Scotiabank's Record 2007 Net Income Exceeds $4 Billion



    
    Fiscal 2007 Highlights (year over year)
      -  Earnings per share (diluted) of $4.01 rose 13% from $3.55
      -  Net income of $4.05 billion, up 13% from $3.58 billion
      -  ROE of 22.0%, versus 22.1%
      -  Productivity ratio of 53.7%, an improvement from 55.3% last year
      -  Annual dividends per share increased 16% to $1.74

    Fourth Quarter Highlights (versus Q4, 2006)
      -  Earnings per share (diluted) of $0.95 rose 6.7% from $0.89
      -  Net income of $954 million, up 6% from $897 million
      -  ROE of 21.0%, versus 21.1%
      -  Productivity ratio of 54.4%, versus 56.9%
      -  A further quarterly dividend increase of 2 cents was announced,
         taking the quarterly dividend per common share to $0.47, payable in
         January, 2008
    

    TORONTO, Dec. 6 /CNW/ - Scotiabank achieved record earnings in 2007 with
net income of $4.05 billion, meeting or surpassing all of its key financial
and operational targets. Earnings per share (EPS) (diluted) were $4.01, up 13%
compared to $3.55 in 2006. Return on equity (ROE) was 22.0%, at the high end
of the Bank's target range.
    Scotiabank has again delivered solid results for the fourth quarter ended
October 31, 2007, with net income of $954 million, up 6% from the same period
last year. EPS (diluted) rose to $0.95 from $0.89 a year ago. ROE was 21.0%
compared to 21.1%. As previously disclosed, the fourth quarter includes a
pre-tax gain of $202 million ($163 million after tax) on the Bank's interests
in Visa Inc. and pre-tax losses of $191 million ($133 million after tax) on
structured credit instruments, which include non-bank asset-backed commercial
paper (ABCP).
    "Our record results and success in meeting or exceeding all financial and
operational targets was achieved by continuing a consistent strategy of
diversifying across geographies and our three growth platforms," said Rick
Waugh, President and Chief Executive Officer (CEO). "All major business lines
delivered strong earnings, led by Domestic Banking with excellent growth of
21%, International Banking with 17% and Scotia Capital with 6%.
    "This growth was achieved in part by increases in asset levels due to
successful execution of strategies to increase market share and gain more
customers. Year over year, the Domestic Bank recorded a 13% increase in
average assets, International Banking saw growth of 19% and Scotia Capital's
average assets grew by 17%.
    "Domestic Banking recorded market share gains in mortgages, personal
deposits, mutual funds and small business.
    "International Banking continues to deliver very strong results, with
excellent revenue and net income growth from our recent acquisitions in Peru,
Costa Rica, Jamaica and Dominican Republic. International also experienced
very strong organic growth, particularly in credit cards, mortgages and
commercial banking.
    "Scotia Capital again had record earnings in 2007, as strong core trading
and investment banking results combined with higher recoveries to more than
offset weaker market conditions in the fourth quarter.
    "The Bank's success across all business lines allowed us to earn through
a compression in the interest margin and the negative impact of foreign
currency translation.
    "Although market conditions were challenging in the fourth quarter, the
Bank continued to achieve solid earnings. The market losses taken were low in
relation to our overall trading and investment results.
    "We believe it is important to provide clarity on Scotiabank's current
exposure to areas of investor concern. In particular, we have no direct
exposure to U.S. sub-prime mortgages. Secondly, we have only nominal holdings
of non-bank ABCP that are subject to the Montreal Accord. Lastly, we do not
sponsor or manage any structured investment vehicles (SIVs) and have only
nominal investments in them. One of our core strengths is risk management and
we will continue to prudently manage our risk/reward balance in 2008.
    "Our strong capital position and earnings generation enabled us to deploy
shareholder capital in a disciplined manner in our pursuit of strategic growth
opportunities. In addition we provided shareholders with two dividend
increases this year totaling 24 cents, or 16%.
    "Scotiabank's results in 2007 reflect our core strengths in cost control
and customer satisfaction. Once again, the Bank has achieved an
industry-leading productivity ratio, and our talented team of dedicated
employees continues to provide customer-focused service. We are also proud to
note the Bank received the internationally prestigious 2007 Catalyst Award for
Scotiabank's Advancement of Women initiative, which recognized the improvement
in our representation of women in our senior management team."

    The Bank met or exceeded all of its key financial and operational
objectives this year as follows:

    
    1.  TARGET: Generate growth in EPS (diluted) of 7 to 12% per year. Our
        year-over-year EPS growth was 13%
    2.  TARGET: Earn a return on equity (ROE) of 20 to 23%. For the full
        year, Scotiabank earned an ROE of 22.0%
    3.  TARGET: Maintain a productivity ratio of less than 58%. Scotiabank's
        performance was 53.7%
    4.  TARGET: Maintain sound capital ratios. At 9.3%, Scotiabank's Tier 1
        capital ratio remains among the highest of the Canadian banks and
        strong by international standards.
    

    "Looking ahead to 2008, we believe our One Team, One Goal approach to
serving customers and superior execution ensures we are well positioned to
continue achieving profitable, sustainable revenue growth, despite potential
headwinds caused by a lower U.S. dollar and uncertain market conditions," Mr.
Waugh said.

    
    Financial Highlights

                                         As at and for the           For the
                                        three months ended        year ended
    -------------------------------------------------------------------------
                                 October     July  October  October  October
                                      31       31       31       31       31
    (Unaudited)                     2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Operating results ($ millions)
    Net interest income            1,716    1,812    1,652    7,098    6,408
    Net interest income (TEB(1))   1,932    1,913    1,783    7,629    6,848
    Total revenue                  3,078    3,201    2,868   12,490   11,208
    Total revenue (TEB(1))         3,294    3,302    2,999   13,021   11,648
    Provision for credit losses       95       92       32      270      216
    Non-interest expenses          1,792    1,752    1,708    6,994    6,443
    Provision for income taxes       204      296      203    1,063      872
    Provision for income taxes
     (TEB(1))                        420      397      334    1,594    1,312
    Net income                       954    1,032      897    4,045    3,579
    Net income available to
     common shareholders             938    1,016      890    3,994    3,549
    -------------------------------------------------------------------------
    Operating performance
    Basic earnings per share ($)    0.95     1.03     0.90     4.04     3.59
    Diluted earnings per share ($)  0.95     1.02     0.89     4.01     3.55
    Return on equity(1) (%)         21.0   21.7(2)    21.1     22.0     22.1
    Productivity ratio (%)
     (TEB(1))                       54.4     53.0     56.9     53.7     55.3
    Net interest margin on total
     average assets (%) (TEB(1))    1.87     1.86     1.89     1.89     1.95
    -------------------------------------------------------------------------
    Balance sheet information
     ($ millions)
    Cash resources and
     securities                  118,030  121,633  118,878
    Loans and acceptances(2)     238,685  233,004  212,329
    Total assets                 411,510  408,115  379,006
    Deposits                     288,458  286,985  263,914
    Preferred shares               1,635    1,290      600
    Common shareholders' equity   17,169   18,377   16,947
    Assets under administration  195,095  198,786  191,869
    Assets under management       31,403   31,031   27,843
    -------------------------------------------------------------------------
    Capital measures
    Tier 1 capital ratio(%)          9.3      9.7     10.2
    Total capital ratio(%)          10.5     10.6     11.7
    Tangible common equity to
     risk-weighted assets(1)(%)      7.2      7.7      8.3
    Risk-weighted assets
     ($ millions)                218,337  219,771  197,010
    -------------------------------------------------------------------------
    Credit quality
    Net impaired loans(3)
     ($ millions)                    601      584      570
    General allowance for
     credit losses ($ millions)    1,298    1,298    1,307
    Net impaired loans as a % of
     loans and acceptances(2)(3)    0.25     0.25     0.27
    Specific provision for
     credit losses as a % of
     average loans and
     acceptances (annualized)(2)    0.16     0.16     0.18     0.13     0.14
    -------------------------------------------------------------------------
    Common share information
    Share price($)
      High                         53.49    54.67    49.50    54.73    49.80
      Low                          46.70    48.91    45.36    46.70    41.55
      Close                        53.48    49.45    49.30
    Shares outstanding (millions)
      Average - Basic                983      988      989      989      988
      Average - Diluted              991      996    1,000      997    1,001
      End of period                  984      982      990
    Dividends per share ($)         0.45     0.45     0.39     1.74     1.50
    Dividend yield (%)               3.6      3.5      3.3      3.4      3.3
    Dividend payout ratio(4) (%)    47.1     43.7     43.3     43.1     41.8
    Market capitalization
     ($ millions)                 52,612   48,578   48,783
    Book value per common
     share ($)                     17.45    18.71    17.13
    Market value to book
     value multiple                  3.1      2.6      2.9
    Price to earnings multiple
     (trailing 4 quarters)          13.2     12.4     13.7
    -------------------------------------------------------------------------
    Other information
    Employees(5)                  58,113   57,152   54,199
    Branches and offices           2,331    2,289    2,191
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-GAAP measure. Refer to Non-GAAP measures section of this press
        release for a discussion of these measures.
    (2) Certain comparative amounts have been restated to conform with
        current period presentation.
    (3) Net impaired loans are impaired loans less the specific allowance for
        credit losses.
    (4) Represents common dividends for the period as a percentage of the net
        income available to common shareholders for the period.
    (5) Amounts for prior periods have been restated to include final numbers
        for all new acquisitions.
    


    Non-GAAP measures

    The Bank uses a number of financial measures to assess its performance.
Some of these measures are not calculated in accordance with Generally
Accepted Accounting Principles (GAAP), are not defined by GAAP and do not have
standardized meanings that would ensure consistency and comparability between
companies using these measures. These non-GAAP measures are discussed in this
press release and defined below:

    Taxable equivalent basis

    The Bank analyzes net interest income and total revenues on a taxable
equivalent basis (TEB). This methodology grosses up tax-exempt income earned
on certain securities reported in net interest income to an equivalent before
tax basis. A corresponding increase is made to the provision for income taxes,
hence there is no impact on net income. Management believes that this basis
for measurement provides a uniform comparability of net interest income
arising from both taxable and non-taxable sources and facilitates a consistent
basis of measurement. While other banks also use TEB, their methodology may
not be comparable to the Bank's. The TEB gross-up to net interest income and
to the provision for income taxes for the three months ended October 31, 2007
is $216 million versus $131 million in the same quarter last year and
$101 million last quarter. For the year ended October 31, 2007, the TEB
gross-up amount is $531 million versus $440 million for last year.
    For purposes of segmented reporting, a segment's net interest income and
provision for income taxes is grossed up by the taxable equivalent amount. The
elimination of the TEB gross-up is recorded in the 'Other' segment.

    Productivity ratio (TEB)

    Management uses the productivity ratio as a measure of the Bank's
efficiency. This ratio represents non-interest expenses as a percentage of
total revenue on a taxable equivalent basis.

    Net interest margin on total average assets (TEB)

    This ratio represents net interest income on a taxable equivalent basis
as a percentage of total average assets.

    Return on equity

    Return on equity is a profitability measure that presents the net income
available to common shareholders as a percentage of the capital deployed to
earn the income. The implementation of the new accounting standards for
financial instruments in the first quarter of 2007 resulted in certain
unrealized gains and losses being reflected in a new component of
shareholders' equity. The Bank calculates its return on equity using average
common shareholders' equity including all new components of shareholders'
equity.

    Economic equity and return on economic equity

    For internal reporting purposes, the Bank allocates capital to its
business segments using a methodology that considers credit, market and
operational risk inherent in each business segment. The amount allocated is
commonly referred to as economic equity. Return on equity for the business
segments is based on the economic equity allocated to the business segments.
The difference between the economic equity amount required to support the
business segments' operations and the Bank's total equity is reported in the
'Other' segment.

    Tangible common equity to risk-weighted assets

    Tangible common equity to risk-weighted assets is an important financial
measure for rating agencies and the investing community. Tangible common
equity is total shareholders' equity plus non-controlling interest in
subsidiaries, less preferred shares, unrealized gains/losses on
available-for-sale securities and cash flow hedges, goodwill and other
intangible assets (net of related taxes). Tangible common equity is presented
as a percentage of risk-weighted assets. Regulatory capital ratios, such as
Tier 1 and Total capital ratios, have standardized meanings as defined by the
Superintendent of Financial Institutions Canada.

    Group Financial Performance and Financial Condition

    Scotiabank had another year of record results in 2007 and met or exceeded
all of its key financial and operational objectives. Asset growth was strong,
recent acquisitions in Peru, Costa Rica and Canada made a solid contribution
to earnings and credit quality remained favourable. These positive impacts
were partly offset by lower net interest margins and the negative impact of
foreign currency translation. The results include a pre-tax gain of
$202 million on the Bank's interest in Visa Inc. and pre-tax losses of
$191 million on structured credit instruments.

    Total revenue

    Total revenue (on a taxable equivalent basis) was $13,021 million in
2007, an increase of $1,373 million or 12% from the prior year, despite the
negative impact of $199 million due to foreign currency translation, as the
Canadian dollar continued to appreciate against most currencies in which the
Bank operates. This increase in revenues reflected the contributions from
acquisitions and broad-based organic growth across all business lines.
Domestic Banking revenue grew by 9% over last year. Despite the negative
impact of foreign currency translation, International Banking revenue rose 23%
reflecting the full-year impact of acquisitions in Peru and Costa Rica, as
well as strong growth in Mexico and the Caribbean. In Scotia Capital, growth
in corporate and investment banking revenues was partially offset by lower
trading revenues. Group Treasury had higher gains on the sale of non-trading
securities.

