Richard E. Waugh Speech - April 3, 2012

Address by Richard E. Waugh
President and Chief Executive Officer

To the 180th Annual General Meeting of Shareholders

Saskatoon, Saskatchewan

April 3, 2012

“Our diversity – by business, geography and people – is what sets us apart. It’s the essence of our strategy, it forms the foundation of our business model, and it’s the defining characteristic of our team.”


Thank you. As John mentioned, this is the first time Scotiabank has held our annual meeting in Saskatoon and we’re very pleased to be here.

We’re especially pleased that we waited until one of the mildest winters in decades to come to the prairies.

Actually, as a native Winnipegger, I’m no stranger to prairie winters … they’re part of who we are, and they make us tough … but that doesn’t mean we don’t appreciate spring each year! We know that with Prairie winds: “Sometimes you have to walk backwards to move forwards.”

So, this spring, I’m very happy to be here in Saskatchewan, particularly at such an exciting time of growth and development for this province.

Once again as we gather for our annual meeting, similar to the last three or four years, global economic and market conditions continue to present challenges.

But as we’ve seen over the past few years, and through other crises, there are always opportunities to be found, even in difficult markets. Scotiabank’s record over the long term demonstrates that.

The key to making the most of opportunities in tough conditions is to build on your strengths.

I’m going to speak today about how Scotiabank is putting one of our most important strengths – our diversity – to work so that we continue to grow and succeed by focusing on our customers through this period and beyond.

Current environment

The environment we’re facing right now began almost five years ago in the summer of 2007 that turned to a financial crisis, followed by a global recession, and a prolonged recovery.

Now we’re facing serious sovereign debt problems in the Euro Zone and the United States, and weakened banking sectors in both markets.

The global economic recovery continues to be slow, and below normal. The developed world is seeing weak growth, and emerging markets are playing a greater role in the global economy than ever before.

It’s important to note that Canada remains in a stronger position than most others. The current concerns about Canada’s housing market are reason for caution but not pessimism. We can and will manage through any potential problems.

I agree with our government. It’s up to the banks themselves – not government or regulators – to manage our risks and advise our customers appropriately.

Likewise, it’s the responsibility of government to set fiscal and monetary policies, and the level of interest rates, according to prevailing conditions. Each has an important role to play.

We keep a very close eye on our mortgage portfolios, and in Scotiabank they are in good shape, as are our customers. In fact, Canadian household balance sheets remain solid, and our housing market is supported by strong fundamentals. Supply is balanced and Canadian banks finance largely on pre-sales and cash equity, where loan-to-value ratios show our customers have true equity. Our customer delinquency rates are well within parameters.

For the global economy, however, we are looking at a prolonged period of slower economic growth, higher market volatility and continued uncertainty.

Contributing to this, and of particular importance to financial institutions in Canada and abroad, is a more prescribed and rapidly changing regulatory environment.

Canada continues to have sound supervision, but we must be careful that rules designed to fix problems in other jurisdictions and financial markets do not impair our own proven and successful financial sector.

Rigid regulations and prescribed rules like the Volcker Rule, Dodd-Frank and Basel – which are designed to limit systemic risk – have a reasonable probability of unintended consequences that could inhibit economic growth and job creation, and even work against the goal of greater financial sector stability.

It’s a challenge to achieve growth in this environment – for economies and for businesses – but certainly achievable by knowing your strengths and building on them. This is something that Scotiabank does well.

Another great example is Saskatchewan, a province that’s doing an excellent job of using its strengths to build for the long term.

Time of opportunity in Saskatchewan

This province has long been a land of great abundance. It has sustained generations of First Nations who have lived here for more than 8,000 years.

It was anointed “the breadbasket of the world” more than a century ago, and continues to be a global leader in agriculture production and technology – with its hub right here in Saskatoon.

And now more than ever, Saskatchewan’s natural resources are generating global attention and investment, including significant reserves of oil and natural gas, and of course the world’s richest sources of potash and uranium.

The world wants what Saskatchewan produces, which is a great position to be in.

And the province has used its wealth in natural resources to its advantage, diversifying and strengthening its economy, and dramatically cutting its debt - a fact that has been recognized with a AAA credit rating from S&P in 2011.

Saskatchewan has been very successful in attracting investment – and people – from across Canada and around the world.

The province is expecting a substantial level of capital investment in 2012 and for the last three years has had the lowest annual provincial unemployment rate

It’s an exciting time for Saskatchewan, and Scotiabank is committed to helping customers make the most of every opportunity, just as we did more than a century ago when we first arrived here.

In 1903, four of Scotiabank’s directors went on a western tour to better understand the banking needs of settlers who were streaming in on the newly completed railway, drawn by surging grain prices and the hope for a better life.

Scotiabank’s first branch in Saskatoon then opened in 1906, in the newly created province of Saskatchewan.

We had our growing pains. The Manager of the Saskatoon branch was forced to live in a tent because of inadequate housing and high rents. Fed up, he eventually wrote to his supervisors and asked for a raise. For the record, he got one… But he still had to live in a tent!

