Fiscal 2007 Highlights (year over year) - Earnings per share
(diluted) of $4.01 rose 13% from $3.55 - Net income of $4.05
billion, up 13% from $3.58 billion - ROE of 22.0%, versus 22.1% -
Productivity ratio of 53.7%, an improvement from 55.3% last year -
Annual dividends per share increased 16% to $1.74 TORONTO, Dec. 6
/PRNewswire-FirstCall/ -- Scotiabank achieved record earnings in
2007 with net income of $4.05 billion, meeting or surpassing all of
its key financial and operational targets. Earnings per share (EPS)
(diluted) were $4.01, up 13% compared to $3.55 in 2006. Return on
equity (ROE) was 22.0%, at the high end of the Bank's target range.
Scotiabank has again delivered solid results for the fourth quarter
ended October 31, 2007, with net income of $954 million, up 6% from
the same period last year. EPS (diluted) rose to $0.95 from $0.89 a
year ago. ROE was 21.0% compared to 21.1%. As previously disclosed,
the fourth quarter includes a pre-tax gain of $202 million ($163
million after tax) on the Bank's interests in Visa Inc. and pre-tax
losses of $191 million ($133 million after tax) on structured
credit instruments, which include non-bank asset-backed commercial
paper (ABCP). "Our record results and success in meeting or
exceeding all financial and operational targets was achieved by
continuing a consistent strategy of diversifying across geographies
and our three growth platforms," said Rick Waugh, President and
Chief Executive Officer (CEO). "All major business lines delivered
strong earnings, led by Domestic Banking with excellent growth of
21%, International Banking with 17% and Scotia Capital with 6%.
"This growth was achieved in part by increases in asset levels due
to successful execution of strategies to increase market share and
gain more customers. Year over year, the Domestic Bank recorded a
13% increase in average assets, International Banking saw growth of
19% and Scotia Capital's average assets grew by 17%. "Domestic
Banking recorded market share gains in mortgages, personal
deposits, mutual funds and small business. "International Banking
continues to deliver very strong results, with excellent revenue
and net income growth from our recent acquisitions in Peru, Costa
Rica, Jamaica and Dominican Republic. International also
experienced very strong organic growth, particularly in credit
cards, mortgages and commercial banking. "Scotia Capital again had
record earnings in 2007, as strong core trading and investment
banking results combined with higher recoveries to more than offset
weaker market conditions in the fourth quarter. "The Bank's success
across all business lines allowed us to earn through a compression
in the interest margin and the negative impact of foreign currency
translation. "Although market conditions were challenging in the
fourth quarter, the Bank continued to achieve solid earnings. The
market losses taken were low in relation to our overall trading and
investment results. "We believe it is important to provide clarity
on Scotiabank's current exposure to areas of investor concern. In
particular, we have no direct exposure to U.S. sub-prime mortgages.
Secondly, we have only nominal holdings of non-bank ABCP that are
subject to the Montreal Accord. Lastly, we do not sponsor or manage
any structured investment vehicles (SIVs) and have only nominal
investments in them. One of our core strengths is risk management
and we will continue to prudently manage our risk/reward balance in
2008. "Our strong capital position and earnings generation enabled
us to deploy shareholder capital in a disciplined manner in our
pursuit of strategic growth opportunities. In addition we provided
shareholders with two dividend increases this year totaling 24
cents, or 16%. "Scotiabank's results in 2007 reflect our core
strengths in cost control and customer satisfaction. Once again,
the Bank has achieved an industry-leading productivity ratio, and
our talented team of dedicated employees continues to provide
customer-focused service. We are also proud to note the Bank
received the internationally prestigious 2007 Catalyst Award for
Scotiabank's Advancement of Women initiative, which recognized the
improvement in our representation of women in our senior management
team." The Bank met or exceeded all of its key financial and
operational objectives this year as follows: 1. TARGET: Generate
growth in EPS (diluted) of 7 to 12% per year. Our year-over-year
EPS growth was 13% 2. TARGET: Earn a return on equity (ROE) of 20
to 23%. For the full year, Scotiabank earned an ROE of 22.0% 3.
TARGET: Maintain a productivity ratio of less than 58%.
Scotiabank's performance was 53.7% 4. TARGET: Maintain sound
capital ratios. At 9.3%, Scotiabank's Tier 1 capital ratio remains
among the highest of the Canadian banks and strong by international
standards. "Looking ahead to 2008, we believe our One Team, One
Goal approach to serving customers and superior execution ensures
we are well positioned to continue achieving profitable,
sustainable revenue growth, despite potential headwinds caused by a
lower U.S. dollar and uncertain market conditions," Mr. Waugh said.
Financial Highlights As at and for the For the three months ended
year ended
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October July October October October 31 31 31 31 31 (Unaudited)
2007 2007 2006 2007 2006
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Operating results ($ millions) Net interest income 1,716 1,812
1,652 7,098 6,408 Net interest income (TEB(1)) 1,932 1,913 1,783
7,629 6,848 Total revenue 3,078 3,201 2,868 12,490 11,208 Total
revenue (TEB(1)) 3,294 3,302 2,999 13,021 11,648 Provision for
credit losses 95 92 32 270 216 Non-interest expenses 1,792 1,752
1,708 6,994 6,443 Provision for income taxes 204 296 203 1,063 872
Provision for income taxes (TEB(1)) 420 397 334 1,594 1,312 Net
income 954 1,032 897 4,045 3,579 Net income available to common
shareholders 938 1,016 890 3,994 3,549
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Operating performance Basic earnings per share ($) 0.95 1.03 0.90
4.04 3.59 Diluted earnings per share ($) 0.95 1.02 0.89 4.01 3.55
Return on equity(1) (%) 21.0 21.7(2) 21.1 22.0 22.1 Productivity
ratio (%) (TEB(1)) 54.4 53.0 56.9 53.7 55.3 Net interest margin on
total average assets (%) (TEB(1)) 1.87 1.86 1.89 1.89 1.95
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Balance sheet information ($ millions) Cash resources and
securities 118,030 121,633 118,878 Loans and acceptances(2) 238,685
233,004 212,329 Total assets 411,510 408,115 379,006 Deposits
288,458 286,985 263,914 Preferred shares 1,635 1,290 600 Common
shareholders' equity 17,169 18,377 16,947 Assets under
administration 195,095 198,786 191,869 Assets under management
31,403 31,031 27,843
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Capital measures Tier 1 capital ratio(%) 9.3 9.7 10.2 Total capital
ratio(%) 10.5 10.6 11.7 Tangible common equity to risk-weighted
assets(1)(%) 7.2 7.7 8.3 Risk-weighted assets ($ millions) 218,337
219,771 197,010
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Credit quality Net impaired loans(3) ($ millions) 601 584 570
General allowance for credit losses ($ millions) 1,298 1,298 1,307
Net impaired loans as a % of loans and acceptances(2)(3) 0.25 0.25
0.27 Specific provision for credit losses as a % of average loans
and acceptances (annualized)(2) 0.16 0.16 0.18 0.13 0.14
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Common share information Share price($) High 53.49 54.67 49.50
54.73 49.80 Low 46.70 48.91 45.36 46.70 41.55 Close 53.48 49.45
49.30 Shares outstanding (millions) Average - Basic 983 988 989 989
988 Average - Diluted 991 996 1,000 997 1,001 End of period 984 982
990 Dividends per share ($) 0.45 0.45 0.39 1.74 1.50 Dividend yield
(%) 3.6 3.5 3.3 3.4 3.3 Dividend payout ratio(4) (%) 47.1 43.7 43.3
43.1 41.8 Market capitalization ($ millions) 52,612 48,578 48,783
Book value per common share ($) 17.45 18.71 17.13 Market value to
book value multiple 3.1 2.6 2.9 Price to earnings multiple
(trailing 4 quarters) 13.2 12.4 13.7
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Other information Employees(5) 58,113 57,152 54,199 Branches and
offices 2,331 2,289 2,191
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(1) Non-GAAP measure. Refer to Non-GAAP measures section of this
press release for a discussion of these measures. (2) Certain
comparative amounts have been restated to conform with current
period presentation. (3) Net impaired loans are impaired loans less
the specific allowance for credit losses. (4) Represents common
dividends for the period as a percentage of the net income
available to common shareholders for the period. (5) Amounts for
prior periods have been restated to include final numbers for all
new acquisitions. 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 discussed in this press release and 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 October 31, 2007 is $216 million versus $131 million in the
same quarter last year and $101 million last quarter. For the year
ended October 31, 2007, the TEB gross-up amount is $531 million
versus $440 million for 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. The Bank
calculates its return on equity using average common shareholders'
equity including all new components of shareholders' equity.
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 (net of related taxes).
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 had another year of
record results in 2007 and met or exceeded all of its key financial
and operational objectives. Asset growth was strong, recent
acquisitions in Peru, Costa Rica and Canada made a solid
contribution to earnings and credit quality remained favourable.
