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

RNS No 7697n
BANK OF NOVA SCOTIA
1 September 1999



SCOTIABANK MAINTAINS STRONG EARNINGS MOMENTUM IN THIRD QUARTER

Toronto, August 31 - Scotiabank maintained strong earnings momentum in the
third quarter, reporting net income of Canadian $397 million, up $39 million
or 11% from the same period a year ago. This marks the Bank's 21st consecutive
quarter of record operating income - extending a performance which dates back to
the third quarter of 1994.

Other year-over-year quarterly highlights include:

:: earnings per share rose to $0.75 from $0.68, a 10% increase

:: return on equity was 15.3%, compared to 15.5%;

:: Tier 1 capital ratio climbed to 8.0% from 6.9%;

:: total assets were $227 billion, up $5 billion.

Reflecting this strong performance, the Board of Directors today announced an
increase in the quarterly dividend of three cents to 24 cents per common
share, payable on October 27 1999, to shareholders of record as of the close
of business on October 5 1999.

"We continued to deliver solid earnings growth this quarter, with all of the
Bank's major business lines making a substantial contribution to our
results," said Peter Godsoe, Scotiabank's Chairman and Chief Executive
Officer. "We are proud of our ability in generating record operating income
every quarter during the past five years - consistency that is the product of
our highly diversified operations, above-average efficiency and an unwavering
focus on the needs of our customers."

"Best bank in Canada"

In July, Euromoney magazine named Scotiabank as "Best bank in Canada", citing
its focus and strong earnings performance during the past year.

Strong mortgage growth in Canada

"Domestically, we achieved substantial growth in residential mortgages, where
Scotiabank ranks second in market share among the six major banks," Godsoe
said. "Due to strong sales efforts by our branch teams and mortgage
specialists, our residential mortgage portfolio rose by $4.5 billion or 10%
over the same period a year ago, after adding back the mortgages we
securitised."

"Our new Scotia Total Equity Plan, a unique lifetime borrowing package
launched during the second quarter, has proven to be very popular with
customers, resulting in a significant increase in our retail lending," Godsoe
said.

To complement this product, during the third quarter the Bank launched the
"Scotia Borrower's Reality Check" - a comprehensive, interactive tool
designed to help Canadians better manage their personal financial affairs.
Available on Scotiabank's website, CD-ROM or diskette, this program enables
Canadians to examine their own personal borrowing situation and develop a plan
to reduce borrowing costs.

"By developing innovative products and advisory tools to meet Canadians'
borrowing needs, we are building on our history of leadership in retail
lending," explained Godsoe.

"Strong sales of investment services and products, such as our market-leading
stock-indexed GICs, led to success on the deposit side as well, where personal
deposits were up 5% year over year," Godsoe said.

Strong results in corporate and investment banking

"Corporate and investment banking achieved good results this quarter,
reflecting our focus on strengthening client relationships and expanding our
industry-specific expertise," Godsoe said. "Net income from corporate banking
was up 17% year over year, as a result of strong lending activity,
particularly in the United States and Europe. Investment banking income also
rose, due mainly to higher trading revenues, including foreign exchange, and
gains on the sale of investment securities."

Solid quarter in international banking

"Our international operations performed well this quarter, particularly in the
Caribbean, where our extensive branch network continued to capture market
share," Godsoe said.

Scotiabank extended its presence in the thriving market of India this quarter,
launching Scotiafinance, a new finance company focusing on retail and
commercial lending, and receiving a licence to open its fifth full-service
branch.

The Bank also announced plans to increase its stake in Chile's Banco Sud
Americano, signing a letter of intent that will give Scotiabank a majority
ownership position. "This investment solidifies our presence in Latin America
- a region with high growth potential due to its relatively untapped retail
banking market," Godsoe said.

