Second quarter highlights compared to the same period a year ago:
TORONTO, May 29 /PRNewswire-FirstCall/ -- Growth across all of the
Bank's business lines and continued low levels of loan losses led
Scotiabank to record results in the second quarter of 2006, as net
income rose $68 million to $894 million or 8% over the same period
last year. Earnings per share (diluted) were up 10% to $0.89 from
$0.81 in the same period last year and return on equity was strong
at 23.2%. The quarter was also highlighted by the completion of a
number of acquisitions in Canada and abroad - each a part of the
Bank's overall strategy to drive future earnings growth. "All three
of our growth platforms contributed to the strong year-over-year
increase in earnings. The Bank experienced its best asset growth in
several years, with a 14% increase in assets since the beginning of
the fiscal year, spread across many key areas and products," said
Rick Waugh, President and CEO. "International Banking continued its
growth momentum with an outstanding 44% rise in income year over
year. Scotia Capital also had tremendous results with a record ROE
of 35%. Both these business lines demonstrated their ability to
earn through the negative impact of foreign currency translation.
"In Domestic Banking, there were substantial year-over-year volume
increases in residential mortgages, credit products and retail and
business deposits, along with strong results in our wealth
management business. With growth from across our delivery channels
and recent acquisitions, we now rank third in market share in
mortgages and personal deposits in Canada. "Favourable credit
conditions continued to prevail throughout Canada, the U.S. and
regions where the Bank has a significant presence, including Latin
America and the Caribbean and Central America. "The Bank continues
to manage its capital prudently, making strategic investments to
drive sustainable revenue growth while continuing to enhance
returns to shareholders by increasing the quarterly dividend. The
completion of our acquisitions in Peru along with the mortgage
operations of Maple Financial Group and the Canadian operations of
National Bank of Greece during the second quarter highlight our
strategy of finding growth opportunities in our business lines. "We
are pleased with our performance through the first half of the year
and remain confident we can achieve our key performance objectives
in 2006."
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Year-to-date performance versus key 2006 financial and operational
objectives was as follows:
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1. OBJECTIVE: Earn a return on equity (ROE) of 18 to 22%. For the
six months, Scotiabank earned an ROE of 22.3%. 2. OBJECTIVE:
Generate growth in earnings per share (diluted) of 5 to 10% per
year. Our year-over-year growth was 9.5%. 3. OBJECTIVE: Maintain a
productivity ratio of less than 58%. Scotiabank's performance was
55.2% for the first six months of 2006. 4. OBJECTIVE: Maintain
sound capital ratios. At 10.2%, Scotiabank's Tier 1 capital ratio
remains strong by Canadian and international standards. FINANCIAL
HIGHLIGHTS
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As at and for the For the three months ended six months ended
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April 30 January 31 April 30 April 30 April 30 (Unaudited) 2006
2006 2005 2006 2005
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Operating results ($ millions) Net interest income (TEB(1)) 1,644
1,605 1,552 3,249 3,055 Total revenue (TEB(1)) 2,830 2,830 2,688
5,660 5,302 Provision for credit losses 35 75 35 110 109
Non-interest expenses 1,565 1,562 1,490 3,127 2,947 Provision for
income taxes (TEB(1)) 313 321 320 634 598 Net income 894 852 826
1,746 1,614 Net income available to common shareholders 887 844 822
1,731 1,606
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Operating performance Basic earnings per share ($) 0.90 0.85 0.82
1.75 1.60 Diluted earnings per share ($) 0.89 0.84 0.81 1.73 1.58
Return on equity (%) 23.2 21.6 22.3 22.3 21.6 Productivity ratio
(%) (TEB(1)) 55.3 55.2 55.4 55.2 55.6 Net interest margin on total
average assets(%) (TEB(1)) 1.97 1.97 2.07 1.97 2.04
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Balance sheet information ($ millions) Cash resources and
securities 113,842 101,953 93,439 Loans and acceptances 214,445
200,752 192,776 Total assets 356,979 324,951 309,090 Deposits
247,648 227,547 214,782 Preferred shares 600 600 600 Common
shareholders' equity 15,814 15,596 15,344 Assets under
administration 188,508 174,110 162,962 Assets under management
26,936 26,185 23,354
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Capital measures Tier 1 capital ratio (%) 10.2 10.8 11.4 Total
capital ratio (%) 11.9 12.8 13.4 Tangible common equity to
risk-weighted assets(2)(%) 8.6 9.0 9.5 Risk-weighted assets ($
millions) 180,112 168,948 160,057
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Credit quality Net impaired loans(3) ($ millions) 579 659 666
General allowance for credit losses ($ millions) 1,330 1,330 1,375
Net impaired loans as a % of loans and acceptances(3) 0.27 0.33
0.35 Specific provision for credit losses as a % of average loans
and acceptances (annualized) 0.07 0.15 0.07 0.11 0.12
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Common share information Share price ($) High 48.67 49.80 41.37
49.80 41.37 Low 45.03 42.89 38.63 42.89 36.41 Close 46.52 46.25
39.99 Shares outstanding (millions) Average - Basic 988 989 996 989
1,001 Average - Diluted 1,001 1,002 1,011 1,002 1,016 End of period
988 988 994 Dividends per share ($) 0.36 0.36 0.32 0.72 0.64
Dividend yield (%) 3.1 3.1 3.2 3.1 3.3 Dividend payout ratio(4)(%)
40.1 42.2 38.7 41.1 39.9 Market capitalization ($ millions) 45,950
45,696 39,734 Book value per common share ($) 16.01 15.78 15.44
Market value to book value multiple 2.9 2.9 2.6 Price to earnings
multiple (trailing 4 quarters) 13.9 14.2 13.2
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Other information Employees 51,503 47,166 44,094 Branches and
offices 2,132 1,968 1,871
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Certain comparative amounts in this quarterly report have been
reclassified to conform with current period presentation. (1) The
adjustment that changes GAAP measures to taxable equivalent basis
(TEB) measures is discussed in footnotes (2) and (3) further below.
(2) Represents common shareholders' equity and non-controlling
interest in subsidiaries, less goodwill and other intangible
assets, as a percentage of risk-weighted assets. (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. MESSAGE TO STAKEHOLDERS
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Strategies for success ---------------------- During the second
quarter, Scotiabank made good progress toward achieving its 2006
objectives by remaining focused on executing its strategies to meet
the needs of all its stakeholders. Each of our major business lines
- Domestic Banking, International Banking and Scotia Capital - is
continuing to focus on three key priorities: sustainable revenue
growth, strategic acquisitions, and effective capital management
and allocation. Sustainable revenue growth results from retaining
and growing existing customer relationships, as well as acquiring
additional customers through investments in new resources,
technology and marketing, and increasing our distribution.
Accordingly, in the past year we have added more than 260 branches
and offices, a 14% increase, through a combination of new openings
and acquisitions. Going forward, by the end of 2007, we expect to
add up to 50 new branches in Canada, more than 100 in Mexico and up
to 50 new branches across the rest of our international network. We
are also expanding services to our business clients worldwide
through our recently formed Global Transaction Banking (GTB) unit.
