Bank Of Nova Scotia · TSX:BNS
Bank Of Nova Scotia — Scotiabank — Q4 2008 Earnings Presentation
21 slides from Bank Of Nova Scotia's earnings presentation, Dec 2, 2008
Slide 1: Investor Presentation Fourth Quarter, 2008
Investor Presentation Fourth Quarter, 2008 December 2, 2008 1 Caution Regarding 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 filings with Canadian sec
Slide 2: 2008 – Overview
Overview Rick Waugh President & Chief Executive Officer 3 2008 – Overview Challenging environment – Difficult market conditions and unprecedented volatility in global financial markets Net income - $3.1 billion, EPS - $3.05 – Q4/08: $315 million, EPS - $0.28 – $642 million write-downs in Q4/08
Slide 3: Core Earnings Remain Solid; Strong Capital
Core Earnings Remain Solid net income, $ millions 1,724 1,564 1,250 1,186 1,125 787 2007 2008 106 Canadian Banking International Scotia Capital Other* (557) Year-over-year Canadian Banking: Strong deposit & asset growth & positive impact of acquisitions, partly offset by higher PCLs, slightly lower
Slide 4: Items of Note
Performance Review Luc Vanneste Executive Vice-President & Chief Financial Officer 7 Items of Note(1) Q4 2008 Reported Net Income ($MM) 315 3,140 Item of Note (After-tax $MM) Q4 2008 Valuation Adjustments Conduit CDOs (137) (166) Other CDOs (122) (176) Other AFS Securities (150) (150) SIVs/ABCP (7)
Slide 5: Solid Core Results; Good Underlying Revenue Growth
Solid Core Results (1) Core Change Q4/08 Items Q4/08 Qtr/Qtr Yr/Yr Reported of Note Core Net income ($MM) $315 $642 $957 (5)% 8% EPS $0.28 $0.65 $0.93 (5)% 6% ROE 6.0% 19.2% (180) bp (30) bp Productivity ratio 75.2% 54.9% 60 bp (40) bp Quarter over quarter (core) + Strong asset growth - Decrease in
Slide 6: Stable All-Bank Margin; Higher Expenses
Stable All-Bank Margin % All Bank 1.87 (1) 1.79 1.76 1.79 1.82 All-Bank: +3 bps qtr/qtr (1) 1.68 + higher margins in Latin America, including acquisitions in Peru Canadian Banking + wider spreads in U.S. & European Corporate 2.49 2.52 2.49 - relatively higher funding costs 2.35 - increase in non-ear
Slide 7: Canadian Banking Results; International Banking
Canadian Banking Results Another Strong Quarter Net Income Q4/08 vs. Q4/07 net income: up 35% (1) ($ millions) + revenues up 14% (1) + strong deposit growth & continued asset growth 466 463 term deposits +12%, chequing/savings +15% mortgages +11%, ScotiaLine +15% + 16 bps increase in margin 347
Slide 8: Scotia Capital Impacted by Writedowns
Scotia Capital Impacted by Writedowns Q4/08 vs. Q4/07 net income: up 21%(1) + revenues up 20%(1) Net Income ($ millions) + record forex & precious metals trading results + higher corporate loan volumes, interest & spreads 349(1) - lower tax-exempt dividend income 297 - expenses up 11% 288(1) - incre
Slide 9: Canadian Banking and International Banking 2009 Priorities
Canadian Banking 2009 Priorities • Maintain positive operating leverage • Focus on key segments & products • Fully integrate recent acquisitions • Take advantage of market opportunities 17 International Banking 2009 Priorities • Focus on deposits & fee-based businesses • Maintain positive operating
Slide 10: Scotia Capital 2009 Priorities; Risk Review
Scotia Capital 2009 Priorities • Continue to prudently manage credit, market and operational risks • Execute global sectoral strategy by expanding coverage of energy, mining, & power sectors & institutional investors • Re-focus the business – Expand key platforms/capabilities – Scale back non-core b
Slide 11: Q4/08 Risk Overview; Provision for Credit Losses