These positive impacts were partly offset by lower net interest
margins and the negative impact of foreign currency translation.
The results include a pre-tax gain of $202 million on the Bank's
interest in Visa Inc. and pre-tax losses of $191 million on
structured credit instruments. Total revenue Total revenue (on a
taxable equivalent basis) was $13,021 million in 2007, an increase
of $1,373 million or 12% from the prior year, despite the negative
impact of $199 million due to foreign currency translation, as the
Canadian dollar continued to appreciate against most currencies in
which the Bank operates. This increase in revenues reflected the
contributions from acquisitions and broad-based organic growth
across all business lines. Domestic Banking revenue grew by 9% over
last year. Despite the negative impact of foreign currency
translation, International Banking revenue rose 23% reflecting the
full-year impact of acquisitions in Peru and Costa Rica, as well as
strong growth in Mexico and the Caribbean. In Scotia Capital,
growth in corporate and investment banking revenues was partially
offset by lower trading revenues. Group Treasury had higher gains
on the sale of non-trading securities. Net interest income Net
interest income on a taxable equivalent basis was $7,629 million in
2007, up $781 million or 11% over last year, despite a negative
impact of $119 million due to foreign currency translation.
Overall, strong asset growth more than offset the compression in
the net interest margin. The growth in average assets of $52
billion or 15% was mainly in business and government lending ($14
billion or 23%), residential mortgages ($14 billion or 17%) and
derivative securities ($7 billion or 20%). All business segments
contributed to the strong asset growth. Domestic's average assets
grew by $18 billion (primarily in mortgages), aided by the
full-year impact of the acquisition of the mortgage business of
Maple Financial Group. International's asset growth of $10 billion
or 19% was driven in part by the full-year impact of acquisitions
in Peru and Costa Rica, as well as strong organic growth across all
regions, particularly credit cards and mortgages in Mexico and the
Caribbean and commercial loans in Asia. Scotia Capital's average
assets grew $22 billion, primarily from a $14 billion increase in
trading assets, and solid growth of $5 billion in corporate loans
and acceptances. The Bank's net interest margin (net interest
income as a percentage of average assets) was 1.89% in 2007, down
from 1.95% last year. The decline was due to higher wholesale
funding costs, as well as a change in asset mix, mainly from strong
growth in lower-yielding, but lower-risk, Canadian residential
mortgages. On a business line basis, the Domestic Banking margin
narrowed due to the very strong volume growth in lower spread
residential mortgages, and higher wholesale funding rates. Some of
this margin compression was offset in Group Treasury (included in
the Other segment), as funding is managed at an all-Bank level.
International Banking's margin widened slightly, primarily in Latin
America from the full-year impact of our acquisitions in Peru, and
higher margins in Mexico and Asia. The margin in Scotia Capital
widened as a result of a rise in tax-exempt dividend income and
increased interest recoveries in corporate lending. Other income
Other income was $5,392 million in 2007, an increase of $592
million or 12% from 2006, despite a reduction of $80 million from
the impact of foreign currency translation. Acquisitions accounted
for approximately $145 million or 25% of the total growth. Gains of
$202 million recognized on the global Visa restructuring were
mostly offset by losses on structured credit instruments. Credit
card and mutual fund fees both set records in 2007, and there were
increases in revenues from deposit and payment services, and
investment management, brokerage and trust services. Trading
revenues were $450 million in 2007, a decrease of $187 million or
29% from last year. Derivative trading declined by $106 million,
mainly in the fourth quarter. Investment banking revenues were $737
million in 2007, an increase of $78 million or 12% over last year.
Underwriting fees rose by $43 million or 13%, due to higher M&A
and new issue fees. The net gain on the sale of non-trading
securities was $488 million in 2007, an increase of $117 million or
32% from last year, mainly from higher equity gains. Other revenues
were $948 million in 2007, an increase of $325 million from last
year, due mainly to a $202 million gain on the global Visa
restructuring, and the impact of acquisitions. Non-interest
expenses Non-interest expenses were $6,994 million in 2007, an
increase of $551 million or 9% from last year, which benefited from
the positive impact of foreign currency translation of $77 million.
Recent acquisitions accounted for approximately $225 million or 40%
of the growth in non-interest expenses. Salaries and employee
benefits were $3,983 million in 2007, up $215 million or 6% from
last year, including the favourable impact of $34 million due to
foreign currency translation. Salaries increased 10% reflecting an
increase in branches and staffing in Canada to support growth
initiatives, as well as the impact of acquisitions, branch openings
in Mexico and more sales and service staff in International
Banking. Performance-based compensation increased $50 million from
the same period last year, reflecting stronger results in most
business lines. This was partially offset by lower stock-based
compensation, due mainly to a smaller increase in the Bank's common
share price during the year. Pension and other employee benefits
declined by $50 million, due primarily to lower pension costs. This
decrease was partly offset by the impact of acquisitions. Premises
and technology expenses were $1,353 million in 2007, an increase of
$139 million or 11% from last year. The higher premises costs
reflected both acquisitions and new branches (35 in Canada, 86 in
Mexico). Technology expenses increased by $54 million or 10%,
mainly for a variety of new projects in Canada and Mexico to
support business growth initiatives, as well as a new data centre
in the Caribbean. Advertising and business development costs were
$311 million, an increase of $79 million or 34%, reflecting
promotional campaigns to drive brand awareness and customer
acquisition. Professional expenses were $227 million an increase of
$53 million or 30%, due mainly to higher fees for litigation and
consulting fees related to acquisition opportunities and other
initiatives. Our productivity ratio - a measure of efficiency in
the banking industry - was 53.7% for the year and remained better
than our target of 58%. The ratio improved from 55.3% last year, as
we continued to have positive operating leverage, with 12% revenue
growth versus 9% expense growth. Taxes The provision for income
taxes was $1,063 million in 2007, an increase of 22% over last
year. This largely reflected the 15% growth in pre-tax income; a
higher effective tax rate in Mexico, as previously unrecognized tax
loss carryforwards were fully utilized during the year; and the
impact of adjustments to the future tax asset, reflecting tax rate
reductions in Canada. The Bank's overall effective tax rate for the
year was 20.3%, up from 19.2% last year. Non-controlling interest
The deduction for non-controlling interest in subsidiaries was $118
million in 2007, an increase of $20 million from 2006, due
primarily to the full-year impact of the acquisitions in Peru. Risk
Management Credit Risk In 2007, the total provision for credit
losses was $270 million, up from $216 million last year. The
specific provision for credit losses was $295 million, up $19
million from 2006, largely reflecting portfolio growth. Domestic
Banking provisions were up $16 million from last year, with higher
retail provisions in line with growth in the portfolio, partially
offset by lower provisions in the commercial portfolio. Specific
provisions of $101 million in the International Banking portfolios
were up $41 million from last year, with higher retail provisions
due to the impact of acquisitions and portfolio growth, partially
offset by net recoveries in the commercial portfolios. Scotia
Capital had net recoveries of $101 million in 2007 versus net
recoveries of $63 million in 2006. Recoveries in 2007 were realized
primarily in the United States. Net impaired loans, after deducting
the specific allowance for credit losses, were $601 million at
October 31, 2007, an increase of $31 million from a year ago. There
was an increase of $153 million in International Banking, partially
offset by declines of $106 million in Scotia Capital and $16
million in Domestic Banking. The general allowance for credit
losses as at October 31, 2007 was $1,298 million, a reduction from
$1,307 million a year ago. In the second quarter, the general
allowance for credit losses was reduced by $25 million in the
Consolidated Statement of Income, while there was a $16 million
increase resulting from the consolidation of an acquisition in
Costa Rica for a net reduction of $9 million in 2007. This net
decline follows net reductions of $23 million in 2006 and $45
million in 2005. Market Risk Market risk in the Bank's trading
activities increased during 2007, with an average one-day value at
risk (VaR) of $12.4 million, compared to $8.9 million in 2006. The
year-over-year increase was due primarily to increased interest
rate risk with modest increases in exposures in all other risk
factors. Trading revenue was positive on more than 92% of the
trading days during the year, compared to 90% in 2006. Liquidity
Risk Liquidity risk is the risk that the Bank is unable to meet its
financial obligations in a timely manner at reasonable prices.
Liquidity risk is controlled by policies and limits with respect to
cash flow gaps over specified periods and minimum holdings of core
liquidity that can generally be sold or pledged to meet the Bank's
obligations. As at October 31, 2007, total liquid assets held by
the Bank were $103 billion (2006 - $98 billion), equal to 25% of
total assets (2006 - 26%). Balance Sheet The Bank's total assets at
October 31, 2007 were $412 billion, up $33 billion or 9% from last
year, after a $26 billion negative impact from foreign currency
translation, resulting from the stronger Canadian dollar. The
increase was due primarily to growth in retail and commercial
loans. Securities declined by $7 billion from last year. Trading
securities declined $3 billion, due almost entirely to the impact
of foreign currency translation. Available-for-sale securities were
down $4 billion as growth in the underlying portfolio was more than
offset by both the deconsolidation of a variable interest entity
that was restructured during the year, as well as the negative
impact of foreign currency translation. Partly offsetting these
declines was an increase of $1 billion for the initial recognition
of available-for-sale securities at their fair value in accordance
with the new financial instruments accounting standards adopted in
2007. The offsetting amount, net of taxes, was included in
accumulated other comprehensive income within shareholders' equity.