In April, GTB launched its Wholesale Investment Account and
commercial card program, aimed at Scotia Capital's clients in the
United States, Canada and Mexico. More products will be introduced
over the coming year. During the quarter, the China Securities
Regulatory Commission granted Qualified Foreign Institutional
Investor (QFII) status to Scotiabank. This will enable the Bank to
trade shares, as well as treasury, corporate and commercial bonds
in local currency on China's exchanges as principal and for
clients. We continue to make effective use of our capital through
acquisitions. In Canada, we purchased the mortgage business of
Maple Financial Group Inc. to build on our position as a leading
provider of mortgage financing. This acquisition improves our
position in the domestic mortgage market from fourth to third, and
will double the number of mortgages we acquire through our broker
channel. In the Dominican Republic, we expanded our operations with
the announced purchase of Citibank's retail banking business, which
encompasses several branches, retail loans, deposits and a
significant credit card portfolio, including a card that is
co-branded with American Airlines. We also completed the purchase
of two banks in Peru as part of our international growth strategy,
investing a total of $390 million, as announced in the first
quarter. We will now begin the process of combining the banks and
establishing Scotiabank firmly in the Peruvian market as the
country's third-largest bank. Scotiabank believes in being a
socially responsible company, and supporting the communities in
which we do business. For example, at our annual meeting in
Winnipeg in March, we were proud to present donations to two of the
city's leading cultural institutions - the Winnipeg Symphony
Orchestra and the Royal Winnipeg Ballet - to support upcoming
events, programming and special initiatives. We are proud of our
success in 2006 to date, and remain confident that Scotiabank is in
a strong position to achieve continued good results throughout the
rest of the year. 2006 Objectives - Our Balanced Scorecard
---------------------------------------- Financial - Return on
equity of 18-22% - Diluted earnings per share growth of 5-10% -
Long-term shareholder value through increases in dividends and
stock price appreciation Customer - High levels of customer
satisfaction and loyalty - Increase market share in primary markets
Operational - Productivity ratio of less than 58% - Sound ratings -
Best practices in corporate governance and compliance processes -
Sound capital ratios People - High levels of employee satisfaction
and engagement - Enhance workforce diversity - Commitment to
corporate social responsibility and strong community involvement
ACHIEVEMENTS
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Domestic Banking - On March 31, Scotiabank acquired the mortgage
lending business of Maple Financial Group Inc., including Maple
Trust Company, a leader in mortgage lending in Canada. The purchase
improves Scotiabank's ranking to third from fourth in Canada's
overall mortgage market, doubling originations through the
fast-growing mortgage broker channel, and provides significant new
opportunities for customer acquisition and cross-sell. Maple Trust
administers a $7.9 billion mortgage portfolio, originated nearly $3
billion in mortgages in 2005, and has over 42,000 mortgages
outstanding. - Our focus on meeting customers' savings and
investment needs continues to produce good results: - Our personal
deposit market share rose 26 basis points during the quarter to
10.5%. For the year, we have gained an industry-leading 34 basis
points. - Scotia Selected(R) Funds assets surpassed $1 billion in
March, a major milestone, as sales momentum continues in our
long-term fund-of-funds solutions. - The Scotia Vision(TM) Funds
continue to lead the industry in lifecycle funds, with total assets
of $289 million. The Vision funds have been featured in a number of
major media and industry articles highlighting the funds' position
as industry leaders, and the first bank lifecycle funds in the
market. - In Q2, Scotiabank launched the new Term Lending System
(TLS), a real time, web-based platform. TLS will enable the Bank to
bring new mortgage products to market faster, and will improve
customer service with more efficient, seamless processing.
International Banking - In April, Scotiabank announced that it will
buy Citigroup Inc.'s consumer banking business in the Dominican
Republic. The purchase includes three branches, consumer loans and
a credit card portfolio. The transaction is subject to regulatory
approval and is scheduled to close during the third quarter. -
Scotiabank Mexico continued to take strategic steps to grow its
lending portfolio, including the announcement of the acquisition of
a 3.1 billion Mexican peso car loan portfolio, subject to
regulatory approval. - Scotiabank Bahamas celebrated its 50th
anniversary on February 20. It began its operations in 1956 with
one branch. Since then, the institution has grown to 20 branches
that offer full banking services on six major islands across the
Bahamas. - The Chinese Securities Regulatory Commission has granted
Qualified Foreign Institutional Investor status to Scotiabank,
making it the first Canadian bank to receive this status. We were
also granted a license by the China Banking Regulatory Commission
that will enable the Bank to offer interest rate, currency,
commodity and other derivatives products to foreign and domestic
companies and financial institutions. Scotia Capital - Scotia
Capital was named Best Investment Bank in Canada for a third year
in a row by Global Finance magazine. - For the fourth consecutive
year, Scotia Capital's corporate derivatives team was ranked number
1 in Canada by an independent third-party market survey. We were
rated number 1 on the quality index, and led in overall market
penetration, best advice on overall balance sheet management and
lead dealer recognition. - We acted as financial advisor on some of
the quarter's largest merger and acquisition deals, including
transactions for Penn West Energy Trust, Fairmont Hotels &
Resorts Inc., Sears Holdings Corporation, TOTAL SA and China
National Petroleum Corporation. Employee highlights - For the third
year in a row, the Scotiabank Group ranked among Training
magazine's Top 100 training organizations in the world. This annual
award, sought by more than 500 global organizations, recognizes
companies that excel at employee learning and development. -
Scotiabank Jamaica recently received the Innovation Gold Award from
the Human Resource Management Association of Jamaica, officially
designating the Bank as the HR Best Practice Flagship Organization
in that country. This top award is presented to the company that
has demonstrated innovative human resource programs, practices or
policies over the last five years. Community involvement - The
Toronto Argonauts football club launched its Stop the Violence
campaign at Scotia Plaza on February 1 in response to increasing
gun and gang violence in the city. Scotiabank donated $25,000
toward the initiative, which will focus on awareness, mentorship
and education of at-risk youth. - The Canadian Diabetes Association
operates 12 camps across Canada, attended each year by some 1,400
children with diabetes. The camps provide both education and
support for the children, and are staffed with qualified medical
professionals, which provides reassurance for their parents.
Scotiabank is proud to be the lead sponsor of the 2006-07 National
Camping Program with a $75,000 commitment. MANAGEMENT'S DISCUSSION
& ANALYSIS
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Forward-looking statements This document includes forward-looking
statements which are made pursuant to the "safe harbour" provisions
of the United States Private Securities Litigation Reform Act of
1995. These statements include comments with respect to the Bank's
objectives, strategies to achieve those objectives, expected
financial results (including those in the area of risk management),
and the outlook for the Bank's businesses and for the Canadian,
United States and global economies. Forward-looking statements are
typically identified by words or phrases such as "believe,"
"expect," "anticipate," "intent," "estimate," "plan," "may
increase," "may fluctuate," and similar expressions of future or
conditional verbs such as "will," "should," "would" and "could." By
their very nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and
specific, and the risk that predictions and other forward-looking
statements will not prove to be accurate. The Bank cautions readers
not to place undue reliance on these statements, as a number of
important factors could cause actual results to differ materially
from the estimates and intentions expressed in such forward-looking
statements. These factors include, but are not limited to, the
economic and financial conditions in Canada and globally;
fluctuations in interest rates and currency values; liquidity; the
effect of changes in monetary policy; legislative and regulatory
developments in Canada and elsewhere; operational and reputational
risks; the accuracy and completeness of information the Bank
receives on customers and counterparties; the timely development
and introduction of new products and services in receptive markets;
the Bank's ability to expand existing distribution channels and to
develop and realize revenues from new distribution channels; the
Bank's ability to complete and integrate acquisitions and its other
growth strategies; changes in accounting policies and methods the
Bank uses to report its financial condition and the results of its
operations, including uncertainties associated with critical
accounting assumptions and estimates; the effect of applying future
accounting changes; global capital markets activity; the Bank's
ability to attract and retain key executives; reliance on third
parties to provide components of the Bank's business
infrastructure; unexpected changes in consumer spending and saving
habits; technological developments; consolidation in the Canadian
financial services sector; changes in tax laws; competition, both
from new entrants and established competitors; judicial and
regulatory proceedings; acts of God, such as earthquakes and
hurricanes; the possible impact of international conflicts and
other developments, including terrorist acts and war on terrorism;
the effects of disease or illness on local, national or
international economies; disruptions to public infrastructure,
including transportation, communication, power and water; and the
Bank's anticipation of and success in managing the risks implied by
the foregoing. A substantial amount of the Bank's business involves
making loans or otherwise committing resources to specific
companies, industries or countries. Unforeseen events affecting
such borrowers, industries or countries could have a material
adverse effect on the Bank's financial results, businesses,
financial condition or liquidity. These and other factors may cause
the Bank's actual performance to differ materially from that
contemplated by forward-looking statements. For more information,
see the discussion starting on page 59 of the Bank's 2005 Annual
Report. The Bank cautions that the foregoing list of important
factors is not exhaustive. When relying on forward-looking
statements to make decisions with respect to the Bank and its
securities, investors and others should carefully consider the
foregoing factors, other uncertainties and potential events. The
Bank does not undertake to update any forward-looking statements,
whether written or oral, that may be made from time to time by or
on behalf of the Bank. The "Outlook" section 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
http://www.sedar.com/ and on the EDGAR section of the SEC's website
at http://www.sec.gov/. Group Financial Performance and Financial
Condition Scotiabank continued its positive earnings momentum with
net income for the first six months of 2006 of $1,746 million,
compared to $1,614 million for the same period last year. Net
income rose 8% to $894 million this quarter, compared to the same
quarter of last year and was up 5% from the previous quarter.
Diluted earnings per share climbed to $0.89 in the second quarter,
up 10% from the same quarter of last year and 6% from last quarter.
