Bank of Nova Scotia · TSX:BNS
Bank of Nova Scotia — Q4 2010 Earnings Presentation
25 slides from Bank of Nova Scotia's earnings presentation, Dec 3, 2010
Slide 1: Investor Presentation Fourth Quarter, 2010
Investor Presentation Fourth Quarter, 2010 December 3, 2010 Caution Regarding Forward-Looking Statements Forward-looking statements Our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other
Slide 2: Overview
Overview Rick Waugh President & Chief Executive Officer 2010 Overview • Record earnings Net income: $4,239 million EPS: $3.91, up 18% vs. prior year ROE: 18.3% • Record revenue and net income with all platforms contributing to success • Record net income in Canadian Banking • Continued strengt
Slide 3: Exceeded 2010 Targets
Exceeded 2010 Targets Objective Target Actual ROE 16% to 20% 18.3% EPS Growth 7% to 12% 18% Productivity Ratio < 58% 51.8% Strong Capital Tier 1: 11.8% Capital ratios Ratios TCE: 9.6% 5 Financial Review Luc Vanneste Executive Vice-President & Chief Financial Officer
Slide 4: Strong Quarter; Consistent Growth in Revenues
Strong Quarter Q4/10 Q3/10 Q/Q Q4/09 Y/Y 1,092 1,062 3% Net Income ($MM) 902 21% $1.00 $0.98 2% EPS $0.83 20% 17.9% 18.2% (30) bps ROE 16.4% 150 bps 54.4% 52.5% (190) bps Productivity Ratio 54.2% (20) bps Year-over-year comparison Q4 earnings benefited from… Partly offset by… • Asset growth and reco
Slide 5: Higher Expenses; Strengthened Capital Ratios
Higher Expenses: Growth Initiatives & Seasonality Non-Interest Expenses ($ millions) Year-over-Year Expenses up 6% 2,183 2,064 - Higher salaries and employee benefits 2,023 - Higher technology and advertising spending to support business growth 1,191 1,097 1,126 394 411 384 Quarter-over-Quarter
Slide 6: Canadian Banking and International Banking Results
Canadian Banking: Strong Quarter, Record Year Year-over-Year Net Income Revenues up 5% ($ millions) + Asset growth 604 + Deposit growth 567 + Growth in Other Income PCLs down $16MM 503 Expenses up 4% - Higher performance based compensation - Expenses related to growth initiatives Quarter-over-
Slide 7: Scotia Capital: Second Best Year on Record; Other Segment
Scotia Capital: Second Best Year on Record Year-over-Year Net Income Revenues down 20% ($ millions) - Lower trading revenue - Lower underwriting and credit fees - Lower loan volumes PCLs down $71MM 353 Expenses up 13% 305 - Higher expense from growth initiatives 273 Quarter-over-Quarter Reve
Slide 8: Risk Review
Risk Review Rob Pitfield Group Head and Chief Risk Officer Q4 2010 Risk Overview • Risk in credit portfolios continues to be well managed Significant decline in specific provisions year-over-year Reduced general allowance by $40 million Continued downward trend in net impaired loan formations
Slide 9: Significant Decline in Specific Provisions
Significant Decline in Specific Provisions Year-over-Year ($ millions) Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Canadian Retail 159 140 149 145 140 Canadian Commercial 33 41 40 24 34 192 181 189 169 174 International Retail 122 130 125 118 129 International Commercial 45 47 48 20 (1) 167 177 173 138 128 Scotia
Slide 10: Risk Outlook; Canadian Banking 2011 Outlook
Risk Outlook • Asset quality remains strong Retail and Commercial portfolios performing as expected Continued strength in corporate portfolios • Expect 2011 provisions to remain in line with 2010 Modest decline in Canadian retail provisions International retail provisions in line with curren
Slide 11: Canadian Banking 2011 Outlook
Canadian Banking: 2011 Outlook • Focus on growing deposits, payments and wealth management • Subdued economic recovery and slower retail asset growth in a competitive environment • Retail PCLs expected to decrease. Commercial PCLs performing as expected • Continue to invest in and grow our core busi
Slide 12: Global Wealth Management 2011 Outlook
Global Wealth Management: 2011 Outlook • Driving diversified organic revenue growth across all business lines Canadian Wealth Management International Wealth Management Insurance Global Transaction Banking • Optimize DundeeWealth opportunity and explore further strategic acquisitions globall
Slide 13: International Banking 2011 Outlook
