, letters of guarantee, credit enhancements and other similar
contracts. The fair value of the obligation at inception is normally
based on the discounted cash flow of the premium to be received for
the guarantee, resulting in a corresponding asset. The Bank has
recorded an increase in other liabilities of $78 million as at
November 1, 2006 and a corresponding increase in other assets
relating to these guarantees.
The Bank's accounting policy is to capitalize transaction costs
relating to non-trading financial assets and non-trading financial
liabilities and, where applicable, these amounts are recognized in
net interest income over the expected life of the instrument.
Items designated as trading
Under the new accounting standards, the Bank has elected to designate
certain portfolios of assets and liabilities as trading.
The Bank's trading operations transact credit derivatives for
customers. The Bank may purchase the underlying loan(s) from another
counterparty to economically hedge the derivative exposure. By
classifying these loans as trading, the fair value changes will be
recorded in income along with the fair value changes of the
derivative. As a result, the Bank significantly reduces or eliminates
an accounting mismatch between the two instruments. The fair value of
these traded loans is based on quoted market prices. The fair value
of these loans was $4.4 billion as at July 31, 2007 and $3.3 billion
as at November 1, 2006. The change in fair value that was recorded
through trading income for the three and nine months ended July 31,
2007 was a loss of $82 million (April 30, 2007 - gain of $94 million)
and a gain of $122 million, respectively. These changes in fair value
were entirely offset by the changes in the fair value of the related
credit derivatives.
The Bank's trading operations purchase loan assets in specifically
authorized portfolios for which performance is evaluated on a fair
value basis. The fair value of these traded loans is based on quoted
market prices. The fair value of these loans was $173 million as at
July 31, 2007 and $164 million as at November 1, 2006. The change in
fair value that was recorded through trading income during the
quarter was a loss of $1 million (April 30, 2007 - gain of
$4 million). The change in fair value that was recorded through
trading income for the nine months ended July 31, 2007 was a gain of
$8 million.
The Bank has classified certain deposit note liabilities containing
extension features as trading, in order to significantly reduce an
accounting mismatch between these liabilities and fair value changes
in related derivatives. The fair value of these deposit note
liabilities, including the extension feature, is determined by
discounting expected cash flows, using current market rates offered
for similar instruments. The fair value of these liabilities was
$829 million as at July 31, 2007 and $785 million as at November 1,
2006. For the three and nine months ended July 31, 2007, the change
in fair value that was recorded through net interest income on these
deposit note liabilities was a gain of $14 million (April 30, 2007 -
loss of $1 million) and a gain of $15 million, respectively. The
changes in fair value are due to changes in market interest rates;
thus, there was no change in fair value attributable to credit risk.
These changes in fair value were mostly offset by the change in fair
value of the related derivatives.
(ii) Hedges
The criteria specifying when a derivative instrument may be accounted
for as a hedge has not changed substantially. There are three main
types of hedges: (i) fair value hedges, (ii) cash flow hedges and
(iii) net investment hedges. Previously, derivatives that met hedge
accounting criteria were accounted for on an accrual basis.
In a fair value hedge, the change in fair value of the hedging
derivative is offset in the Consolidated Statement of Income by the
change in fair value of the hedged item relating to the hedged risk.
The Bank utilizes fair value hedges primarily to convert fixed rate
financial assets and liabilities to floating rate. The main financial
instruments designated in fair value hedging relationships include
bond assets, loans, deposit liabilities and subordinated debentures.
In a cash flow hedge, the change in fair value of the hedging
derivative is recorded in other comprehensive income, to the extent
it is effective, until the hedged item affects the Consolidated
Statement of Income. The Bank utilizes cash flow hedges primarily to
convert floating rate deposit liabilities to fixed rate. The
reclassification from accumulated other comprehensive income to
earnings over the next 12 months as a result of outstanding cash flow
hedges is expected to be a net gain of approximately $48 million
(after tax). As at July 31, 2007, the maximum length of cash flow
hedges outstanding was less than seven years.
In a net investment hedge, the change in fair value of the hedging
instrument, to the extent it is effective, is recorded directly in
other comprehensive income. These amounts are recognized in income
when the corresponding cumulative translation adjustments from the
self-sustaining foreign operation are recognized in income.
Any hedge ineffectiveness is measured and recorded in current period
net interest income in the Consolidated Statement of Income.
Previously, hedge ineffectiveness was generally recognized in the
Consolidated Statement of Income over the life of the hedging
relationship. The Bank recorded a gain of $1 million during the
quarter (April 30, 2007 - loss of $6 million), of which a loss of
$1 million (April 30, 2007 - loss of $5 million) related to cash flow
hedges, due to the ineffective portion of designated hedges.