Strong growth in International Banking, along with solid increases
in Scotia Capital and Domestic Banking, contributed to this
quarter's increase in net income over last year. This allowed the
Bank to earn through the continued negative impact of foreign
currency translation. The Bank closed three acquisitions in the
current quarter: the Canadian operations of the National Bank of
Greece, mortgage operations of Maple Financial Group, and Banco
Sudamericano and Banco Wiese Sudameris in Peru. As these
acquisitions did not have a full quarter's impact, they are
expected to make a greater contribution to income in future
quarters. Total revenue Total revenue, on a taxable equivalent
basis, was $2,830 million this quarter, up 5% from $2,688 million
in the second quarter of last year. Excluding the impacts of
foreign currency translation and the recent acquisitions, total
revenues were up 6%. This growth arose from increases in net
interest income, primarily from strong customer-driven asset
growth, as well as broad-based growth in other income. Total
revenue was in line with last quarter, notwithstanding lower
trading revenues following the record levels attained in the first
quarter, and three fewer days this quarter. Year-to-date revenue of
$5,660 million rose $358 million or 7% from the comparative period
last year. Net interest income Net interest income, on a taxable
equivalent basis, climbed to $1,644 million in the second quarter,
up 6% from the same quarter of last year, and $39 million or 2%
above the preceding quarter. The net interest margin was 1.97%,
compared to 2.07% in the same quarter last year, but unchanged from
the previous quarter. Canadian currency net interest income rose
$59 million or 6% to $967 million from last year, due primarily to
growth in retail assets, particularly residential mortgages and
ScotiaLine loans, along with higher dividend income. The favourable
volume impact was partially offset by the effect of a compressed
margin, caused mainly by rising interest rates and a flattening of
the yield curve. Quarter over quarter, Canadian currency net
interest income grew by $9 million or 1%, due mainly to higher
dividend income. The positive effect of increased lending volumes
was offset by the impact of three fewer days this quarter. Foreign
currency net interest income climbed $34 million or 5% from the
same quarter last year, due in part to contributions from recent
acquisitions. Mexico also contributed significantly to the
year-over-year increase as a result of strong growth in commercial
and retail lending, coupled with higher spreads. Volumes increased
in a broad number of areas across the Caribbean and Central
America, including Trinidad & Tobago, Bahamas, El Salvador and
Dominican Republic. Partially offsetting this growth was lower
securities income this quarter and the negative impact of foreign
currency translation. There was also a quarter-over-quarter
increase in foreign currency net interest income of $31 million or
5%. This was primarily attributable to recent acquisitions. Results
also benefited from greater securities income from the purchase of
asset-backed securities related to a U.S. retail automotive
receivables portfolio. On a year-to-date basis, total net interest
income of $3,249 million rose $194 million or 6% from the same
period last year. Other income Other income of $1,186 million this
quarter was up $50 million or 4% from the same period last year.
There was growth in transaction-based revenues in retail banking
and wealth management, driven by higher customer activity. Also,
trading revenues were up, buoyed by continuing favourable market
conditions and strong client activity. Partially offsetting this
revenue growth were lower net gains on investment securities, as
the second quarter last year included a higher gain from the sale
of a larger portion of the Bank's investment holding in Shinsei
Bank in Japan. Securitization revenues were down, due primarily to
reduced spreads. Other income fell by $39 million or 3% from last
quarter. While there were higher retail brokerage revenues,
underwriting fees and net gains on investment securities, these
were more than offset by the drop in trading revenues from the
record levels reported in the first quarter. Year to date, other
income grew $164 million or 7% to $2,411 million over the same
period last year. Although there was a positive contribution to
other income by the recent acquisitions, this was more than offset
by the negative impact of foreign currency translation.
Nevertheless, most revenue categories reflected growth, other than
investment banking, credit fees and securitization revenues.
Provision for credit losses Total provisions for credit losses were
$35 million this quarter, in line with the same quarter last year
but down from $75 million last quarter. There was no change to the
general allowance this quarter. Scotia Capital continued to benefit
from recoveries and International reported low levels of
provisions, although there were higher provisions in the Domestic
commercial portfolio. Further discussion on credit risk is provided
below. Non-interest expenses and productivity The productivity
ratio, a measure of operating efficiency, continues to reflect the
Bank's disciplined approach to expense management. The ratio was
55.3% this quarter, in line with 55.4% in the second quarter last
year and 55.2% in the first quarter. Non-interest expenses
increased $75 million to $1,565 million, up 5% from the same period
last year. Excluding the impact of foreign currency translation and
the recent acquisitions, non-interest expenses grew by $55 million
or 4%. The year-over-year growth in non-interest expenses supported
ongoing business operations and was attributable mainly to
increases in salaries, employee benefits and technology costs.
Partly offsetting these increases were lower legal provisions and
capital taxes. Non-interest expenses were in line with last
quarter. Increases in technology and communication costs, as well
as higher business development expenses, particularly in Canada and
the Caribbean, were offset by lower legal provisions and capital
taxes. Overall salaries and benefit expenses were relatively
comparable to last quarter. There was a reduction in stock-based
compensation, due to a lower appreciation in the Bank's share price
this quarter, combined with the accelerated recognition of costs
for recent retirees in the prior quarter. This was offset by
increases in performance-based compensation, mainly in Scotiabank
Mexico, and other employee benefit costs. The year-to-date
non-interest expenses were $3,127 million, up $180 million or 6%
from the comparative period last year, driven by acquisitions and
ongoing business growth initiatives. Taxes The effective tax rate
for the second quarter was 17.9%, lower than both the second
quarter of last year, at 21.2%, and the prior quarter, at 20.5%.
The effective tax rate was down year over year, due primarily to
increased earnings from subsidiaries in lower tax jurisdictions. As
well, the second quarter of last year included a charge for a
decline in the value of future tax assets in Scotiabank Mexico as a
result of announced reductions in Mexican income tax rates. The
combination of higher income from foreign subsidiaries, certain
securities gains and dividend income, all taxed at lower rates, as
well as greater tax-efficient funding transactions, resulted in a
lower effective tax rate this quarter compared to the preceding
quarter. Year to date, the effective tax rate was 19.2% compared to
20.6% for the same period last year. Risk management The Bank's
risk management policies and practices are unchanged from those
outlined in pages 59 to 70 of the 2005 Annual Report. Credit risk
Credit quality was stable in the quarter. The total provision for
credit losses of $35 million this quarter was in line with the same
period a year ago, and lower than the $75 million in the first
quarter. The quarter-over-quarter improvement was due to higher
recoveries in Scotia Capital and lower provisions in the
International portfolios, partially offset by higher provisions in
commercial lending in Canada. Scotia Capital had no new provisions
and recoveries of $54 million in the second quarter, compared to a
net recovery of $57 million in the same quarter last year and a $16
million net recovery last quarter, as favourable credit conditions
continued to prevail throughout Canada, the U.S. and Europe. Credit
losses of $88 million in the Domestic Banking portfolios were
higher than the $66 million in the same quarter last year and the
$64 million in the prior quarter. The increase in the current
quarter was primarily in the commercial portfolio, mainly in two
accounts. Retail provisions were in line with the comparative
quarters. International operations had a credit loss provision of
$1 million in the second quarter, lower than both the $26 million
experienced in the same period last year and the $27 million in the
previous quarter. The reduction over the previous quarter was
mainly a result of a large provision in Asia last quarter, and
higher provision reversals in the Caribbean and Central America
this quarter. Total net impaired loans, after deducting the
allowance for specific credit losses, were $579 million as at April
30, 2006, a decrease of $80 million from last quarter. In addition,
the Bank had a general allowance for credit losses of $1,330
million at April 30, 2006, unchanged from last quarter. The
forestry and automotive sectors continue to be closely monitored
due to challenging industry conditions. The Bank actively manages
its risks and level of exposure to these industries. Market risk
Value at Risk (VaR) is a key measure of market risk in the Bank's
trading activities. In the second quarter, the average one-day VaR
was $8.0 million, compared to $6.8 million for the same quarter
last year. The change is the result of increased exposures in
equities, foreign exchange and commodities. The average one-day VaR
decreased slightly from the previous quarter, with increases in
commodities exposure offset by declines in interest rate and
equities exposures. Average for the three months ended
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Risk factor April 30 January 31 April 30 ($ millions) 2006 2006
2005
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Interest rate $ 4.5 $ 5.5 $ 5.4 Equities 5.4 5.6 4.2 Foreign
exchange 1.9 1.8 1.1 Commodities 1.4 0.7 0.4 Diversification (5.2)
(5.5) (4.3)
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All-Bank VaR $ 8.0 $ 8.1 $ 6.8
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There were eight days of trading losses in the second quarter,
compared to four days in the previous quarter. The losses were well
