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Second quarter financial measures compared to the same period a year ago:
– Earnings per share (diluted) of $1.02, compared to $0.81
– Net income of $1,097 million, versus $872 million
– Return on equity of 19.9%,compared to 16.8%
– Productivity ratio of 49.9%, versus 51.4%
– Quarterly dividend maintained at 49 cents per common share
Year-to-date performance versus our 2010 financial and operational objectives was as follows:
Targets:
1. Earn a return on equity (ROE)(1) of 16 to 20%. For the six months, Scotiabank earned an ROE of 18.7%.
2. Generate growth in earnings per common share (diluted) of 7 to 12%. Our year-over-year growth in earnings per share was 19.9%.
3. Maintain a productivity ratio(1) of less than 58%. Scotiabank’s ratio was 50.2% for the six months.
4. Maintain strong capital ratios. At 11.2%, Scotiabank’s Tier 1 capital ratio remains strong by Canadian and international standards.
Scotiabank today announced second quarter net income of $1,097 million, up $225 million or 26% compared with the same period last year.
Quarter over quarter, net income increased $109 million or 11%. Diluted earnings per share (EPS) were $1.02 compared to $0.81 in the same period last year and $0.91 last quarter. Return on equity was 19.9% in the second quarter compared to 16.8% last year and 17.4% last quarter. The dividend was maintained at 49 cents per common share.
“We are pleased to announce record quarterly results as we reach the half-way point in the year,” said Rick Waugh, Scotiabank President and CEO. “Our results reflect strong contributions from personal and commercial banking and wealth management, as well as the excellent performance of our wholesale business.
“In the face of volatility in world markets, we remain focused on our fundamentals, diversification by business and geography combined with prudent risk management and cost control practices in order to maintain profitability and strong return on equity. Our credit portfolios continue to improve, as evidenced by lower provisions for credit losses this quarter. Furthermore, we have little or no exposure to troubled European sovereign debt.
“With net income of $584 million, Canadian Banking had a record quarter. Year over year, there was strong growth in residential mortgages, lines of credit and business accounts, as well as improved spreads from easing liquidity costs, all of which contributed to higher net interest income. Wealth management and commercial banking revenues also grew, reflecting the improvements in the economy and equity markets.
“International Banking continues to earn through economic and foreign currency headwinds. Despite these challenges, continued widening of margins and careful expense management contributed to overall results.
“Scotia Capital generated strong results this quarter. Net income was $391 million, driven by solid contributions across all business units, good trading performance and net recoveries in provisions for credit losses.
“Our strong capital position and continued generation of capital gives us the ongoing flexibility to maintain our shareholder dividends and explore opportunities for business development and growth.
“While we manage costs carefully, we will continue to invest in growing our businesses. We do not expect our productivity ratio to remain at the current low level, although it will be well within our target.
“The foundation for our success is the focus we place on our core priorities; sustainable revenue growth, capital management, leadership development, prudent risk management and expense control. With the solid results achieved during the first half of the year, we are well-positioned to meet our established objectives for 2010.”
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; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and reputational risks; the risk that the Bank’s risk management models may not take into account all relevant factors; 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, see the discussion starting on page 62 of the Bank’s 2009 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” sections in this document are based on the Bank’s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections.
Additional information relating to the Bank, including the Bank’s Annual Information Form, can be located on the SEDAR website at http://www.sedar.com/ and on the EDGAR section of the SEC’s website at http://www.sec.gov/.
2010 Objectives
Our Balanced Scorecard
Financial
– Return on equity of 16-20%
– Diluted earnings per share growth of 7-12%
– Long-term shareholder value through increases in dividends and stock price appreciation
People
– High levels of employee satisfaction and engagement
– Diversity of workforce
– Collaboration
Customer
– High levels of customer satisfaction and loyalty
– Deeper relationship with existing customers
– New customer acquisition
Operational
– Productivity ratio of less than 58%
– Strong practices in corporate governance and compliance processes
– Strong capital ratios
– Corporate social responsibility and strong community involvement
Notable Business Highlights
Serving our customers to help them become better off financially
The Scotiabank StartRight Program for Newcomers to Canada website is now available in eight languages – English, French, Traditional Chinese, Simplified Chinese, Spanish, Punjabi, Arabic and Farsi.
Scotiabank is continuing its longstanding relationship with the Canadian Federation of Independent Business (CFIB). As the Official Bank of the CFIB, we will continue to support our customers by combining the value of Scotiabank’s Small Business and Commercial offerings with CFIB’s market leading position as the Voice of Small Business.
In Wealth Management, the performance of ScotiaFunds remains competitive with market share gains for all funds in 40 of the past 42 months. Scotia INNOVA Portfolios surpassed $1 billion in Assets Under Management, just over a year from their introduction to the marketplace in mid-January 2009.
Through the second quarter, Scotia Capital has supported clients on some significant projects:
– Acted as Joint Bookrunner and Co-Manager of a US$1.9 billion equity offering and US$2.7 billion high yield issuance respectively, for Consol Energy Inc.
– Scotia Capital acted as sole Lead Manager and Bookrunner for the RTL-Westcan Limited Partnership C$130 million high yield bond offering and also acted as Lead Arranger for a new C$40 million first lien term and revolving credit facility for the company.
– Acted as Co-Lead Arranger of a US$1.5 billion Senior Secured Term Loan for Americas Mining Corporation, a wholly-owned subsidiary of Grupo Mexico.
Scotiabank recognized for excellence
Scotiabank was honoured to have received the following accolades during the quarter:
– The highest-ranking bank on the 2010 Canadian Business – Reputation Institute list of Most Reputable Canadian Companies.
– Once again named one of Canada’s Best Diversity Employers as part of the ‘Canada’s Top 100 Employers Project.’
– One of the Best Places to Work(R) in Canada, 2010 by the Great Place To Work(R) Institute. Scotiabank has also been named on Best Workplace lists in Mexico, Peru, the Caribbean and Central America.
– Recognized in Macleans and Canadian Business magazines on THE GREEN 30 list of Canadian companies.
– Scotia Capital was named the Best Investment Bank in Canada for the fourth time in six years, and the Best Infrastructure Bank globally for the second consecutive year, by Global Finance magazine.
Celebrating International Women’s Day
In celebration of the 99th annual International Women’s Day, Scotiabank has launched a year-long recognition campaign. Based on nominations, ‘Her Success, Her Way’, will recognize two Scotiabank women employees each month throughout the year leading up to the 100th anniversary of International Women’s Day in 2011. The Bank will make donations to the charities of choice of the women who are recognized and their nominators.