New electronic banking initiatives

Scotiabank is committed to leading the way in electronic banking, to help
customers bank when, where and how they want. In keeping with this strategy,
the Bank launched several new electronic banking initiatives this quarter. In
partnership with Rogers Cantel, Scotiabank began offering an interactive
messaging device that gives customers banking and discount brokerage
information at their fingertips, in real time, over the Cantel AT&T wireless
network. In June, Scotiabank became the first Canadian bank to provide customers
with ABM access to up-to-the-minute information on their investments, loans and
mortgages.

Providing community support

Scotiabank continued to play a leadership role in the fight against breast
cancer during the quarter, serving as the premier sponsor of the second World
Conference on Breast Cancer. Held in Ottawa in July, the conference attracted
1,000 delegates from 62 countries around the globe to share information on new
breast cancer research developments and related programs.

"As Canada's most international bank, we believe it is important to play a
leadership role in the battle against this global killer,'' said Godsoe.

Financial results
-----------------

Highlights for the third quarter compared with the preceding quarter include:

:: net income of $397 million, an increase of 3%;

:: earnings per share of $0.75, up from $0.73;

:: return on equity of 15.3%, versus 15.7%;

:: Tier 1 capital ratio of 8.0%, further strengthened from 7.8%.

Net income for the nine months ended July 31, 1999 rose by 11% to $1.149
billion, up from $1.035 billion in the same period a year ago. Year-to-date
earnings per share grew by 10% to $2.17. Return on equity was 15.3%, down
marginally from 15.5%.

Total revenues - net interest income and other income - reached $1.9 billion
in the third quarter, 6% higher than last year.

Net interest income grew to $1.156 billion, a 3% rise over the same quarter a
year ago. This increase was moderated by the securitisations undertaken by the
Bank which resulted in a transfer of net interest income to other income.
Contributing to the gains in net interest income were substantial growth in
residential mortgages in Canada and higher lending volumes in the Caribbean
and in Europe. The overall interest margin was 2.12%, unchanged from the same
period
last year, notwithstanding a decline in the Canadian interest margin.

Other income for the third quarter was $786 million, up 10% year over year,
with solid contributions by all core businesses, as well as greater
securitisation revenues. Most notably, there were higher investment banking
revenues of $44 million, and large gains in commercial and corporate credit fees
of $19 million reflecting strong lending activity. During the quarter, $89
million in investment securities gains were realised - $24 million more than a
year ago. The Bank also recorded a net write down of $22 million on a portfolio
of real estate properties which are in the process of being sold.

One of the Bank's competitive advantages is its superior productivity. The
Bank's productivity ratio - non-interest expenses as a percentage of total
revenues - was 60.4% in the third quarter versus 60.7% in the same quarter a
year ago. On a year-to-date basis, the productivity ratio of 59.9% was better
than the Bank's target of 60%.

Non-interest expenses were $1.2 billion in the third quarter, $63 million or
6% higher than the same period a year ago. Salaries - the Bank's largest
expense category - rose 6% year over year, partly due to higher
performance-linked compensation. There were increases in other expenses for new
initiatives to build sales and service capabilities, and to enhance the Bank's
technology infrastructure. Partly offsetting these higher costs were lower
deposit insurance premiums.

Net impaired loans as a percentage of total loans and acceptances at 0.2%
remained unchanged from the preceding quarter. Net impaired loans were $342
million as at July 31 1999, against $305 million last quarter.

The 1999 forecast annual specific provision for credit losses is estimated at
$435 million, unchanged from last quarter. This quarter's provision for credit
losses was $108 million, one-quarter of the estimated annual specific
provision, a reduction of $15 million from the same quarter a year ago.
General provisions remained unchanged at $750 million.

Total assets were $227 billion as at July 31 1999, almost $6 billion above the
preceding quarter. Approximately half of this increase arose from the
translation effect of a weaker Canadian dollar, with the balance resulting
from higher mortgages, securities and cash resources. Compared to a year ago,
total assets were up 2% or $5 billion.