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 April 30, 2006, liquid assets were
$96 billion compared to $87 billion at January 31, 2006. This
represented 27% of total assets, comprised of 73% in securities,
and 27% in cash and deposits with banks. These percentages are
unchanged from the prior quarter. The quarter-over-quarter increase
in liquid assets was attributable primarily to higher balances of
debt securities. 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
foreign jurisdictions. Securities may also be sold under repurchase
agreements. As at April 30, 2006, total assets pledged or sold
under repurchase agreements were $60 billion, compared to $51
billion at January 31, 2006. The quarter-over-quarter increase was
attributable to higher levels of pledges for securities borrowing
and lending activities, and to a higher level of securities sold
under repurchase agreements. Related party transactions There were
no changes to the Bank's procedures and policies for related party
transactions from those outlined on pages 75 and 116 of the 2005
Annual Report. All transactions with related parties continued to
be at market terms and conditions. Balance sheet The Bank's total
assets of $357 billion as at April 30, 2006, grew a substantial $43
billion or 14% from October 31, 2005, or $50 billion, excluding the
effect of foreign currency translation. The majority of the growth
occurred in the second quarter. The Bank's lending portfolio grew
$18 billion, excluding the effect of foreign currency translation
of $3 billion. Domestic residential mortgages led this growth with
a $7 billion increase, before securitization of $2 billion. This
growth included the mortgage businesses of the two recent Canadian
acquisitions, which contributed $3 billion. Internationally, retail
and commercial loans climbed by $5 billion, including $3 billion
from the purchase of the two Peruvian banks. In addition, loans and
acceptances grew by $2 billion in Scotia Capital, primarily in
Canada and the U.S. partially offset by declines in Europe. The
Bank's securities increased $17 billion, excluding the effect of
foreign currency translation. Investment securities were up $7
billion, largely from financing transactions with customers,
including the purchase of asset-backed securities structured with a
large corporate customer. Trading securities rose $10 billion,
mainly in Scotia Capital to support customer-driven activity and
trading operations. As at April 30, 2006, the surplus of the market
value over book value of the Bank's investment securities was $895
million, down $195 million from January 31, 2006, due in part to
the realization of gains in the second quarter of 2006 of $108
million. The remaining decline was primarily in the Bank's bond
portfolios as a result of higher interest rates. Other increases
included deposits with banks, which were up $5 billion, and an
increase in trading derivatives market valuation of $6 billion. The
latter was driven by significantly higher market values on foreign
currency derivatives, the rise in precious metal prices, along with
structured transactions activity this period. Total liabilities
climbed $43 billion to $341 billion as at April 30, 2006, compared
to $298 billion at October 31, 2005. The increase was $50 billion,
excluding the effect of foreign currency translation. Personal
deposits rose by $8 billion, of which $3 billion related to recent
acquisitions, and the balance primarily from particularly strong
growth in domestic term deposits. Non-personal deposits were up $27
billion and repurchase obligations grew $5 billion, both mainly to
fund the Bank's asset growth. Capital management The Bank's capital
ratios remain strong and position the Bank to take advantage of
growth opportunities as they arise. The Tier 1 ratio was 10.2% this
quarter, compared to 10.8% last quarter, reflecting the investment
of the Bank's capital through acquisitions and asset growth to help
drive higher revenues. There was an increase in risk-weighted
assets from the acquisitions completed in the quarter and growth in
the underlying business in Scotia Capital, Domestic and
International Banking. 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 8.6% at April 30, 2006, versus 9.0% at
January 31, 2006. During the quarter, the Bank purchased 1.9
million common shares at an average price of $45.66, pursuant to
the normal course issuer bid initiated in the first quarter of
2006. This compares to purchases of 5.9 million shares in the same
quarter a year ago and 3.7 million shares last quarter. 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. Financial instruments are generally carried at cost,
except those held for trading purposes, which are carried at their
estimated fair value. There was no change to the basis of
calculating the fair value of financial instruments from October
31, 2005, and no significant changes in fair value of financial
instruments that arose from factors other than normal economic,
industry and market conditions. Total derivative notional amounts
were $973 billion at April 30, 2006, compared to $886 billion at
October 31, 2005. The increase was mostly in foreign exchange
contracts. 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 $17 billion, compared to
$12 billion last year end. 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 were 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. The Bank may securitize residential mortgages as a
means of diversifying its funding sources, as it represents a
cost-effective method of funding the growth in this portfolio. A
further $712 million in residential mortgages were securitized this
quarter, bringing the balance of outstanding mortgages securitized
by the Bank to $7,878 million as at April 30, 2006, versus $7,801
million at October 31, 2005. Guarantees and other indirect
commitments outstanding increased 9% from October 31, 2005. Fees
from guarantees and loan commitment arrangements recorded in other
income were $52 million for the three-month period ended April 30,
2006, compared to $57 million for the same period a year ago.
Common dividend The Board of Directors, at its meeting on May 29,
2006, approved an increase in the quarterly dividend of 3 cents per
common share, for a quarterly dividend of 39 cents per common
share. This furthers the Bank's track record of providing its
shareholders with continued dividend growth. The quarterly dividend
applies to shareholders of record as of July 4, 2006. This dividend
is payable July 27, 2006. Outlook The regions in which the Bank
operates continue to enjoy solid economic growth and relatively low
inflation, despite the upward trend in energy prices and borrowing
costs. While China and India are leading global growth, economic
conditions have been buoyant in the U.S., Mexico and many parts of
Latin America, and have shown signs of improvement in Europe and
Japan. The Canadian economy has been supported by solid domestic
demand and robust commodity exports, which have mitigated the
effect of the recent rise in the Canadian dollar. Looking ahead,
global growth may moderate in the second half of fiscal 2006,
particularly if interest rates and commodity prices rise further
and the U.S. dollar remains under pressure. The first six months of
2006 have produced results that were at the top end of our
performance objectives. While the Bank will continue to be
challenged by a number of factors, including the strong Canadian
dollar and continued pressure on the net interest margins, the Bank
expects it will meet its 2006 key performance objectives. Business
Line Review Domestic Banking For the three For the six months ended
months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) (Taxable equivalent April 30 January 31
April 30 April 30 April 30 basis)(1) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Business line income Net interest income $ 884 $ 909 $ 852 $ 1,793
$ 1,742 Provision for credit losses 88 64 66 152 142 Other income
485 472 445 957 892 Non-interest expenses 845 833 817 1,678 1,601
Provision for income taxes 138 153 134 291 281
-------------------------------------------------------------------------
Net income $ 298 $ 331 $ 280 $ 629 $ 610 Preferred dividends paid 2
2 1 4 2
-------------------------------------------------------------------------
Net income available to common shareholders $ 296 $ 329 $ 279 $ 625
$ 608
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(2) 27.3% 30.5% 28.9% 28.9% 31.5%
Average assets ($ billions) $ 132 $ 130 $ 121 $ 131 $ 121
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer to footnote (2) further below. (2) Refer to footnote (1)
in the Total table further below. Domestic Banking, which includes
Wealth Management, generated net income available to common
shareholders of $296 million in the second quarter, an increase of
$17 million or 6% from the same period last year. Quarter over
quarter, net income declined by $33 million or 10% due to the
shorter quarter and the timing of certain costs. Return on equity
was 27%. Domestic earnings represented 33% of the Bank's total net
income. The acquisitions this quarter, namely the Canadian
operations of National Bank of Greece and the mortgage business of
Maple Financial Group, did not have an impact on this quarter's
results. Average retail assets grew 10% compared to the same period
last year, led by substantial increases of $7 billion or 10% in
residential mortgages before securitization, as well as personal
line of credit growth of $2 billion or 11%. Retail deposits grew 6%
due primarily to an increase in term deposits. Additionally,
business deposits rose a strong 12%, mainly in current accounts.
Quarter over quarter, both average assets and deposits rose by 2%.
Total revenues increased $72 million or 5% versus the second
quarter of last year mainly as a result of volume growth and higher
fee income in Wealth Management. Revenues were down slightly
quarter over quarter, from the impact of three fewer days this
quarter. Net interest income rose $32 million or 4% from the same
quarter last year to $884 million. Continued strong growth was
recorded across most products, particularly in residential
mortgages, lines of credit, personal term deposits and current
accounts. Largely offsetting this growth, however, was a lower
interest margin due primarily to the impact of rising interest
rates, a flat yield curve and the cost of relatively more expensive
wholesale deposits used to fund the division's net asset growth.
Compared to last quarter, net interest income fell by 3%, because
of three fewer days this quarter. Provisions for credit losses rose
$22 million year over year, and $24 million from the prior quarter,
due primarily to provisions for two accounts in the commercial
portfolio. Credit quality in the retail portfolio remained solid.
