Bank of Nova Scotia · TSX:BNS
Bank of Nova Scotia — Q2 2009 Earnings Presentation
26 slides from Bank of Nova Scotia's earnings presentation, May 28, 2009
Slide 1: Investor Presentation Second Quarter, 2009
Investor Presentation Second Quarter, 2009 May 28, 2009 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 securit
Slide 2: Earning Through Challenging Environment
Overview Rick Waugh President & Chief Executive Officer 3 Earning Through Challenging Environment • Net income: $872MM, EPS: $0.81, ROE 17.6% • Record top-line revenue growth, up 12% • Solid profitability in all businesses • Proactive risk management • Solid capital – maintained dividend at $0.49/sh
Slide 3: Solid Earnings in Our Three Main Businesses
Solid Earnings in Our Three Main Businesses net income ($ millions) Q2/08 Q1/09 Q2/09 422 438 410 388 335 332 300 328 255 Other* Canadian International Scotia Capital (32) (198) (284) Year over year Canadian Banking: Strong deposit & asset growth, higher PCLs International: Wider margins, positive i
Slide 4: Solid Quarter
Performance Review Luc Vanneste Executive Vice-President & Chief Financial Officer 7 Solid Quarter Q2/09 Qtr/Qtr Yr/Yr Reported Net income ($MM) $872 +4% (11)% EPS $0.81 +1% (16)% ROE 17.6% 70 bps (380) bps Productivity ratio 51.4% (730) bps (340) bps Quarter over quarter + Growth in net interest in
Slide 5: Q2/09 Items of Note; Record Revenues
Q2/09 Items of Note Pre-tax After-tax EPS Item Business Line; Line Item ($MM) ($MM) Impact AFS securities Other: Other Income (97) (104) (70) (0.07) write-downs* SC: Other Income (7) Credit card sale in (36) (26) (0.03) Int’l: Other Income Mexico Provisions release in 29 21 0.02 Int’l: PCLs Mexico *
Slide 6: Strong Year-over-Year Asset Growth; Higher Net Interest Margin
Strong Year-over-Year Asset Growth average assets, $ billions 14% (2)% 529 519 519 Residential mortgages 455 113 111 111 106 Personal loans 50 52 & credit cards 52 44 Business & 135 133 133 government 111 (includes BA's) Securities 97 104 104 98 119 Other 134 119 96 Q2/08 Q2/09 Q1/09 Q2/09 Yr/Yr Qtr
Slide 7: Disciplined Expense Management; Maintaining Solid Capital
Disciplined Expense Management Non-interest expenses ($ millions) Q2/09 vs. Q1/09 expenses: down 6% 2,010 + lower stock & performance-based compensation 1,886 1,794 + shorter quarter - lower remuneration costs + reduction in discretionary spending: advertising, business development costs 1,130 1,024
Slide 8: Canadian Banking Solid Quarter; International Banking
Canadian Banking Solid Quarter Net Income Q2/09 vs. Q1/09 net income: down 7% ($ millions) - revenues down 2% NII stable, higher margin offset by shorter quarter - lower wealth management revenues, reflecting 438 422 410 Dundee Wealth (DW) equity accounted earnings + expenses down 4% + reduced dis
Slide 9: Scotia Capital Record Quarter, Despite Rise in PCLs
Scotia Capital Record Quarter, Despite Rise in PCLs Q2/09 vs. Q1/09 net income: up 9% Net Income + revenues up 20% ($ millions) + record quarter in Global Capital Markets + higher spreads & loan origination fees, partly offset by small decrease in average loans + expenses down 21% + lower performanc
Slide 10: Business Line Outlook; Canadian Banking Outlook
Business Line Outlook Chris Hodgson Group Head, Canadian Banking Rob Pitfield Group Head, International Banking Stephen McDonald Group Head, Global Corporate & Investment Banking, & Co-CEO Scotia Capital 19 Canadian Banking Outlook • Revenue & Volume growth – Cautiously optimistic on asset growth de
Slide 11: International Banking Outlook; Scotia Capital Outlook
International Banking Outlook • Slower economic growth in key markets in 2009 • Key priorities: credit risk, prudent asset growth, margins, expense control • Continuing actions to mitigate risk • Rolling out longer-term initiatives 21 Scotia Capital Outlook • Strong, broad-based results • Continued
Slide 12: Risk Review; Q2/09 Risk Overview
Risk Review Brian Porter Group Head, Risk & Treasury 23 Q2/09 Risk Overview • Managing through challenging markets – Specific provisions for credit losses: $402MM vs. $281MM in Q1/09 – Established sectoral provision of $60MM for wholesale auto – Added $27MM to general allowance – now at $1.35 billio
Slide 13: Specific Provisions for Credit Losses
Specific Provisions for Credit Losses $ millions Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Canadian P&C Retail 82 77 78 122 126 Commercial 20 22 29 33 52 102 99 107 155 178 International P&C Retail 69 81 105 130 125 Commercial (9) (25) (15) (14) (10) 60 56 90 116 115 Scotia Capital (9) 4 10 10 109* 153 159 207