As at October 31, 2007, the unrealized gains on available-for-sale
securities were substantial at $972 million, but declined $119
million from the prior year, due mainly to gains realized during
the year, the impact of foreign currency translation, and a
reduction in the value of certain debt securities. The Bank's loan
portfolio grew $24 billion or 12% from last year, despite a
negative impact of $11 billion due to foreign currency translation.
Domestic residential mortgages led this growth with a $16 billion
increase, before securitization of $4 billion, largely from market
share gains as well as the continued demand arising from the strong
domestic housing market. Personal loans were up $3 billion from
last year, with $1 billion due to the popularity of the domestic
ScotiaLine product. Business and government loans increased $9
billion from last year, or $18 billion before the impact of foreign
currency translation. Loans in Scotia Capital were up $6 billion,
primarily to support trading operations. Domestic experienced
growth of $2 billion. In International banking, business and
government loans increased in most locations despite the negative
impact of foreign currency translation, with Asia, in particular
reflecting net growth of $2 billion. Total liabilities were $393
billion as at October 31, 2007, an increase of $32 billion or 9%
from last year, despite the negative $28 billion impact due to
foreign currency translation. Deposits grew $25 billion and
derivative instrument liabilities were up $12 billion. The latter
increase was similar to the change in the derivative instrument
assets. Partially offsetting was a decline in obligations related
to repurchase agreements, due in part to foreign currency
translation. Total deposits grew $25 billion or 9% from last year,
net of a $20 billion negative impact due to foreign currency
translation. Personal deposits increased $7 billion, led by $3
billion growth in domestic personal GICs. International experienced
modest increases in personal deposits across most regions. Business
and government deposits were up $20 billion, notwithstanding the
impact of foreign currency translation, primarily to fund the
Bank's strong asset growth in 2007. Total shareholders' equity rose
$1 billion in 2007. The increase was due primarily to strong
internal capital generation of $2 billion, the issuance of $1
billion non-cumulative preferred shares during the year and the
change in accounting standards for financial instruments, which
resulted in after-tax fair value adjustments of approximately $1
billion relating primarily to available-for-sale securities. This
growth in capital was negatively impacted by the strong
appreciation of the Canadian dollar against most currencies. This
resulted in unrealized foreign currency translation losses on the
Bank's net investments in foreign subsidiaries of $2 billion during
the year, net of foreign currency gains on related hedges, and
taxes of $427 million. Capital management The Bank's capital base
continues to be strong, with a tangible common equity (TCE, as
defined under Financial Highlights above) ratio of 7.2%, a decline
of 110 basis points from last year, and a Tier 1 capital ratio of
9.3%, down 90 basis points. Both declines were due primarily to the
further deployment of capital for acquisitions and to support
organic asset growth. Furthermore, we are well positioned to meet
the new Basel II requirements in 2008. In the first quarter of
2007, the Bank renewed its normal course issuer bid to purchase up
to 20 million of the Bank's common shares. This represented
approximately 2 per cent of the Bank's common shares outstanding as
at December 31, 2006. During fiscal 2007, the Bank purchased 12
million common shares at an average cost of $52.21 per share. The
bid is expected to be renewed upon its expiry on January 11, 2008.
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. 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 totalled $22.5
billion as at October 31, 2007, of which $20.1 billion were to
off-balance sheet conduits administered by the Bank. As at October
31, 2007, total commercial paper outstanding for off-balance sheet
conduits administered by the Bank was $14.5 billion. At year end,
the Bank held less than 2% of the combined conduits' outstanding
commercial paper. Exposure to U.S. sub-prime mortgage risk is
nominal. For conduits not administered by the Bank, liquidity
facilities totaled $2.4 billion, of which $1.8 billion were for
U.S. third-party conduits and $570 million were for Canadian
third-party conduits. Exposure to the non-bank conduits subject to
the Montreal Accord is not significant, with $87 million
outstanding. Sub-prime exposure in third party conduits is nominal.
Fourth Quarter Review Net income Net income available to common
shareholders was $938 million in the fourth quarter, an increase of
$48 million or 5% from the same quarter last year, despite the
negative impact of $53 million from foreign currency translation.
The year-over-year increase reflected the impact of several
acquisitions, widespread organic growth in retail volumes and other
income in both Domestic and International Banking, and higher
securities gains, partly offset by lower trading revenues. In the
fourth quarter of 2007, the Bank recognized a gain of $202 million
($163 million after tax) on its domestic and international
interests in Visa Inc. Visa Inc. was formed as a result of a
reorganization of Visa Canada, Visa USA and Visa International.
This gain was recognized in Other Income - Other. Mostly offsetting
this gain were losses on structured credit instruments totalling
$191 million ($133 million after tax). Net income available to
common shareholders was $78 million below last quarter's
near-record level. The decrease reflected lower trading revenues,
the negative impact of $37 million from foreign currency
translation, and higher expenses. Total revenue Total revenue (on a
taxable equivalent basis) was $3,294 million in the fourth quarter,
an increase of $295 million or 10% over the same quarter last year,
notwithstanding a negative foreign currency translation impact of
$136 million. Quarter over quarter, total revenue fell $8 million,
after an $87 million negative impact from foreign currency
translation. Net interest income Net interest income (on a taxable
equivalent basis) was $1,932 million in the fourth quarter, an
increase of $149 million or 8% over the same quarter last year, and
$19 million above the third quarter. These increases occurred
notwithstanding the negative impact of foreign currency translation
of $78 million over the same quarter last year and $46 million
compared to the third quarter. Asset volumes for the quarter
remained relatively constant with the increase in Domestic's
lower-risk residential mortgages offset by a reduction in trading
securities in Scotia Capital. Compared to the same quarter a year
ago, the increase in net interest income was the result of the
solid growth in average assets of $34 billion or 9%. Residential
mortgages grew by $13 billion or 15% in Domestic. Scotia Capital's
loan volumes grew by $3 billion and lending in International rose
by $5 billion. Acquisitions and strong organic growth in both
retail and commercial lending in the Caribbean and commercial
lending in Asia were the main components of International's higher
volumes. The Bank's net interest margin narrowed by two basis
points, primarily from a larger mark-to-market loss on financial
instruments and growth in lower yielding, lower risk mortgages.
This was partially offset by the higher tax exempt dividend income,
and a wider margin in International Banking, where spreads widened
in Peru, Mexico and Asia. Quarter over quarter, the Bank's net
interest margin rose by one basis point to 1.87%. This was largely
driven by an increase in Scotia Capital's margin through the
recognition of higher tax-exempt dividend income and a reduction in
the volume of low-spread trading assets, as well as an improvement
in the International margin. The latter was a result of growth in
commercial lending assets in Asia, and retail lending assets
throughout the Caribbean and Central America, and Mexico. The
positive impact of these items were mostly offset by mark-to-market
losses on financial instruments, the continued growth in lower
spread Canadian residential mortgages, and rising funding costs as
wholesale interest rates rose in the fourth quarter due to market
volatility. Other income Other income was $1,362 million in the
fourth quarter, an increase of $146 million or 12% from the same
quarter last year, despite a negative $58 million impact from
foreign currency translation. The gains of $202 million on the
global Visa restructuring and $43 million on the sale of the bond
index business were mostly offset by losses aggregating $191
million on structured credit instruments. This was comprised of a
reduction in trading revenues of $115 million and write-downs of
non-trading securities of $76 million (including $20 million
related to non-bank ABCP). The remaining increase came from
widespread growth in retail products and services. Also
contributing were higher gains on non-trading securities. Partially
offsetting were lower trading and underwriting revenues. Quarter
over quarter, other income declined by $27 million. The gains from
the global Visa restructuring and the sale of the bond index
business were more than offset by losses on structured credit
instruments and the negative $41 million impact from foreign
currency translation. Non-interest expenses and productivity
Non-interest expenses were $1,792 million in the fourth quarter, an
increase of $84 million or 5% over the same quarter last year,
notwithstanding the benefit of $52 million from foreign currency
translation. Premises expenses were up 14% due to branch openings
in Canada and Mexico, as well as recent acquisitions. Salaries
increased reflecting normal growth and the expansion of branches in
Domestic and International. Technology, advertising and
professional fees also rose, due primarily to new projects and
initiatives to drive revenue growth. These were partly offset by
lower pension and benefit costs. Quarter over quarter, non-interest
expenses grew $40 million, due mainly to higher technology and
advertising costs, professional fees and salaries, partially offset
by lower performance-based compensation and benefits, and the
positive impact of $30 million from foreign currency translation.