For the nine-month period ended July 31, 2007, the Bank recorded a
gain of $7 million, of which $3 million related to cash flow hedges.
When either a fair value or cash flow hedge is discontinued, any
cumulative adjustment to either the hedged item or other
comprehensive income is recognized in income over the remaining term
of the original hedge, or when the hedged item is derecognized.
There were no significant changes to the Bank's risk management
policies and hedging activities as a result of the new accounting
standards.
(iii) Comprehensive Income
A new Statement of Comprehensive Income now forms part of the Bank's
consolidated financial statements and displays current period net
income and other comprehensive income.
Accumulated other comprehensive income (loss) is a separate component
of shareholders' equity. The Consolidated Statement of Comprehensive
Income reflects changes in accumulated other comprehensive income,
including changes in unrealized gains and losses on available-for-
sale assets, as well as changes in the fair value of derivatives
designated as cash flow hedges, to the extent they are effective.
Unrealized foreign currency translation amounts arising from self-
sustaining foreign operations and the impact of any related hedges,
previously reported separately in the Consolidated Statement of
Changes in Shareholders' Equity, now form part of accumulated other
comprehensive income (loss).
The components of accumulated other comprehensive income (loss) as at
and for the period ended July 31, 2007, and other comprehensive
income (loss) for the three and nine months then ended were as
follows:
Accumulated other comprehensive income (loss)
As at and for the nine months ended
---------------------------------------------------------------------
Opening Transition Net Ending
balance amount change balance
---------------------------------------------------
October 31 November 1 July 31
($ millions) 2006 2006 2007
---------------------------------------------------------------------
Unrealized foreign
currency translation
losses, net of
hedging activities $(2,321) $ - $ (531) $(2,852)(1)
Unrealized gains on
available-for-sale
securities, net of
hedging activities - 706 (81) 625(2)
Gains (losses) on
derivative instruments
designated as cash
flow hedges - (23) 139 116(3)
---------------------------------------------------------------------
Accumulated other
comprehensive income
(loss) $(2,321) $ 683 $ (473) $ (2,111)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------
Opening Net Ending
balance change balance
-----------------------------------
October 31 July 31
($ millions) 2005 2006
---------------------------------------------------------
Unrealized foreign
currency translation
losses, net of
hedging activities $(1,961) $ (336) $(2,297)(1)
Unrealized gains on
available-for-sale
securities, net of
hedging activities - - -
Gains (losses) on
derivative instruments
designated as cash
flow hedges - - -
---------------------------------------------------------
Accumulated other
comprehensive income
(loss) $(1,961) $ (336) $ (2,297)
---------------------------------------------------------
---------------------------------------------------------
(1) Net of income tax expense of nil.
(2) Net of income tax expense of $355. Also, the balance as at
July 31, 2007 includes unrealized losses of $200 after tax on the
available-for-sale securities.
(3) Net of income tax expense of $57.
Other comprehensive income (loss)
The following table summarizes the changes in the components of other
comprehensive income (loss).
For the three For the nine
months ended months ended
---------------------------------------------------------------------
July 31 July 31 July 31 July 31
($ millions) 2007 2006 2007(6) 2006
---------------------------------------------------------------------
Net change in unrealized
foreign currency
translation gains (losses)
Unrealized foreign currency
translation gains
(losses)(1) $ (742) $ 256 $ (859) $ (519)
Gains (losses) on hedges
of net investments in
self-sustaining foreign
operations(1) 277 (95) 328 183
---------------------------------------------------------------------
(465) 161 (531) (336)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net change in unrealized gains
on available-for-sale securities
Unrealized gains (losses) on
available-for-sale
securities(2) (118) - 23 -
Reclassification of net gains
to net income(3) (28) - (104) -
---------------------------------------------------------------------
(146) - (81) -
---------------------------------------------------------------------
---------------------------------------------------------------------
Net change in gains on
derivative instruments
designated as cash flow
hedges
Gains (losses) on derivative
instruments designated as cash
flow hedges(4) (129) - 5 -
Reclassification of net losses
to net income(5) 226 - 134 -
---------------------------------------------------------------------
97 - 139 -
---------------------------------------------------------------------
---------------------------------------------------------------------
Other comprehensive
income (loss) $ (514) $ 161 $ (473) $ (336)
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) For the three and nine months ended July 31, 2007, net of income
tax expense of nil.
(2) For the three and nine months ended July 31, 2007, net of income
tax benefit of $56 and income tax expense of $26, respectively.
