Scotia Capital
Financials Summit 2004
Réal Raymond
President and CEO
Toronto, September 14, 2004
Excellent positioning for year end
2004 Objectives Q3 04 YTD
Growth in earnings
per share
5% to 10%
7%
20%
Return on common
shareholders' equity
15% to 17% 17%
18%
Tier 1 capital ratio
8.75% to 9.50% 9.5% 9.5%
Dividend payout ratio
(1)
35% to 45% 34% 34%
Change in Net Income
9 MS 04 vs 9 MS 03
-26.8
8.2
7.9
14.3
2.9
4.4
28.0
-78.3
-90%
-70%
-50%
-30%
-10%
10%
30%
50%
Net income
Revenue
Expense
PCL
NBC
Big 5
3
(1)
As % of loans and BAs
(2)As % of BIS assets, July 31
Loan Losses and Provisioning
Sectoral Growth
9 months 2004
5
12.8
16.3
4.0
7.9
33.3
9.8
20.1
14.3
0%
5%
10%
15%
20%
25%
30%
35%
Total
P&C
Wealth Mgmt
Financial Markets
Revenue
Net Income
Today’s Agenda
Current business and economic
environment in Canada
More Challenging Environment
Ahead for Banks
7
Bottoming up in loan losses
Slackening in personal credit growth
Slower rebound in Wealth Management
Tougher time for Financial Markets
Reversal of Monetary Conditions
10-year Treasury Bonds
Consumers’ Debt
% of Disposable Income
9
40%
50%
60%
70%
80%
90%
100%
110%
70
73
76
79
82
85
88
91
94
97
00
03
Tougher Market for Investors
Performance of equities vs bonds
12500
14500
16500
18500
20500
22500
24500
00
01
02
03
04
375
395
415
435
455
475
495
515
535
555
575
TSE
Canada: Non Financial Businesses
11
40
60
80
100
120
140
160
180
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Internally-generated
funds *
Acquisition of
capital assets
*
Undistributed profits and amortization
The Outlook for EPS Growth
Revenue Growth
9ms04+2003 vs 9ms03+2002
(1)
4 banks excl. Scotia
13
14.8
9.5
25.3
26.7
5.3
7.4
5.5
1.3
0%
5%
10%
15%
20%
25%
30%
Total
P&C(1)
Wealth Mgmt(1)
Financial Markets
NBC
Big 5
Dominant Position in Quebec
Our core market
Being #1 or #2 in all markets open to us
remains priority
Credit Card Receivables
Quebec
Moving average 1999=10015
100
110
120
130
140
150
160
170
180
190
1999
2000
2001
2002
2003
NBC
Canadian banks
Foreign banks
Banks
Mutual Funds AUM
Quebec
Moving average 1999 = 10085
95
105
115
125
135
145
99Q4
00Q4
01Q4
02Q4
03Q4
Business Development: Quebec Initiatives
Goal of increasing clients’ share of wallet
Deployment 280 financial planners in high volume
branches
More than 50 structured products created
Wealth Management
17
National Bank Family of Funds
Net sales 12 months
3.8%
Mutual Funds Industry
Wealth Management
$ Millions
19
600
625
650
675
700
725
750
2003
Q2
Q3
Q4
2004
Q2
Q3
75
100
125
150
175
200
225
Revenus
Net income before tax
R
e
ve
n
u
e
s
N
IB
T
4 quarter moving average
Business Development: Quebec Initiatives
Direct insurance partnership with AXA
continues to grow at 15% range
66,000 active car insurance policies, 40%
from non-bank clients
Ranked in #2 or #3 spot for brand recognition
depending on the measure
Altamira
Network
Altamira
Network
National Bank
Financial
National Bank
Financial
Partnerships
Partnerships
Financial
Markets
Financial
Markets
Niche Strategy of National Bank
Business Model
21
125
150
175
200
225
250
275
300
00
01
02
03
04
Quarter
Trend
Average 4 quarters
Quarterly Revenues
Financial Markets, Millions $
Source: National Bank Financial database
23
0
1
2
3
4
2000
2001
2002
2003
YTD - July
2004
(I n bi lli o n s $ )0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
NBF Net Underwriting ($billions)
NBF Market Share
Competitive Positioning
Equity Issues
# of deals 113 162 196
225 148
NBF Retail Outside Quebec
22.4
27.2
28.5
29.4
31.1
38.9
36.7
37.3
30.4
26.4
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
01-Sept
02-Sept
03-June
03-Sept
04-June
AUA NBCN
Billions $
25
10
15
20
25
30
35
40
Oct-00
Oct-01
Oct-02
Oct-03
Jul-04
260 257 255
228 224 221
205
152 149
139
50
100
150
200
250
300
N u m b er o f D eal sInvestment Banking Group
New Issuance of Equities
Edward
Jones
Jan 2001
May 2001
May 2002
Nov 2001
Nov 2002
August 2003
Nov 2002
Nov 2002
Partnerships – Key Business
Development Strategy
27