Q4/08 Risk Overview Managing through challenging market conditions – PCL: $207mm vs $159mm in Q3/08 – Gross impaired loan formations: $615mm vs $629mm in Q3/08 – Average one-day VaR: $20.1mm vs $15.8mm in Q3/08 Areas of current focus – Bank-sponsored multi-seller conduits – Automotive exposure –
Slide 12: Strong Relative PCL Performance; Gross Formations
Strong Relative PCL Performance Specific Provisions as % of Average Loans and Acceptances 0.60% 0.56% 0.50% 0.43% 0.44% 0.40% 0.32% 0.29% 0.30% 0.26% 0.24% 0.23% 0.20% 0.18% 0.14% 0.13% 0.10% 0.00% 2006 2007 Q1/08 Q2/08 Q3/08 Q4/08 BNS 4 Cdn. Bank Peers 23 Trend in Gross Formations ($ millions) 629
Slide 13: Trading Results Versus One-Day VaR; Trading Revenues
Trading Results Versus One-Day VaR ($ millions) August 1, 2008 to October 31, 2008 Actual P&L 40 1 day VaR 30 20 10 0 (10) (20) (30) (40) Average one-day VaR: $20.1mm in Q4/08 vs $15.8mm in Q3/08 25 Trading Revenues # days Q4/08 trading revenues ($ millions) 10 8 6 4 2 0 (40) (35) (30) (25) (20) (
Slide 14: Bank-Sponsored Multi-Seller Conduits; Auto Industry Exposure
Bank-Sponsored Multi-Seller Conduits Canadian U.S. (Q4/08, $ billions) Conduits Conduit Funded assets 3.8 8.4 Commitments 0.5 4.4 Total exposure 4.3 12.8 Weighted-average: rating (equivalent) AA- or higher 92% A or higher life (years) 1.0 1.2 Assets mostly receivables – Auto loans/leases: 42%; tra
Slide 15: International Retail Loan Portfolios; 2009 Risk Outlook
International Retail Loan Portfolios (Outstandings at Q4/08, $ billions) 10.0 9.8 Personal Loans 3 .1 Credit Cards 8.0 Mortgages 0 .8 6.0 5.5 1.6 4.0 0 .6 3.5 5 .9 1.0 0 .1 2.0 2.0 3 .3 0 .8 2 .4 0 .6 0 .6 0.0 C&CA* Mexico Chile Peru PCL 2008 2007 2008 2007 2008 2007 2008 2007 $mm 68 43 186 85 20 12
Slide 16: Outlook; 2009 Priorities
Outlook Rick Waugh President & Chief Executive Officer 31 2009 Priorities Drive sustainable revenue growth – leverage acquisitions/investments – take advantage of market opportunities Prudent capital management Leadership Maintain strong focus on risk management Expense control 32
Slide 17: Targets
Targets EPS growth: 7-12% ROE: 16-20% Productivity ratio – less than 58% Maintain strong capital ratios 33 Appendix 34
Slide 18: Items of Note in Q4/08; Items of Note in Q4/07
Items of Note in Q4/08 Pre-tax After-tax Gain/(Loss) ($MM) ($MM) EPS ($) Financial statement impact (Pre-tax) Q4/08 Conduit CDOs (245) (137) SC: Securities Gains Other CDOs (45) (24) SC: Securities Gains (73) (70) Int’l: Securities Gains (50) Other/Other Income (23) (45)* (35) Other: Securities Gain
Slide 19: Impact of Forex; Continued Strong Asset Growth
Impact of Forex Impact ($ millions) Q4/08 vs. Q4/08 vs. 2008 vs. Q3/08 Q4/07 2007 Net Interest Income (TEB) 40 70 (221) Other Income (23) (24) (80) Non-interest expenses (31) (47) 146 Net income (13) (5) (104) EPS (diluted) (1) cent - (10) cents Spot Rate Average exchange rate Oct. 31/08 2008 2007 Q
Slide 20: Canadian Banking - Market Share; Trading Revenues
Canadian Banking - Market Share Deposit Momentum Continues Qtr/Qtr Yr/Yr Residential Mortgages (3) bps (9) bps Personal Term Deposits +12 bps +87 bps Total Personal Deposits +16 bps +61 bps Mutual Funds +9 bps +28 bps Canadian Banking market share figures as at September 2008 39 Trading Revenues ($
Slide 21: Other Segment Impacted by Writedowns; Gross Impaired Loan Formations
Other Segment (1) Impacted by Writedowns Q4/08 vs. Q4/07 net income - increased funding volumes, relatively higher cost for liquidity & hedging of interest rate risk Net Income ($ millions) - lower underlying securities gains + higher securitization revenues Q4/07 Q3/08 Q4/08 + lower expenses Report