Slide 14: Specific Provisions: Commercial & Corporate; Coverage on Loan Portfolio
Specific Provisions: Commercial & Corporate $ millions 151 109 24 29 1 10 10 2 4 52 29 33 20 22 -9 -15 -14 -10 -9 -25 Canadian Banking International Banking Scotia Capital Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 PCL ratio (bps) 1 - 8 9 47 27 Coverage on Loan Portfolio Total Allowance for Credit Losses as % of
Slide 15: Canadian and International Retail Portfolios
Canadian and International Retail Portfolios • Portfolios performing as expected - Highly secured and well diversified - Delinquencies rising in some products as economies soften • Actively managing risks - Canada: indirect auto and unsecured revolving credit - International: Chile and Peru acquisit
Slide 16: Wholesale Auto Portfolio; North American Real Estate
Wholesale Auto Portfolio Total(1) Total(1) $ billions Canada U.S. Other Q2/09 Q1/09 OEM(2) 0.1 0.1 - 0.2 0.6 Finance & Leasing 0.6 0.3 0.2 1.1 1.2 Parts Manufacturers 0.3 0.4 0.1 0.8 0.8 Dealers/Floorplan 2.9 - - 2.9 3.0 3.9 0.8 0.3 5.0 5.6 GM & Chrysler only 11% of total dealer exposure Portfol
Slide 17: 2009 Risk Outlook; Appendices
2009 Risk Outlook • Challenging credit markets for balance of the year • Focused on actively managing risk • Provisions to remain within risk tolerances 33 Appendices 34
Slide 18: Canadian Banking Solid Quarter
Canadian Banking Solid Quarter Change ($MM) Q2/09 Q1/09 Comments on Q/Q Movements Q/Q higher margin & volume growth, offset by shorter NII 1,147 1,146 +1 quarter lower income recognition on DW investment Other lower wealth management revenues, seasonally 524 556 (32) Income lower VISA fees h
Slide 19: Canadian Banking Solid Volume Growth; International Banking
Canadian Banking Solid Volume Growth Average Balances ($BN) Q2/09 Q1/09 Q2/08 Y/Y Q/Q Residential Mortgages* 118.0 118.2 108.8 8.4% (0.1)% Personal Loans 34.2 33.0 28.2 21.1% 3.5% Credit Cards** 9.1 9.1 8.7 5.5% 0.7% Non-Personal Loans & 25.7 26.3 25.6 0.5% (2.3)% Acceptances Personal Deposits 92.3
Slide 20: International Banking Stable Underlying Revenues
International Banking Stable Underlying Revenues Revenues (TEB) Q2/09 vs. Q1/09 revenues: down 8% ($ millions) Mexico - loss on sale of portion of credit card portfolio - lower forex revenues vs. very strong Q1 1,418 + solid volume growth & wider spreads 1,308 Caribbean & Central America 1,153 3
Slide 21: Economic Outlook in Key Markets
Economic Outlook in Key Markets Real GDP Growth % 2000-2007 2008e 2009f 2010f Avg. Mexico 2.9 1.3 (4.5) 1.7 Peru 5.1 9.8 3.5 3.8 Chile 4.4 3.2 (1.0) 2.0 Jamaica 1.5 (0.6) (3.0) 0.5 Trinidad & 8.2 3.0 (0.5) 2.5 Tobago Costa Rica 4.7 3.0 (0.5) 1.5 DR 5.4 5.3 0.0 1.5 2009f 2010f Canada (2.6) 1.7 U.S. (
Slide 22: Scotia Capital Record Revenues
Scotia Capital Record Revenues Revenues (TEB) Q2/09 vs. Q1/09 revenues: up 20% ($ millions) + broad based trading strength; higher derivatives 847 revenues + higher spreads & credit related fees, partly offset 704 by decrease in average volumes + CDO write-downs in Q1/09 400 - lower investment banki
Slide 23: Gross Impaired Loans
Gross Impaired Loans $ millions Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Canadian P&C Retail 444 472 523 621 747 Commercial 244 228 238 262 307 688 700 761 883 1,054 International P&C Retail 664 688 833 997 1,110 Commercial 604 674 776 919 994 1,268 1,362 1,609 1,916 2,104 Scotia Capital 56 101 124 186 439 Tot
Slide 24: Relative PCL Performance; Canadian Retail Loans and Provisions
Relative PCL Performance Specific Provisions as % of Average Loans and Acceptances 0.80% 0.72% 0.60% 0.56% 0.51% 0.40% 0.37% 0.32% 0.26% 0.24% 0.24% 0.20% 0.16% 0.14% 0.13% 0.00% 2005 2006 2007 2008 Q1/09 Q2/09 BNS 4 Cdn. Bank Peers 47 Canadian Retail Loans and Provisions (Outstandings at Q2/09, $ b
Slide 25: International Retail Loans and Provisions; Multi-Seller Conduits
International Retail Loans and Provisions (Outstandings at Q2/09, $ billions) 11.4 P erso nal Lo ans (to tal = $ 7.1B ) 3.4 Credit Cards (to tal = $ 2.2 B ) 1.0 M o rtgages (to tal = $ 13.7 B ) 5.2 1.4 4.0 7.0 0.5 1.1 0.1 2.4 3.3 2.8 1.2 0.6 0.6 C&CA* Mexico Chile Peru % of total 50% 23% 17% 10% PCL
Slide 26: One-Day VaR; Trading Revenue
One-Day VaR ($ millions) February 1, 2009 to April 30, 2009 Actual P&L 40 1 day VaR 30 20 10 0 (10) (20) (30) (40) Average one-day VaR: $16.0mm in Q2/09 vs $21.7mm in Q1/09 51 Trading Revenue Q2/09 Trading Revenue ($ millions) # days 6 4 2 0 (6) (5) (4) (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Bank of Nova Scotia (Scotiabank) — Q2 2009 Earnings Presentation on 6ix