Business Development: Outside Quebec
$70 M of new loans each month
75,000 new accounts
$850 M new loans represents 15% of non
credit card personal loans
Revitalizing NBC Retail Operations
West of Quebec
29
39
136
(45)
130
(1)
49
2004
Savings
2003
Investment products
Credit
Net Sales – July YTD
(In millions)
Altamira/Bank Connection
Branch distribution of Altamira funds
Use of Altamira channel to distribute Bank
products
Efficiency Ratio
Bank (%)
31
65.3
64.7
64.9
65.7
66.6
65.9
63.5
64.0
64.5
65.0
65.5
66.0
66.5
67.0
9M-02
9M-03
9M-04
NBC
Big 5
(1)
As % of loans and BAs
(2)As % of tangible equity
Risk Management
Quality of assets
Big 5
NBC
Big 5
NBC
15.7%
13.0%
11.8%
12.4%
0.46%
0.45%
0.33%
0.35%
-0.19%
-0.38%
-0.28%
-0.46%
Net non-performing
1
Provisions for loan losses
1
Gross non-performing
2
Growth and Volatility
Financial Markets Revenue
Capital Efficiency
Adjusted BIS assets equal BIS assets plus 12.5x gross goodwill and intangibles from acquisitions
35
45%
50%
55%
60%
65%
99
00
01
02
03
04
5,0%
5,6%
6,2%
6,8%
7,4%
BIS assets as a % of book (left scale)
Revenues as % adjusted BIS assets
Capital Sources and Uses
2000-04, Millions $
255
-258
-595
-180
-843
-808
-123
2,532
Net income available
Tier 1 Capital Ratio
37
7%
8%
9%
10%
11%
12%
00
01
02
03
04
NA
Big 5
P/E (12 Months Forward)
P/E Discount
39
0%
10%
20%
30%
40%
50%
60%
96
97
98
99
00
01
02
03
04
Banks/TSE
Na/Banks
Banks vs TSX NA vs BanksIBES; 3 months average
New Reality of Banking Industry
Reduced impact of interest rate hikes
Stronger balance sheet
Better risk management tools
New Reality of Banking Industry
Reduced impact of interest rates hikes
Stronger balance sheet
Better risk management tools
Last loan loss cycle stemmed from tech bubble
Increased liquidity of the corporate sector
In summary:
Banks have been an excellent pick relative to
the market during the past five years
National Bank certainly deserves a closer look
41
Q&A
• HIGHLIGHTS
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, National Bank of Canada makes written and oral forward-looking statements, included in this analyst and investor presentation, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders, in press releases and in other communications. All such statements are made pursuant to the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.These forward-looking statements include, among others, statements with respect to the economy,market changes, the achievementof strategic objectives, certain risks as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. These forward-looking statements are typically identified by the words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and words and expressions of similar import.
By their very nature, such forward-looking statements require us to make assumptions and involve inherent risks and uncertainties, both general and specific. There is significant risk that express or implied projections contained in such statements will not materialize or will not be accurate. A number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Such differences may be caused by factors, many of which are beyond Bank’s control, which include, but are not limited to, changes in Canadian and/or global economic and financial conditions (particularly fluctuations in interest rates, currencies and other financial instruments), liquidity, market trends, regulatory developments and competition in geographic areas where the Bank operates, technological changes, consolidation in the Canadian financial services sector, the possible impact on our businesses of international conflicts and other developments including those relating to the war on terrorism and the Bank’s anticipation of and success in managing the risks implied by the foregoing. The Bank cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Bank therefore cautions readers not to place undue reliance on these forward-looking statements. 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 behalf of the Bank.