Other income was $485 million in the second quarter, an increase of
$40 million or 9% versus the same period last year. All business
lines showed improved results, led by Wealth Management, which rose
by 14%. Brokerage revenues grew $12 million or 9% due to higher
trading volumes, and mutual fund revenues increased $6 million or
19% from higher average balances. In addition, there were increases
in card revenues and transaction service fees. Other income rose by
$13 million or 2% quarter over quarter. Non-interest expenses rose
3% from the same quarter last year. This increase reflected growth
in salaries, primarily for merit increases and higher staffing to
support business growth; pension and staff benefits;
technology-related expenses, and appraisal and acquisition fees in
line with higher mortgage volumes. Partly offsetting this increase
were lower capital taxes. Non-interest expenses rose 1% from last
quarter, mainly reflecting timing of expenses. International
Banking For the three For the six months ended months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) (Taxable equivalent April 30 January 31
April 30 April 30 April 30 basis)(1) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Business line income Net interest income $ 542 $ 529 $ 489 $ 1,071
$ 951 Provision for credit losses 1 27 26 28 33 Other income 220
215 174 435 354 Non-interest expenses 443 452 391 895 779 Provision
for income taxes 25 10 42 35 65 Non-controlling interest in net
income of subsidiaries 23 20 17 43 34
-------------------------------------------------------------------------
Net income $ 270 $ 235 $ 187 $ 505 $ 394 Preferred dividends paid 2
2 1 4 2
-------------------------------------------------------------------------
Net income available to common shareholders $ 268 $ 233 $ 186 $ 501
$ 392
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(2) 26.2% 22.9% 21.0% 24.5% 22.5%
Average assets ($ billions) $ 54 $ 52 $ 49 $ 53 $ 49
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer to footnote (2) further below. (2) Refer to footnote (1)
in the Total table further below. International Banking's net
income available to common shareholders in the second quarter of
2006 was a record $268 million, a substantial increase of $82
million or 44% from last year. Excluding the impact of foreign
currency translation, underlying net income rose $96 million or
52%. Compared with last quarter, net income increased $35 million
or 15%, and now represents 30% of the Bank's consolidated net
income. This quarter's results were bolstered by low credit losses,
the inclusion of approximately one month of income from the
acquisitions in Peru, combined with strong year-over-year growth in
Mexico and a continued solid performance in the Caribbean and
Central America. Return on equity was 26%. Average asset volumes
increased $5 billion or 8% from last year, or $7 billion (14%)
excluding the negative impact of foreign currency translation. Of
this, $2 billion was due to the acquisitions in Peru and $1 billion
was due to the 2005 acquisition of Banco de Comercio in El
Salvador. In addition, underlying retail loans grew 22%, driven by
38% growth in credit cards and a 23% increase in mortgages. Total
revenues were $762 million in the second quarter, an increase of
$99 million or 15% from last year and $18 million or 2% from last
quarter. Adjusting for foreign currency translation, the
year-over-year growth was $144 million or 22%. Major contributors
to this growth were Peru, Scotiabank Mexico and the Caribbean and
Central America, partly due to the acquisition of Banco de
Comercio. Net interest income was $542 million this quarter, up $53
million or 11% from the same period last year. The negative impact
of foreign currency translation was offset by the inclusion of the
acquisitions in El Salvador and Peru. The underlying growth was
mainly due to higher retail loans in the Caribbean and Central
America and Scotiabank Mexico. Compared to last quarter, net
interest income increased $13 million or 2%. The provision for
credit losses was $1 million in the second quarter, $25 million
lower than last year, and $26 million lower than last quarter. This
quarter's provisions were favourably affected by retail and
commercial provision reversals in the Caribbean and Central
America, combined with low provisions in the other regions. The
quarter-over-quarter reduction was also due to a large provision in
Asia last quarter. Other income was $220 million this quarter, up
$46 million or 27% year over year and $5 million or 3% above last
quarter. Approximately half of the year-over-year increase was due
to the acquisitions in El Salvador and Peru. The remainder was from
Scotiabank Mexico, as a result of strong increases in credit card
and other retail revenues, combined with smaller increases in
Jamaica and Chile. Non-interest expenses were $443 million this
quarter, up $52 million or 13% from last year, but $9 million or 2%
lower than last quarter. The year-over-year increases were mainly a
result of the acquisitions in El Salvador and Peru, combined with
increased compensation-related expenses in Mexico, Jamaica and
Puerto Rico, partly offset by foreign currency translation. The
quarter-over-quarter decrease was primarily due to lower litigation
and benefit expenses this quarter, partly offset by additional
expenses from the inclusion of Peru and higher performance-based
compensation in Scotiabank Mexico, reflecting the finalization of
year-end payouts in the first quarter of 2006. The effective tax
rate was 8% in the second quarter, compared to 17% a year ago and
4% last quarter. The decline from a year ago resulted mainly from
higher tax savings in Scotiabank Mexico, partly from greater
utilization of tax loss carry forwards due to higher earnings and
the tax cost last year to adjust the value of future tax assets as
a result of a reduction in Mexican tax rates. Scotia Capital For
the three For the six months ended months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) (Taxable equivalent April 30 January 31
April 30 April 30 April 30 basis)(1) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Business line income Net interest income $ 229 $ 209 $ 230 $ 438 $
446 Provision for credit losses (54) (16) (57) (70) (66) Other
income 351 411 329 762 666 Non-interest expenses 253 254 256 507
517 Provision for income taxes 104 122 120 226 173
-------------------------------------------------------------------------
Net income $ 277 $ 260 $ 240 $ 537 $ 488 Preferred dividends paid 1
2 1 3 2
-------------------------------------------------------------------------
Net income available to common shareholders $ 276 $ 258 $ 239 $ 534
$ 486
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(2) 35.4% 32.3% 31.1% 33.8% 30.8%
Average assets ($ billions) $ 128 $ 115 $ 113 $ 121 $ 110
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer to footnote (2) further below. (2) Refer to footnote (1)
in the Total table further below. Scotia Capital reported record
net income available to common shareholders of $276 million, $37
million or 16% ahead of last year and an $18 million or 7% increase
from last quarter. This represents a contribution of 31% to the
Bank's overall results this quarter. Return on equity was 35%,
higher than the strong results achieved throughout 2005 and ahead
of the record achieved last quarter. Compared to last year total
average assets increased 14% to $128 billion. There was an increase
of $9 billion in securities in our trading businesses to support
both client driven activity and trading opportunities. The increase
also reflects the $6 billion impact of purchases of U.S. retail
automotive receivables. In addition, there was a 3% increase in
corporate loans and acceptances. Canada experienced growth in
corporate loans and acceptances of $2 billion (20%) over the second
quarter last year. This was partially offset by reductions in loans
in the U.S. and Europe. Compared to the prior quarter the increase
in total assets was due to the purchase of U.S. retail automotive
receivables and growth in lending assets in both Canada and the
U.S. Securities in our trading businesses also grew $5 billion over
last quarter. Total revenues of $580 million were 4% higher than
last year, due primarily to growth in Global Capital Markets
businesses. The precious metals operations had a record quarter,
and the derivatives business reported their second-best quarter,
due to favourable market conditions. Revenues also increased from
the addition of Scotia Waterous in the second half of last year.
Global Corporate and Investment Banking revenues were down 6%, due
mainly to a gain last year on the sale of a restructured loan
asset. The decline in revenues compared to last quarter reflected
lower trading revenues from the record levels reported last
quarter, partially offset by growth in lending and investment
banking revenues. Net interest income at $229 million was
comparable to last year but up 10% from last quarter. Year over
year, increased interest recoveries from impaired loans and higher
interest from trading operations were offset by the unfavourable
impact of reduced loan volumes and narrower credit spreads. The
quarter-over-quarter increase reflected higher loan volumes and
higher interest recoveries from impaired loans, somewhat offset by
narrower credit spreads. This quarter, Scotia Capital continued to
benefit from the stable credit environment. There were no new
provisions this quarter and recoveries were $54 million, compared
to net recoveries of $57 million last year and $16 million last
quarter. Net recoveries were realized in the U.S. and Europe this
quarter and primarily in the U.S. last year. The improved
recoveries and a continued decline in impaired loans arose from the
overall strength of the credit environment and the effective
execution of the Bank's loan workout strategies. Other income at
$351 million was 7% higher than last year. Global Capital Markets
operations were up 20% from last year, which reflected increases in
almost all businesses and included record revenues from precious
metals operations due to favourable market conditions. Other income
from Global Corporate and Investment Banking decreased 9%, as the
prior year included a gain from the sale of a restructured loan
asset. Other income declined 15% from last quarter, due primarily
to lower equity trading revenues from a very strong first quarter,
partly offset by higher fees generated from loan syndications in
the U.S. Non-interest expenses were $253 million, a 1% decrease
from last year, due to lower performance-related compensation,
mainly from adjustments to the quarterly estimate, and reduced
support costs. This was partially offset by the inclusion of Scotia
Waterous, which was acquired in the latter part of last year.