The Bank's productivity ratio was 54.4% this quarter, compared to
56.9% in the same quarter last year, and 53.0% last quarter. Year
over year, there was positive operating leverage of 5%. Taxes The
Bank's effective tax rate was 17.1% in the fourth quarter, a 90
basis point decrease from the same quarter last year and 470 basis
points below the previous quarter. These declines were due mainly
to higher income from tax-exempt securities, and a lower tax rate
on the Visa gain, partly offset by a $50 million provision relating
to an outstanding tax matter. Non-controlling interest The
deduction for non-controlling interest in subsidiaries was $33
million for the quarter, up $5 million from the same period last
year, and $4 million from last quarter, due mainly to higher levels
of earnings in less than wholly-owned subsidiaries (primarily
Peru). Risk Management Credit Risk The provision for credit losses
was $95 million in the fourth quarter, compared to $32 million in
the same period last year and $92 million in the previous quarter.
Last year's provision comprised $92 million in specific provisions
and a reduction of $60 million in the general allowance for credit
losses. Scotia Capital had net recoveries of $10 million in the
fourth quarter, compared to a provision of $26 million in the
fourth quarter of last year and net recoveries of $10 million in
the previous quarter. The net recovery in the current quarter
related primarily to provision reversals in the U.S. portfolio.
Credit losses of $78 million in the Domestic Banking portfolios
were up from $58 million in the same quarter last year. The
year-over-year increase arose from higher retail provisions in line
with strong growth in retail lending volumes. Credit losses were $1
million higher compared to last quarter. International Banking's
provisions for credit losses were $27 million in the fourth
quarter, compared to $8 million in the same period last year and
$25 million in the prior quarter. Both the year-over-year and
quarter-over-quarter increases are due mainly to higher provisions
in the retail portfolios, offset partially by higher net recoveries
in the commercial portfolio. Total net impaired loans, after
deducting the allowance for specific credit losses, were $601
million as at October 31, 2007, up from $584 million last quarter.
The general allowance for credit losses was $1,298 million,
unchanged from last quarter. Market Risk In the fourth quarter, VaR
declined to $13.2 million from $15.6 million in the third quarter
as a result of reduced equity risk. There were a total of nine
trading loss days, compared to six loss days in the third quarter.
Daily trading losses exceeded the VaR on one occasion during 2007
compared with zero in 2006. This occurred on August 7, 2007 due to
significant movements in the credit and equity markets and resulted
in a single-day loss of $16.8 million. A Bank-sponsored conduit
with $1 billion of highly-rated structured credit assets was
consolidated at the end of the year and the risk was aggregated
with the Bank's trading portfolios. This increased the October 31,
2007, all-Bank VaR and the interest rate VaR by $8 million and $10
million respectively; the all-Bank VaR has subsequently been
reduced to levels approximating the Q4 2007 average. One-day VaR by
risk factor ($ millions) Average for the three months ended
31-Oct-07 31-Jul-07 31-Oct-06 Interest Rate $ 9.2 $ 9.0 $ 7.4
Equities $ 6.1 $ 8.7 $ 5.9 Foreign Exchange $ 2.4 $ 2.0 $ 0.8
Commodities $ 1.5 $ 1.3 $ 0.5 Diversification Effect $ (6.0) $
(5.4) $ (4.5) All Bank $ 13.2 $ 15.6 $ 10.1 Dividend The Board of
Directors, at its meeting on December 6, 2007, approved a quarterly
dividend of 47 cents per common share, an increase of 2 cents,
payable on January 29, 2008, to shareholders of record as of
January 2, 2008. This will be 12% higher than the quarterly
dividend paid January, 2007. Annual dividends per share increased
24 cents, or 16%, to $1.74, continuing the Bank's long record of
dividend increases. Outlook Global growth is expected to average
about 5% for the fourth year in a row in 2007 despite recurring
volatility in financial and currency markets and the setback to the
performance of the U.S. economy triggered by the downturn in
housing. The resilience of international activity stems in large
part from continued strong economic advances in China, India, and
other emerging nations where export-driven growth is increasingly
being reinforced by domestic spending gains. At the same time,
however, growth has started to slow in many developed countries,
including Canada. There are also significant challenges related to
weakening U.S. demand and the recent rapid appreciation of many
currencies against the U.S. dollar, which has underscored the need
for substantial competitive adjustments in a variety of industries.
Alongside these challenges, there is growing concern and
uncertainty around interest rates, inflation and financial markets
generally. Looking ahead, Canada and Mexico will continue to
benefit from the robust demand for most commodities, mitigating the
negative influence of weakening U.S. domestic demand. Overall, we
see the Bank's operating environment as challenging through much of
2008. That said, we remain well positioned to continue to grow and
achieve our targets. In view of this outlook, we have established
the following targets for 2008: - Earnings per share growth: 7 to
12%; - ROE: 20 to 23%; - Productivity of less than 57%; and -
Maintain strong capital ratios. Business Line Highlights Domestic
Banking Full Year Domestic Banking reported record net income
available to common shareholders of $1,550 million in 2007, $271
million or 21% higher than last year. Return on equity was 33%.
Domestic Banking accounted for 39% of the Bank's total net income.
Results included a gain of $92 million (net of applicable taxes)
from the global Visa restructuring. Excluding this gain, underlying
net income was a record at $1,458 million, $179 million or 14%
higher than last year. Retail and small business banking,
commercial banking and wealth management all generated solid
performances. Average assets grew $18 billion or 13% in 2007. This
was led by a substantial increase in residential mortgage balances
(before securitization) of $13 billion or 16%, resulting in a 15
basis point increase in market share versus last year. Both the
branch and mortgage broker channels produced strong growth. There
was also very good year-over-year growth in personal revolving
credit and business lending, including acceptances and business
loans. Retail and small business deposits grew $6 billion or 7%,
due mainly to an increase in term deposit balances, which led to an
industry-leading gain in personal term deposit market share of 41
basis points from last year, including the acquisition of Dundee
Bank. Commercial deposits, including current accounts and
non-personal term deposits, rose 10%, continuing the double-digit
growth trend of the past several years. In Wealth Management,
assets under administration rose 11% to $130 billion, while assets
under management grew 8% to $26 billion. Net asset inflows from new
customers, continued growth in our share of existing customers'
investment business, and market-driven gains all contributed to
this growth. Total revenues were $6,103 million, up $486 million or
9% from last year. Net interest income increased $172 million to
$3,854 million due to strong volume growth in both assets and
deposits. This was partially offset by a decline in the margin of
19 basis points to 2.51%. This decrease in the margin was due
mainly to higher wholesale funding costs, strong growth in net
assets, the growth of relatively lower-spread mortgages as a
proportion of the total portfolio and competitive pricing
pressures. Other income for the year was $2,249 million, an
increase of $314 million or 16%. Excluding the $111 million gain
related to the global Visa restructuring, other income rose 10% or
$203 million, including record growth in wealth management, and
increases in retail and small business and commercial banking
activities. Retail & Small Business Banking Total revenues were
$4,046 million, up $305 million or 8% from last year. Net interest
income rose $122 million or 4% from strong growth in assets and
deposits, partially offset by a lower margin. Excluding the Visa
gain, other income rose $72 million or 9% driven by higher service
fees from chequing and savings accounts, due to pricing changes and
new account growth, and higher credit card revenues, reflecting
growth in cardholder transactions. There was strong revenue growth
of 14% in small business banking. We grew our lending and deposit
market share and overall customer base in this important segment.
Commercial Banking Total revenues rose $42 million or 5% to $926
million in 2007. Net interest income was 6% higher than last year,
driven by strong growth in both assets and deposits, partially
offset by a decline in the margin. Average assets rose 9% and
average deposits increased 10%. Year over year, other income rose
3% to $310 million. Wealth Management Total revenues were a record
$1,131 million, up $139 million or 14% from last year, driven by
solid increases in all business units. Mutual fund revenue grew
24%, driven by net fund sales of $2.3 billion. This growth, which
led to greater market share, occurred primarily in more profitable,
long-term funds. The results also benefited from solid fund
performance. Full-service brokerage revenues rose 9%, mainly as a
result of increased fee-based business, as well as higher mutual
fund trailer fees and insurance revenues. Private client revenues
increased 13%, reflecting growth in Scotia Cassels managed account
fees, Scotiatrust estate and trust fees, and private banking fees.
ScotiaMcLeod Direct Investing revenues rose 14%, mostly driven by
growth in trading volumes and mutual fund trailers. Assets under
administration continue to grow, rising 11% during the year,
reflecting increases in our mutual fund, private client and retail
brokerage businesses. Assets under management rose a strong 8%,
primarily from strong mutual fund sales and performance.