(3) For the three and nine months ended July 31, 2007, net of income
tax benefit of $17 and $54, respectively.
(4) For the three and nine months ended July 31, 2007, net of income
tax benefit of $64 and income tax expense of $3, respectively.
(5) For the three and nine months ended July 31, 2007, net of income
tax expense of $113 and $67, respectively.
(6) The first quarter's amounts included herein have been
reclassified to conform with the current period presentation.
Prior year change
In the third quarter of 2006, the Bank early adopted a CICA Abstract
dealing with the accounting for stockbased compensation for employees
eligible to retire before the vesting date. This Abstract required
that: i) compensation costs attributable to stock-based compensation
awards granted to employees who are eligible to retire on the grant
date be fully recognized on the grant date; and ii) compensation
costs attributable to stock-based compensation awards granted to
employees who will become eligible to retire during the vesting
period be recognized over the time frame between the grant date and
the date of retirement eligibility. Previously, these costs were
recognized by the Bank over the vesting period of the award.
The Bank did not restate net income for any particular prior quarter,
as it was not material to any particular quarter or annual period,
and recorded an adjustment of $25 million (net of income tax benefit
of $13 million) to opening fiscal 2006 retained earnings for the
cumulative effect on prior years arising from this change in
accounting policy.
2. Sales of loans through securitizations
The Bank securitizes residential mortgages through the creation of
mortgage-backed securities. No credit losses are expected, as the
mortgages are insured. For the quarter ended July 31, 2007, the key
weighted-average assumptions used to measure the fair value at the
dates of securitization were a prepayment rate of 20%, an excess
spread of 0.8% and a discount rate of 4.8%. The following table
summarizes the Bank's sales.
For the three For the nine
months ended months ended
---------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31
($ millions) 2007 2007 2006 2007 2006
---------------------------------------------------------------------
Net cash
proceeds(1) $ 1,321 $ 595 $ 683 $ 2,764 $ 1,815
Retained interest 28 17 16 77 49
Retained servicing
liability (9) (4) (5) (20) (13)
---------------------------------------------------------------------
1,340 608 694 2,821 1,851
Residential
mortgages
securitized 1,351 605 699 2,817 1,848
---------------------------------------------------------------------
Net gain on sale $ (11) $ 3 $ (5) $ 4 $ 3
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Excludes insured mortgages which were securitized and retained by
the Bank of $1,008 for the three months ended July 31, 2007
(April 30, 2007 - $182; July 31, 2006 - $661), and $1,716 for the
nine months ended July 31, 2007 (July 31, 2006 - $1,175). As at
July 31, 2007, the outstanding balance of mortgage-backed
securities was $3,336, and these assets have been classified as
available-for-sale securities.
3. Allowance for credit losses
The following table summarizes the change in the allowance for credit
losses.
For the three For the nine
months ended months ended
---------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31
($ millions) 2007 2007 2006 2007 2006
---------------------------------------------------------------------
Balance at
beginning
of period $ 2,516 $ 2,631 $ 2,717 $ 2,618 $ 2,475
Write-offs (179) (136) (142) (483) (393)
Recoveries 38 64 50 137 145
Provision for
credit losses(4) 92 20 74 175 184
Other, including
foreign exchange
adjustment (34) (63) 7 (14) 295
---------------------------------------------------------------------
Balance at the end
of period(1)(2)(3) $ 2,433 $ 2,516 $ 2,706 $ 2,433 $ 2,706
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) As at July 31, 2007, includes $53 of specific and general
allowances relating to acquisitions of new subsidiaries
(April 30, 2007 - $43; July 31, 2006 - $342), which may change as
the valuation of the acquired loan assets is finalized.
(2) As at July 31, 2007, $10 has been recorded in other liabilities
(April 30, 2007 - $11; July 31, 2006 - $11).
(3) As at July 31, 2007, the general allowance for credit losses was
$1,298 (April 30, 2007 - $1,298; July 31, 2006 - $1,330).
(4) For the three and nine months ended July 31, 2007, net of
reduction in general allowance of nil and $25, respectively.
4. Variable interest entities
On April 30, 2007, one of the multi-seller conduits administered by
the Bank issued a subordinated note to an unrelated party that will
absorb the majority of the expected losses. It was determined that
the Bank was no longer the primary beneficiary and as a result, the
variable interest entity (VIE) was no longer recorded in the Bank's
Consolidated Balance Sheet as at April 30, 2007. On the date of
deconsolidation, this resulted in a decrease to both available-for-
sale securities and other liabilities of $7 billion, and a net
increase in guarantees and other indirect commitments of $8 billion.