    Net interest income

    Net interest income on a taxable equivalent basis was $7,629 million in
2007, up $781 million or 11% over last year, despite a negative impact of
$119 million due to foreign currency translation. Overall, strong asset growth
more than offset the compression in the net interest margin.
    The growth in average assets of $52 billion or 15% was mainly in business
and government lending ($14 billion or 23%), residential mortgages
($14 billion or 17%) and derivative securities ($7 billion or 20%). All
business segments contributed to the strong asset growth. Domestic's average
assets grew by $18 billion (primarily in mortgages), aided by the full-year
impact of the acquisition of the mortgage business of Maple Financial Group.
International's asset growth of $10 billion or 19% was driven in part by the
full-year impact of acquisitions in Peru and Costa Rica, as well as strong
organic growth across all regions, particularly credit cards and mortgages in
Mexico and the Caribbean and commercial loans in Asia. Scotia Capital's
average assets grew $22 billion, primarily from a $14 billion increase in
trading assets, and solid growth of $5 billion in corporate loans and
acceptances.
    The Bank's net interest margin (net interest income as a percentage of
average assets) was 1.89% in 2007, down from 1.95% last year. The decline was
due to higher wholesale funding costs, as well as a change in asset mix,
mainly from strong growth in lower-yielding, but lower-risk, Canadian
residential mortgages.
    On a business line basis, the Domestic Banking margin narrowed due to the
very strong volume growth in lower spread residential mortgages, and higher
wholesale funding rates. Some of this margin compression was offset in Group
Treasury (included in the Other segment), as funding is managed at an all-Bank
level. International Banking's margin widened slightly, primarily in Latin
America from the full-year impact of our acquisitions in Peru, and higher
margins in Mexico and Asia. The margin in Scotia Capital widened as a result
of a rise in tax-exempt dividend income and increased interest recoveries in
corporate lending.

    Other income

    Other income was $5,392 million in 2007, an increase of $592 million or
12% from 2006, despite a reduction of $80 million from the impact of foreign
currency translation. Acquisitions accounted for approximately $145 million or
25% of the total growth. Gains of $202 million recognized on the global Visa
restructuring were mostly offset by losses on structured credit instruments.
    Credit card and mutual fund fees both set records in 2007, and there were
increases in revenues from deposit and payment services, and investment
management, brokerage and trust services.
    Trading revenues were $450 million in 2007, a decrease of $187 million or
29% from last year. Derivative trading declined by $106 million, mainly in the
fourth quarter.
    Investment banking revenues were $737 million in 2007, an increase of
$78 million or 12% over last year. Underwriting fees rose by $43 million or
13%, due to higher M&A and new issue fees.
    The net gain on the sale of non-trading securities was $488 million in
2007, an increase of $117 million or 32% from last year, mainly from higher
equity gains.
    Other revenues were $948 million in 2007, an increase of $325 million
from last year, due mainly to a $202 million gain on the global Visa
restructuring, and the impact of acquisitions.

    Non-interest expenses

    Non-interest expenses were $6,994 million in 2007, an increase of
$551 million or 9% from last year, which benefited from the positive impact of
foreign currency translation of $77 million. Recent acquisitions accounted for
approximately $225 million or 40% of the growth in non-interest expenses.
    Salaries and employee benefits were $3,983 million in 2007, up
$215 million or 6% from last year, including the favourable impact of
$34 million due to foreign currency translation. Salaries increased 10%
reflecting an increase in branches and staffing in Canada to support growth
initiatives, as well as the impact of acquisitions, branch openings in Mexico
and more sales and service staff in International Banking. Performance-based
compensation increased $50 million from the same period last year, reflecting
stronger results in most business lines. This was partially offset by lower
stock-based compensation, due mainly to a smaller increase in the Bank's
common share price during the year. Pension and other employee benefits
declined by $50 million, due primarily to lower pension costs. This decrease
was partly offset by the impact of acquisitions.
    Premises and technology expenses were $1,353 million in 2007, an increase
of $139 million or 11% from last year. The higher premises costs reflected
both acquisitions and new branches (35 in Canada, 86 in Mexico). Technology
expenses increased by $54 million or 10%, mainly for a variety of new projects
in Canada and Mexico to support business growth initiatives, as well as a new
data centre in the Caribbean.
    Advertising and business development costs were $311 million, an increase
of $79 million or 34%, reflecting promotional campaigns to drive brand
awareness and customer acquisition. Professional expenses were $227 million an
increase of $53 million or 30%, due mainly to higher fees for litigation and
consulting fees related to acquisition opportunities and other initiatives.
    Our productivity ratio - a measure of efficiency in the banking industry
- was 53.7% for the year and remained better than our target of 58%. The ratio
improved from 55.3% last year, as we continued to have positive operating
leverage, with 12% revenue growth versus 9% expense growth.

    Taxes

    The provision for income taxes was $1,063 million in 2007, an increase of
22% over last year. This largely reflected the 15% growth in pre-tax income; a
higher effective tax rate in Mexico, as previously unrecognized tax loss
carryforwards were fully utilized during the year; and the impact of
adjustments to the future tax asset, reflecting tax rate reductions in Canada.
The Bank's overall effective tax rate for the year was 20.3%, up from 19.2%
last year.

    Non-controlling interest

    The deduction for non-controlling interest in subsidiaries was
$118 million in 2007, an increase of $20 million from 2006, due primarily to
the full-year impact of the acquisitions in Peru.

    Risk Management

    Credit Risk

    In 2007, the total provision for credit losses was $270 million, up from
$216 million last year. The specific provision for credit losses was
$295 million, up $19 million from 2006, largely reflecting portfolio growth.
    Domestic Banking provisions were up $16 million from last year, with
higher retail provisions in line with growth in the portfolio, partially
offset by lower provisions in the commercial portfolio. Specific provisions of
$101 million in the International Banking portfolios were up $41 million from
last year, with higher retail provisions due to the impact of acquisitions and
portfolio growth, partially offset by net recoveries in the commercial
portfolios. Scotia Capital had net recoveries of $101 million in 2007 versus
net recoveries of $63 million in 2006. Recoveries in 2007 were realized
primarily in the United States.
    Net impaired loans, after deducting the specific allowance for credit
losses, were $601 million at October 31, 2007, an increase of $31 million from
a year ago. There was an increase of $153 million in International Banking,
partially offset by declines of $106 million in Scotia Capital and $16 million
in Domestic Banking.
    The general allowance for credit losses as at October 31, 2007 was
$1,298 million, a reduction from $1,307 million a year ago. In the second
quarter, the general allowance for credit losses was reduced by $25 million in
the Consolidated Statement of Income, while there was a $16 million increase
resulting from the consolidation of an acquisition in Costa Rica for a net
reduction of $9 million in 2007. This net decline follows net reductions of
$23 million in 2006 and $45 million in 2005.

    Market Risk

    Market risk in the Bank's trading activities increased during 2007, with
an average one-day value at risk (VaR) of $12.4 million, compared to
$8.9 million in 2006. The year-over-year increase was due primarily to
increased interest rate risk with modest increases in exposures in all other
risk factors. Trading revenue was positive on more than 92% of the trading
days during the year, compared to 90% in 2006.

    Liquidity Risk

    Liquidity risk is the risk that the Bank is unable to meet its financial
obligations in a timely manner at reasonable prices. Liquidity risk is
controlled by policies and limits with respect to cash flow gaps over
specified periods and minimum holdings of core liquidity that can generally be
sold or pledged to meet the Bank's obligations. As at October 31, 2007, total
liquid assets held by the Bank were $103 billion (2006 - $98 billion), equal
to 25% of total assets (2006 - 26%).

    Balance Sheet

    The Bank's total assets at October 31, 2007 were $412 billion, up
$33 billion or 9% from last year, after a $26 billion negative impact from
foreign currency translation, resulting from the stronger Canadian dollar. The
increase was due primarily to growth in retail and commercial loans.
    Securities declined by $7 billion from last year. Trading securities
declined $3 billion, due almost entirely to the impact of foreign currency
translation. Available-for-sale securities were down $4 billion as growth in
the underlying portfolio was more than offset by both the deconsolidation of a
variable interest entity that was restructured during the year, as well as the
negative impact of foreign currency translation. Partly offsetting these
declines was an increase of $1 billion for the initial recognition of
available-for-sale securities at their fair value in accordance with the new
financial instruments accounting standards adopted in 2007. The offsetting
amount, net of taxes, was included in accumulated other comprehensive income
within shareholders' equity.
    As at October 31, 2007, the unrealized gains on available-for-sale
securities were substantial at $972 million, but declined $119 million from
the prior year, due mainly to gains realized during the year, the impact of
foreign currency translation, and a reduction in the value of certain debt
securities.
    The Bank's loan portfolio grew $24 billion or 12% from last year, despite
a negative impact of $11 billion due to foreign currency translation. Domestic
residential mortgages led this growth with a $16 billion increase, before
securitization of $4 billion, largely from market share gains as well as the
continued demand arising from the strong domestic housing market. Personal
loans were up $3 billion from last year, with $1 billion due to the popularity
of the domestic ScotiaLine product.
    Business and government loans increased $9 billion from last year, or
$18 billion before the impact of foreign currency translation. Loans in Scotia
Capital were up $6 billion, primarily to support trading operations. Domestic
experienced growth of $2 billion. In International banking, business and
government loans increased in most locations despite the negative impact of
foreign currency translation, with Asia, in particular reflecting net growth
of $2 billion.
    Total liabilities were $393 billion as at October 31, 2007, an increase
of $32 billion or 9% from last year, despite the negative $28 billion impact
due to foreign currency translation. Deposits grew $25 billion and derivative
instrument liabilities were up $12 billion. The latter increase was similar to
the change in the derivative instrument assets. Partially offsetting was a
decline in obligations related to repurchase agreements, due in part to
foreign currency translation.
    Total deposits grew $25 billion or 9% from last year, net of a
$20 billion negative impact due to foreign currency translation. Personal
deposits increased $7 billion, led by $3 billion growth in domestic personal
GICs. International experienced modest increases in personal deposits across
most regions. Business and government deposits were up $20 billion,
notwithstanding the impact of foreign currency translation, primarily to fund
the Bank's strong asset growth in 2007.
    Total shareholders' equity rose $1 billion in 2007. The increase was due
primarily to strong internal capital generation of $2 billion, the issuance of
$1 billion non-cumulative preferred shares during the year and the change in
accounting standards for financial instruments, which resulted in after-tax
fair value adjustments of approximately $1 billion relating primarily to
available-for-sale securities. This growth in capital was negatively impacted
by the strong appreciation of the Canadian dollar against most currencies.
This resulted in unrealized foreign currency translation losses on the Bank's
net investments in foreign subsidiaries of $2 billion during the year, net of
foreign currency gains on related hedges, and taxes of $427 million.

    Capital management

    The Bank's capital base continues to be strong, with a tangible common
equity (TCE, as defined under Financial Highlights above) ratio of 7.2%, a
decline of 110 basis points from last year, and a Tier 1 capital ratio of
9.3%, down 90 basis points. Both declines were due primarily to the further
deployment of capital for acquisitions and to support organic asset growth.
Furthermore, we are well positioned to meet the new Basel II requirements in
2008.
    In the first quarter of 2007, the Bank renewed its normal course issuer
bid to purchase up to 20 million of the Bank's common shares. This represented
approximately 2 per cent of the Bank's common shares outstanding as at
December 31, 2006. During fiscal 2007, the Bank purchased 12 million common
shares at an average cost of $52.21 per share. The bid is expected to be
renewed upon its expiry on January 11, 2008.

    Off-balance sheet arrangements

    In the normal course of business, the Bank enters into contractual
arrangements that are not required to be consolidated in its financial
statements. These arrangements are primarily in three categories: Variable
Interest Entities (VIEs), securitizations, and guarantees and loan
commitments. No material contractual obligations were entered into this
quarter that are not in the ordinary course of business. Processes for review
and approval of these contractual arrangements are unchanged from last year.
    The Bank provides liquidity facilities, as well as partial credit
enhancements in certain instances, to commercial paper conduits administered
by the Bank and by third parties. These facilities provide an alternate source
of financing in the event a conduit cannot issue commercial paper, or in some
cases, when certain specified conditions or performance measures are not met.
Liquidity facilities to commercial paper conduits totalled $22.5 billion as at
October 31, 2007, of which $20.1 billion were to off-balance sheet conduits
administered by the Bank. As at October 31, 2007, total commercial paper
outstanding for off-balance sheet conduits administered by the Bank was
$14.5 billion. At year end, the Bank held less than 2% of the combined
conduits' outstanding commercial paper. Exposure to U.S. sub-prime mortgage
risk is nominal.
    For conduits not administered by the Bank, liquidity facilities totaled
$2.4 billion, of which $1.8 billion were for U.S. third-party conduits and
$570 million were for Canadian third-party conduits. Exposure to the non-bank
conduits subject to the Montreal Accord is not significant, with $87 million
outstanding. Sub-prime exposure in third party conduits is nominal.

    Fourth Quarter Review

    Net income

    Net income available to common shareholders was $938 million in the
fourth quarter, an increase of $48 million or 5% from the same quarter last
year, despite the negative impact of $53 million from foreign currency
translation. The year-over-year increase reflected the impact of several
acquisitions, widespread organic growth in retail volumes and other income in
both Domestic and International Banking, and higher securities gains, partly
offset by lower trading revenues.
    In the fourth quarter of 2007, the Bank recognized a gain of $202 million
($163 million after tax) on its domestic and international interests in Visa
Inc. Visa Inc. was formed as a result of a reorganization of Visa Canada, Visa
USA and Visa International. This gain was recognized in Other Income - Other.
Mostly offsetting this gain were losses on structured credit instruments
totalling $191 million ($133 million after tax).
    Net income available to common shareholders was $78 million below last
quarter's near-record level. The decrease reflected lower trading revenues,
the negative impact of $37 million from foreign currency translation, and
higher expenses.