Compared to last quarter, expenses were down slightly, as lower
salaries and performance-related compensation were offset by higher
professional fees and technology costs. Other(1) For the three For
the six months ended months ended
-------------------------------------------------------------------------
(Unaudited) ($ millions) (Taxable equivalent April 30 January 31
April 30 April 30 April 30 basis)(2) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Business line income Net interest income(3) $ (124) $ (138) $ (113)
$ (262) $ (254) Other income 130 127 188 257 335 Non-interest
expenses 24 23 26 47 50 Provision for income taxes(3) (67) (60)
(70) (127) (91)
-------------------------------------------------------------------------
Net income $ 49 $ 26 $ 119 $ 75 $ 122 Preferred dividends paid 2 2
1 4 2
-------------------------------------------------------------------------
Net income available to common shareholders $ 47 $ 24 $ 118 $ 71 $
120
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Average assets ($ billions) $ 29 $ 25 $ 24 $ 27 $ 23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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) The Bank, like some other banks, analyzes
revenues, net interest margin on total average assets and the
productivity ratio on a taxable equivalent basis (TEB). This
methodology grosses up tax-exempt income earned on certain
securities to an equivalent before-tax basis. In the presentation
of business line results, the corresponding offset is made in the
provision for income taxes. 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. This use of TEB results in
measures that are different from comparable GAAP measures and may
not be the same as measures presented by other companies. (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 April 30, 2006 ($113), January 31, 2006 ($96), and
April 30, 2005 ($94), and for the six months ended April 30, 2006
($209), and April 30, 2005 ($170), to arrive at the amounts
reported in the Consolidated Statement of Income. Net income
available to common shareholders was $47 million in the second
quarter, down $71 million from the same period last year, but $23
million above the first quarter. The year-over-year decrease was
mainly because last year included higher securities gains mainly
from the sale of a larger portion of the Bank's investment in
Shinsei Bank. The quarter-over-quarter increase was driven by
higher total revenues. Total revenues for the second quarter were
$6 million, down $69 million from the same period last year. This
was entirely due to the decrease in securities gains related to
Shinsei. Total revenues increased $17 million from the previous
quarter as larger securities gains were partly offset by reduced
securitization revenues. Net interest income and the provision for
income taxes included the elimination of tax exempt income gross-up
included in the operating divisions' results, which are reported on
a taxable equivalent basis. The elimination was somewhat higher
this quarter compared to the same quarter last year and the
previous quarter, due to higher tax-exempt dividend income.
Non-interest expenses were in line with both the same quarter last
year and the first quarter. Total For the three For the six months
ended months ended
-------------------------------------------------------------------------
(Unaudited) April 30 January 31 April 30 April 30 April 30 ($
millions) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Business line income Net interest income $ 1,531 $ 1,509 $ 1,458 $
3,040 $ 2,885 Provision for credit losses 35 75 35 110 109 Other
income 1,186 1,225 1,136 2,411 2,247 Non-interest expenses 1,565
1,562 1,490 3,127 2,947 Provision for income taxes 200 225 226 425
428 Non-controlling interest in net income of subsidiaries 23 20 17
43 34
-------------------------------------------------------------------------
Net income $ 894 $ 852 $ 826 $ 1,746 $ 1,614 Preferred dividends
paid 7 8 4 15 8
-------------------------------------------------------------------------
Net income available to common shareholders $ 887 $ 844 $ 822 $
1,731 $ 1,606
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other measures Return on equity(1) 23.2% 21.6% 22.3% 22.3% 21.6%
Average assets ($ billions) $ 343 $ 322 $ 307 $ 332 $ 303
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For management and internal reporting purposes, the Bank
allocates equity to its business lines using a methodology that
considers credit, market and operational risk inherent in each
business line. Return on equity is calculated based on the economic
equity allocated to the business line. Economic equity is not a
defined term under GAAP and, accordingly, the resulting return on
equity for each business line may not be comparable to those used
by other financial institutions. Quarterly Financial Highlights For
the three months ended
-------------------------------------------------------------------------
April Jan. Oct. July April Jan. Oct. July 30 31 31 31 30 31 31 31
2006 2006 2005 2005 2005 2005 2004 2004
-------------------------------------------------------------------------
Total revenue ($ millions) $2,717 $2,734 $2,660 $2,608 $2,594
$2,538 $2,384 $2,464 Total revenue (TEB(1)) ($ millions) 2,830
2,830 2,735 2,689 2,688 2,614 2,457 2,532 Net income ($ millions)
894 852 811 784 826 788 705 731 Basic earnings per share ($) 0.90
0.85 0.81 0.78 0.82 0.78 0.70 0.72 Diluted earnings per share ($)
0.89 0.84 0.80 0.77 0.81 0.77 0.69 0.71
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The adjustment that changes GAAP measures to taxable equivalent
basis (TEB) measures is discussed in footnotes (2) and (3) above.
Share Data As at
-------------------------------------------------------------------------
April 30 (thousands of shares outstanding) 2006
-------------------------------------------------------------------------
Common shares 987,742(1)
-------------------------------------------------------------------------
Preferred shares Series 12 12,000(2) Preferred shares Series 13
12,000(3)
-------------------------------------------------------------------------
Class A preferred shares issued by Scotia Mortgage Investment
Corporation 250(4)
-------------------------------------------------------------------------
Series 2000-1 trust securities issued by BNS Capital Trust 500(4)
Series 2002-1 trust securities issued by Scotiabank Capital Trust
750(5) Series 2003-1 trust securities issued by Scotiabank Capital
Trust 750(5)
-------------------------------------------------------------------------
Outstanding options granted under the Stock Option Plans to
purchase common shares 36,085(1)(6)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) As at May 19, 2006, the number of outstanding common shares and
options were 987,832 and 35,968, 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 $0.30 per share. (4) Reported in capital
instrument liabilities in the Consolidated Balance Sheet. (5)
Reported in deposits in the Consolidated Balance Sheet. (6)
Included are 16,436 stock options with tandem stock appreciation
right (SAR) features. Further details, including convertibility
features, are available in Notes 13, 14 and 15 of the October 31,
2005, consolidated financial statements presented in the 2005
Annual Report, and Note 3 further below. Accounting Policies and
Estimates The interim consolidated financial statements have been
prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP). The significant accounting policies used in the
preparation of these interim consolidated financial statements are
consistent with those used in the Bank's 2005 audited annual
consolidated financial statements (refer to Note 1 to the year-end
statements). Details of significant future changes in accounting
standards affecting the Bank are presented in Note 1 of the interim
consolidated financial statements. The key assumptions and bases
for estimates that management has made under GAAP, and their impact
on the amounts reported in the interim consolidated financial
statements and notes, remain substantially unchanged from those
described in our 2005 Annual Report. INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
-------------------------------------------------------------------------
Consolidated Statement of Income For the For the three months ended
six months ended
-------------------------------------------------------------------------
April 30 January 31 April 30 April 30 April 30 (Unaudited)($
millions) 2006 2006 2005 2006 2005
-------------------------------------------------------------------------
Interest income Loans $ 2,902 $ 2,813 $ 2,417 $ 5,715 $ 4,816
Securities 998 897 797 1,895 1,496 Deposits with banks 210 184 151
394 287
-------------------------------------------------------------------------
4,110 3,894 3,365 8,004 6,599
-------------------------------------------------------------------------
Interest expense Deposits 1,942 1,790 1,384 3,732 2,714
Subordinated debentures 31 35 33 66 66 Capital instrument
liabilities 13 13 14 26 27 Other 593 547 476 1,140 907
-------------------------------------------------------------------------
2,579 2,385 1,907 4,964 3,714
-------------------------------------------------------------------------
Net interest income 1,531 1,509 1,458 3,040 2,885 Provision for
credit losses (Note 5) 35 75 35 110 109
-------------------------------------------------------------------------
Net interest income after provision for credit losses 1,496 1,434
1,423 2,930 2,776
-------------------------------------------------------------------------
Other income Card revenues 71 75 56 146 118 Deposit and payment
services 183 189 168 372 336 Mutual funds 60 58 47 118 91
Investment management, brokerage and trust services 175 161 156 336
298 Credit fees 132 131 135 263 271 Trading revenues 157 243 125
400 335 Investment banking 162 155 167 317 347 Net gain on
investment securities 108 94 134 202 196 Securitization revenues 8
13 20 21 39 Other 130 106 128 236 216
-------------------------------------------------------------------------
1,186 1,225 1,136 2,411 2,247
-------------------------------------------------------------------------
Net interest and other income 2,682 2,659 2,559 5,341 5,023
-------------------------------------------------------------------------
Non-interest expenses Salaries and employee benefits 928 934 883
1,862 1,753 Premises and technology 298 281 285 579 558
Communications 67 64 63 131 123 Advertising and business
development 53 47 50 100 93 Professional 38 32 45 70 87 Business
and capital taxes 23 37 42 60 79 Other 158 167 122 325 254
-------------------------------------------------------------------------
1,565 1,562 1,490 3,127 2,947
-------------------------------------------------------------------------
Income before the undernoted 1,117 1,097 1,069 2,214 2,076
Provision for income taxes 200 225 226 425 428 Non-controlling
interest in net income of subsidiaries 23 20 17 43 34
-------------------------------------------------------------------------
Net income $ 894 $ 852 $ 826 $ 1,746 $ 1,614
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Preferred dividends paid 7 8 4 15 8
-------------------------------------------------------------------------
Net income available to common shareholders $ 887 $ 844 $ 822 $
1,731 $ 1,606
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common shares outstanding (millions): Basic 988
989 996 989 1,001 Diluted 1,001 1,002 1,011 1,002 1,016
-------------------------------------------------------------------------
Earnings per common share(1)(in dollars): Basic $ 0.90 $ 0.85 $
0.82 $ 1.75 $ 1.60 Diluted $ 0.89 $ 0.84 $ 0.81 $ 1.73 $ 1.58
-------------------------------------------------------------------------
Dividends per common share (in dollars) $ 0.36 $ 0.36 $ 0.32 $ 0.72