5. Subordinated debentures
On July 16, 2007, the Bank redeemed all of its $500 million 6.25%
subordinated debentures due July 2012, at par plus accrued interest
to the redemption date.
6. Significant capital transactions
Normal course issuer bid
In the first quarter of 2007, the Bank initiated a new normal course
issuer bid to purchase up to 20 million of the Bank's common shares.
This represents approximately 2 per cent of the Bank's common shares
outstanding as at December 31, 2006. The bid will terminate on the
earlier of January 11, 2008, or the date on which the Bank completes
its purchases. During the three months ended July 31, 2007, the Bank
purchased 7.7 million common shares at an average cost of $51.47. For
the nine months ended July 31, 2007, the Bank purchased 12 million
common shares at an average cost of $52.21.
New issuances
The Bank issued $345 million, or 13.8 million shares, of Series 15
Non-cumulative preferred shares during the second quarter of 2007.
The initial issuance of 12 million shares was completed on April 5,
2007, with the remaining 1.8 million shares issued on April 17, 2007.
The Series 15 preferred shares are entitled to non-cumulative
preferential cash dividends, payable quarterly in an amount per share
of $0.28125.
The initial dividend, paid on July 27, 2007, was $0.34829 per share.
With regulatory approval, the shares may be redeemed by the Bank on
or after July 27, 2012 at $25.00 per share, together with declared
and unpaid dividends to the date then fixed for redemption, and
thereafter at annually declining premiums until July 27, 2016,
following which no redemption premium is payable. These preferred
shares qualify as Tier 1 capital.
The Bank issued $345 million, or 13.8 million shares, of Series 14
Non-cumulative preferred shares during the first quarter of 2007. The
Series 14 preferred shares are entitled to non-cumulative
preferential cash dividends payable quarterly in an amount per share
of $0.28125. The initial dividend, paid on April 26, 2007, was
$0.28356 per share. With regulatory approval, the shares may be
redeemed by the Bank on or after April 26, 2012 at $26.00 per share,
together with declared and unpaid dividends to the date then fixed
for redemption, and thereafter at annually declining premiums until
April 27, 2016, following which no redemption premium is payable.
These preferred shares qualify as Tier 1 capital.
7. Employee future benefits
Employee future benefits include pensions and other post-retirement
benefits, post-employment benefits and compensated absences. The
following table summarizes the expenses for the Bank's principal
plans(1).
For the three For the nine
months ended months ended
---------------------------------------------------------------------
July 31 April 30 July 31 July 31 July 31
($ millions) 2007 2007 2006 2007 2006
---------------------------------------------------------------------
Benefit expenses
Pension plans $ 5 $ 7 $ 18 $ 21 $ 64
Other benefit plans 30 30 31 90 94
---------------------------------------------------------------------
$ 35 $ 37 $ 49 $ 111 $ 158
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Other plans operated by certain subsidiaries of the Bank are not
considered material and are not included in this note.
8. Segmented results of operations
Scotiabank is a diversified financial services institution that
provides a wide range of financial products and services to retail,
commercial and corporate customers around the world. The Bank is
organized into three main operating segments: Domestic Banking,
International Banking and Scotia Capital. Results for these operating
segments are presented in the Business segment income tables above.
9. Acquisitions
On July 19, 2007, the Bank secured regulatory approvals in both
Thailand and Canada and completed the acquisition of 24.99% of
Thanachart Bank for approximately $225 million. This investment will
be accounted for under the equity method of accounting.
During the fourth quarter of 2006, the Bank completed the acquisition
of Corporacion Interfin, the parent company of Banco Interfin in
Costa Rica, for $325 million. Total assets at acquisition were
approximately $1.6 billion, with the majority of the assets being
loans. In the first quarter, the estimated total goodwill of
$247 million and other intangible assets of $35 million were recorded
in the Consolidated Balance Sheet. These amounts may be refined as
the Bank completes its valuation of the assets acquired and
liabilities assumed.
10. Subsequent event
On August 9, 2007, Scotia Mortgage Investment Corporation, a wholly
owned subsidiary of the Bank, announced its intention to redeem all
its 250,000 Class A non-cumulative preferred shares (Scotia BOOMS) on
October 31, 2007. The Scotia BOOMS preferred shares are included in
the Bank's capital instrument liabilities in the Consolidated
Balance Sheet.SHAREHOLDER & INVESTOR INFORMATION CONTACT INFORMATION
-------------------------------------------------------------------------
Direct deposit service
Shareholders may have dividends deposited directly into accounts held at
financial institutions which are members of the Canadian Payments Association.