Non-interest expenses Non-interest expenses of $3,559 million rose
modestly in 2007, up $90 million or 3% from last year. The increase
was due mainly to the impact of the growth initiatives, including
expansion of the branch network and the hiring of additional
financial advisors. Also contributing to the increase were
acquisitions, normal salary increases and higher volume-related
expenses, consistent with higher revenues. Partially offsetting
were lower pension expenses and lower stock-based compensation.
Credit quality The provision for credit losses was $295 million in
2007, an increase of $16 million compared to last year. Credit
quality remained strong in the retail portfolio, with the ratio of
loan losses to average loan balances increasing two basis points to
22 basis points. Credit quality in the commercial portfolio was
also solid, with provisions remaining at very low levels. Fourth
Quarter Net income available to common shareholders for the fourth
quarter was $434 million, an increase of $98 million or 29% from
the same quarter last year. Return on equity was 37% and Domestic
Banking accounted for 46% of the Bank's fourth quarter total net
income. Quarter over quarter, net income increased $43 million or
11%. Excluding the gain on the global Visa restructuring, net
income was 2% higher than last year. Quarter over quarter, net
income declined 12% excluding the gain on the global Visa
restructuring, mainly as a result of lower net interest income from
margin compression and higher expenses to support growth
initiatives. Net interest income was flat year over year, with
strong asset and deposit growth mostly offset by a decline in the
net interest margin. Retail assets before securitization rose 13%,
due primarily to growth of $13 billion or 15% in residential
mortgage balances. Quarter over quarter, net interest income
decreased $52 million or 5% as a result of margin compression from
the higher cost of wholesale funding due to increased market
volatility. Excluding the Visa gain, other income rose $55 million
or 11% from last year, primarily from higher mutual fund revenues
and increases in transaction and credit fees. Other income was up
3% from last quarter. Retail & Small Business Banking Total
revenues were $1,066 million, up $99 million or 10% from last year.
Net interest income declined $29 million or 4%, as strong growth in
assets and deposits was offset by a lower margin. Average assets
rose 13% and average deposits increased 7%. Excluding the Visa
global restructuring gain, other income rose $18 million or 9% over
last year, primarily from increases in transaction service revenues
and card revenues. Quarter over quarter, excluding the Visa gain,
total revenues declined 7%, due mainly to lower net interest income
as a result of margin compression. Commercial Banking Total
revenues rose $41 million or 17% to $273 million in the quarter.
Net interest income was 15% higher than last year, primarily driven
by growth in both assets and deposits, and an increase in the
margin. Average assets rose 10% and average deposits increased 2%.
Year over year, other income rose 21% to $101 million from higher
credit fees, card revenues and other revenues. Quarter over
quarter, total revenues rose 16% from both higher net interest
income due primarily to an increase in the margin and other income.
Wealth Management Total revenues were $277 million, up $22 million
or 9% from the same quarter last year. Mutual fund revenue grew 24%
as a result of growth in average assets of $3.3 billion or 21%.
This growth was driven by strong net fund sales of $2.3 billion in
2007, primarily in more profitable longer-term funds. Private
client revenues increased 13%, reflecting growth in Scotia Cassels,
Scotiatrust and private banking. ScotiaMcLeod Direct Investing
revenues rose 28%, driven by a 23% growth in trading volumes
reflecting increased trading activity. Quarter-over-quarter,
revenues declined 2% mainly in retail brokerage due to market
conditions. Assets under administration continue to grow, rising
11% during the year, reflecting increases in our mutual fund,
private client and retail brokerage businesses. Assets under
management rose a strong 8%, primarily from strong sales and mutual
fund performance. Quarter over quarter, assets under administration
and assets under management grew 1% and 2% respectively.
Non-interest expenses Non-interest expenses rose $15 million or 2%
from the same quarter last year, as a result of growth initiatives
and normal salary increases, partially offset by lower pension
expenses and stock-based compensation. Expenses rose $35 million or
4% quarter over quarter, reflecting the impact of growth
initiatives, including acquisitions, new branches, higher
advertising and stock-based compensation. Credit quality Overall
credit quality remained stable. In the fourth quarter, provisions
for credit losses were $78 million, up from both last year and last
quarter in retail banking, in line with substantial portfolio
growth. Other Domestic Banking Highlights: - In October, we signed
a five year agreement with the National Hockey League (NHL) and NHL
Players' Association (NHLPA) establishing Scotiabank as the
Official Bank of the NHL and NHLPA in Canada. This agreement gives
Scotiabank the exclusive opportunity to market our banking
services, including credit cards, wealth management and commercial
services under the NHL shield. Furthermore, Scotiabank has
partnered with CBC's Hockey Night in Canada to sponsor its pre-game
show, Scotiabank Hockey Tonight, for the 2007/2008 hockey season.
These new partnerships build on our current relationships as
sponsors of the Calgary Flames, the Edmonton Oilers and the Ottawa
Senators, whose home arena is Scotiabank Place. - On September 28,
2007 Scotiabank announced that all regulatory approvals have been
received and it completed the transaction announced September 18,
2007 involving Scotiabank's purchase of Dundee Bank of Canada and a
strategic equity investment in DundeeWealth Inc. Scotiabank now
owns 18 per cent of the outstanding shares of DundeeWealth Inc. -
The Atlantic Customer Contact Center (ACCC) has been recognized by
Service Quality Measurement (SQM) Group for achieving 'World Class'
customer and employee satisfaction in 2007. Out of the 300
companies benchmarked, they were one of only 15 organizations
recognized for 'World Class' customer satisfaction, and one of only
two organizations to achieve 'World Class' status in employee
satisfaction. International Banking Full Year International
Banking's net income available to common shareholders in 2007 was a
record $1,232 million, a substantial increase of $178 million or
17% from last year. Excluding $71 million in gains (net of
applicable taxes) on the global Visa restructuring and the $51
million Value Added Tax (VAT) recovery in 2006, net income was up
$158 million or 16%. The most significant contributors to earnings
growth were the Caribbean and Central America, and Peru. Results in
the Caribbean and Central America were bolstered by the impact of
our acquisitions in Costa Rica, the Dominican Republic and Jamaica,
as well as strong organic loan growth and higher credit card
revenues. The contribution from Peru reflected a full year of
ownership, compared to seven months last year. Mexico also had
strong retail loan growth, but was impacted by the VAT recovery in
2006 and a higher tax rate, as the remaining tax loss carry
forwards were fully utilized during the year. This strong growth
was achieved notwithstanding the $37 million negative impact of
foreign currency translation. International Banking accounted for
31% of the Bank's total net income, and had a return on equity of
19.5%. Average assets increased 19% during the year to $66 billion,
despite the 4% negative impact of foreign currency translation. The
increase was a result of organic growth, as well as acquisitions.
The organic growth was driven by a 21% increase in retail loans and
a 23% rise in commercial loans. Growth in credit cards and
mortgages was particularly robust, up 32% and 24%, respectively,
spread across the division. Organic commercial loan growth of $4
billion was primarily in Asia and the Caribbean and Central
America. Growth in low-cost deposits was also strong at 11%, as
balances rose in Mexico and throughout the Caribbean. Total
revenues were $3,989 million in 2007, an increase of $744 million
or 23% from last year, net of the $142 million negative impact of
foreign currency translation. Net interest income was $2,762
million in 2007, an increase of $456 million or 20% from last year,
despite a negative foreign currency translation impact of $101
million. The increase was a result of very strong organic loan
growth of 22% spread across the division, as well as the impact of
acquisitions in Peru and the Caribbean and Central America. Net
interest margins were up from last year, driven by increases in
Mexico and Asia, as well as the full year impact of acquisitions in
Peru, partially offset by a decline in the Caribbean and Central
America. Other income increased $288 million or 31% to $1,227
million compared to last year. Excluding the gains on the global
Visa restructuring, growth was still a very strong 21%, despite the
$41 million negative impact of foreign currency translation. This
growth resulted from our acquisitions in Peru and the Caribbean and
Central America, higher investment gains in Mexico, and widespread
transaction-driven growth. Partially offsetting these increases was
the negative change in fair value of certain securities in 2007
from widening credit spreads. Caribbean and Central America Total
revenues were $1,628 million in 2007, an increase of $321 million
or 25%, with the gains on the global Visa restructuring offsetting
the negative impact of foreign currency translation. Net interest
income was $1,186 million in 2007, an increase of $166 million or
16% from last year, with the negative impact from foreign currency
translation being offset by the $59 million growth from our
acquisitions. The increase was driven by organic asset growth
across the region, with a 25% increase in commercial lending and a
19% increase in retail loans, primarily in credit cards (up 26%)
and mortgages (up 22%). Net interest margins declined due to a
change in the mix of business, partly as a result of acquisitions.
Other income of $442 million was up $155 million from last year.