International Banking: 2011 Outlook • Renewed asset and revenue growth as economies rebound Stronger growth in Latin and Asian markets, gradual improvement in other regions Stable margins – increasing retail asset growth, improving product mix and sales productivity • Stable PCLs, with positive
Slide 14: Scotia Capital 2011 Outlook
Scotia Capital: 2011 Outlook • Trading revenues likely to be more in line with recent quarters Should benefit from growth initiatives in niche products, target industries and select geographies • Modest signs of M&A activity should accelerate and drive asset growth • PCLs should remain below histo
Slide 15: 2011 Outlook; Targets Remain Unchanged
2011 Outlook • Continue to take advantage of a unique window of opportunity • Focused on achieving sustainable revenue growth supported by strong contributions from all business lines • Moderate asset growth and a wider margin • Non-interest expenses will be driven mainly by acquisitions and volume-
Slide 16: Appendix: Net Interest Margin
Appendix Net Interest Margin (%) 1.74 1.76 1.73 1.75 1.68 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q4 margin benefited from… Partially offset by… • Mark-to-market gains • Lower spreads in Scotia Capital • Lower volume of low margin assets 32
Slide 17: Canadian Banking: Wealth Management and Volume Growth
Canadian Banking: Strong Y/Y Performance in Wealth Management Revenues (TEB) Year-over-Year ($ millions) Retail & Small Business 1,971 1,974 + Asset growth 1,886 + Higher net interest income Commercial Banking + Lower PCLs 1,192 1,221 + Higher fee based revenues and securities gains 1,199 Weal
Slide 18: Canadian Banking Market Share; International Banking
Canadian Banking: Market Share Market Share (%) 1 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Residential Mortgages 20.14 20.23 20.28 20.40 20.53 Total Personal Lending 18.30 18.29 18.26 18.27 18.27 Total Personal Deposits 10.89 10.84 10.89 10.83 10.81 Small Business Lending2 14.55 15.70 15.57 14.87 15.84 Mutual
Slide 19: Scotia Capital Trading Revenues; Economic Outlook in Key Markets
Scotia Capital: Strong Trading Revenues Revenues (TEB) Year-over-Year ($ millions) Global Capital Markets - Lower fixed income and institutional equity revenues 910 + Precious metals revenues 724 Global Corporate & Investment Banking 697 - Significantly lower loan volumes 443 387 385 Quarter-ove
Slide 20: Unrealized Securities Gains; Trend in PCL Ratios
Unrealized Securities Gains ($ millions) Q4/10 Q3/10 Q4/09 Emerging Market Debt 378 330 461 Other Debt 765 602 512 Equities 274 176 40 1,417 1,108 1,013 Net Fair Value of Derivative Instruments (228) (193) (185) and Other Hedge Amounts Total 1,189 915 828 39 Trend in PCL Ratios (Specific PCL as % av
Slide 21: Trend in Specific Provisions and Impaired Loan Formations
Trend in Specific Provisions ($ millions) 500 0.70% 0.60% 400 0.50% 300 0.40% 0.30% 200 0.20% 100 0.10% 0 0.00% Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Specific PCLs Specific PCLs as a % of Avg. Loans & BAs 41 Trend in Net Impaired Loan Formations ($ millions) 1
Slide 22: Trend in Gross Impaired Loans; Coverage Ratios
Trend in Gross Impaired Loans ($ millions) 6,000 2.00% 5,000 1.50% 4,000 3,000 1.00% 2,000 0.50% 1,000 - 0.00% 07 08 08 08 08 09 09 09 09 10 10 10 * 10 4/ 1/ 2/ 3/ 4/ 1/ 2/ 3/ 4/ 1/ 2/ 3/ 4/ Q Q Q Q Q Q Q Q Q Q Q Q Q GILs ex. R-G R-G Premier Bank GILs as a % of Loans & BAs ex. R-G GILs as a % of Loa
Slide 23: Canadian and International Retail: Loans and Provisions
Canadian Retail: Loans and Provisions (balances at Q4/10, $ billions) 135 Total = $181B; 92% secured 24 13 9 Mortgages(1) Lines of Credit Personal Loans Credit Cards(2) % secured 100% 69% 97% 37% PCL Q4/10 Q3/10 Q4/10 Q3/10 Q4/10 Q3/10 Q4/10 Q3/10 $ millions 3 1 40 29 55 69 41 46 % of avg. 1 <1 67 4
Slide 24: International Commercial Lending Portfolio; Trading Results Within VaR
International Commercial: Lending Portfolio Q4/10 = $37 billion Peru 15% Asia/Pacific (10 countries) 26% Other 7% Mexico 10% Caribbean & Chile Central America 15% 27% • Well secured • Portfolios in Asia/Pacific, Mexico, Chile, Peru and Central America performing well 47 Q4 2010 Trading Results Withi
Slide 25: Q4 2010 Trading Revenue Distribution
Q4 2010 Trading Revenue Distribution (# days) 10 8 6 4 2 0 (4) (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 ($ millions) 91% of days had positive results in Q4/10 49