    Total revenue

    Total revenue (on a taxable equivalent basis) was $3,294 million in the
fourth quarter, an increase of $295 million or 10% over the same quarter last
year, notwithstanding a negative foreign currency translation impact of
$136 million. Quarter over quarter, total revenue fell $8 million, after an
$87 million negative impact from foreign currency translation.

    Net interest income

    Net interest income (on a taxable equivalent basis) was $1,932 million in
the fourth quarter, an increase of $149 million or 8% over the same quarter
last year, and $19 million above the third quarter. These increases occurred
notwithstanding the negative impact of foreign currency translation of
$78 million over the same quarter last year and $46 million compared to the
third quarter.
    Asset volumes for the quarter remained relatively constant with the
increase in Domestic's lower-risk residential mortgages offset by a reduction
in trading securities in Scotia Capital.
    Compared to the same quarter a year ago, the increase in net interest
income was the result of the solid growth in average assets of $34 billion or
9%. Residential mortgages grew by $13 billion or 15% in Domestic. Scotia
Capital's loan volumes grew by $3 billion and lending in International rose by
$5 billion. Acquisitions and strong organic growth in both retail and
commercial lending in the Caribbean and commercial lending in Asia were the
main components of International's higher volumes. The Bank's net interest
margin narrowed by two basis points, primarily from a larger mark-to-market
loss on financial instruments and growth in lower yielding, lower risk
mortgages. This was partially offset by the higher tax exempt dividend income,
and a wider margin in International Banking, where spreads widened in Peru,
Mexico and Asia.
    Quarter over quarter, the Bank's net interest margin rose by one basis
point to 1.87%. This was largely driven by an increase in Scotia Capital's
margin through the recognition of higher tax-exempt dividend income and a
reduction in the volume of low-spread trading assets, as well as an
improvement in the International margin. The latter was a result of growth in
commercial lending assets in Asia, and retail lending assets throughout the
Caribbean and Central America, and Mexico. The positive impact of these items
were mostly offset by mark-to-market losses on financial instruments, the
continued growth in lower spread Canadian residential mortgages, and rising
funding costs as wholesale interest rates rose in the fourth quarter due to
market volatility.

    Other income

    Other income was $1,362 million in the fourth quarter, an increase of
$146 million or 12% from the same quarter last year, despite a negative
$58 million impact from foreign currency translation. The gains of
$202 million on the global Visa restructuring and $43 million on the sale of
the bond index business were mostly offset by losses aggregating $191 million
on structured credit instruments. This was comprised of a reduction in trading
revenues of $115 million and write-downs of non-trading securities of $76
million (including $20 million related to non-bank ABCP).
    The remaining increase came from widespread growth in retail products and
services. Also contributing were higher gains on non-trading securities.
Partially offsetting were lower trading and underwriting revenues.
    Quarter over quarter, other income declined by $27 million. The gains
from the global Visa restructuring and the sale of the bond index business
were more than offset by losses on structured credit instruments and the
negative $41 million impact from foreign currency translation.

    Non-interest expenses and productivity

    Non-interest expenses were $1,792 million in the fourth quarter, an
increase of $84 million or 5% over the same quarter last year, notwithstanding
the benefit of $52 million from foreign currency translation. Premises
expenses were up 14% due to branch openings in Canada and Mexico, as well as
recent acquisitions. Salaries increased reflecting normal growth and the
expansion of branches in Domestic and International. Technology, advertising
and professional fees also rose, due primarily to new projects and initiatives
to drive revenue growth. These were partly offset by lower pension and benefit
costs.
    Quarter over quarter, non-interest expenses grew $40 million, due mainly
to higher technology and advertising costs, professional fees and salaries,
partially offset by lower performance-based compensation and benefits, and the
positive impact of $30 million from foreign currency translation.
    The Bank's productivity ratio was 54.4% this quarter, compared to 56.9%
in the same quarter last year, and 53.0% last quarter. Year over year, there
was positive operating leverage of 5%.

    Taxes

    The Bank's effective tax rate was 17.1% in the fourth quarter, a 90 basis
point decrease from the same quarter last year and 470 basis points below the
previous quarter. These declines were due mainly to higher income from
tax-exempt securities, and a lower tax rate on the Visa gain, partly offset by
a $50 million provision relating to an outstanding tax matter.

    Non-controlling interest

    The deduction for non-controlling interest in subsidiaries was
$33 million for the quarter, up $5 million from the same period last year, and
$4 million from last quarter, due mainly to higher levels of earnings in less
than wholly-owned subsidiaries (primarily Peru).

    Risk Management

    Credit Risk

    The provision for credit losses was $95 million in the fourth quarter,
compared to $32 million in the same period last year and $92 million in the
previous quarter. Last year's provision comprised $92 million in specific
provisions and a reduction of $60 million in the general allowance for credit
losses.
    Scotia Capital had net recoveries of $10 million in the fourth quarter,
compared to a provision of $26 million in the fourth quarter of last year and
net recoveries of $10 million in the previous quarter. The net recovery in the
current quarter related primarily to provision reversals in the U.S.
portfolio.
    Credit losses of $78 million in the Domestic Banking portfolios were up
from $58 million in the same quarter last year. The year-over-year increase
arose from higher retail provisions in line with strong growth in retail
lending volumes. Credit losses were $1 million higher compared to last
quarter.
    International Banking's provisions for credit losses were $27 million in
the fourth quarter, compared to $8 million in the same period last year and
$25 million in the prior quarter. Both the year-over-year and
quarter-over-quarter increases are due mainly to higher provisions in the
retail portfolios, offset partially by higher net recoveries in the commercial
portfolio.
    Total net impaired loans, after deducting the allowance for specific
credit losses, were $601 million as at October 31, 2007, up from $584 million
last quarter.
    The general allowance for credit losses was $1,298 million, unchanged
from last quarter.

    Market Risk

    In the fourth quarter, VaR declined to $13.2 million from $15.6 million
in the third quarter as a result of reduced equity risk. There were a total of
nine trading loss days, compared to six loss days in the third quarter. Daily
trading losses exceeded the VaR on one occasion during 2007 compared with zero
in 2006. This occurred on August 7, 2007 due to significant movements in the
credit and equity markets and resulted in a single-day loss of $16.8 million.
A Bank-sponsored conduit with $1 billion of highly-rated structured credit
assets was consolidated at the end of the year and the risk was aggregated
with the Bank's trading portfolios. This increased the October 31, 2007,
all-Bank VaR and the interest rate VaR by $8 million and $10 million
respectively; the all-Bank VaR has subsequently been reduced to levels
approximating the Q4 2007 average.

    
                                      One-day VaR by risk factor ($ millions)
                                        Average for the three months ended

                                       31-Oct-07     31-Jul-07     31-Oct-06
    Interest Rate                      $     9.2     $     9.0     $     7.4
    Equities                           $     6.1     $     8.7     $     5.9
    Foreign Exchange                   $     2.4     $     2.0     $     0.8
    Commodities                        $     1.5     $     1.3     $     0.5
    Diversification Effect             $    (6.0)    $    (5.4)    $    (4.5)
    All Bank                           $    13.2     $    15.6     $    10.1
    

    Dividend

    The Board of Directors, at its meeting on December 6, 2007, approved a
quarterly dividend of 47 cents per common share, an increase of 2 cents,
payable on January 29, 2008, to shareholders of record as of January 2, 2008.
This will be 12% higher than the quarterly dividend paid January, 2007. Annual
dividends per share increased 24 cents, or 16%, to $1.74, continuing the
Bank's long record of dividend increases.

    Outlook

    Global growth is expected to average about 5% for the fourth year in a
row in 2007 despite recurring volatility in financial and currency markets and
the setback to the performance of the U.S. economy triggered by the downturn
in housing. The resilience of international activity stems in large part from
continued strong economic advances in China, India, and other emerging nations
where export-driven growth is increasingly being reinforced by domestic
spending gains.
    At the same time, however, growth has started to slow in many developed
countries, including Canada. There are also significant challenges related to
weakening U.S. demand and the recent rapid appreciation of many currencies
against the U.S. dollar, which has underscored the need for substantial
competitive adjustments in a variety of industries. Alongside these
challenges, there is growing concern and uncertainty around interest rates,
inflation and financial markets generally. Looking ahead, Canada and Mexico
will continue to benefit from the robust demand for most commodities,
mitigating the negative influence of weakening U.S. domestic demand.
    Overall, we see the Bank's operating environment as challenging through
much of 2008. That said, we remain well positioned to continue to grow and
achieve our targets. In view of this outlook, we have established the
following targets for 2008:

    
    -   Earnings per share growth: 7 to 12%;
    -   ROE: 20 to 23%;
    -   Productivity of less than 57%; and
    -   Maintain strong capital ratios.
    

    Business Line Highlights

    Domestic Banking

    Full Year

    Domestic Banking reported record net income available to common
shareholders of $1,550 million in 2007, $271 million or 21% higher than last
year. Return on equity was 33%. Domestic Banking accounted for 39% of the
Bank's total net income. Results included a gain of $92 million (net of
applicable taxes) from the global Visa restructuring. Excluding this gain,
underlying net income was a record at $1,458 million, $179 million or 14%
higher than last year. Retail and small business banking, commercial banking
and wealth management all generated solid performances.
    Average assets grew $18 billion or 13% in 2007. This was led by a
substantial increase in residential mortgage balances (before securitization)
of $13 billion or 16%, resulting in a 15 basis point increase in market share
versus last year. Both the branch and mortgage broker channels produced strong
growth. There was also very good year-over-year growth in personal revolving
credit and business lending, including acceptances and business loans. Retail
and small business deposits grew $6 billion or 7%, due mainly to an increase
in term deposit balances, which led to an industry-leading gain in personal
term deposit market share of 41 basis points from last year, including the
acquisition of Dundee Bank. Commercial deposits, including current accounts
and non-personal term deposits, rose 10%, continuing the double-digit growth
trend of the past several years.
    In Wealth Management, assets under administration rose 11% to
$130 billion, while assets under management grew 8% to $26 billion. Net asset
inflows from new customers, continued growth in our share of existing
customers' investment business, and market-driven gains all contributed to
this growth.
    Total revenues were $6,103 million, up $486 million or 9% from last year.
Net interest income increased $172 million to $3,854 million due to strong
volume growth in both assets and deposits. This was partially offset by a
decline in the margin of 19 basis points to 2.51%. This decrease in the margin
was due mainly to higher wholesale funding costs, strong growth in net assets,
the growth of relatively lower-spread mortgages as a proportion of the total
portfolio and competitive pricing pressures.
    Other income for the year was $2,249 million, an increase of $314 million
or 16%. Excluding the $111 million gain related to the global Visa
restructuring, other income rose 10% or $203 million, including record growth
in wealth management, and increases in retail and small business and
commercial banking activities.

    Retail & Small Business Banking

    Total revenues were $4,046 million, up $305 million or 8% from last year.
Net interest income rose $122 million or 4% from strong growth in assets and
deposits, partially offset by a lower margin. Excluding the Visa gain, other
income rose $72 million or 9% driven by higher service fees from chequing and
savings accounts, due to pricing changes and new account growth, and higher
credit card revenues, reflecting growth in cardholder transactions. There was
strong revenue growth of 14% in small business banking. We grew our lending
and deposit market share and overall customer base in this important segment.

    Commercial Banking

    Total revenues rose $42 million or 5% to $926 million in 2007. Net
interest income was 6% higher than last year, driven by strong growth in both
assets and deposits, partially offset by a decline in the margin. Average
assets rose 9% and average deposits increased 10%. Year over year, other
income rose 3% to $310 million.

    Wealth Management

    Total revenues were a record $1,131 million, up $139 million or 14% from
last year, driven by solid increases in all business units. Mutual fund
revenue grew 24%, driven by net fund sales of $2.3 billion. This growth, which
led to greater market share, occurred primarily in more profitable, long-term
funds. The results also benefited from solid fund performance. Full-service
brokerage revenues rose 9%, mainly as a result of increased fee-based
business, as well as higher mutual fund trailer fees and insurance revenues.
Private client revenues increased 13%, reflecting growth in Scotia Cassels
managed account fees, Scotiatrust estate and trust fees, and private banking
fees. ScotiaMcLeod Direct Investing revenues rose 14%, mostly driven by growth
in trading volumes and mutual fund trailers. Assets under administration
continue to grow, rising 11% during the year, reflecting increases in our
mutual fund, private client and retail brokerage businesses. Assets under
management rose a strong 8%, primarily from strong mutual fund sales and
performance.

    Non-interest expenses

    Non-interest expenses of $3,559 million rose modestly in 2007, up
$90 million or 3% from last year. The increase was due mainly to the impact of
the growth initiatives, including expansion of the branch network and the
hiring of additional financial advisors. Also contributing to the increase
were acquisitions, normal salary increases and higher volume-related expenses,
consistent with higher revenues. Partially offsetting were lower pension
expenses and lower stock-based compensation.

    Credit quality

    The provision for credit losses was $295 million in 2007, an increase of
$16 million compared to last year. Credit quality remained strong in the
retail portfolio, with the ratio of loan losses to average loan balances
increasing two basis points to 22 basis points. Credit quality in the
commercial portfolio was also solid, with provisions remaining at very low
levels.