$ 0.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The calculation of earnings per share is based on full dollar
and share amounts. The accompanying notes are an integral part of
these interim consolidated financial statements. Consolidated
Balance Sheet As at
-------------------------------------------------------------------------
April 30 January 31 October 31 April 30 (Unaudited)($ millions)
2006 2006 2005 2005
-------------------------------------------------------------------------
Assets Cash resources Cash and non-interest- bearing deposits with
banks $ 2,055 $ 2,244 $ 2,501 $ 2,137 Interest-bearing deposits
with banks 19,592 18,125 15,182 15,954 Precious metals 4,020 3,571
2,822 2,403
-------------------------------------------------------------------------
25,667 23,940 20,505 20,494
-------------------------------------------------------------------------
Securities Investment 29,758 26,140 23,452 22,781 Trading 58,417
51,873 50,007 50,164
-------------------------------------------------------------------------
88,175 78,013 73,459 72,945
-------------------------------------------------------------------------
Loans Residential mortgages 81,575 77,042 75,520 70,848 Personal
and credit cards 36,857 35,331 34,695 34,403 Business and
government 67,407 62,608 62,681 62,174 Securities purchased under
resale agreements 22,208 20,058 20,578 20,748
-------------------------------------------------------------------------
208,047 195,039 193,474 188,173 Allowance for credit losses (Note
5) 2,706 2,434 2,469 2,591
-------------------------------------------------------------------------
205,341 192,605 191,005 185,582
-------------------------------------------------------------------------
Other Customers' liability under acceptances 9,104 8,147 7,576
7,194 Trading derivatives' market valuation 16,685 12,926 11,622
12,884 Land, buildings and equipment 2,178 1,926 1,934 1,904
Goodwill 639 497 498 292 Other intangible assets 269 226 235 226
Other assets 8,921 6,671 7,191 7,569
-------------------------------------------------------------------------
37,796 30,393 29,056 30,069
-------------------------------------------------------------------------
$ 356,979 $ 324,951 $ 314,025 $ 309,090
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity Deposits Personal $ 90,718 $
86,289 $ 83,953 $ 82,527 Business and government 124,363 113,652
109,389 107,071 Banks 32,567 27,606 24,103 25,184
-------------------------------------------------------------------------
247,648 227,547 217,445 214,782
-------------------------------------------------------------------------
Other Acceptances 9,104 8,147 7,576 7,194 Obligations related to
securities sold under repurchase agreements 29,960 24,902 26,032
25,164 Obligations related to securities sold short 10,961 10,513
11,250 8,542 Trading derivatives' market valuation 15,746 13,639
11,193 11,445 Other liabilities 23,741 20,369 20,794 22,346
Non-controlling interest in subsidiaries 387 310 306 290
-------------------------------------------------------------------------
89,899 77,880 77,151 74,981
-------------------------------------------------------------------------
Subordinated debentures 2,268 2,578 2,597 2,633
-------------------------------------------------------------------------
Capital instrument liabilities 750 750 750 750
-------------------------------------------------------------------------
Shareholders' equity Capital stock Preferred shares 600 600 600 600
Common shares and contributed surplus 3,363 3,339 3,317 3,242
Retained earnings 14,909 14,458 14,126 13,517 Cumulative foreign
currency translation gains/(losses) (2,458) (2,201) (1,961) (1,415)
-------------------------------------------------------------------------
16,414 16,196 16,082 15,944
-------------------------------------------------------------------------
$ 356,979 $ 324,951 $ 314,025 $ 309,090
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of these interim
consolidated financial statements. Consolidated Statement of
Changes in Shareholders' Equity For the six months ended
-------------------------------------------------------------------------
April 30 April 30 (Unaudited)($ millions) 2006 2005
-------------------------------------------------------------------------
Preferred shares Balance at beginning of period $ 600 $ 300 Issued
- 300
-------------------------------------------------------------------------
Balance at end of period 600 600
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common shares and contributed surplus Common shares: Balance at
beginning of period 3,316 3,228 Issued 65 73 Purchased for
cancellation (19) (60)
-------------------------------------------------------------------------
Balance at end of period 3,362 3,241 Contributed surplus: Fair
value of stock options 1 1
-------------------------------------------------------------------------
Total 3,363 3,242
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings Balance at beginning of period 14,126 13,239 Net
income 1,746 1,614 Dividends: Preferred (15) (8) Common (712) (640)
Purchase of shares (236) (681) Other - (7)
-------------------------------------------------------------------------
Balance at end of period 14,909 13,517
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cumulative foreign currency translation gains/(losses) Balance at
beginning of period (1,961) (1,783) Net unrealized foreign exchange
translation(1) (497) 368
-------------------------------------------------------------------------
Balance at end of period (2,458) (1,415)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total shareholders' equity at end of period $ 16,414 $ 15,944
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Comprises unrealized foreign exchange translation
gains/(losses) on net investments in self-sustaining foreign
operations of $(775) (April 30, 2005 - $624) and gains/(losses)
from related foreign exchange hedging activities of $278 (April 30,
2005 - $(256)). The accompanying notes are an integral part of
these interim consolidated financial statements. Condensed
Consolidated Statement of Cash Flows For the For the three months
ended six months ended
-------------------------------------------------------------------------
Sources and (uses) of cash flows April 30 April 30 April 30 April
30 (Unaudited)($ millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Cash flows from operating activities Net income $ 894 $ 826 $ 1,746
$ 1,614 Adjustments to net income to determine cash flows (38) 52
(81) 62 Net accrued interest receivable and payable 37 3 (60) 21
Trading securities (7,165) (3,156) (9,331) (6,314) Trading
derivatives' market valuation, net (1,606) (899) (493) (1,239)
Other, net (314) (361) (1,556) 667
-------------------------------------------------------------------------
(8,192) (3,535) (9,775) (5,189)
-------------------------------------------------------------------------
Cash flows from financing activities Deposits 17,204 6,719 30,096
14,839 Obligations related to securities sold under repurchase
agreements 5,825 (15) 5,001 4,902 Obligations related to securities
sold short 444 1,078 (230) 927 Subordinated debentures
redemptions/repayments (300) - (300) - Capital stock issued 28 326
56 366 Capital stock redeemed/ purchased for cancellation (87)
(236) (255) (741) Cash dividends paid (363) (322) (727) (648)
Other, net 453 122 896 327
-------------------------------------------------------------------------
23,204 7,672 34,537 19,972
-------------------------------------------------------------------------
Cash flows from investing activities Interest-bearing deposits with
banks (700) 34 (4,082) (2,426) Loans, excluding securitizations
(9,806) (4,624) (13,863) (12,192) Loan securitizations 698 638
1,132 1,227 Investment securities, net (3,552) 3 (6,466) (1,141)
Land, buildings and equipment, net of disposals (54) (4) (102) (62)
Other, net(1) (1,759) (24) (1,759) (24)
-------------------------------------------------------------------------
(15,173) (3,977) (25,140) (14,618)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (28)
16 (68) 51
-------------------------------------------------------------------------
Net change in cash and cash equivalents (189) 176 (446) 216 Cash
and cash equivalents at beginning of period 2,244 1,961 2,501 1,921
-------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,055 $ 2,137 $ 2,055
$ 2,137
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash disbursements made for: Interest $ 2,422 $ 1,927 $ 4,749 $
3,719 Income taxes $ 293 $ 226 $ 567 $ 465
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the three and six months ended April 30, 2006, comprises
investments in subsidiaries and the purchase of assets related to
these investments, net of cash and cash equivalents at the date of
acquisition of $137 (April 30, 2005 - nil). 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, 2005. 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. Certain comparative amounts have
been reclassified to conform with the current period's
presentation. 1. Future accounting changes: The following
summarizes future accounting policy changes that will be relevant
to the Bank's consolidated financial statements. Financial
instruments The Canadian Institute of Chartered Accountants has
issued three new standards: Financial Instruments - Recognition and
Measurement, Hedges and Comprehensive Income. These will be
effective for the Bank on November 1, 2006, and require the
following: Financial Instruments - Recognition and Measurement All
financial assets and liabilities will be carried at fair value in
the Consolidated Balance Sheet, except the following, which will be
carried at amortized cost unless designated as held for trading
upon initial recognition: loans and receivables, certain securities
and non-trading financial liabilities. 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. Unrealized gains and losses on financial
assets that are held as available for sale will be recorded in
other comprehensive income until realized, when they will be
recorded in the Consolidated Statement of Income. All derivatives,
including embedded derivatives that must be separately accounted
for, will be recorded at fair value in the Consolidated Balance
Sheet. Hedges In a fair value hedge, the change in fair value of
the hedging derivative will be offset in the Consolidated Statement
of Income against the change in the fair value of the hedged item
relating to the hedged risk. In a cash flow hedge, the change in
fair value of the derivative to the extent effective will be
recorded in other comprehensive income until the asset or liability
being hedged affects the Consolidated Statement of Income, at which
time the related change in fair value of the derivative will also
be recorded in the Consolidated Statement of Income. Any hedge
ineffectiveness will be recorded in the Consolidated Statement of
Income. Comprehensive Income Unrealized gains and losses on
financial assets that will be held as available for sale,
unrealized foreign currency translation amounts arising from
self-sustaining foreign operations, and changes in the fair value
of cash flow hedging instruments, will be recorded in a Statement
of Other Comprehensive Income until recognized in the Consolidated
Statement of Income. Other comprehensive income will form part of
shareholders' equity. The transitional impact of these new
standards is not yet determinable as it is dependent on the Bank's
outstanding positions, hedging strategies and market volatility at
the time of transition. 2. 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 line income tables
above. 3. Significant capital transactions In the first quarter of
2006, the Bank initiated a new normal course issuer bid to purchase
up to 50 million of the Bank's common shares. This represents
approximately 5 per cent of the Bank's outstanding common shares.