Loans and acceptances rose to $143.4 billion or 1% over last year. After
adjusting for the $8 billion of loan securitisations completed over the past
year, loans and acceptances grew by 7%. The largest contributor to this
success was residential mortgages.

The Bank's securities portfolio was $33.4 billion as at July 31 1999, against
$29.4 billion a year ago. The surplus of market value over book value in the
Bank's investment securities portfolio was $228 million, versus $591 million
in the preceding quarter. The decline was due in part to securities gains
recognized in the current quarter, as well as lower values for emerging market
securities.

Total deposits were $156.5 billion as at July 31, 1999, basically unchanged
from a year ago. Personal deposits rose by 5%, reflecting strong sales of the
Bank's comprehensive range of deposit and investment services.

Common equity rose to $9.8 billion as at July 31, 1999, an increase of $390
million from the preceding quarter. This was mainly attributable to earnings
retention of $266 million, and a foreign currency translation adjustment of
$111 million. The quarterly increase in Tier 1 regulatory capital of almost 4%
exceeded the growth in risk-adjusted assets of 1%, resulting in an improved
Tier 1 ratio of 8.0%, up from 7.8% last quarter. The total capital ratio was
11.5% against 11.2% at the end of the prior quarter.

Performance Highlights
Scotiabank

                                       For the three months ended
                                     July 31    April 30    July 31
                 (Unaudited)         1999       1999        1998


Net income (millions)                $397      $384          $358

Earnings per share                  $0.75     $0.73         $0.68

Return on equity                     15.3%     15.7%         15.5%

Return on assets                     0.71%     0.68%         0.66%

Productivity ratio                   60.4%     61.0%         60.7%


                                         For the nine months ended

                                              July 31  July 31
(Unaudited)                                   1999     1998

Net income (millions)                       $1,149      $1,035

Earnings per share                           $2.17       $1.97

Return on equity                              15.3%       15.5%

Return on assets                              0.67%       0.66%

Productivity ratio                            59.1% (1)   60.2%


(1) The productivity ratio was 59.9% when a one-time gain of $77 million
realised on the sale of shares acquired several years ago through a loan
restructuring is excluded.

Interim Consolidated Statement of Income
Scotiabank

                               For the three months   For the nine months
                                     ended                 ended

(Unaudited)                  July 31 April 30  July 31  July 31  July 31
($ millions)                 1999    1999      1998     1999     1998

Interest income
Loans                        $2,565   $2,631   $2,652   $8,004   $7,465
Securities                      480      457      455    1,378    1,321
Deposits with banks             212      231      252      730      749

                              3,257    3,319    3,359   10,112    9,535

Interest expense
Deposits                      1,720    1,787    1,862    5,501    5,286
Subordinated debentures          81       75       95      232      261
Other                           300      295      283      879      762

                              2,101    2,157    2,240    6,612    6,309

Net interest income           1,156    1,162    1,119    3,500    3,226
Provision for credit losses     108      109      123      476      471


Net interest income after
provision for credit losses   1,048    1,053      996    3,024    2,755

Other income
Deposit and payment services    152      146      162      452      459
Investment management
 and trust                       79       83       83      242      231
Credit fees                     136      128      117      389      334
Investment banking              246      246      202      729      671
Net gain on investment
 securities                      89       37       65      241      248
Other                            84      110       84      290      225

                                786      750      713    2,343    2,168

Net interest and other
 income                       1,834    1,803    1,709    5,367    4,923


Non-interest expenses
Salaries                        583      576      551    1,715    1,632
Pension contributions and
 other staff benefits            96       83       86      257      234
Premises and equipment,
 including depreciation         250      261      254      762      708
Other                           267      268      242      786      729


                              1,196    1,188    1,133    3,520    3,303

Income before the
 undernoted:                    638      615      576    1,847    1,620
Provision for income taxes      228      218      207      661      558
Non-controlling interest in
 net income of subsidiaries      13       13       11       37       27


Net income                     $397     $384     $358   $1,149   $1,035


Preferred dividends paid        $27      $27      $24      $81      $70

Net income available to
 common shareholders           $370     $357     $334   $1,068     $965

Certain comparative amounts in these financial statements have been
reclassified to conform with current period presentation.