    Fourth Quarter

    Net income available to common shareholders for the fourth quarter was
$434 million, an increase of $98 million or 29% from the same quarter last
year. Return on equity was 37% and Domestic Banking accounted for 46% of the
Bank's fourth quarter total net income. Quarter over quarter, net income
increased $43 million or 11%. Excluding the gain on the global Visa
restructuring, net income was 2% higher than last year. Quarter over quarter,
net income declined 12% excluding the gain on the global Visa restructuring,
mainly as a result of lower net interest income from margin compression and
higher expenses to support growth initiatives.
    Net interest income was flat year over year, with strong asset and
deposit growth mostly offset by a decline in the net interest margin. Retail
assets before securitization rose 13%, due primarily to growth of $13 billion
or 15% in residential mortgage balances. Quarter over quarter, net interest
income decreased $52 million or 5% as a result of margin compression from the
higher cost of wholesale funding due to increased market volatility.
    Excluding the Visa gain, other income rose $55 million or 11% from last
year, primarily from higher mutual fund revenues and increases in transaction
and credit fees. Other income was up 3% from last quarter.

    Retail & Small Business Banking

    Total revenues were $1,066 million, up $99 million or 10% from last year.
Net interest income declined $29 million or 4%, as strong growth in assets and
deposits was offset by a lower margin. Average assets rose 13% and average
deposits increased 7%. Excluding the Visa global restructuring gain, other
income rose $18 million or 9% over last year, primarily from increases in
transaction service revenues and card revenues. Quarter over quarter,
excluding the Visa gain, total revenues declined 7%, due mainly to lower net
interest income as a result of margin compression.

    Commercial Banking

    Total revenues rose $41 million or 17% to $273 million in the quarter.
Net interest income was 15% higher than last year, primarily driven by growth
in both assets and deposits, and an increase in the margin. Average assets
rose 10% and average deposits increased 2%. Year over year, other income rose
21% to $101 million from higher credit fees, card revenues and other revenues.
Quarter over quarter, total revenues rose 16% from both higher net interest
income due primarily to an increase in the margin and other income.

    Wealth Management

    Total revenues were $277 million, up $22 million or 9% from the same
quarter last year. Mutual fund revenue grew 24% as a result of growth in
average assets of $3.3 billion or 21%. This growth was driven by strong net
fund sales of $2.3 billion in 2007, primarily in more profitable longer-term
funds. Private client revenues increased 13%, reflecting growth in Scotia
Cassels, Scotiatrust and private banking. ScotiaMcLeod Direct Investing
revenues rose 28%, driven by a 23% growth in trading volumes reflecting
increased trading activity.
    Quarter-over-quarter, revenues declined 2% mainly in retail brokerage due
to market conditions. Assets under administration continue to grow, rising 11%
during the year, reflecting increases in our mutual fund, private client and
retail brokerage businesses. Assets under management rose a strong 8%,
primarily from strong sales and mutual fund performance. Quarter over quarter,
assets under administration and assets under management grew 1% and 2%
respectively.

    Non-interest expenses

    Non-interest expenses rose $15 million or 2% from the same quarter last
year, as a result of growth initiatives and normal salary increases, partially
offset by lower pension expenses and stock-based compensation. Expenses rose
$35 million or 4% quarter over quarter, reflecting the impact of growth
initiatives, including acquisitions, new branches, higher advertising and
stock-based compensation.

    Credit quality

    Overall credit quality remained stable. In the fourth quarter, provisions
for credit losses were $78 million, up from both last year and last quarter in
retail banking, in line with substantial portfolio growth.

    
    Other Domestic Banking Highlights:

    -   In October, we signed a five year agreement with the
        National Hockey League (NHL) and NHL Players' Association (NHLPA)
        establishing Scotiabank as the Official Bank of the NHL and NHLPA in
        Canada. This agreement gives Scotiabank the exclusive opportunity to
        market our banking services, including credit cards, wealth
        management and commercial services under the NHL shield. Furthermore,
        Scotiabank has partnered with CBC's Hockey Night in Canada to sponsor
        its pre-game show, Scotiabank Hockey Tonight, for the
        2007/2008 hockey season. These new partnerships build on our current
        relationships as sponsors of the Calgary Flames, the Edmonton Oilers
        and the Ottawa Senators, whose home arena is Scotiabank Place.
    -   On September 28, 2007 Scotiabank announced that all regulatory
        approvals have been received and it completed the transaction
        announced September 18, 2007 involving Scotiabank's purchase of
        Dundee Bank of Canada and a strategic equity investment in
        DundeeWealth Inc. Scotiabank now owns 18 per cent of the outstanding
        shares of DundeeWealth Inc.
    -   The Atlantic Customer Contact Center (ACCC) has been recognized by
        Service Quality Measurement (SQM) Group for achieving 'World Class'
        customer and employee satisfaction in 2007. Out of the 300 companies
        benchmarked, they were one of only 15 organizations recognized for
        'World Class' customer satisfaction, and one of only two
        organizations to achieve 'World Class' status in employee
        satisfaction.
    

    International Banking

    Full Year

    International Banking's net income available to common shareholders in
2007 was a record $1,232 million, a substantial increase of $178 million or
17% from last year. Excluding $71 million in gains (net of applicable taxes)
on the global Visa restructuring and the $51 million Value Added Tax (VAT)
recovery in 2006, net income was up $158 million or 16%. The most significant
contributors to earnings growth were the Caribbean and Central America, and
Peru.
    Results in the Caribbean and Central America were bolstered by the impact
of our acquisitions in Costa Rica, the Dominican Republic and Jamaica, as well
as strong organic loan growth and higher credit card revenues. The
contribution from Peru reflected a full year of ownership, compared to seven
months last year. Mexico also had strong retail loan growth, but was impacted
by the VAT recovery in 2006 and a higher tax rate, as the remaining tax loss
carry forwards were fully utilized during the year. This strong growth was
achieved notwithstanding the $37 million negative impact of foreign currency
translation. International Banking accounted for 31% of the Bank's total net
income, and had a return on equity of 19.5%.
    Average assets increased 19% during the year to $66 billion, despite the
4% negative impact of foreign currency translation. The increase was a result
of organic growth, as well as acquisitions. The organic growth was driven by a
21% increase in retail loans and a 23% rise in commercial loans. Growth in
credit cards and mortgages was particularly robust, up 32% and 24%,
respectively, spread across the division. Organic commercial loan growth of
$4 billion was primarily in Asia and the Caribbean and Central America. Growth
in low-cost deposits was also strong at 11%, as balances rose in Mexico and
throughout the Caribbean.
    Total revenues were $3,989 million in 2007, an increase of $744 million
or 23% from last year, net of the $142 million negative impact of foreign
currency translation.
    Net interest income was $2,762 million in 2007, an increase of
$456 million or 20% from last year, despite a negative foreign currency
translation impact of $101 million. The increase was a result of very strong
organic loan growth of 22% spread across the division, as well as the impact
of acquisitions in Peru and the Caribbean and Central America. Net interest
margins were up from last year, driven by increases in Mexico and Asia, as
well as the full year impact of acquisitions in Peru, partially offset by a
decline in the Caribbean and Central America.
    Other income increased $288 million or 31% to $1,227 million compared to
last year. Excluding the gains on the global Visa restructuring, growth was
still a very strong 21%, despite the $41 million negative impact of foreign
currency translation. This growth resulted from our acquisitions in Peru and
the Caribbean and Central America, higher investment gains in Mexico, and
widespread transaction-driven growth. Partially offsetting these increases was
the negative change in fair value of certain securities in 2007 from widening
credit spreads.

    Caribbean and Central America

    Total revenues were $1,628 million in 2007, an increase of $321 million
or 25%, with the gains on the global Visa restructuring offsetting the
negative impact of foreign currency translation. Net interest income was
$1,186 million in 2007, an increase of $166 million or 16% from last year,
with the negative impact from foreign currency translation being offset by the
$59 million growth from our acquisitions. The increase was driven by organic
asset growth across the region, with a 25% increase in commercial lending and
a 19% increase in retail loans, primarily in credit cards (up 26%) and
mortgages (up 22%). Net interest margins declined due to a change in the mix
of business, partly as a result of acquisitions.
    Other income of $442 million was up $155 million from last year. This
included a negative impact of foreign currency translation of $16 million,
$63 million in gains from the global Visa restructuring and $49 million from
acquisitions. The remaining $59 million in organic growth was due primarily to
a very strong increase of 30% in credit card fees, as well as increases in
personal banking fees and foreign exchange revenues.

    Mexico

    Total revenues were $1,366 million in 2007, an increase of $160 million
or 13%. This included a negative impact of foreign currency translation of $56
million, which was partly offset by $19 million in gains from the global Visa
restructuring.
    Net interest income was $888 million in 2007, an increase of $85 million
or 11% from last year, despite a $34 million negative impact due to foreign
currency translation. This increase was driven by strong volume growth,
primarily in retail loans, with a 43% rise in credit card balances and a 39%
increase in mortgages. Net interest margins were higher than last year,
reflecting a change in the mix of assets.
    Other income rose $75 million or 19% year over year, with the impact of
the gains from the global Visa restructuring offsetting the negative impact of
foreign currency translation. The increase was due primarily to higher
investment gains, a 27% increase in full-service and discount brokerage fees
from higher client trading revenues, a 19% increase in credit card fees and an
18% increase in other personal banking fees.

    Latin America, Asia and Other

    Total revenues were $995 million in 2007, an increase of $264 million,
due primarily to a rise of $250 million from Peru, $9 million in Visa gains
offset by a $15 million negative impact from foreign currency translation. The
remaining increase was due primarily to very strong organic commercial loan
growth of 48% in Asia, and higher revenues in Chile resulting from higher
margins and retail loan volumes, and an improved funding mix. These were
partly offset by lower other income in Asia due to the gain on the sale of a
foreclosed asset in 2006, and the negative change in fair value of certain
securities in 2007 from widening credit spreads.

    Non-interest expenses

    Non-interest expenses were $2,279 million in 2007, up 18% from last year.
This increase reflected a $73 million favourable impact of foreign currency
translation, a $51 million VAT recovery in 2006 and a $202 million increase
from our acquisitions in Peru and the Caribbean and Central America. The
remaining increase was due to higher compensation expenses, consistent with
business growth and new branch openings, volume driven increases in
communications and processing costs, and higher credit card and advertising
expenses. Partly offsetting these increases were lower litigation fees.

    Credit quality

    The provision for credit losses was $101 million in 2007, up $41 million
from the low levels recorded last year. Overall the division had a credit loss
ratio of 25 basis points, which is in line with levels in three of the last
four years. Higher provisions in Mexico and the Caribbean were partly offset
by lower provisions in Peru and Asia.

    Fourth Quarter

    International Banking's net income available to common shareholders in
the fourth quarter of 2007 was $353 million, a substantial increase of
$85 million or 32% from the same period last year and $83 million or 31% above
last quarter. Excluding the $71 million after-tax gain on the global Visa
restructuring, net income rose 5% relative to the prior year and 4% relative
to last quarter. The negative impact of foreign currency translation was
$21 million year over year and $14 million quarter over quarter. The increase
in net income from last year was due primarily to strong organic growth in the
Caribbean and Central America. The positive change from last quarter was due
to an increase in fair value of certain securities in this quarter, which were
negatively affected by widening credit spreads in the third quarter of 2007.
International Banking accounted for 38% of the Bank's total fourth quarter net
income and had a return on equity of 21.3%.
    Average asset volumes were $65 billion this quarter, up $6 billion or 10%
from last year. This was a result of organic loan growth in local currency of
18%, driven by an increase of 29% in credit cards, 22% in mortgages and 10% in
other retail loans. In addition, commercial loans rose 18% from strong growth
in Asia, the Caribbean and Central America, Chile and Mexico. This growth was
partly offset by the $6 billion negative impact of foreign currency
translation. Average assets were flat compared to last quarter, as the
unfavourable impact of foreign currency translation of $4 billion offset
widespread underlying organic growth in both retail and commercial loans.
    Total revenues were $1,090 million this quarter, an increase of
$195 million or 22% from last year and $137 million or 14% above last quarter.
Excluding the gains from the global Visa restructuring, revenues were up
$104 million from last year and $46 million from last quarter. This growth was
achieved notwithstanding the negative impact of foreign currency translation
of $88 million and $55 million, respectively. Major contributors to the
year-over-year growth were Mexico, Peru and our acquisitions in Caribbean and
Central America, as well as strong organic asset and deposit growth in the
Caribbean and Asia. The quarter-over-quarter increase was widespread across
the division.
    Net interest income was $710 million this quarter, up $82 million or 13%
from last year and $7 million or 1% from last quarter. The growth was dampened
somewhat by the negative year-over-year and quarter-over-quarter impact of
foreign currency translation of $61 million and $41 million, respectively. The
year-over-year increase was driven by very strong organic loan and deposit
growth across the segment. Interest margins were up 13 basis points from last
year and five basis points above last quarter. However, excluding the higher
impact of derivatives used for asset/liability management, margins were up 14
basis points from last year and 13 basis points from last quarter, due
primarily to a shift in the asset mix towards higher-yielding retail products
and lower cost deposits.
    Other income was $380 million, up $113 million or 42% from last year.
Excluding the $91 million gain from the global Visa restructuring, other
income was $289 million, an increase of $22 million or 8% relative to last
year, notwithstanding the negative $27 million impact of foreign currency
translation. The remaining increase was due to widespread customer-driven
transaction revenues, primarily in card, brokerage and personal banking fees,
higher investment gains and the impact of our acquisitions. These were partly
offset by the gain on foreclosed assets in Asia in the fourth quarter of 2006.
Quarter over quarter, other income increased $130 million, reflecting the
gains from the global Visa restructuring, partly offset by the negative
$14 million impact of foreign currency translation. This underlying growth was
due primarily to the change in fair value of certain securities affected in
the earlier period by widening credit spreads, increased securities gains and
higher transaction-driven revenues in Mexico.