To arrange direct deposit service, please write to the Transfer Agent.
Dividend and Share Purchase Plan
Scotiabank's dividend reinvestment and share purchase plan allows common
and preferred shareholders to purchase additional common shares by reinvesting
their cash dividend without incurring brokerage or administrative fees.
As well, eligible shareholders may invest up to $20,000 each fiscal year
to purchase additional common shares of the Bank. Debenture holders may apply
interest on fully registered Bank subordinated debentures to purchase
additional common shares. All administrative costs of the plan are paid by the
Bank.
For more information on participation in the plan, please contact the
Transfer Agent.
Dividend dates for 2007
Record and payment dates for common and preferred shares, subject to
approval by the Board of Directors.Record Date Payment Date
January 2 January 29
April 3 April 26
July 3 July 27
October 2 October 29Annual Meeting date for fiscal 2007
The Annual Meeting of Shareholders of the Bank for the fiscal year ending
October 31, 2007 will be held in Edmonton, Alberta at 10:00 a.m. Mountain
time, on Tuesday, March 4, 2008.
Duplicated communication
If your shareholdings are registered under more than one name or address,
multiple mailings will result. To eliminate this duplication, please write to
the Transfer Agent to combine the accounts.
Website
For information relating to Scotiabank and its services, visit us at our
website: www.scotiabank.com.
Conference call and Web broadcast
The quarterly results conference call will take place on August 28, 2007,
at 3:30 p.m. EDT and is expected to last approximately one hour. Interested
parties are invited to access the call live, in listen-only mode, by
telephone, tollfree, at 1-800-733-7571 (please call five to 15 minutes in
advance). In addition, an audio webcast, with accompanying slide presentation,
may be accessed via the Investor Relations page of www.scotiabank.com.
Following discussion of the results by Scotiabank executives, there will be a
question and answer session. Listeners are invited to submit questions by e-
mail to investor.relations@scotiabank.com.
A telephone replay of the conference call will be available from August
28, 2007, to September 11, 2007, by calling (416) 640-1917 and entering the
identification code 21242750 followed by the number sign. The archived audio
webcast will be available on the Bank's website for three months.
-------------------------------------------------------------------------CONTACT INFORMATION
Investors:
Financial analysts, portfolio managers and other investors requiring
financial information, please contact Investor Relations, Finance Department:
Scotiabank
Scotia Plaza, 44 King Street West
Toronto, Ontario, Canada M5H 1H1
Telephone: (416) 866-5982
Fax: (416) 866-7867
E-mail: investor.relations@scotiabank.com
Media:
For other information and for media enquiries, please contact the Public,
Corporate and Government Affairs Department at the above address.
Telephone: (416) 866-3925
Fax: (416) 866-4988
E-mail: corpaff@scotiabank.com
Shareholders:
For enquiries related to changes in share registration or address,
dividend information, lost share certificates, estate transfers, or to advise
of duplicate mailings, please contact the Bank's Transfer Agent:
Computershare Trust Company of Canada
100 University Avenue, 9th Floor
Toronto, Ontario, Canada M5J 2Y1
Telephone: 1-877-982-8767
Fax: 1-888-453-0330
E-mail: service@computershare.com
Co-Transfer Agent (U.S.A.)
Computershare Trust Company N.A.
350 Indiana Street
Golden, Colorado 80401 U.S.A.
Telephone: 1-800-962-4284
For other shareholder enquiries, please contact the Finance Department:
Scotiabank
Scotia Plaza, 44 King Street West
Toronto, Ontario, Canada M5H 1H1
Telephone: (416) 866-4790
Fax: (416) 866-4048
E-mail: corporate.secretary@scotiabank.comRapport trimestriel disponible en français
Le Rapport annuel et les états financiers de la Banque sont publiés en
français et en anglais et distribués aux actionnaires dans la version de leur
choix. Si vous préférez que la documentation vous concernant vous soit
adressée en français, veuillez en informer Relations publiques, Affaires de la
société et Affaires gouvernementales, La Banque de Nouvelle-Ecosse, Scotia
Plaza, 44, rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si
possible, l'étiquette d'adresse, afin que nous puissions prendre note du
changement.
The Bank of Nova Scotia is incorporated in Canada with limited liability.
%SEDAR: 00001289EF %CIK: 0000009631
For further information:
For further information: Kevin Harraher, Vice-President, Investor Relations, (416) 866-5982; Frank Switzer, Director, Public Affairs, (416) 866-7238