It hasn’t always been easy, but our push westward was an important step in the growth and diversification of our business. And today, Saskatchewan, and particularly Saskatoon, represent one of our strong regions in Canada, and globally, and proof of our diversity.

The growth of Scotiabank’s diverse business

The diversity of Scotiabank’s business is one of our greatest advantages.

We have many strengths – including risk management, expense control, governance, and others.

But our diversity – by business, geography and people – is what sets us apart. It’s the essence of our strategy, it forms the foundation of our business model, and it’s the defining characteristic of our team.

The story of how we became such a diverse bank says a lot about who we are. We have a great video to show you later in the meeting that tells some of our story.

It’s always been about partnering with customers to uncover opportunities, beginning with traders doing business between Britain, North America and the West Indies over 100 years ago.

Over the years, we have continued to diversify through customer growth and by making selective, highly disciplined acquisitions that align with our diversification strategy and ensure shareholder value.

Internationally, we’ve chosen to expand to markets where it makes the most sense, focusing on higher growth and higher potential regions where we already have a presence, where we can leverage our resources and expertise, and have a comparative advantage.

In our approach to new markets, we’ve made some mistakes but, by far, we’ve done it the right way. Again, by staying focused on customers: taking time to learn each market, understanding customers’ unique needs, investing in local people and communities, and making a long-term commitment.

We operate as a local bank in each market, and I’m very proud that our customers see us that way as well.

In 2011, we continued to diversify internationally. We entered a new high-growth market in Uruguay, and deepened our presence in Colombia, Brazil and China.

2011 marked the first full year, and a very successful one, for our Global Wealth Management business, part of the major reorganization we undertook at the end of 2010 to further diversify and take better advantage of our international footprint. We have very quickly moved up to a top-tier position in this business.

In Canada, we are now firmly established as Canada’s Hockey Bank. Last week we launched the ScotiaHockey NHL Visa card, building on the success of our other entertainment-based loyalty programs like the Scene card, which now has three and a half million total card holders, including more than a million Scotiabank customers.

And in Global Banking and Markets – formerly Scotia Capital – we continue to be globally focused in energy, mining and infrastructure. And in our fixed income business, we recently earned primary dealer status for the central banks of England, Germany, France and the U.S. Federal Reserve.

Today, we are one of the 20 largest banks in the world by market capitalization – and most importantly, we offer a full range of financial solutions to more than 19 million customers in over 55 countries.

Our global community of Scotiabankers is more than 77,000 strong. Nearly half of us are native speakers of Spanish – almost double the number of just five years ago – and we have more Scotiabankers outside of Canada than within.

Diversity = strength

Being a diverse business offers many benefits.

It has helped make us a safe and stable bank. This is a fundamental responsibility of any bank, and in 2012, Scotiabank was again recognized as among the 20 safest banks in the world – a bank you can trust.

It’s what our stakeholders expect, and it’s what they deserve:

Families and businesses deserve a safe bank that’s there to respond to their financial needs when markets are up and when they’re down – and to know that their savings are protected.

Employees deserve a company that provides great career opportunities and secure employment, where broad-based layoffs are not expected nor contemplated.

Local communities deserve a local partner that understands its unique needs and has its long-term interests at heart.

And shareholders deserve a steady investment that generates consistent, solid and growing returns – with a dividend that’s well protected, safe and growing.

At the heart of our stability is our traditional and straightforward business model, that’s about 75% personal and commercial banking, and 25% wholesale banking.

Let me be clear: our wholesale and trading businesses – which serve the very largest corporations and institutions – are very important. They are key elements of the full suite of financial services we provide to customers, but they don’t dominate our business model, as they do in many other banks, especially those around the world.

Most importantly, like everything else we do, our wholesale business is customer-centred. We build long term relationships with customers. We are not in it for the quick returns. And, as a strategy, we do little securitization compared to many of our peer group.

We have four strong, diversified business lines: Our Canadian and international personal and commercial businesses, our wholesale business and our Global Wealth Management business, again all serving individual customers.

We’ve seen over the past several quarters how challenges in one part can be offset by strength in other areas, which is especially important in times of greater volatility.

Together, these four strong pillars form a solid foundation, providing an excellent diversified balance to our earnings, and our risks.


We expect each business to contribute about 20% to 30% of our earnings over time, and we’re very close to that balance right now.

We also expect each to contribute to generating our very high return on equity, which we currently target at 15 to 18 percent for 2012 -- one of the highest in the world in the financial sector and one we have consistently produced.

Our earnings are roughly split half and half between Canada and international markets. Scotiabank’s strong presence in high-growth emerging economies helps balance slower GDP growth in Canada.

In fact, this year we expect average economic growth in our key international markets to be more than double what it is Canada.

We have the advantage of being able to look across our operations to see what works well, and apply it where we see an opportunity. And we have the ability to take up advantages of scale where appropriate across our four businesses.