    Caribbean and Central America

    Total revenues were $454 million in the fourth quarter, an increase of
$105 million from the same period last year and an increase of $61 million
above the prior quarter. Net interest income of $295 million, was up
$25 million, or 9%, from last year as strong contribution from acquisitions
and organic growth overcame the $31 million negative impact of foreign
currency translation. Compared to the prior quarter, net interest income was
down $7 million as organic growth was more than offset by the $21 million
negative impact of foreign currency translation. Margins were down slightly
from the prior year, but up from the prior quarter.
    Other income of $159 million rose $80 million, or double the prior year
and up $68 million, or 74%, over the prior quarter. Excluding the gains from
the global Visa restructuring, other income was up 21% over the prior year but
declined 5% from the prior period. Strong contributions from acquisitions and
organic growth were negatively impacted by foreign currency translation.

    Mexico

    Total revenues were $363 million in the fourth quarter, an increase of
$60 million from the prior year and $41 million from the prior quarter.
Excluding the gains from the global Visa restructuring, the increases were
$41 million and $22 million, respectively. Net interest income of $223 million
reflected a rise of $19 million from the same period in 2006 but was down
$4 million from the third quarter. Strong organic growth and higher margins
were negatively impacted by foreign currency translation and the negative
impact of derivatives used for asset/liability management, particularly
relative to the prior quarter.
    Other income was $140 million in the fourth quarter, an increase of
$42 million from the prior year and $45 million above the prior quarter.
Excluding the gains on the global Visa restructuring, the increases were still
a strong $23 million and $26 million, respectively. This performance reflects
higher securities gains and growth in transaction-driven revenues.

    Latin America, Asia and Other

    Total revenues were $273 million in the final quarter of 2007, reflecting
an increase of $31 million over the same period last year and $35 million
above the prior quarter. Excluding the gains on the global Visa restructuring,
the increases were $22 million and $26 million, respectively. Net interest
income was $192 million, reflecting an increase of $39 million over the same
period last year and $19 million over the prior quarter. These increases were
due to growth in Chile, Peru and Asia, combined with generally increasing
margins, partially offset by foreign currency translation.
    Other income of $81 million included gains from the global Visa
restructuring of $9 million. Absent those gains, other income declined
$18 million relative to the same period last year but grew $8 million relative
to the prior quarter. The decrease year-over-year was primarily due to the
gain on foreclosed assets in Asia in 2006. The positive change from last
quarter was due to an increase in fair value of certain securities this
quarter, which were negatively affected by widening credit spreads in the
third quarter of 2007.

    Non-interest expenses

    Non-interest expenses were $582 million this quarter, up $27 million or
5% from last year and $24 million or 4% from last quarter. These increases
were due to the impact of acquisitions in the Caribbean and Central America,
increased compensation and premises expenses consistent with our overall
volume growth and branch expansion strategies, as well as ongoing business
growth initiatives in the Caribbean and Mexico. These increases were partly
offset by lower benefit costs and the positive impact of foreign currency
translation.

    Credit quality

    The provision for credit losses was $27 million in the fourth quarter,
compared to $8 million in the same period last year and $25 million last
quarter. The increase from last year was due primarily to increased provisions
in Mexico and the Caribbean from low levels in the fourth quarter of 2006.

    Taxes

    The effective tax rate this quarter was 18%, up from 10% in the same
period last year and 1% higher than last quarter. The increases were due to a
higher effective tax rate in Mexico as tax loss carry forwards have been fully
utilized, partly offset by a low tax rate on the gains from the global Visa
restructuring.

    
    Other International Banking Highlights:

    -   Subsequent to the end of the quarter, the Bank closed a transaction
        to acquire Banco del Desarrollo, Chile's seventh largest bank.
        Banco del Desarrollo has 74 branches and 24 business centres
        providing services in small business, microlending and consumer
        finance. When combined with our existing Chilean subsidiary,
        Scotiabank Sud Americano, this investment provides substantial growth
        opportunities in this key Latin American market.
    -   Scotiabank continues to be honoured for its commitment to excellence
        in banking. Scotiabank de Costa Rica, Scotiabank Trinidad & Tobago,
        and Scotiabank Turks & Caicos received the Bank of the Year award
        from The Banker magazine.
    -   We continue to expand our distribution network in high growth
        markets. During the quarter, we opened 28 new locations in Mexico and
        six branches and offices in other key international markets.
    

    Scotia Capital

    Full Year

    Scotia Capital contributed record net income available to common
shareholders of $1,114 million in 2007, a 6% increase over last year,
notwithstanding challenging market conditions in the fourth quarter. Scotia
Capital delivered 3% revenue growth, as strong core trading and investment
banking results more than offset losses on structured credit instruments in
the fourth quarter. The division also benefited from the recognition of a
$43 million gain on the sale of its bond index business, which was completed
in the fourth quarter. In addition, Scotia Capital experienced higher net loan
loss and interest recoveries than the prior year. Return on equity was strong
at 29%, slightly lower than last year's record performance. Scotia Capital
contributed 28% of the Bank's total net income.
    Total average assets increased 17% to $152 billion compared to last year.
There was an increase of $14 billion in trading securities and loans to
support both client-driven activity and trading opportunities. Average
corporate loans and acceptances rose $5.5 billion, or 22%, to $30.6 billion.
Canada achieved solid growth of $2.2 billion accompanied by strong loan growth
in the U.S. of $2.7 billion, despite the impact of the strengthening Canadian
dollar.
    Total revenues increased to $2,450 million, up 3% compared to the prior
year, despite fourth quarter losses on structured credit instruments. Growth
was achieved in both Global Capital Markets and Global Corporate and
Investment Banking.
    Net interest income increased 22% to $1,160 million, due primarily to a
rise in interest from trading operations and higher interest recoveries on
impaired loans. Other income declined 10% to $1,290 million reflecting a
decline in trading revenues, the result of the fourth quarter losses mentioned
above, as well as lower credit-related fees and securities gains.

    Global Corporate and Investment Banking

    Total revenues increased 3% to $1,192 million compared to last year.
Advisory and new issue fees rose 8%, and revenue growth was also achieved in
our lending businesses. Net interest income was up 12% compared to 2006, due
primarily to higher interest recoveries from impaired loans. As well, an
increase in asset volumes in all lending markets contributed to higher net
interest income, although these volume gains were largely mitigated by lower
portfolio spreads, in part reflecting a transition to higher quality assets.
Loan origination fees also declined. Other income decreased 4% compared to the
prior year, reflecting lower gains from the sale of securities and a decrease
in credit fees in the United States, partly offset by volume-driven growth in
acceptance fees in Canada. Good growth was achieved in M&A and advisory fees,
in addition to a modest increase in new issue revenues.

    Global Capital Markets

    Total revenues increased 2% to $1,258 million compared to last year.
Higher revenues from the derivatives, fixed income, precious metals and
foreign exchange operations were partly offset by lower equity trading
results. Interest income from trading operations increased 34%, due mainly to
higher tax-exempt dividend income. Other income declined 15% despite growth in
the foreign exchange and precious metals businesses and the gain on sale of
the bond index business, due primarily to the losses on structured credit
instruments.

    Non-interest expenses

    Non-interest expenses were $1,013 million in 2007, a 6% increase from
last year, due largely to increased performance-related compensation, in line
with improved results, as well as higher salary costs, which included signing
bonuses to expand specialist expertise. Technology costs also rose to support
business growth. These increases were partly offset by lower pension and
benefit costs.

    Credit quality

    Scotia Capital reported net loan loss recoveries of $101 million in 2007,
compared to $63 million in 2006. Significantly higher net recoveries were
realized in the United States this year, while recoveries declined in Europe
and Canada.

    Fourth Quarter

    Net income available to common shareholders for the quarter was
$226 million, a $9 million decrease from last year, and $50 million below last
quarter. Compared to last year, lower revenues, primarily from derivatives,
and higher expenses were offset by higher loan loss recoveries. The decrease
compared to the third quarter reflects lower revenues, due primarily to losses
on structured credit instruments, partially offset by reduced expenses.
    Revenues were $520 million, a decrease of $55 million or 10% from the
prior year and $124 million or 19% from the third quarter.

    Global Corporate and Investment Banking

    Revenues increased 6% from the same period last year and 4% from the
third quarter. Compared to the same period last year, interest income
increased 10% as volume growth in all lending markets was partly offset by
tighter credit spreads and lower loan origination fees. Other income increased
3% from the fourth quarter of the prior year as higher securities gains in the
United States and Europe were offset by lower new issue and advisory revenues.
Revenues were higher compared to the prior quarter as higher securities gains
in the United States and Europe were partly offset by lower credit fees and
new issue and advisory revenues.

    Global Capital Markets

    Revenues decreased 23% from last year and 37% from the previous quarter.
Interest income was higher compared to both the same period last year and to
the third quarter due to higher tax-exempt dividend income. Other income
decreased compared to the fourth quarter last year and to the prior quarter
due primarily to the losses on structured credit instruments of $135 million
(including $20 million of non-bank ABCP). Partially offsetting was the
recognition of a $43 million gain on the sale of the bond index business,
which was completed in the fourth quarter. The decrease compared to last
quarter is more pronounced due to the strong trading revenues realized in the
third quarter.

    Non-interest expenses

    Total non-interest expenses were $225 million in the fourth quarter, 4%
higher than last year and $42 million lower than the third quarter. Compared
to last year, higher performance-based compensation and salaries costs were
partially offset by a decrease in pension and benefits costs. The decrease
from the previous quarter reflects lower performance-based compensation and
pension and benefits costs, partially offset by higher salaries (primarily
signing bonuses and severance costs).

    Credit quality

    There was a net loan loss recovery of $10 million in the fourth quarter,
compared to a provision for credit losses of $26 million last year and a net
recovery of $10 million last quarter. Recoveries were recognized in the United
States, compared to small credit losses recognized in the United States and
Europe last year. Recoveries recognized in the prior quarter were primarily in
Europe.

    
    Other Scotia Capital Highlights:

    -   Scotia Capital acted as Co-Lead Arranger and Lead Hedge Advisor on a
        C$750 million senior secured bank debt facility supporting
        Borealis Infrastructure's investment in Bruce Power through
        BPC Generation Infrastructure Trust. This financing is one of the
        first to occur in the nuclear sector in North America.
    -   Scotia Capital acted as Senior Managing Agent on a US$7.2 billion
        financing for Community Health Systems Inc., in connection with their
        acquisition of Triad Hospitals Inc. As part of this transaction, we
        also were co-manager of a US$3 billion high yield offering and
        participated in the company's interest rate hedging program.
    -   Scotia Capital acted as Joint Lead Arranger and Joint Bookrunner on a
        US$500 million senior credit facility and a US$400 million bridge
        loan to support U.S. Steel Corporation's acquisition of Stelco Inc.
    

    Other

    Full Year

    Net income available to common shareholders was $98 million in 2007,
compared to $169 million in 2006.
    Net interest income and the provision for income taxes include the
elimination of tax-exempt income gross-up. This amount is included in the
operating segments, which are reported on a taxable equivalent basis. The
elimination was $531 million in 2007, compared to $440 million last year,
reflecting higher dividend income. Net interest income was negative
$679 million in 2007, compared to negative $531 million in 2006. This was due
primarily to the impact of eliminating a higher tax-exempt income gross up,
unfavourable changes in the fair value of non-trading derivatives used for
hedging purposes, and lower dividend income from investment securities.
    Other income grew $138 million to $627 million in 2007 due primarily to
higher equity gains.
    Non-interest expenses increased $51 million from last year to
$143 million, due mainly to higher compensation and litigation expenses.
    The provision for credit losses included a $25 million reduction in the
general allowance in 2007, compared to a $60 million reduction in 2006.
    The provision for income taxes includes the elimination of the gross-up
of tax-exempt income, which was $91 million higher than last year.

    Fourth Quarter

    Net income available to common shareholders was negative $75 million in
the fourth quarter, compared to positive $52 million in the same period last
year and $79 million last quarter.
    Contributing to both quarter-over-quarter and year-over-year declines
were the impact of unfavourable changes in the fair value of non-trading
derivatives, litigation expenses, and write-downs of non-trading securities 
of $56 million.
    The general allowance was unchanged this quarter versus a $60 million
reduction in the same quarter last year.
    The provision for income taxes includes the elimination of the gross-up
of tax-exempt income, which was $115 million higher than the third quarter and
$85 million higher than the same quarter of last year. The fourth quarter 
also includes a $50 million provision relating to an outstanding tax matter.

    Other Initiatives

    Corporate Governance

    Sound and effective corporate governance continues to be a priority for
Scotiabank, and is considered essential to the Bank's strength, integrity and
long-term success. Scotiabank's corporate governance policies are designed,
and are reviewed annually, to reflect evolving best practices in corporate
governance. The Board of Directors and its Corporate Governance and Pension
Committee engage in a continuing assessment of Scotiabank's overall approach
to corporate governance to maintain the continued independence of the Board
and its ability to effectively supervise management's operation of the Bank
for the long-term benefit of its stakeholders.
    For further information on Scotiabank's corporate governance policies,
please refer to the corporate governance section of Scotiabank's website,
www.scotiabank.com, which includes information about the Board of Directors,
including profiles of the Bank's directors and executives, and copies of the
charter and membership of each Board committee.

