Bank of Nova Scotia - 3rd Quarter & 9 Mths Results

RNS No 1430k
BANK OF NOVA SCOTIA
27th August 1997

                                              For further information:
                                              Mr. Robert Chisholm
                                              Vice-Chairman, [phone]

Good operating results and record securities gains combine for strong third
quarter for Scotiabank


TORONTO - Scotiabank today reported a net income of $384 million in the third
quarter ended July 31, 1997, an increase of $109 million or 40% over the same
period a year ago. Earnings per share rose to $1.51 in the third quarter from
$1.04 for the same period a year ago. Return on equity improved to 20.3% from
16.0%, while return on assets improved to 0.85% from 0.67% for the same quarter
last year.

The third quarter results included record gains on the sale of investment
securities of $170 million which were realized to take advantage of the strong
equity markets. These gains were substantially higher than the quarterly average
of $35 million realized over the past few years. Using this quarterly average,
income for the quarter would have been $307 million, an increase of $32 million
over the third quarter of last year. Earnings per share would have been $1.19
compared to $1.04, while return on equity would have been 16.1% versus 16.0%
for the same period last year.

"All of our business lines - Retail and Commercial Banking, Corporate Banking,
International Banking, and, in particular, Investment Banking - contributed to
our strong results," stated Peter Godsoe, Chairman and CEO, Scotiabank. "This
broad diversification continues to reward both Scotiabank customers and
shareholders."

"During the third quarter, the Bank continued in its leadership role as Canada's
most international bank," said Godsoe. "We announced our plans to complete the
purchase of the remaining 75 per cent of Banco Quilmes in Argentina and
finalized the agreement to purchase 25 per cent of Banco Sudamericano in Peru."

Domestically, Scotiabank made an offer on June 24, 1997, valued at approximately
$1.2 billion, to acquire all of the common shares of National Trustco Inc. As
of August 14, 1997, the Bank had completed the acquisition with more than 98% of
the shareholders having tendered their shares to the Bank.

"Also on the domestic front, the Bank continued to actively pursue the small
business market, reinforcing our commitment to this important sector of the
Canadian economy. Since the beginning of this fiscal year, about 2,300 new small
business borrowers have chosen Scotiabank as their bank, increasing our total
number of small business borrowing customers to approximately 87,000," stated
Godsoe.

Net income for the first nine months of fiscal 1997 was $981 million, an
increase of $195 million or 25% over the same period a year ago. Year-to-date
earnings per share grew to $3.81 from $3.00. Return on equity improved to 17.9%
from 15.7% and return on assets rose to 0.75% from 0.67%.

Net interest income for the quarter was $924 million, a $91 million or 11%
increase from the same period last year.

"We saw a strong growth in consumer mortgages, reflecting the momentum of the
Canadian economy," observed Godsoe. "As well, we saw increases in most revenue
categories, with good loan growth in both domestic and foreign markets."

Other income grew to $711 million, a $198 million or 39% increase over the same
quarter last year. Most of this growth was due to the unusually high securities
gains earned in the quarter, as the Bank took advantage of the strong equity
markets. The strong markets also enabled the Bank to generate substantially
higher levels of underwriting fees and brokerage commissions, and achieve higher
mutual fund revenues through a 50% year over year growth in the net assets of
the Scotiabank family of mutual funds.

Non-interest expenses for the third quarter were $911 million, $112 million
or 14% higher than in the same quarter a year ago. The majority of this increase
is attributed to performance-linked compensation associated with higher
revenues. Technology costs were up over the same period a year ago, primarily
due to expenditures on new sales and service initiatives, including the new
Scotia OnLine Internet Banking and Discount Brokerage Service launched this
month.

"Scotiabank is aggressively investing in new technologies and services as part
of our commitment to meet evolving customer service needs and preferences,"
Godsoe explained.

The Bank's productivity ratio -- non-interest expenses as a percentage of total
revenues -- was 54.8%, slightly higher than last quarter's 54.3%. Even when the
unusually high securities gains and gains on the sales of certain businesses
recorded earlier in the year are excluded, the ratio is still better than the
Bank's target rate of 60%, reflecting Scotiabank's continuing emphasis on cost
control.

Credit quality remains at the best level experienced over the past decade. The
whole-year specific provision for credit losses, estimated at $355 million, is
unchanged from the preceding quarter. The specific provision for the third
quarter was $88 million, a decrease of $7 million over the same period last
year.

The Bank's general provision remained at $500 million, among the highest of the
Canadian banks.

Net impaired loans increased to $446 million, or 0.4% of loans and acceptances
as at July 31, 1997, up from $364 million last quarter. The majority of the
increase was attributable to one corporate account in the United States.

The Bank continues to have a large surplus in its securities and developing
country portfolios (LDC), amounting to $1.7 billion at the end of the third
quarter. The Bank's securities portfolio had a surplus of market value over
book value of $665 million, as at July 31, 1997, compared to $525 million at the
end of the second quarter, notwithstanding the large securities gains of $170
million realized during this quarter. The surplus of market value over book
value in the LDC securities and LDC loan portfolio was $1,051 million, an
increase of $119 million from the end of the preceding quarter.

Total assets increased to $182 billion from $176 billion in the second quarter.
Loans and acceptances accounted for nearly $3 billion in quarterly growth.
Residential mortgages rose $682 million in the quarter, and internationally,
growth was achieved across most loan portfolios. Other changes included an
increase in reverse repurchase agreements of $5 billion, partially offset by a
combined reduction in securities and cash resources of approximately $3 billion.

Capital funds rose to $13.6 billion, an increase of $1,740 million over the
prior quarter. Strong earnings retention contributed $272 million to this
growth. In addition, taking advantage of favourable market rates, the Bank
issued two Canadian dollar subordinated debentures totalling $800 million and a
US$500 million subordinated debenture during the quarter.