I should be clear that we don’t take a one-size-fits-all approach. We use our specific expertise, including our local knowledge on the ground in each country we serve, to tailor solutions for each situation. We can do this because we have great local staff who rely on strong head office support.

This is one of the key benefits of having a global reach, but operating as a local bank in each market.

In a similar way, our diversity makes us a stronger team.

Particularly because of our large international footprint, we have a more diverse team than some of our competitors. That’s a very important competitive advantage for us.

There’s great value in the unique ideas that each employee brings to the workplace – whether it’s because of their different education, cultural background or life experience.

When everyone thinks the same way, they’ll approach challenges the same way. Having a team with many different perspectives helps us find creative and innovative solutions to meet the needs of our customers and stay ahead of our competition.

This belief is embedded and strongly encouraged in our leadership strategy, which is designed to make the most of our diverse team by giving them opportunities across the Bank – and to collaborate through cross-divisional teams and initiatives.

You will hear more about leadership at Scotiabank from Sylvia Chrominska later in the meeting.

There are Canadians working in many of our international markets, but there are also international employees working here in Canada and in many other places.

The head of our Commercial Banking business in Thailand began his career with Scotiabank in his native Trinidad and Tobago.

The head of our Mexican Contact Centre is a long-serving Scotiabanker from Argentina.

Employees from Prairie Region are working for Scotiabank in the British Virgin Islands, St. Lucia, Chile and Thailand.

Building for the future

In a global environment like the one we’re in, everyone must dig deeper for growth and use every advantage they have.

Scotiabank’s tremendous diversity is a clear advantage – and we’re taking some important steps to ensure we’re making the most of it.

Across our Bank, we are continuing to build our culture of collaboration across business lines and geographies, so that every part our diverse organization is pulling in the same direction to deliver on our core purpose, which is to help customers become financially better off.

Collaboration is a very simple concept, but with an organization the size and complexity of ours, it’s not a small job. We’ve had some great successes, and we’re continuing to push forward.

We’ve implemented Collaboration and Accountability Agreements to ensure we provide more seamless and complete solutions to customers in every market no matter what business lines are involved. 14 leadership teams, which cut across business lines and must meet regularly, are accountable for ensuring that collaboration is a top priority.

As part of a seamless customer experience, we’re moving toward a more unified brand that pulls all of our different parts closer together.

We’re leveraging the fact that Scotiabank’s reputation is one of our most important assets. And, in fact, in a recent ranking we were named one of the top 100 global brands, and among the top 20 financial services brands.

This recognition is based on our reputation of trust, safety and high profitability.

Our wholesale and trading business, which we used to call Scotia Capital, has been rebranded Scotiabank, Global Banking and Markets. This helps us leverage Scotiabank’s excellent reputation outside Canada that was reinforced by our strong performance during the crisis. This will become even more important as our wholesale business continues to become more international.

Overall, across the organization, to simplify and clarify who we are, we’re cutting the number of brands we use in half.

We’ve also streamlined the way customers view and access our products and services. Earlier this year, we launched a cleaner, simpler website that’s been given a number of positive reviews. And now, visitors from anywhere in the world come to a single, unified “front door” that shows them who we are and where we’re located, and gives them access to the services we provide in each location.

We’re also tapping into our diverse talent pool to find our future leaders and give them development opportunities. We’ve always had great depth on our team, and our employees tend to stay with us for a long time.

This is what allows us to forge deep, long-term relationships with customers. But it also makes it critical that we ensure our employees are getting the broad experience they need to progress to leadership roles.

Scotiabankers around the world have a very strong sense of extended family, and core values.

Although they may have very different roles and be in different locations, they are united by their commitment to something bigger than themselves. Because of that, they work extremely well together, and work hard to put customers and values ahead of everything else.

That’s a great advantage for us, and we’re making the most of it. We have a culture I’m very proud of, and it’s a significant reason for our success in providing sustainable profitability year in, year out.


In conclusion, while the world may be in a period of slower economic growth and greater uncertainty – and we have to take account of that – there are still excellent opportunities to be found.

Despite the challenges, on the global landscape, Canada stands out as a story of strength – Saskatchewan stands out within Canada as a growth leader – and Scotiabank, within our banking sector, as Canada’s most international bank, and a leader around the world.

Success in this environment will go to those who are building on their strengths.

Saskatchewan has done a great job of this. To ensure its continued prosperity will require making the most of its full spectrum of resources – human and capital.

And it will require continuing diversification of its economy so that it can prosper even if demand for what it produces is lower.

At Scotiabank, we look forward to growing with this province as it continues to prosper in the coming years. We are investing in this region, and we’re committed to our local communities here.

Scotiabank is strong, and we are very well positioned to succeed in this environment. We remain committed to our successful 5-point strategy, and to our well-defined values.

Our continued success means building on our broad-based businesses and our diverse team, and working together across our organization to provide seamless and complete solutions to customers.

Meeting the needs of our customers and remembering our core values have shaped our Bank’s history for 180 years. And even though a lot has changed in that time, these same things will determine our success in the future.

Thank you.