    Disclosure procedures

    The Board of Directors and the Audit and Conduct Review Committee of
Scotiabank reviewed and approved this news release prior to its distribution
today. The disclosure controls and procedures of Scotiabank support the
ability of the President and Chief Executive Officer and the Chief Financial
Officer to certify the annual Consolidated Financial Statements and the annual
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

    Community involvement

    Scotiabank takes pride in the contributions made by the Bank and its
employees to the many communities where we live, work and do business. Here
are a few examples of our sponsorships and donations during 2007:

    
    -   During the quarter, the Scotiabank Group announced a $1.9 million
        donation to the Richard Ivey School of Business to fund scholarships
        for MBA and undergraduate business students. The Scotiabank
        Leadership Awards will create an endowment that offers two
        scholarships to exemplary students on an annual basis. This donation
        continues a longstanding relationship between the Bank and the
        school, involving philanthropy, student recruitment and executive
        education.
    -   Scotiabank was the Regional Official Sponsor for the ICC Cricket
        World Cup West Indies 2007 (CWC 2007), the third-largest sporting
        event in the world. Scotiabank employees volunteered in most match
        locations, and helped to make the event a warm and wonderful
        experience for participants, officials, visitors and spectators
        around the globe. The sponsorship builds on Scotiabank's longstanding
        commitment to cricket in the West Indies, including its Kiddy Cricket
        program, launched jointly with the West Indies Cricket Board to help
        pass along the skills and passion for cricket among local children.
        Since 2000, Scotiabank has introduced Kiddy Cricket to more than
        20,000 children in 14 countries throughout the Caribbean. More than
        150 Scotiabank employee volunteers have received training to teach
        children the basics of the game.
    

    Employees and Human Resources

    Scotiabank wants both current and potential employees to view the Bank as
a great place to work - and our employees' level of satisfaction with their
employment experience and immediate work environments remained very high, as
measured by ViewPoint, the Bank's annual employee satisfaction survey. In
2007, the overall level of satisfaction remained steady at 87 per cent. The
Diversity Index, which measures employees' perceptions of respect and
management sensitivity to work/life demands, reached 89 per cent, up from 88
per cent in 2006.
    We were proud that, earlier this year, Scotiabank's accomplishments in
furthering the advancement of women were recognized with the 2007 Catalyst
Award. The award is presented annually to companies with innovative and
effective approaches undertaken by Canadian and American organizations - with
proven results - to address the recruitment, development and advancement of
women. Scotiabank was the first Canadian winner of the Catalyst Award since
1999. Winning initiatives were reviewed and judged rigorously on criteria
including business rationale, senior leadership support, communication,
measurable results, accountability, originality, and ability to be duplicated.

    
    Business Segment Review

    Domestic Banking

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
    (Unaudited) ($ millions)     October     July  October  October  October
    (Taxable equivalent               31       31       31       31       31
     basis)(1)                      2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Business segment income
    Net interest income          $   954  $ 1,006  $   957  $ 3,855  $ 3,682
    Provision for credit losses       78       77       58      295      279
    Other income                     663      537      498    2,248    1,935
    Non-interest expenses            927      892      912    3,559    3,469
    Provision for income taxes       173      179      147      685      581
    -------------------------------------------------------------------------
    Net Income                   $   439  $   395  $   338  $ 1,564  $ 1,288
    Preferred dividends paid           5        4        3       14        9
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   434  $   391  $   335  $ 1,550  $ 1,279
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other measures
    Return on equity(1)             37.0%    31.8%    27.3%    33.0%    27.8%
    Average assets ($ billions)  $   163  $   156  $   145  $   154  $   136
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    International Banking

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
    (Unaudited) ($ millions)     October     July  October  October  October
    (Taxable equivalent               31       31       31       31       31
     basis)(1)                      2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Business segment income
    Net interest income          $   710  $   703  $   628  $ 2,762  $ 2,306
    Provision for credit losses       27       25        8      101       60
    Other income                     380      250      267    1,227      939
    Non-interest expenses            582      558      555    2,279    1,927
    Provision for income taxes        89       65       34      241       98
    Non-controlling interest in
     net income of subsidiaries       33       29       28      118       98
    -------------------------------------------------------------------------
    Net Income                   $   359  $   276  $   270  $ 1,250  $ 1,062
    Preferred dividends paid           6        6        2       18        8
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   353  $   270  $   268  $ 1,232  $ 1,054
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other measures
    Return on equity(1)             21.3%    16.1%    21.1%    19.5%    23.4%
    Average assets ($ billions)  $    65  $    65  $    59  $    66  $    56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Scotia Capital

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
    (Unaudited) ($ millions)     October     July  October  October  October
    (Taxable equivalent               31       31       31       31       31
     basis)(1)                      2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Business segment income
    Net interest income          $   364  $   231  $   251  $ 1,160  $   951
    Provision for credit losses      (10)     (10)      26     (101)     (63)
    Other income                     156      413      324    1,290    1,437
    Non-interest expenses            225      267      216    1,013      955
    Provision for income taxes        76      107       97      413      443
    -------------------------------------------------------------------------
    Net Income                   $   229  $   280  $   236  $ 1,125  $ 1,053
    Preferred dividends paid           3        4        1       11        6
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   226  $   276  $   235  $ 1,114  $ 1,047
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other measures
    Return on equity(1)             24.2%    27.7%    26.2%    29.0%    31.3%
    Average assets ($ billions)  $   150  $   156  $   140  $   152  $   130
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-GAAP measure. Refer to Non-GAAP measures section of this press
        release for a discussion of these non-GAAP measures.


    Other(1)

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
    (Unaudited) ($ millions)     October     July  October  October  October
    (Taxable equivalent               31       31       31       31       31
     basis)(2)                      2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Business segment income
    Net interest income          $  (312) $  (128) $  (184) $  (679) $  (531)
    Provision for credit losses        -        -      (60)     (25)     (60)
    Other income                     163      189      127      627      489
    Non-interest expenses             58       35       25      143       92
    Provision for income taxes(3)   (134)     (55)     (75)    (276)    (250)
    -------------------------------------------------------------------------
    Net Income                   $   (73) $    81  $    53  $   106  $   176
    Preferred dividends paid           2        2        1        8        7
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   (75) $    79  $    52  $    98  $   169
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other measures
    Average assets ($ billions)  $    31  $    32  $    30  $    31  $    29
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Total

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
                                 October     July  October  October  October
                                      31       31       31       31       31
    (Unaudited) ($ millions)        2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Business segment income
    Net interest income          $ 1,716  $ 1,812  $ 1,652  $ 7,098  $ 6,408
    Provision for credit losses       95       92       32      270      216
    Other income                   1,362    1,389    1,216    5,392    4,800
    Non-interest expenses          1,792    1,752    1,708    6,994    6,443
    Provision for income taxes       204      296      203    1,063      872
    Non-controlling interest in
     net income of subsidiaries       33       29       28      118       98
    -------------------------------------------------------------------------
    Net Income                   $   954  $ 1,032  $   897  $ 4,045  $ 3,579
    Preferred dividends paid          16       16        7       51       30
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   938  $ 1,016  $   890  $ 3,994  $ 3,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other measures
    Return on equity(2)             21.0%    21.7%(4) 21.1%    22.0%    22.1%
    Average assets ($ billions)  $   409  $   409  $   374  $   403  $   351
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes all other smaller operating segments and corporate
        adjustments, such as the elimination of the tax-exempt income gross-
        up reported in net interest income and provision for income taxes,
        differences in the actual amount of costs incurred and charged to the
        operating segments, and the impact of securitizations.
    (2) Non-GAAP measure. Refer to Non-GAAP measures section of this press
        release for a discussion of these non-GAAP measures.
    (3) Includes the elimination of the tax-exempt income gross-up reported
        in net interest income and provision for income taxes for the three
        months ended October 31, 2007 ($216), July 31, 2007 ($101),
        October 31, 2006 ($131), and the years ended October 31, 2007 ($531)
        and October 31, 2006 ($440) to arrive at the amounts reported in the
        Consolidated Statement of Income.
    (4) Certain comparative amounts have been restated to conform with
        current period presentation.


    Geographic Highlights

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
                                 October     July  October  October  October
                                      31       31       31       31       31
    (Unaudited)                     2007     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Net income available to common
     shareholders ($ millions)
    Canada                       $   560  $   639  $   538  $ 2,304  $ 2,039
    United States                     97       98       27      497      312
    Mexico                           122      112      116      505      547
    Other international              237      201      181      861      674
    Corporate adjustments            (78)     (34)      28     (173)     (23)
    -------------------------------------------------------------------------
                                 $   938  $ 1,016  $   890  $ 3,994  $ 3,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average assets ($ billions)
    Canada                       $   278  $   270  $   243  $   265  $   227
    United States                     27       25       33       29       31
    Mexico                            20       21       20       21       21
    Other international               77       86       71       81       66
    Corporate adjustments              7        7        7        7        6
    -------------------------------------------------------------------------
                                 $   409  $   409  $   374  $   403  $   351
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Impact of foreign currency translation

    The movement in foreign currency exchange rates again had a negative
effect on the Bank's earnings in 2007. The Canadian dollar appreciated 3%
relative to the U.S. dollar and 4% against the Mexican peso. The dollar also
strengthened against the Jamaican dollar and many other currencies in which
the Bank conducts business. Changes in the average exchange rates affected net
income as shown in the following table:

    Table 2

    Impact of Foreign Currency Translation

    Average Exchange Rate                       2007        2006        2005
    -------------------------------------------------------------------------
    U.S. dollar/Canadian dollar               0.9088      0.8782      0.8217
    Mexican peso/Canadian dollar              9.9679      9.5422      9.0523
    -------------------------------------------------------------------------

                                             2007 vs.    2006 vs.    2005 vs.
    Impact on income ($ millions)               2006        2005        2004

    Net interest income                     $   (119)       (202)   $   (164)
    Other income                                 (80)       (138)       (123)
    Non-interest expenses                         77         136          95
    Other items (net of tax)                      40          51          47
    -------------------------------------------------------------------------
    Net income                              $    (82)       (153)   $   (145)
    Earnings per share (diluted)            $  (0.08)      (0.15)   $  (0.14)
    -------------------------------------------------------------------------
    Impact by business line ($ millions)
    International Banking                   $    (37)   $    (65)   $    (62)
    Scotia Capital                          $    (19)   $    (35)   $    (34)
    Domestic Banking                        $     (4)   $     (8)   $     (9)
    Other                                   $    (22)   $    (45)   $    (40)

    Impact of acquisitions

    The Bank made a number of acquisitions in 2007 and 2006 which contributed
to the growth in Canada and in our international operations. The impact on
selected income statement categories is shown in the following table:

    Table 3

    Impact of Acquisitions

    ($ millions)                                            2007        2006
    -------------------------------------------------------------------------
    Net interest income                                 $    464    $    173
    Other income                                             263         118
    Non-interest expenses                                   (416)       (191)
    Other items (net of tax)                                (117)        (46)
    -------------------------------------------------------------------------
    Net income                                          $    194    $     54
    Earnings per share (diluted)                        $   0.19    $   0.05


    Quarterly Financial Highlights

                                    For the three months ended
    -------------------------------------------------------------------------
                        Oct.  July  April    Jan.   Oct.  July  April    Jan.
                         31     31     30     31     31     31     30     31
                       2007   2007   2007   2007   2006   2006   2006   2006
    -------------------------------------------------------------------------
    Total revenue
     ($ millions)    $3,078 $3,201 $3,102 $3,109 $2,868 $2,889 $2,717 $2,734
    Total revenue
     (TEB)(1)
     ($ millions)     3,294  3,302  3,211  3,214  2,999  2,989  2,830  2,830
    Net income
     ($ millions)       954  1,032  1,039  1,020    897    936    894    852
    Basic earnings
     per share ($)     0.95   1.03   1.04   1.02   0.90   0.94   0.90   0.85
    Diluted earnings
     per share ($)     0.95   1.02   1.03   1.01   0.89   0.93   0.89   0.84
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-GAAP measure. Refer to Non-GAAP measures section of this press
        release for a discussion of these non-GAAP measures.


    Share Data
                                                                       As at
    -------------------------------------------------------------------------
                                                                  October 31
    (thousands of shares outstanding)                                   2007
    -------------------------------------------------------------------------

    Common shares                                                  983,767(1)
    -------------------------------------------------------------------------
    Preferred shares Series 12                                      12,000(2)
    Preferred shares Series 13                                      12,000(3)
    Preferred shares Series 14                                      13,800(4)
    Preferred shares Series 15                                      13,800(5)
    Preferred shares Series 16                                      13,800(6)
    -------------------------------------------------------------------------
    Series 2000-1 trust securities issued by BNS Capital Trust         500(7)
    Series 2002-1 trust securities issued
     by Scotiabank Capital Trust                                       750(8)
    Series 2003-1 trust securities issued
     by Scotiabank Capital Trust                                       750(8)
    Series 2006-1 trust securities issued
     by Scotiabank Capital Trust                                       750(8)
    -------------------------------------------------------------------------
    Scotiabank Trust Subordinated Notes -
     Series A issued by Scotiabank Subordinated Notes Trust          1,000(8)
    -------------------------------------------------------------------------

    Outstanding options granted under the Stock Option
     Plans to purchase common shares                             27,885(1)(9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) As at November 22, 2007, the number of outstanding common shares and
        options were 983,879 and 27,773, respectively. The number of other
        securities disclosed in this table were unchanged.
    (2) These shares are entitled to non-cumulative preferential cash
        dividends payable quarterly in an amount of $0.328125 per share.
    (3) These shares are entitled to non-cumulative preferential cash
        dividends payable quarterly in an amount $0.30 per share.
    (4) These shares are entitled to non-cumulative preferential cash
        dividends payable quarterly in an amount of $0.28125 per share.
    (5) These shares are entitled to non-cumulative preferential cash
        dividends payable quarterly in an amount of $0.28125 per share.
    (6) These shares are entitled to non-cumulative preferential cash
        dividends payable quarterly in an amount of $0.328125 per share. The
        initial dividend will be paid on Janurary 29, 2008, at $0.39195 per
        share.
    (7) Reported in capital instrument liabilities in the Consolidated
        Balance Sheet.
    (8) Reported in deposits in the Consolidated Balance Sheet.
    (9) Included are 16,025 stock options with tandem stock appreciation
        rights (SAR) features.