This included a negative impact of foreign currency translation of
$16 million, $63 million in gains from the global Visa
restructuring and $49 million from acquisitions. The remaining $59
million in organic growth was due primarily to a very strong
increase of 30% in credit card fees, as well as increases in
personal banking fees and foreign exchange revenues. Mexico Total
revenues were $1,366 million in 2007, an increase of $160 million
or 13%. This included a negative impact of foreign currency
translation of $56 million, which was partly offset by $19 million
in gains from the global Visa restructuring. Net interest income
was $888 million in 2007, an increase of $85 million or 11% from
last year, despite a $34 million negative impact due to foreign
currency translation. This increase was driven by strong volume
growth, primarily in retail loans, with a 43% rise in credit card
balances and a 39% increase in mortgages. Net interest margins were
higher than last year, reflecting a change in the mix of assets.
Other income rose $75 million or 19% year over year, with the
impact of the gains from the global Visa restructuring offsetting
the negative impact of foreign currency translation. The increase
was due primarily to higher investment gains, a 27% increase in
full-service and discount brokerage fees from higher client trading
revenues, a 19% increase in credit card fees and an 18% increase in
other personal banking fees. Latin America, Asia and Other Total
revenues were $995 million in 2007, an increase of $264 million,
due primarily to a rise of $250 million from Peru, $9 million in
Visa gains offset by a $15 million negative impact from foreign
currency translation. The remaining increase was due primarily to
very strong organic commercial loan growth of 48% in Asia, and
higher revenues in Chile resulting from higher margins and retail
loan volumes, and an improved funding mix. These were partly offset
by lower other income in Asia due to the gain on the sale of a
foreclosed asset in 2006, and the negative change in fair value of
certain securities in 2007 from widening credit spreads.
Non-interest expenses Non-interest expenses were $2,279 million in
2007, up 18% from last year. This increase reflected a $73 million
favourable impact of foreign currency translation, a $51 million
VAT recovery in 2006 and a $202 million increase from our
acquisitions in Peru and the Caribbean and Central America. The
remaining increase was due to higher compensation expenses,
consistent with business growth and new branch openings, volume
driven increases in communications and processing costs, and higher
credit card and advertising expenses. Partly offsetting these
increases were lower litigation fees. Credit quality The provision
for credit losses was $101 million in 2007, up $41 million from the
low levels recorded last year. Overall the division had a credit
loss ratio of 25 basis points, which is in line with levels in
three of the last four years. Higher provisions in Mexico and the
Caribbean were partly offset by lower provisions in Peru and Asia.
Fourth Quarter International Banking's net income available to
common shareholders in the fourth quarter of 2007 was $353 million,
a substantial increase of $85 million or 32% from the same period
last year and $83 million or 31% above last quarter. Excluding the
$71 million after-tax gain on the global Visa restructuring, net
income rose 5% relative to the prior year and 4% relative to last
quarter. The negative impact of foreign currency translation was
$21 million year over year and $14 million quarter over quarter.
The increase in net income from last year was due primarily to
strong organic growth in the Caribbean and Central America. The
positive change from last quarter was due to an increase in fair
value of certain securities in this quarter, which were negatively
affected by widening credit spreads in the third quarter of 2007.
International Banking accounted for 38% of the Bank's total fourth
quarter net income and had a return on equity of 21.3%. Average
asset volumes were $65 billion this quarter, up $6 billion or 10%
from last year. This was a result of organic loan growth in local
currency of 18%, driven by an increase of 29% in credit cards, 22%
in mortgages and 10% in other retail loans. In addition, commercial
loans rose 18% from strong growth in Asia, the Caribbean and
Central America, Chile and Mexico. This growth was partly offset by
the $6 billion negative impact of foreign currency translation.
Average assets were flat compared to last quarter, as the
unfavourable impact of foreign currency translation of $4 billion
offset widespread underlying organic growth in both retail and
commercial loans. Total revenues were $1,090 million this quarter,
an increase of $195 million or 22% from last year and $137 million
or 14% above last quarter. Excluding the gains from the global Visa
restructuring, revenues were up $104 million from last year and $46
million from last quarter. This growth was achieved notwithstanding
the negative impact of foreign currency translation of $88 million
and $55 million, respectively. Major contributors to the
year-over-year growth were Mexico, Peru and 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 widespread across the division. Net interest income
was $710 million this quarter, up $82 million or 13% from last year
and $7 million or 1% from last quarter. The growth was dampened
somewhat by the negative year-over-year and quarter-over-quarter
impact of foreign currency translation of $61 million and $41
million, respectively. The year-over-year increase was driven by
very strong organic loan and deposit growth across the segment.
Interest margins were up 13 basis points from last year and five
basis points above last quarter. However, excluding the higher
impact of derivatives used for asset/liability management, margins
were up 14 basis points from last year and 13 basis points from
last quarter, due primarily to a shift in the asset mix towards
higher-yielding retail products and lower cost deposits. Other
income was $380 million, up $113 million or 42% from last year.
Excluding the $91 million gain from the global Visa restructuring,
other income was $289 million, an increase of $22 million or 8%
relative to last year, notwithstanding the negative $27 million
impact of foreign currency translation. The remaining increase was
due to widespread customer-driven transaction revenues, primarily
in card, brokerage and personal banking fees, higher investment
gains and the impact of our acquisitions. These were partly offset
by the gain on foreclosed assets in Asia in the fourth quarter of
2006. Quarter over quarter, other income increased $130 million,
reflecting the gains from the global Visa restructuring, partly
offset by the negative $14 million impact of foreign currency
translation. This underlying growth was due primarily to the change
in fair value of certain securities affected in the earlier period
by widening credit spreads, increased securities gains and higher
transaction-driven revenues in Mexico. Caribbean and Central
America Total revenues were $454 million in the fourth quarter, an
increase of $105 million from the same period last year and an
increase of $61 million above the prior quarter. Net interest
income of $295 million, was up $25 million, or 9%, from last year
as strong contribution from acquisitions and organic growth
overcame the $31 million negative impact of foreign currency
translation. Compared to the prior quarter, net interest income was
down $7 million as organic growth was more than offset by the $21
million negative impact of foreign currency translation. Margins
were down slightly from the prior year, but up from the prior
quarter. Other income of $159 million rose $80 million, or double
the prior year and up $68 million, or 74%, over the prior quarter.
Excluding the gains from the global Visa restructuring, other
income was up 21% over the prior year but declined 5% from the
prior period. Strong contributions from acquisitions and organic
growth were negatively impacted by foreign currency translation.
Mexico Total revenues were $363 million in the fourth quarter, an
increase of $60 million from the prior year and $41 million from
the prior quarter. Excluding the gains from the global Visa
restructuring, the increases were $41 million and $22 million,
respectively. Net interest income of $223 million reflected a rise
of $19 million from the same period in 2006 but was down $4 million
from the third quarter. Strong organic growth and higher margins
were negatively impacted by foreign currency translation and the
negative impact of derivatives used for asset/liability management,
particularly relative to the prior quarter. Other income was $140
million in the fourth quarter, an increase of $42 million from the
prior year and $45 million above the prior quarter. Excluding the
gains on the global Visa restructuring, the increases were still a
strong $23 million and $26 million, respectively. This performance
reflects higher securities gains and growth in transaction-driven
revenues. Latin America, Asia and Other Total revenues were $273
million in the final quarter of 2007, reflecting an increase of $31
million over the same period last year and $35 million above the
prior quarter. Excluding the gains on the global Visa
restructuring, the increases were $22 million and $26 million,
respectively. Net interest income was $192 million, reflecting an
increase of $39 million over the same period last year and $19
million over the prior quarter. These increases were due to growth
in Chile, Peru and Asia, combined with generally increasing
margins, partially offset by foreign currency translation. Other
income of $81 million included gains from the global Visa
restructuring of $9 million. Absent those gains, other income
declined $18 million relative to the same period last year but grew
$8 million relative to the prior quarter. The decrease
year-over-year was primarily due to the gain on foreclosed assets
in Asia in 2006. The positive change from last quarter was due to
an increase in fair value of certain securities this quarter, which
were negatively affected by widening credit spreads in the third
quarter of 2007. Non-interest expenses Non-interest expenses were
$582 million this quarter, up $27 million or 5% from last year and
$24 million or 4% from last quarter. These increases were due to
the impact of acquisitions in the Caribbean and Central America,
increased compensation and premises expenses consistent with our
overall volume growth and branch expansion strategies, as well as
ongoing business growth initiatives in the Caribbean and Mexico.
These increases were partly offset by lower benefit costs and the
positive impact of foreign currency translation. Credit quality The
provision for credit losses was $27 million in the fourth quarter,
compared to $8 million in the same period last year and $25 million
last quarter. The increase from last year was due primarily to
increased provisions in Mexico and the Caribbean from low levels in
the fourth quarter of 2006. Taxes The effective tax rate this
quarter was 18%, up from 10% in the same period last year and 1%
higher than last quarter. The increases were due to a higher
effective tax rate in Mexico as tax loss carry forwards have been
fully utilized, partly offset by a low tax rate on the gains from
the global Visa restructuring. Other International Banking
Highlights: - Subsequent to the end of the quarter, the Bank closed
a transaction to acquire Banco del Desarrollo, Chile's seventh
largest bank. Banco del Desarrollo has 74 branches and 24 business
centres providing services in small business, microlending and
consumer finance. When combined with our existing Chilean
subsidiary, Scotiabank Sud Americano, this investment provides
substantial growth opportunities in this key Latin American market.