At the quarter end, the Tier 1 capital ratio was 6.7%, up from 6.6% at the end
of the preceding quarter. The total capital ratio increased to 10.0% from 8.9%.

A quarterly dividend of 37 cents per common share was approved by the Board of
Directors at today's meeting, payable on October 29, 1997, to shareholders of
record as of October 7, 1997.


PERFORMANCE HIGHLIGHTS

                                               For the three months ended
                                             July 31    April 30    July 31
(Unaudited)                                     1997        1997       1996

Net income ($ millions)                         $384        $300       $275
Earnings per share ($)                         $1.51       $1.16      $1.04
Return on equity                               20.3%       16.7%      16.0%
Return on assets                               0.85%       0.70%      0.67%
Productivity ratio                             54.8% (1)   54.3%      58.2%

                                                 For the nine months ended
                                                         July 31    July 31
(Unaudited)                                                 1997       1996

Net income ($ millions)                                     $981       $786
Earnings per share ($)                                     $3.81      $3.00
Return on equity                                           17.9%      15.7%
Return on assets                                           0.75%      0.67%
Productivity ratio                                         56.9%      58.9%

(1) Excluding the unusually higher securities gains of $135 million in Q3, and
    the gains in Q2 on the sales of the Bank's pension and institutional custody
    businesses, the majority of the dealer financial services portfolio, and the
    Bank's shareholding in Montrusco Associates Inc, the productivity ratios
    were still better than the target rate of 60%.


Interim Consolidated Statement of Income

                         For the three months ended  For the nine months ended
(Unaudited)              July 31  April 30  July 31       July 31   July 31
($ millions)                1997      1997     1996          1997      1996

Interest income
Loans                     $1,987    $1,911   $2,018        $5,864    $5,919
Securities                   426       448      403         1,275     1,272
Deposits with banks          198       177      190           561       556

                           2,611     2,536    2,611         7,700     7,747

Interest expense
Deposits                   1,420     1,370    1,462         4,182     4,536
Subordinated debentures       65        58       51           181       161
Other                        202       201      265           576       609

                           1,687     1,629    1,778         4,939     5,306

Net interest income          924       907      833         2,761     2,441
Provision for credit losses   88       264       95           441       285

Net interest income after
 provision for credit 
 losses                      836       643      738         2,320     2,156

Other income
Service charges              123       112      115           349       327
Credit fees                  101       101       84           289       251
Investment banking           180       151      128           495       422
Foreign exchange and 
 precious metals              30        40       40           113       107 
Net gain on investment 
 securities                  170        90       42           339       110
Other                        107       192      104           433       301

                             711       686      513         2,018     1,518

Net interest and other
 income                    1,547     1,329    1,251         4,338     3,674

Non-interest expense
 Salaries                    478       473      423         1,430     1,260
Pension contributions and 
 other staff benefits         61        58       50           175       153
Premises and equipment 
 including depreciattion     191       167      160           584       490 
Other                        181       180      166           572       474

                             911       878      799         2,761     2,377

Income before the
 undernoted:                 636       451      452         1,577     1,297 
Provision for income taxes   245       143      169           570       489
Non-controlling interest 
 in net income of 
 subsidiaries                  7         8        8            26        22

Net income                  $384      $300     $275          $981      $786

Preferred dividends paid     $24       $24      $29           $74       $84

Net income available to
 common shareholders        $360      $276     $246          $907      $702

Note: Gains and losses on securities are now reported in Other income effective
      the first quarter of 1997, whereas previously they were reported in
      Interest income. 
      Certain comparative amounts in these financial statements have been
      reclassified to conform with current period presentation.


Consolidated Balance Sheet Highlights       

                                                   As at
(Unaudited)                        July 31      April 30        July 31
($ millions)                          1997          1997           1996

Cash resources                     $16,059       $17,250        $16,814
Securities                          25,956        27,728         27,967
Assets purchased under resale
agreements                          14,653         9,664          8,328
Loans                              102,250       100,239         92,538
Other assets(1)                     22,779        21,247         18,678

Total assets                      $181,697      $176,128       $164,325

Deposits - Personal                $46,870       $47,929        $46,943
         - Business and
           governments              52,542        52,140         43,356
         - Banks                    24,636        26,671         28,164

Total deposits                     124,048       126,740        118,463

Other liabilities(1)                44,070        37,549         34,607
Subordinated debentures              5,106         3,629          3,334

Equity - preferred                   1,325         1,325          1,675
       - common                      7,148         6,885          6,246

Total liabilities and equity      $181,697      $176,128       $164,325

(1) In accordance with new accounting requirements issued by the Canadian
    Institute of Chartered Accountants, unrealized gains and losses on trading
    derivative instruments are reported separately in Other assets and Other
    liabilities respectively effective the first quarter of 1997, whereas
    previously they were netted and reported in either Other assets or Other
    liabilities.


Capital and Common Share Information      

                                          As at
                         July 31       April 30         July 31
(Unaudited)                 1997           1997            1996

Capital ratios
Tier 1                     6.67%          6.61%           6.71%
Tier 2                     3.31%          2.26%           2.66%
Total                      9.98%          8.87%           9.37%

Common shares
outstanding (millions)     238.9          238.3           236.3

Book value per share ($)  $29.92         $28.89          $26.43
Market price per share    $66.00         $53.05          $32.95


                              For the three months ended
                         July 31       April 30         July 31
                            1997           1997            1996

Common dividends paid
Total ($ millions)           $88            $88             $80
Per share ($)              $0.37          $0.37           $0.34


END