The bid will terminate on the earlier of January 5, 2007, or the
date the Bank completes its purchases. During the second quarter,
the Bank purchased 1.9 million common shares at an average cost of
$45.66. For the six months ended April 30, 2006, 5.6 million common
shares were purchased at an average price of $45.80. On February 8,
2006, the Bank redeemed all of its $300 million 7.4% subordinated
debentures that were due to mature in 2011. 4. Sales of loans
through securitizations The Bank securitizes residential mortgages
through the creation of mortgage-backed securities. The net gain on
the sale of the mortgages resulting from these securitizations is
recognized in securitization revenues in the Consolidated Statement
of Income. No credit losses are expected, as the mortgages are
insured. The following table summarizes the Bank's sales. For the
For the three months ended six months ended
---------------------------------------------------------------------
April 30 January 31 April 30 April 30 April 30 ($ millions) 2006
2006 2005 2006 2005
---------------------------------------------------------------------
Net cash proceeds(1) $ 698 $ 434 $ 638 $ 1,132 $ 1,227 Retained
interest 22 11 21 33 35 Retained servicing liability (6) (2) (4)
(8) (8)
---------------------------------------------------------------------
714 443 655 1,157 1,254 Residential mortgages securitized 712 437
644 1,149 1,232
---------------------------------------------------------------------
Net gain on sale $ 2 $ 6 $ 11 $ 8 $ 22
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Excludes insured mortgages which were securitized and retained
by the Bank of $246 for the three months ended April 30, 2006
(January 31, 2006 - $268; April 30, 2005 - $179), and $514 for the
six months ended April 30, 2006 (April 30, 2005 - $704). These
assets are classified as investment securities and have an
outstanding balance of $1,628 as at April 30, 2006. 5. Allowance
for credit losses The following table summarizes the change in the
allowance for credit losses. For the For the three months ended six
months ended
---------------------------------------------------------------------
April 30 January 31 April 30 April 30 April 30 ($ millions) 2006
2006 2005 2006 2005
---------------------------------------------------------------------
Balance at beginning of period $ 2,445 $ 2,475 $ 2,650 $ 2,475 $
2,704 Write-offs (120) (131) (153) (251) (302) Recoveries 56 39 48
95 84 Provision for credit losses 35 75 35 110 109 Other, including
foreign exchange adjustment(1) 301 (13) 19 288 4
---------------------------------------------------------------------
Balance at the end of period(2)(3) $ 2,717 $ 2,445 $ 2,599 $ 2,717
$ 2,599
---------------------------------------------------------------------
(1) As at April 30, 2006, includes $342 relating to acquisitions of
new subsidiaries (January 31, 2006 - $7; April 30, 2005 - nil),
which may change as the valuation of the acquired loan assets is
finalized. (2) As at April 30, 2006, $11 (January 31, 2006 - $11;
April 30, 2005 - $8) has been recorded in other liabilities. (3) As
at April 30, 2006, the general allowance for credit losses was
$1,330 (January 31, 2006 - $1,330; April 30, 2005 - $1,375). 6.
Employee future benefits Employee future benefits include pensions
and other post-retirement benefits, post-employment benefits and
compensated absences. The following table summarizes the expenses
for the Bank's principal plans(1). For the For the three months
ended six months ended
---------------------------------------------------------------------
April 30 January 31 April 30 April 30 April 30 ($ millions) 2006
2006 2005 2006 2005
---------------------------------------------------------------------
Benefit expenses Pension plans $ 22 $ 24 $ 24 $ 46 $ 45 Other
benefit plans 32 31 25 63 52
---------------------------------------------------------------------
$ 54 $ 55 $ 49 $ 109 $ 97
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Other plans operated by certain subsidiaries of the Bank are
not considered material and are not included in this note. 7.
Acquisitions During the second quarter, the Bank completed the
acquisitions of (i) the Canadian operations of the National Bank of
Greece on February 3, 2006, (ii) Maple Trust Company on March 31,
2006, and (iii) two Peruvian banks, Banco Wiese Sudameris and Banco
Sudamericano on March 9, 2006, with the intention to merge the
banks and own approximately 78% of the combined entity. Prior to
the latter transaction the Bank owned 35% of Banco Sudamericano.
The combined investment in these companies was approximately $700
million, which includes amounts invested directly in the acquired
businesses. In addition to the purchase of Maple Trust Company, as
part of the acquisition of the Canadian mortgage operations of
Maple Financial Group Inc., the Bank purchased mortgages from the
Group. The consolidation of these investments did not have a
material effect on the consolidated financial results for this
quarter. For the two Canadian acquisitions, the estimated total
goodwill of $148 million and other intangibles of $52 million have
been recorded in the Consolidated Balance Sheet as at April 30,
2006. These amounts may be refined as the Bank completes its
valuation of the assets acquired and liabilities assumed. The Bank
has not completed its assessment and valuation of the assets
acquired and liabilities assumed for the Peruvian banks. As a
result, the amount of the purchase price in excess of the carrying
value of the assets and liabilities has not been fully allocated to
the acquired assets and liabilities in the Consolidated Balance
Sheet. The resultant goodwill and other intangible assets are not
expected to be material to the Bank's consolidated financial
statements. SHAREHOLDER & INVESTOR 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 2006
Record and payment dates for common and preferred shares, subject
to approval by the Board of Directors. Record Date Payment Date
January 3 January 27 April 4 April 26 July 4 July 27 October 3
October 27 Valuation Day Price For Canadian income tax purpose, The
Bank of Nova Scotia's common stock was quoted at $31.13 per share
on Valuation Day, December 22, 1971. This is equivalent to $2.594
after adjusting for the two-for-one stock split in 1976, the
three-for-one stock split in 1984, the two-for-one stock split in
1998. The stock dividend in 2004 did not affect the Valuation Day
amount. The stock received as part of the 2004 stock dividend is
not included in the pre-1971 pool. 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: http://www.scotiabank.com/. Conference call and Web
broadcast The quarterly results conference call will take place on
May 29, 2006, at 3:45 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, toll-free, at
1-800-814-3911 (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
http://www.scotiabank.com/. Following discussion of the results by
Scotiabank executives, there will be a question and answer session.
Listeners are also invited to submit questions by e-mail to . A
telephone replay of the conference call will be available from May
29, 2006, to June 12, 2006, by calling (416) 640-1917 and entering
the identification code 21186784 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: 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: 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: Co-Transfer Agent (U.S.A.)
Computershare Trust Company, Inc. 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: Rapport trimestriel disponible en francais Le Rapport
annuel et les etats financiers de la Banque sont publies en
francais et en anglais et distribues aux actionnaires dans la
version de leur choix. Si vous preferez que la documentation vous
concernant vous soit adressee en francais, veuillez en informer
Relations publiques, Affaires de la societe et Affaires
gouvernementales, La Banque de Nouvelle-Ecosse, Scotia Plaza, 44,
rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si
possible, l'etiquette d'adresse, afin que nous puissions prendre
note du changement. The Bank of Nova Scotia is incorporated in
Canada with limited liability. DATASOURCE: Scotiabank CONTACT: Luc
Vanneste, Executive Vice-President & Chief Financial Officer,
(416) 933-3250; Kevin Harraher, Vice-President, Investor Relations,
(416) 866-5982; Frank Switzer, Public Affairs, (416) 866-7238
Copyright