    Consolidated Financial Statements

    Consolidated Statement of Income

                                             For the three           For the
                                              months ended        year ended
    -------------------------------------------------------------------------
                                 October     July  October  October  October
                                      31       31       31       31       31
    (Unaudited) ($ millions)      2007(1)  2007(1)    2006     2007     2006
    -------------------------------------------------------------------------

    Interest income
    Loans                        $ 3,668  $ 3,536  $ 3,254  $13,985  $11,575
    Securities                     1,071    1,192    1,116    4,680    4,124
    Securities purchased under
     resale agreements               320      325      326    1,258    1,102
    Deposits with banks              303      292      257    1,112      881
    -------------------------------------------------------------------------
                                   5,362    5,345    4,953   21,035   17,682
    -------------------------------------------------------------------------

    Interest expense
    Deposits                       2,968    2,756    2,582   10,850    8,589
    Subordinated debentures           23       30       32      116      130
    Capital instrument
     liabilities                      13       14       13       53       53
    Other                            642      733      674    2,918    2,502
    -------------------------------------------------------------------------
                                   3,646    3,533    3,301   13,937   11,274
    -------------------------------------------------------------------------
    Net interest income            1,716    1,812    1,652    7,098    6,408
    Provision for credit losses       95       92       32      270      216
    -------------------------------------------------------------------------
    Net interest income after
     provision for credit losses   1,621    1,720    1,620    6,828    6,192
    -------------------------------------------------------------------------

    Other income
    Card revenues                     92       92       83      366      307
    Deposit and payment services     204      208      196      817      766
    Mutual funds                      78       77       63      296      241
    Investment management,
     brokerage and trust services    185      192      171      760      666
    Credit fees                      126      143      127      530      530
    Trading revenues                 (67)     217      138      450      637
    Investment banking               164      184      175      737      659
    Net gain on securities,
     other than trading(2)           148      134       64      488      371
    Other                            432      142      199      948      623
    -------------------------------------------------------------------------
                                   1,362    1,389    1,216    5,392    4,800
    -------------------------------------------------------------------------
    Net interest and other income  2,983    3,109    2,836   12,220   10,992
    -------------------------------------------------------------------------

    Non-interest expenses
    Salaries and employee benefits   963    1,013      966    3,983    3,768
    Premises and technology          362      335      322    1,353    1,214
    Communications                    76       76       75      300      276
    Advertising and business
     development                      94       71       73      311      232
    Professional                      81       53       58      227      174
    Business and capital taxes        33       37       36      143      133
    Other                            183      167      178      677      646
    -------------------------------------------------------------------------
                                   1,792    1,752    1,708    6,994    6,443
    -------------------------------------------------------------------------
    Income before the undernoted   1,191    1,357    1,128    5,226    4,549
    Provision for income taxes       204      296      203    1,063      872
    Non-controlling interest in
     net income of subsidiaries       33       29       28      118       98
    -------------------------------------------------------------------------
    Net income                   $   954  $ 1,032  $   897  $ 4,045  $ 3,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred dividends paid          16       16        7       51       30
    -------------------------------------------------------------------------
    Net income available to
     common shareholders         $   938  $ 1,016  $   890  $ 3,994  $ 3,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of common
     shares outstanding (millions):
      Basic                          983      988      989      989      988
      Diluted                        991      996    1,000      997    1,001
    -------------------------------------------------------------------------
    Earnings per common share
     (in dollars)(3):
      Basic                      $  0.95  $  1.03  $  0.90  $  4.04  $  3.59
      Diluted                    $  0.95  $  1.02  $  0.89  $  4.01  $  3.55
    -------------------------------------------------------------------------
    Dividends per common share
     (in dollars)                $  0.45  $  0.45  $  0.39  $  1.74  $  1.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain comparative amounts have been reclassified to conform with
    current period presentation.

    (1) Refer to note below on new accounting policies related to financial
        instruments adopted in the first quarter of 2007.
    (2) Prior to November 1, 2006, the net gain was related to securities
        classified as investment securities. These securities were
        reclassified as a result of new accounting policies related to
        financial instruments.
    (3) The calculation of earnings per share is based on full dollar and
        share amounts.

    See Basis of Presentation below.


    Consolidated Balance Sheet

                                                            As at
    -------------------------------------------------------------------------
                                               October       July    October
                                                    31         31         31
    (Unaudited) ($ millions)                    2007(1)    2007(1)      2006
    -------------------------------------------------------------------------

    Assets
    Cash resources
    Cash and non-interest-bearing
     deposits with banks                      $  2,138   $  2,370   $  2,280
    Interest-bearing deposits with banks        23,011     23,048     17,734
    Precious metals                              4,046      3,358      3,362
    -------------------------------------------------------------------------
                                                29,195     28,776     23,376
    -------------------------------------------------------------------------
    Securities
    Trading                                     59,685     63,797     62,490
    Available-for-sale(2)                       28,426     28,636          -
    Investment                                       -          -     32,870
    Equity accounted investments                   724        424        142
    -------------------------------------------------------------------------
                                                88,835     92,857     95,502
    -------------------------------------------------------------------------
    Securities purchased under
     resale agreements                          22,542     26,834     25,705
    -------------------------------------------------------------------------

    Loans
    Residential mortgages                      102,154     99,000     89,590
    Personal and credit cards                   41,734     41,360     39,058
    Business and government                     85,500     84,778     76,733
    -------------------------------------------------------------------------
                                               229,388    225,138    205,381
    Allowance for credit losses                  2,241      2,423      2,607
    -------------------------------------------------------------------------
                                               227,147    222,715    202,774
    -------------------------------------------------------------------------

    Other
    Customers' liability under acceptances      11,538     10,289      9,555
    Derivative instruments                      21,960     16,635     12,098
    Land, buildings and equipment                2,271      2,296      2,256
    Goodwill                                     1,134      1,140        873
    Other intangible assets                        273        287        294
    Other assets                                 6,615      6,286      6,573
    -------------------------------------------------------------------------
                                                43,791     36,933     31,649
    -------------------------------------------------------------------------
                                              $411,510   $408,115   $379,006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Deposits
    Personal                                  $100,823   $ 98,171   $ 93,450
    Business and government                    161,229    156,668    141,072
    Banks                                       26,406     32,146     29,392
    -------------------------------------------------------------------------
                                               288,458    286,985    263,914
    -------------------------------------------------------------------------

    Other
    Acceptances                                 11,538     10,289      9,555
    Obligations related to securities
     sold under repurchase agreements           28,137     31,223     33,470
    Obligations related to securities
     sold short                                 16,039     21,322     13,396
    Derivative instruments                      24,689     15,352     12,869
    Other liabilities                           21,138     20,248     24,799
    Non-controlling interest in subsidiaries       497        505        435
    -------------------------------------------------------------------------
                                               102,038     98,939     94,524
    -------------------------------------------------------------------------
    Subordinated debentures                      1,710      1,774      2,271
    -------------------------------------------------------------------------
    Capital instrument liabilities                 500        750        750
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock
      Preferred shares                           1,635      1,290        600
      Common shares and contributed surplus      3,566      3,521      3,425
    Retained earnings                           17,460     16,967     15,843
    Accumulated other comprehensive
     income (loss)(1)                           (3,857)    (2,111)    (2,321)
    -------------------------------------------------------------------------
                                                18,804     19,667     17,547
    -------------------------------------------------------------------------
                                              $411,510   $408,115   $379,006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain comparative amounts have been reclassified to conform with
    current period presentation.

    (1) Refer to note below on new accounting policies related to financial
        instruments adopted in the first quarter of 2007.
    (2) Prior to November 1, 2006, these securities were classified as
        investment securities. They were reclassified as a result of new
        accounting policy related to financial instruments.

    See Basis of Presentation below.



    Consolidated Statement of Changes in Shareholders' Equity

                                                          For the year ended
    -------------------------------------------------------------------------
                                                          October    October
                                                               31         31
    (Unaudited) ($ millions)                                 2007       2006
    -------------------------------------------------------------------------
    Preferred shares
    Balance at beginning of year                         $    600   $    600
    Issued                                                  1,035          -
    -------------------------------------------------------------------------
    Balance at end of year                                  1,635        600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Common shares and contributed surplus
    Common shares:
      Balance at beginning of year                          3,425      3,316
      Issued                                                  184        135
      Purchased for cancellation                              (43)       (26)
    -------------------------------------------------------------------------
      Balance at end of year                                3,566      3,425
    Contributed surplus: Fair value of stock options            -          -
    -------------------------------------------------------------------------
    Total                                                   3,566      3,425
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
    Balance at beginning of year                           15,843     14,126
    Cumulative effect of adopting
     new accounting policies                               (61)(1)    (25)(2)
    -------------------------------------------------------------------------
                                                           15,782     14,101
    Net income                                              4,045      3,579
    Dividends:
      Preferred                                               (51)       (30)
      Common                                               (1,720)    (1,483)
    Purchase of shares                                       (586)      (324)
    Other                                                     (10)         -
    -------------------------------------------------------------------------
    Balance at end of year                                 17,460     15,843
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)(1)
    Balance at beginning of year                           (2,321)    (1,961)
    Cumulative effect of adopting new
     accounting policies                                      683          -
    Other comprehensive income (loss)                      (2,219)      (360)
    -------------------------------------------------------------------------
    Balance at end of year                                 (3,857)    (2,321)
    -------------------------------------------------------------------------
    Total shareholders' equity at end of year            $ 18,804   $ 17,547
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statement of Comprehensive Income(1)

                                                          For the year ended
    -------------------------------------------------------------------------
                                                          October    October
                                                               31         31
    (Unaudited) ($ millions)                                 2007       2006
    -------------------------------------------------------------------------
    Comprehensive income
    Net income                                           $  4,045   $  3,579
    Other comprehensive income (loss),
     net of income taxes:
      Net change in unrealized foreign
       currency translation losses                         (2,228)      (360)
      Net change in unrealized gains on
       available-for-sale securities                          (67)         -
      Net change in gains (losses) on derivative
       instruments designated as cash flow hedges              76          -
    -------------------------------------------------------------------------
    Other comprehensive income (loss)                      (2,219)      (360)
    -------------------------------------------------------------------------
    Comprehensive income                                 $  1,826   $  3,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain comparative amounts have been reclassified to conform with
    current period presentation.

    (1) Refer to note below on new accounting policies related to financial
        instruments adopted in the first quarter of 2007.
    (2) Relates to the adoption of a new accounting policy related to stock-
        based compensation adopted in 2006.

    See Basis of Presentation below.



    Condensed Consolidated Statement of Cash Flows

                                         For the three               For the
                                          months ended            year ended
    -------------------------------------------------------------------------
                                    October    October    October    October
    Sources (uses) of cash flows         31         31         31         31
    (Unaudited) ($ millions)           2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash flows from operating
     activities
    Net income                     $    954   $    897   $  4,045   $  3,579
    Adjustments to determine net
     cash flows from (used in)
     operating activities               (86)       (62)       (57)      (103)
    Net accrued interest
     receivable and payable              88        296         18        221
    Trading securities                2,686     (4,834)       334    (13,042)
    Derivative instruments, net       3,439        816        932        668
    Other, net                       (2,891)     1,924     (3,261)     2,713
    -------------------------------------------------------------------------
                                      4,190       (963)     2,011     (5,964)
    -------------------------------------------------------------------------
    Cash flows from financing
     activities
    Deposits                         13,566      8,144     41,746     44,014
    Obligations related to
     securities sold under
     repurchase agreements           (1,964)     4,435     (3,858)     8,245
    Obligations related to
     securities sold short           (4,610)    (1,247)     3,848      2,190
    Subordinated debentures
     redemptions/repayments               -          -       (500)      (300)
    Capital instrument liabilities
     redemptions/repayments            (250)         -       (250)         -
    Preferred shares issued             345          -      1,035          -
    Common shares issued                 20         33        112        118
    Common shares redeemed/
     purchased for cancellation           -        (36)      (629)      (350)
    Cash dividends paid                (458)      (393)    (1,771)    (1,513)
    Other, net                         (139)       341      3,391        684
    -------------------------------------------------------------------------
                                      6,510     11,277     43,124     53,088
    -------------------------------------------------------------------------
    Cash flows from investing
     activities
    Interest-bearing deposits
     with banks                      (1,063)       923     (7,087)    (1,664)
    Securities purchased under
     resale agreements                3,484     (3,205)     1,897     (5,633)
    Loans, excluding
     securitizations                (14,094)    (9,273)   (42,028)   (31,978)
    Loan securitizations                992        699      3,756      2,514
    Securities, other than
     trading, net(1)                    265      1,239       (851)    (8,169)
    Land, buildings and equipment,
     net of disposals                   (87)       (95)      (317)      (256)
    Other, net(2)                      (271)      (326)      (390)    (2,099)
    -------------------------------------------------------------------------
                                    (10,774)   (10,038)   (45,020)   (47,285)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and cash
     equivalents                       (158)        (9)      (257)       (60)
    -------------------------------------------------------------------------
    Net change in cash and cash
     equivalents                       (232)       267       (142)      (221)
    Cash and cash equivalents
     at beginning of period           2,370      2,013      2,280      2,501
    -------------------------------------------------------------------------
    Cash and cash equivalents
     at end of period(3)           $  2,138   $  2,280   $  2,138   $  2,280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash disbursements made for:
      Interest                     $  2,765   $  3,003   $ 13,625   $ 10,559
      Income taxes                 $     69   $    188   $    905   $  1,012
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain comparative amounts have been reclassified to conform with
    current period presentation.

