Presentation to the Scotiabank Annual General Meeting
Winnipeg, Manitoba

An address by Luc Vanneste
Executive Vice-President and Chief Financial Officer

Scotiabank

March 3, 2006

"Our record of consistent earnings growth has been more than matched by our record of consistent dividend growth. We had two increases in 2005. Dividends were up 20 per cent on the year. Furthermore they more than doubled in the past four years. All this without compromising our capital strength or our ability to reinvest in our businesses! Overall, an excellent track record on dividends."

"Our capital strength remains a big plus for us and gives us flexibility to consider a broad range of options for future growth, while continuing to increase returns to shareholders."

Check Against Delivery

Thank you very much, Mr. Chairman, and good morning, ladies and gentlemen.

Let me begin by saying how pleased I am to speak to you for the first time as your Chief Financial Officer.  I'd also like to reiterate the comments from Mr. (Art) Scace about how great it is to be in Winnipeg. My wife was born here and lived in the west end for over 20 years and we always enjoy coming back to see family and friends.

This morning, I'm going to discuss the highlights of your Bank's financial performance for 2005 and then briefly report on the first quarter of fiscal 2006.

I am very pleased to report record full-year results. For the year our earnings per share (EPS) were $3.15 versus $2.82 a year ago, an increase of 12 per cent and above our five-to-10 per cent target range.

Our return on equity (ROE) also rose to a strong 20.9 per cent, up from 19.9 per cent in 2004, beating our target range of 17-to-20 per cent. And our productivity ratio was 56.3 per cent for the year, better than our goal to remain below 58 per cent and still the best among the Canadian banks by a solid margin.

The next slide shows your Bank's record of consistent earnings growth over the past decade. Since 1995, earnings have grown at an annual rate of 15 per cent, an excellent record. Earnings growth in the past two years was achieved despite the significant negative impact of foreign currency translation, as the Canadian dollar strengthened from historic lows.

This was more than offset by very strong retail asset growth, improving asset quality, record trading results and the contribution of recent acquisitions, particularly Grupo Scotiabank in Mexico.

At the core of this success is our focus on diversification across our three major business lines to drive sustainable growth which we believe gives us a unique competitive advantage.

Our record of consistent earnings growth has been more than matched by our record of consistent dividend growth. We had two increases in 2005. Dividends were up 20 per cent on the year. Furthermore, they more than doubled in the past four years. All this without compromising our capital strength or our ability to reinvest in our businesses! Overall, an excellent track record on dividends.

As can be seen on the next slide, our capital strength remains a big plus for us and gives us flexibility to consider a broad range of options for future growth, while continuing to increase returns to shareholders.

The Tier 1 ratio was 11.1 per cent at the end of 2005, down slightly from 2004, but still very strong. Even more important, our Tangible Common Equity ratio was also very strong at 9.3 per cent, the best of the major Canadian banks.

More good news in 2005 included the continued improvement in credit quality. Provisions for credit losses in 2005 were $230 million, a substantial decrease of $160 million from last year and the lowest level since 1997!

Net impaired loans, after deducting the specific allowance, were $681 million at year-end, down $198 million from 2004 and 67 per cent lower than they were in 2002. As well, the continuation of positive trends in economic and business conditions allowed us to reduce the general allowance for credit losses by $45 million.

The next slide shows the strength of our major business lines. In 2005 we saw strong growth across the board, again a testament to the opportunities we see in each of the businesses. 

Earnings in Domestic Banking were up 13 per cent. As well, Scotia Capital's earnings increased 12 per cent. International Banking also performed well, up 12 per cent. Our International operations are a key differentiator that continue to set us apart from our domestic peers.

Let's look at the business lines in more detail. First Domestic Banking had a strong year in 2005, with net income available to common shareholders of about $1.3 billion, which as I just mentioned, is a 13 per cent increase over 2004. We saw significant asset growth in mortgages and other retail lending products. We also had a record year in Wealth Management, driven by excellent results in retail brokerage. And non-interest expenses and provisions for credit losses remained well controlled, particularly in the retail portfolio.

Turning to Scotia Capital, we had a strong year with record results for the second consecutive year reflecting record earnings in Global Trading and higher-than-normal credit recoveries. These record results were achieved despite the negative impact on earnings from the effects of foreign currency translation.

Scotia Capital continues to distinguish itself. It was named Best Investment Bank in Canada by Global Finance magazine for the second year in a row and it was also named Best Foreign Exchange Bank.

International Banking also had a good year in 2005, with net income available to common shareholders of $800 million, notwithstanding the significant negative effect of a $62 million foreign currency translation resulting from the appreciation of the Canadian dollar. Scotiabank Mexico's earnings contribution rose substantially, and the Caribbean and Central America also had solid growth.

Our International Banking operations were also recognized with a number of awards, including Bank of the Year awards from Latin Finance magazine for our operations in Mexico, Jamaica and the Caribbean. 

In summary we had a record year and this strong financial performance continues to be reflected in our total shareholder returns. 

Our average five-year total shareholder return was over 18 per cent, which is well above the S&P/TSX Composite Index and the S&P/TSX Banks Index.

To put in terms of dollars and cents, a $100 dollar investment in Scotiabank in 2000 is now worth $229.35! And we continued our strong performance in the first quarter of 2006.  Our record results were announced this morning, and I'll just take a moment to give you the highlights:

• our EPS was $0.84, up 9.0 per cent from $0.77 a year ago;
• our ROE was a solid 21.6 per cent, up from 21.0 per cent in Q1 2005;
• our net income available to common shareholders was $844 million, up 8.0 per cent; and
• our tangible common equity ratio was a strong 9.0 per cent (Tier One capital ratio was 10.8 per cent).

Overall, Mr. Chairman and ladies and gentlemen, 2005 was a strong year for Scotiabank shareholders and the trend is continuing in 2006 with very solid first quarter results.

I'd now like to call upon our President and Chief Executive Officer to say a few words.  Ladies and gentlemen, please welcome Rick Waugh.

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; 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; 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 54 in the Management's Discussion & Analysis section of the Bank's 2004 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. Additional information relating to the Bank, including the Bank's Annual Information Form, can be located on the SEDAR website at www.sedar.com, and on the EDGAR section of the SEC's website at www.sec.gov.