Consolidated Balance Sheet Highlights
Scotiabank


                                                          As at
 (Unaudited)                                   July 31  April 30  July 31
($ millions)                                   1999     1999      1998

Cash resources                                $19,626  $17,445    $19,109
Securities                                     33,350   32,149     29,424
Assets purchased under
resale agreements                             13,706   12,606      12,778
Loans                                         134,114  131,300    133,775
Other assets                                   26,603   27,976     27,570

Total assets                                 $227,399 $221,476   $222,656


Deposits - Personal                           $64,962  $64,338    $61,869
         - Business and
           governments                         65,437   63,663     64,712
         - Banks                               26,099   24,582     29,767

Total deposits                                156,498  152,583    156,348
Other liabilities                              53,909   52,705     49,612
Subordinated debentures                         5,451    5,037      6,164

Equity - Preferred                              1,775    1,775      1,775
       - Common                                 9,766    9,376      8,757

Total liabilities and equity                 $227,399 $221,476   $222,656

Components of Net Income and Average Assets
Scotiabank


                                  For the three months   For the nine months
                                         ended                 ended
(Unaudited)                  July 31 April 30  July 31  July 31  July 31
($ million                   1999    1999      1998     1999     1998

Net Income

By business line:
Canadian retail and
 commercial banking          $147     $147     $156     $455     $461
Corporate banking             144      142      122      483      314
Investment banking             97       90       43      275      197
International banking          85       82       64      220      168
Other                         (76)     (77)     (27)    (284)    (105)
                             $397     $384     $358   $1,149   $1,035


By geography:
Canada                       $252     $241     $208     $764     $648
United States                 100      102       90      330      240
International                 121      118       87      339      252
Other                         (76)     (77)     (27)    (284)    (105)

                             $397     $384     $358   $1,149   $1,035


Average Assets

By business line:
Canadian retail and
 commercial banking       $79,725  $78,694  $79,296  $79,637  $77,681
Corporate banking          40,993   45,723   39,305   44,528   37,155
Investment banking         66,367   69,992   62,817   69,580   62,692
International banking      27,494   27,412   24,237   27,382   22,502
Other                       8,686    8,639    9,019    8,924    8,817

                         $223,265 $230,460 $214,674 $230,051 $208,847

By geography:
Canada                   $128,284 $128,487 $126,743 $129,132 $124,663
United States              34,485   39,149   30,001   37,695   28,677
International              51,810   54,185   48,911   54,300   46,690
Other                       8,686    8,639    9,019    8,924    8,817

                         $223,265 $230,460 $214,674 $230,051 $208,847


Capital and Common Share Information
Scotiabank


                                                          As at
                                                 July 31  April 30  July 31
(Unauditd)                                       1999     1999      1998


Capital ratios
Tier 1                                           8.0%     7.8%       6.9%
Total                                           11.5%    11.2%      10.4%

Common shares outstanding (millions)            493.8    493.3     491.8

Book value per share                           $19.78   $19.01    $17.81
Market value per share                         $31.35   $34.65    $33.95

                                             For the three months ended
                                              July 31 April 30 July 31
(Unaudited)                                   1999    1999     1998


Common dividends paid
Total (millions)                            $103.7   $103.5     $98.3

Per share                                     $0.21    $0.21     $0.20


Contact: Sabi Marwah, Executive Vice-President and Chief Financial Officer,
tel Toronto 00 1 416 866 6808 or Shelley Jourard, Senior Manager, Public
Affairs, tel [phone], both of Scotiabank

END

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