2018 Annual Report Building for the Future

2018 Annual Report

Building for the Future

Scotiabank is Canada's International Bank and a leading financial services provider in the Americas.

We are dedicated to helping our more than 25 million customers become better off through a broad range of advice, products and services, including personal and commercial banking, wealth management and private

3.5

banking, corporate and investment banking, and capital markets.

Earnings per Share Growth*

Diluted, dollars per share

Dividend Growth

Dollars per share

3.0

Strong Capital Position

2.5

7.11 $ 7.07.0-

6.56.5-

6.06.05.5.5-

CAGR = 7%

5.05.01144 1155 1166 1177 1188

$3.28

3.536..55 -

3.036..00 -

2.525..55 -

CAGR = 6%

2.025..00 1144 1155 1166 1177 1188

6.5

CET1 Capital Ratio %

10.8 10.3 11.0 11.5 11.1

14

15

16

17

18

Return on equity:*

14.9%

6.0

VS

5.5

14.7%in 2017

*Adjusted - please refer to page 18

? Diversified by business and geography, providing sustainable and growing earnings and dividends

? Earnings momentum in personal, commercial and wealth businesses

? Increased skills and leadership capabilities in core areas

5.0

? Strong risk management culture

? Increasing scale and market share in key markets through strategic deployment of capital

? Diversified exposure to high quality growth markets in the Pacific Alliance

? Leading levels of technology investment supports our digital banking strategy to strengthen the customer experience and improve efficiency

? Strong balance sheet, capital and liquidity ratios

Contents

1 CEO Message to Shareholders 11 Chairman's Message to Shareholders 12 Executive Management Team

13 Board of Directors 15 Management's Discussion and Analysis 139 Consolidated Financial Statements

Proud of our Progress

CEO Message to Shareholders

Brian J. Porter

President and Chief Executive Officer

Dear fellow Shareholders,

I wanted to begin this letter ? my fifth letter to you, the Bank's shareholders ? by reiterating that it is my profound honour to serve as Scotiabank's President and CEO. I have long believed that banking is a calling. I cannot think of many careers that are as dynamic and fulfilling.

Drafting my annual Letter to Shareholders can be challenging, in large measure because of the diversity of interests represented across Scotiabank's shareholder base. When it comes to balancing the competing demands for short-term results and creating medium-to-long term value, I am proud of what we accomplished in 2018. We invested considerably in our existing businesses and we also acquired a number of high-quality assets. These actions will be additive to the Bank and to you, our shareholders, for years to come.

I hope that this letter will give you a clearer sense of the Bank's strong financial performance, the strategic progress that we have made over the past year, and the basis for our confidence in the Bank's future.

This year, I am closing my letter with a detailed Q&A which reflects some of the questions that are often raised by the stakeholder community.

Earnings by Geography

(in $ billions)

$0.7 $0.7

$0.6

$8.8*

Total

$4.9

$1.9

56 n Canada..................................

%

21 n Pacific Alliance........................

%

7 n U.S........................................... %

8 n Caribbean................................. %

8 n Other International.................... %

*Adjusted - please refer to page 18 May not add due to rounding

2018 SCOTIABANK ANNUAL REPORT | 1

Financial Performance

CEO Message to Shareholders

Against a backdrop of challenging and volatile geopolitical and economic conditions, the Bank delivered another year of record earnings. After adjusting for acquisition-related costs, net income was $9.1 billion ? up 10% compared to last year. Adjusted operating leverage, which measures the difference between year-over-year revenue growth and expense growth, remained strong at 3.7%.

Canadian Banking

Canadian Banking had another very good year, delivering earnings of $4.4 billion. Adjusted earnings growth of 8% was strong and supported by mid-single digit mortgage growth, margin expansion and productivity improvements. We have a strong Canadian Banking franchise that will be further strengthened by our recent Wealth Management acquisitions. As a result, we are confident that we will meet our medium term goals for this division of net income growth of 7%-plus and a productivity ratio (which measures expenses as a percentage of revenue) of ................
................

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