- Scotiabank continues to be honoured for its commitment to
excellence in banking. Scotiabank de Costa Rica, Scotiabank
Trinidad & Tobago, and Scotiabank Turks & Caicos received
the Bank of the Year award from The Banker magazine. - We continue
to expand our distribution network in high growth markets. During
the quarter, we opened 28 new locations in Mexico and six branches
and offices in other key international markets. Scotia Capital Full
Year Scotia Capital contributed record net income available to
common shareholders of $1,114 million in 2007, a 6% increase over
last year, notwithstanding challenging market conditions in the
fourth quarter. Scotia Capital delivered 3% revenue growth, as
strong core trading and investment banking results more than offset
losses on structured credit instruments in the fourth quarter. The
division also benefited from the recognition of a $43 million gain
on the sale of its bond index business, which was completed in the
fourth quarter. In addition, Scotia Capital experienced higher net
loan loss and interest recoveries than the prior year. Return on
equity was strong at 29%, slightly lower than last year's record
performance. Scotia Capital contributed 28% of the Bank's total net
income. Total average assets increased 17% to $152 billion compared
to last year. There was an increase of $14 billion in trading
securities and loans to support both client-driven activity and
trading opportunities. Average corporate loans and acceptances rose
$5.5 billion, or 22%, to $30.6 billion. Canada achieved solid
growth of $2.2 billion accompanied by strong loan growth in the
U.S. of $2.7 billion, despite the impact of the strengthening
Canadian dollar. Total revenues increased to $2,450 million, up 3%
compared to the prior year, despite fourth quarter losses on
structured credit instruments. Growth was achieved in both Global
Capital Markets and Global Corporate and Investment Banking. Net
interest income increased 22% to $1,160 million, due primarily to a
rise in interest from trading operations and higher interest
recoveries on impaired loans. Other income declined 10% to $1,290
million reflecting a decline in trading revenues, the result of the
fourth quarter losses mentioned above, as well as lower
credit-related fees and securities gains. Global Corporate and
Investment Banking Total revenues increased 3% to $1,192 million
compared to last year. Advisory and new issue fees rose 8%, and
revenue growth was also achieved in our lending businesses. Net
interest income was up 12% compared to 2006, due primarily to
higher interest recoveries from impaired loans. As well, an
increase in asset volumes in all lending markets contributed to
higher net interest income, although these volume gains were
largely mitigated by lower portfolio spreads, in part reflecting a
transition to higher quality assets. Loan origination fees also
declined. Other income decreased 4% compared to the prior year,
reflecting lower gains from the sale of securities and a decrease
in credit fees in the United States, partly offset by volume-driven
growth in acceptance fees in Canada. Good growth was achieved in
M&A and advisory fees, in addition to a modest increase in new
issue revenues. Global Capital Markets Total revenues increased 2%
to $1,258 million compared to last year. Higher revenues from the
derivatives, fixed income, precious metals and foreign exchange
operations were partly offset by lower equity trading results.
Interest income from trading operations increased 34%, due mainly
to higher tax-exempt dividend income. Other income declined 15%
despite growth in the foreign exchange and precious metals
businesses and the gain on sale of the bond index business, due
primarily to the losses on structured credit instruments.
Non-interest expenses Non-interest expenses were $1,013 million in
2007, a 6% increase from last year, due largely to increased
performance-related compensation, in line with improved results, as
well as higher salary costs, which included signing bonuses to
expand specialist expertise. Technology costs also rose to support
business growth. These increases were partly offset by lower
pension and benefit costs. Credit quality Scotia Capital reported
net loan loss recoveries of $101 million in 2007, compared to $63
million in 2006. Significantly higher net recoveries were realized
in the United States this year, while recoveries declined in Europe
and Canada. Fourth Quarter Net income available to common
shareholders for the quarter was $226 million, a $9 million
decrease from last year, and $50 million below last quarter.
Compared to last year, lower revenues, primarily from derivatives,
and higher expenses were offset by higher loan loss recoveries. The
decrease compared to the third quarter reflects lower revenues, due
primarily to losses on structured credit instruments, partially
offset by reduced expenses. Revenues were $520 million, a decrease
of $55 million or 10% from the prior year and $124 million or 19%
from the third quarter. Global Corporate and Investment Banking
Revenues increased 6% from the same period last year and 4% from
the third quarter. Compared to the same period last year, interest
income increased 10% as volume growth in all lending markets was
partly offset by tighter credit spreads and lower loan origination
fees. Other income increased 3% from the fourth quarter of the
prior year as higher securities gains in the United States and
Europe were offset by lower new issue and advisory revenues.
Revenues were higher compared to the prior quarter as higher
securities gains in the United States and Europe were partly offset
by lower credit fees and new issue and advisory revenues. Global
Capital Markets Revenues decreased 23% from last year and 37% from
the previous quarter. Interest income was higher compared to both
the same period last year and to the third quarter due to higher
tax-exempt dividend income. Other income decreased compared to the
fourth quarter last year and to the prior quarter due primarily to
the losses on structured credit instruments of $135 million
(including $20 million of non-bank ABCP). Partially offsetting was
the recognition of a $43 million gain on the sale of the bond index
business, which was completed in the fourth quarter. The decrease
compared to last quarter is more pronounced due to the strong
trading revenues realized in the third quarter. Non-interest
expenses Total non-interest expenses were $225 million in the
fourth quarter, 4% higher than last year and $42 million lower than
the third quarter. Compared to last year, higher performance-based
compensation and salaries costs were partially offset by a decrease
in pension and benefits costs. The decrease from the previous
quarter reflects lower performance-based compensation and pension
and benefits costs, partially offset by higher salaries (primarily
signing bonuses and severance costs). Credit quality There was a
net loan loss recovery of $10 million in the fourth quarter,
compared to a provision for credit losses of $26 million last year
and a net recovery of $10 million last quarter. Recoveries were
recognized in the United States, compared to small credit losses
recognized in the United States and Europe last year. Recoveries
recognized in the prior quarter were primarily in Europe. Other
Scotia Capital Highlights: - Scotia Capital acted as Co-Lead
Arranger and Lead Hedge Advisor on a C$750 million senior secured
bank debt facility supporting Borealis Infrastructure's investment
in Bruce Power through BPC Generation Infrastructure Trust. This
financing is one of the first to occur in the nuclear sector in
North America. - Scotia Capital acted as Senior Managing Agent on a
US$7.2 billion financing for Community Health Systems Inc., in
connection with their acquisition of Triad Hospitals Inc. As part
of this transaction, we also were co-manager of a US$3 billion high
yield offering and participated in the company's interest rate
hedging program. - Scotia Capital acted as Joint Lead Arranger and
Joint Bookrunner on a US$500 million senior credit facility and a
US$400 million bridge loan to support U.S. Steel Corporation's
acquisition of Stelco Inc. Other Full Year Net income available to
common shareholders was $98 million in 2007, compared to $169
million in 2006. 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 $531 million in
2007, compared to $440 million last year, reflecting higher
dividend income. Net interest income was negative $679 million in
2007, compared to negative $531 million in 2006. This was due
primarily to the impact of eliminating a higher tax-exempt income
gross up, unfavourable changes in the fair value of non-trading
derivatives used for hedging purposes, and lower dividend income
from investment securities. Other income grew $138 million to $627
million in 2007 due primarily to higher equity gains. Non-interest
expenses increased $51 million from last year to $143 million, due
mainly to higher compensation and litigation expenses. The
provision for credit losses included a $25 million reduction in the
general allowance in 2007, compared to a $60 million reduction in
2006. The provision for income taxes includes the elimination of
the gross-up of tax-exempt income, which was $91 million higher
than last year. Fourth Quarter Net income available to common
shareholders was negative $75 million in the fourth quarter,
compared to positive $52 million in the same period last year and
$79 million last quarter. Contributing to both quarter-over-quarter
and year-over-year declines were the impact of unfavourable changes
in the fair value of non-trading derivatives, litigation expenses,
and write-downs of non-trading securities of $56 million. The
general allowance was unchanged this quarter versus a $60 million
reduction in the same quarter last year. The provision for income
taxes includes the elimination of the gross-up of tax-exempt
income, which was $115 million higher than the third quarter and
$85 million higher than the same quarter of last year. The fourth
quarter also includes a $50 million provision relating to an
outstanding tax matter. Other Initiatives Corporate Governance
Sound and effective corporate governance continues to be a priority
for Scotiabank, and is considered essential to the Bank's strength,
integrity and long-term success. Scotiabank's corporate governance
policies are designed, and are reviewed annually, to reflect
evolving best practices in corporate governance. The Board of