    (1) Prior to November 1, 2006, this related to securities classified as
        investment securities. They were reclassified as a result of new
        accounting policies related to financial instruments.
    (2) For the three and twelve months ended October 31, 2007, comprises
        investments in subsidiaries, net of cash and cash equivalents at the
        date of acquisition of $3 and $6, respectively (October 31, 2006 -
        $9, and $167, respectively), and net of non-cash consideration of
        common shares issued from treasury of $21 and $36, respectively
        (October 31, 2006 - nil, and $1, respectively).
    (3) Represents cash and non-interest bearing deposits with banks.

    See Basis of Presentation below.
    


    Basis of preparation

    These unaudited consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (GAAP),
except for certain required disclosures. Therefore, these consolidated
financial statements should be read in conjunction with the Bank's audited
consolidated financial statements for the year ended October 31, 2006. The
significant accounting policies used in the preparation of these consolidated
financial statements are consistent with those used in the 2006 year-end
statements, except as described below. Certain comparative amounts have been
reclassified to conform with the current period's accounting presentation.

    New accounting policies

    Commencing November 1, 2006, the Bank adopted three new accounting
standards: (i) Financial Instruments - Recognition and Measurement, (ii)
Hedges and (iii) Comprehensive Income. The new standards require all financial
assets and financial liabilities to be carried at fair value in the
Consolidated Balance Sheet, except the following, which are carried at
amortized cost unless designated as held for trading upon initial recognition:
loans and receivables, securities designated as held-to-maturity and
non-trading financial liabilities. The methods used by the Bank in determining
the fair value of financial instruments are unchanged as a result of
implementing these new accounting standards. Prior periods have not been
restated as a result of implementing the new accounting standards, except that
unrealized foreign currency translation gains/losses on net investments in
self-sustaining operations have been reclassified to accumulated other
comprehensive income (loss). As a result of these changes, the Bank has
recorded a net reduction of $61 million (net of income tax benefit of
$31 million) to opening retained earnings. This transition impact arose
primarily from recognizing in retained earnings the deferred gains and losses
relating to certain previously discontinued hedges. The adoption of these new
accounting policies did not have a material impact on the Bank's results of
operations for fiscal 2007. The most significant other balance sheet
categories impacted on November 1, 2006 as a result of these new standards
were as follows:

    
    -------------------------------------------------------------------------
    $ millions

    Balance sheet        Increase/
     category           (Decrease)   Explanation
    -------------------------------------------------------------------------
    Available-for-sale    $ 1,091    To record these securities at fair value
     securities
    -------------------------------------------------------------------------
    Future tax assets     $  (369)   To record future taxes on the components
     (Other assets)                  of accumulated other comprehensive
                                     income
    -------------------------------------------------------------------------
    Accumulated other     $   683    After-tax impact related to net
     comprehensive income            unrealized gains on available-for-sale
                                     securities and cash flow hedges
    -------------------------------------------------------------------------
    

    A new Consolidated Statement of Comprehensive Income now forms part of
the Bank's consolidated financial statements and displays current period net
income and other comprehensive income. Accumulated other comprehensive income
(loss) is a separate component of shareholders' equity. The Consolidated
Statement of Comprehensive Income reflects changes in accumulated other
comprehensive income, comprising changes in unrealized gains and losses on
available-for-sale assets, the fair value of derivatives designated as cash
flow hedges, to the extent they are effective, and foreign currency
translation amounts arising from self-sustaining foreign operations.
    The components of accumulated other comprehensive income (loss) as at
October 31, 2007 and 2006 were as follows:

    
    Accumulated other comprehensive income (loss)(1)

                                            As at and for the year ended
    -------------------------------------------------------------------------
                                    Opening  Transition       Net     Ending
                                    balance     amount     change    balance
                                  -------------------------------------------
                                    October   November               October
    ($ millions)                    31 2006     1 2006             31 2007(1)
    -------------------------------------------------------------------------
    Unrealized foreign currency
     translation losses, net of
     hedging activities            $ (2,321)  $      -   $ (2,228)  $ (4,549)
    Unrealized gains on
     available-for-sale securities,
     net of hedging activities            -        706        (67)       639
    Gains (losses) on derivative
     instruments designated as
     cash flow hedges                     -        (23)        76         53
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income (loss)   $ (2,321)  $    683   $ (2,219)  $ (3,857)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    As at and for the year ended
    --------------------------------------------------------------
                                    Opening        Net     Ending
                                    balance     change    balance
                                  --------------------------------
                                    October               October
    ($ millions)                    31 2005             31 2006(1)
    --------------------------------------------------------------
    Unrealized foreign currency
     translation losses, net of
     hedging activities            $ (1,961)  $   (360)  $ (2,321)
    Unrealized gains on
     available-for-sale securities,
     net of hedging activities            -          -          -
    Gains (losses) on derivative
     instruments designated as
     cash flow hedges                     -          -          -
    --------------------------------------------------------------
    Accumulated other
     comprehensive income (loss)   $ (1,961)  $   (360)  $ (2,321)
    --------------------------------------------------------------
    --------------------------------------------------------------
    (1) Amounts are net of applicable Income tax expense/benefit.
    

    Shareholder and Investor Information

    Direct Deposit Service

    Shareholders may have dividends deposited directly into accounts held at
financial institutions which are members of the Canadian Payments Association.
To arrange direct deposit service, please write to the Transfer Agent.

    Dividend and Share Purchase Plan

    Scotiabank's dividend reinvestment and share purchase plan allows common
and preferred shareholders to purchase additional common shares by reinvesting
their cash dividend without incurring brokerage or administrative fees.
    As well, eligible shareholders may invest up to $20,000 each fiscal year
to purchase additional common shares of the Bank. Debenture holders may apply
interest on fully registered Bank subordinated debentures to purchase
additional common shares. All administrative costs of the plan are paid by the
Bank.
    For more information on participation in the plan, please contact the
Transfer Agent.

    Dividend Dates for 2008

    Record and payment dates for common and preferred shares, subject to
approval by the Board of Directors.

    
        Record Date          Payment Date
        January 2            January 29
        April 1              April 28
        July 2               July 29
        October 7            October 29
    

    Annual Meeting Date for Fiscal 2007

    The Bank's Annual Meeting of Shareholders will be held at the Shaw
Conference Centre in Edmonton, Alberta, on March 4, 2008. The record date for
determining shareholders entitled to receive notice of and to vote at the
meeting will be the close of business on January 14, 2008.

    Duplicated Communication

    If your shareholdings are registered under more than one name or address,
multiple mailings will result. To eliminate this duplication, please write to
the Transfer Agent to combine the accounts.

    World Wide Web Site

    For information relating to Scotiabank and its services, visit us at our
Web site: www.scotiabank.com.

    Conference Call and Web Broadcast

    The quarterly results conference call will take place on December 6,
2007, at 2:00 p.m. EST and is expected to last approximately one hour.
Interested parties are invited to access the call live, in listen-only mode,
by telephone, toll free, at 1-800-733-7571 (please call five to 15 minutes in
advance). In addition, an audio Webcast, with accompanying slide presentation,
may be accessed via the Investor Relations page of www.scotiabank.com.
Following discussion of the results by Scotiabank executives, there will be a
question and answer session. Listeners are invited to submit questions by
e-mail to investor.relations@scotiabank.com.
    A telephone replay of the conference call will be available from
December 6, 2007, to December 20, 2007, by calling (416) 640-1917 and entering
the identification code 21251767 followed by the number sign. The archived
audio Webcast will be available on the Bank's Website for three months.

    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 securities regulators or the U.S.
Securities and Exchange Commission, or in other communications. All such
statements are made pursuant to the "safe harbour" provisions of the United
States Private Securities Litigation Reform Act of 1995 and any applicable
Canadian securities legislation. Forward-looking statements may include
comments with respect to the Bank's objectives, strategies to achieve those
objectives, expected financial results (including those in the area of risk
management), and the outlook for the Bank's businesses and for the Canadian,
United States and global economies. Such statements are typically identified
by words or phrases such as "believe," expect," "anticipate," "intent,"
"estimate," "plan," "may increase," "may fluctuate," and similar expressions
of future or conditional verbs such as "will," "should," "would" and "could."
    By their very nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and specific, and
the risk that predictions and other forward-looking statements will not prove
to be accurate. Do not unduly rely on forward-looking statements, as a number
of important factors, many of which are beyond our control, could cause actual
results to differ materially from the estimates and intentions expressed in
such forward-looking statements. These factors include, but are not limited
to: the economic and financial conditions in Canada and globally; fluctuations
in interest rates and currency values; liquidity; the effect of changes in
monetary policy; legislative and regulatory developments in Canada and
elsewhere, including changes in tax laws; operational and reputational risks;
the accuracy and completeness of information the Bank receives on customers
and counterparties; the timely development and introduction of new products
and services in receptive markets; the Bank's ability to expand existing
distribution channels and to develop and realize revenues from new
distribution channels; the Bank's ability to complete and integrate
acquisitions and its other growth strategies; changes in accounting policies
and methods the Bank uses to report its financial condition and the results of
its operations, including uncertainties associated with critical accounting
assumptions and estimates; the effect of applying future accounting changes;
global capital markets activity; the Bank's ability to attract and retain key
executives; reliance on third parties to provide components of the Bank's
business infrastructure; unexpected changes in consumer spending and saving
habits; technological developments; fraud by internal or external parties,
including the use of new technologies in unprecedented ways to defraud the
Bank or its customers; consolidation in the Canadian financial services
sector; competition, both from new entrants and established competitors;
judicial and regulatory proceedings; acts of God, such as earthquakes and
hurricanes; the possible impact of international conflicts and other
developments, including terrorist acts and war on terrorism; the effects of
disease or illness on local, national or international economies; disruptions
to public infrastructure, including transportation, communication, power and
water; and the Bank's anticipation of and success in managing the risks
implied by the foregoing. A substantial amount of the Bank's business involves
making loans or otherwise committing resources to specific companies,
industries or countries. Unforeseen events affecting such borrowers,
industries or countries could have a material adverse effect on the Bank's
financial results, businesses, financial condition or liquidity. These and
other factors may cause the Bank's actual performance to differ materially
from that contemplated by forward-looking statements. For more information on
the risks the Bank faces, see the Risk Management section of the Bank's 2006
Annual Report.
    The preceding list of important factors is not exhaustive. When relying
on forward-looking statements to make decisions with respect to the Bank and
its securities, investors and others should carefully consider the preceding
factors, other uncertainties and potential events. The Bank does not undertake
to update any forward-looking statements, whether written or oral, that may be
made from time to time by or on its behalf.
    The "Outlook" section in this document is based on the Bank's views and
the actual outcome is uncertain. Readers should consider the above-noted
factors when reviewing this section.

    Additional information relating to the Bank, including the Bank's Annual
Information Form, can be located on the SEDAR website at www.sedar.com and on
the EDGAR section of the SEC's website at www.sec.gov.

    
    General Information

    Information on your shareholdings and dividends may be obtained by writing
to the Bank's Transfer Agent:

        Computershare Trust Company of Canada
        100 University Avenue, Ninth Floor
        Toronto, Ontario, Canada  M5J 2Y1
        Telephone: 1-877-982-8767
        Facsimile: 1-888-453-0330
        Electronic Mail: service@computershare.com

    Contact Information

    Investors:
    Financial analysts, portfolio managers and other investors requiring
financial information, please contact Investor Relations, Finance Department:

        Scotiabank
        Scotia Plaza, 44 King Street West
        Toronto, Ontario, Canada M5H 1H1
        Telephone: (416) 866-5982
        Facsimile: (416) 866-7867
        Electronic Mail: investor.relations@scotiabank.com

    Media:
    For other information and for media enquiries, please contact the Public,
Corporate and Government Affairs Department at the above address.

        Telephone: (416) 866-3925
        Facsimile: (416) 866-4988
        Electronic Mail: corpaff@scotiabank.com

    Shareholders:
    For enquiries related to changes in share registration or address,
dividend information, lost share certificates, estate transfers, or to advise
of duplicate mailings, please contact the Bank's Transfer Agent:

        Computershare Trust Company of Canada
        100 University Avenue, Ninth Floor
        Toronto, Ontario, Canada  M5J 2Y1
        Telephone: 1-877-982-8767
        Facsimile: 1-888-453-0330
        Electronic Mail: service@computershare.com

        Co-Transfer Agent (U.S.A.)
        Computershare Trust Company N.A.
        350 Indiana Street
        Golden, Colorado 80401 U.S.A.
        Telephone: 1-800-962-4284

    For other shareholder enquiries, please contact the Finance Department:

        Scotiabank
        Scotia Plaza, 44 King Street West
        Toronto, Ontario, Canada M5H 1H1
        Telephone: (416) 866-4790
        Facsimile: (416) 866-4048
        Electronic Mail: corporate.secretary@scotiabank.com
    

    Rapport trimestriel disponible en français

    Le Rapport annuel et les états financiers de la Banque sont publiés en
français et en anglais et distribués aux actionnaires dans la version de leur
choix. Si vous préférez que la documentation vous concernant vous soit
adressée en français, veuillez en informer Relations publiques, Affaires de la
société et Affaires gouvernementales, La Banque de Nouvelle-Ecosse, Scotia
Plaza, 44, rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si
possible, l'étiquette d'adresse, afin que nous puissions prendre note du
changement.

    The Bank of Nova Scotia is incorporated in Canada with limited liability.

    %SEDAR: 00001289EF          %CIK: 0000009631




For further information:

For further information: Kevin Harraher, Vice-President, Investor
Relations, (416) 866-5982; Frank Switzer, Director, Public Affairs, (416)
866-7238


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