Directors and its Corporate Governance and Pension Committee engage
in a continuing assessment of Scotiabank's overall approach to
corporate governance to maintain the continued independence of the
Board and its ability to effectively supervise management's
operation of the Bank for the long-term benefit of its
stakeholders. For further information on Scotiabank's corporate
governance policies, please refer to the corporate governance
section of Scotiabank's website, http://www.scotiabank.com/, which
includes information about the Board of Directors, including
profiles of the Bank's directors and executives, and copies of the
charter and membership of each Board committee. Disclosure
procedures The Board of Directors and the Audit and Conduct Review
Committee of Scotiabank reviewed and approved this news release
prior to its distribution today. The disclosure controls and
procedures of Scotiabank support the ability of the President and
Chief Executive Officer and the Chief Financial Officer to certify
the annual Consolidated Financial Statements and the annual
Management's Discussion and Analysis of Financial Condition and
Results of Operations. Community involvement Scotiabank takes pride
in the contributions made by the Bank and its employees to the many
communities where we live, work and do business. Here are a few
examples of our sponsorships and donations during 2007: - During
the quarter, the Scotiabank Group announced a $1.9 million donation
to the Richard Ivey School of Business to fund scholarships for MBA
and undergraduate business students. The Scotiabank Leadership
Awards will create an endowment that offers two scholarships to
exemplary students on an annual basis. This donation continues a
longstanding relationship between the Bank and the school,
involving philanthropy, student recruitment and executive
education. - Scotiabank was the Regional Official Sponsor for the
ICC Cricket World Cup West Indies 2007 (CWC 2007), the
third-largest sporting event in the world. Scotiabank employees
volunteered in most match locations, and helped to make the event a
warm and wonderful experience for participants, officials, visitors
and spectators around the globe. The sponsorship builds on
Scotiabank's longstanding commitment to cricket in the West Indies,
including its Kiddy Cricket program, launched jointly with the West
Indies Cricket Board to help pass along the skills and passion for
cricket among local children. Since 2000, Scotiabank has introduced
Kiddy Cricket to more than 20,000 children in 14 countries
throughout the Caribbean. More than 150 Scotiabank employee
volunteers have received training to teach children the basics of
the game. Employees and Human Resources Scotiabank wants both
current and potential employees to view the Bank as a great place
to work - and our employees' level of satisfaction with their
employment experience and immediate work environments remained very
high, as measured by ViewPoint, the Bank's annual employee
satisfaction survey. In 2007, the overall level of satisfaction
remained steady at 87 per cent. The Diversity Index, which measures
employees' perceptions of respect and management sensitivity to
work/life demands, reached 89 per cent, up from 88 per cent in
2006. We were proud that, earlier this year, Scotiabank's
accomplishments in furthering the advancement of women were
recognized with the 2007 Catalyst Award. The award is presented
annually to companies with innovative and effective approaches
undertaken by Canadian and American organizations - with proven
results - to address the recruitment, development and advancement
of women. Scotiabank was the first Canadian winner of the Catalyst
Award since 1999. Winning initiatives were reviewed and judged
rigorously on criteria including business rationale, senior
leadership support, communication, measurable results,
accountability, originality, and ability to be duplicated. Business
Segment Review Domestic Banking For the three For the months ended
year ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) October July October October October
(Taxable equivalent 31 31 31 31 31 basis)(1) 2007 2007 2006 2007
2006
-------------------------------------------------------------------------
Business segment income Net interest income $ 954 $ 1,006 $ 957 $
3,855 $ 3,682 Provision for credit losses 78 77 58 295 279 Other
income 663 537 498 2,248 1,935 Non-interest expenses 927 892 912
3,559 3,469 Provision for income taxes 173 179 147 685 581
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Net Income $ 439 $ 395 $ 338 $ 1,564 $ 1,288 Preferred dividends
paid 5 4 3 14 9
-------------------------------------------------------------------------
Net income available to common shareholders $ 434 $ 391 $ 335 $
1,550 $ 1,279
-------------------------------------------------------------------------
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Other measures Return on equity(1) 37.0% 31.8% 27.3% 33.0% 27.8%
Average assets ($ billions) $ 163 $ 156 $ 145 $ 154 $ 136
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International Banking For the three For the months ended year ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) October July October October October
(Taxable equivalent 31 31 31 31 31 basis)(1) 2007 2007 2006 2007
2006
-------------------------------------------------------------------------
Business segment income Net interest income $ 710 $ 703 $ 628 $
2,762 $ 2,306 Provision for credit losses 27 25 8 101 60 Other
income 380 250 267 1,227 939 Non-interest expenses 582 558 555
2,279 1,927 Provision for income taxes 89 65 34 241 98
Non-controlling interest in net income of subsidiaries 33 29 28 118
98
-------------------------------------------------------------------------
Net Income $ 359 $ 276 $ 270 $ 1,250 $ 1,062 Preferred dividends
paid 6 6 2 18 8
-------------------------------------------------------------------------
Net income available to common shareholders $ 353 $ 270 $ 268 $
1,232 $ 1,054
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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Other measures Return on equity(1) 21.3% 16.1% 21.1% 19.5% 23.4%
Average assets ($ billions) $ 65 $ 65 $ 59 $ 66 $ 56
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Scotia Capital For the three For the months ended year ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) October July October October October
(Taxable equivalent 31 31 31 31 31 basis)(1) 2007 2007 2006 2007
2006
-------------------------------------------------------------------------
Business segment income Net interest income $ 364 $ 231 $ 251 $
1,160 $ 951 Provision for credit losses (10) (10) 26 (101) (63)
Other income 156 413 324 1,290 1,437 Non-interest expenses 225 267
216 1,013 955 Provision for income taxes 76 107 97 413 443
-------------------------------------------------------------------------
Net Income $ 229 $ 280 $ 236 $ 1,125 $ 1,053 Preferred dividends
paid 3 4 1 11 6
-------------------------------------------------------------------------
Net income available to common shareholders $ 226 $ 276 $ 235 $
1,114 $ 1,047
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(1) 24.2% 27.7% 26.2% 29.0% 31.3%
Average assets ($ billions) $ 150 $ 156 $ 140 $ 152 $ 130
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Non-GAAP measure. Refer to Non-GAAP measures section of this
press release for a discussion of these non-GAAP measures. Other(1)
For the three For the months ended year ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) October July October October October
(Taxable equivalent 31 31 31 31 31 basis)(2) 2007 2007 2006 2007
2006
-------------------------------------------------------------------------
Business segment income Net interest income $ (312) $ (128) $ (184)
$ (679) $ (531) Provision for credit losses - - (60) (25) (60)
Other income 163 189 127 627 489 Non-interest expenses 58 35 25 143
92 Provision for income taxes(3) (134) (55) (75) (276) (250)
-------------------------------------------------------------------------
Net Income $ (73) $ 81 $ 53 $ 106 $ 176 Preferred dividends paid 2
2 1 8 7
-------------------------------------------------------------------------
Net income available to common shareholders $ (75) $ 79 $ 52 $ 98 $
169
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Average assets ($ billions) $ 31 $ 32 $ 30 $ 31 $ 29
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total For the three For the months ended year ended
-------------------------------------------------------------------------
October July October October October 31 31 31 31 31 (Unaudited) ($
millions) 2007 2007 2006 2007 2006
-------------------------------------------------------------------------
Business segment income Net interest income $ 1,716 $ 1,812 $ 1,652
$ 7,098 $ 6,408 Provision for credit losses 95 92 32 270 216 Other
income 1,362 1,389 1,216 5,392 4,800 Non-interest expenses 1,792
1,752 1,708 6,994 6,443 Provision for income taxes 204 296 203
1,063 872 Non-controlling interest in net income of subsidiaries 33
29 28 118 98
-------------------------------------------------------------------------
Net Income $ 954 $ 1,032 $ 897 $ 4,045 $ 3,579 Preferred dividends
paid 16 16 7 51 30
-------------------------------------------------------------------------
Net income available to common shareholders $ 938 $ 1,016 $ 890 $
3,994 $ 3,549
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-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(2) 21.0% 21.7%(4) 21.1% 22.0% 22.1%
Average assets ($ billions) $ 409 $ 409 $ 374 $ 403 $ 351
-------------------------------------------------------------------------
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(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) Non-GAAP measure. Refer to Non-GAAP measures
section of this press release for a discussion of these 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 October 31, 2007 ($216), July 31,
2007 ($101), October 31, 2006 ($131), and the years ended October
31, 2007 ($531) and October 31, 2006 ($440) to arrive at the
amounts reported in the Consolidated Statement of Income. (4)
Certain comparative amounts have been restated to conform with
current period presentation. DATASOURCE: Scotiabank - Financial
Releases CONTACT: Kevin Harraher, Vice-President, Investor
Relations, (416) 866-5982; Frank Switzer, Director, Public Affairs,
(416) 866-7238
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