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Opportunity is
around the world.
18 Scotiabank 2005 Annual Report
REPORT ON BUSINESS LINES
Building the best Canadian-based
international financial services company…
Scotiabank is, increasingly, an international bank. Some of our greatest International Banking net income
growth opportunities exist outside of Canada. In fiscal 2005, International ($ millions)
Banking accounted for 27% (or $800 million) of the Bank’s net income,
compared to 19% in 1999. This growing contribution to our overall 800
718
earnings underlines the long-term potential of International Banking. 636
Scotiabank has always looked beyond Canada’s borders for new opportuni-
ties: our first branch outside of Canada opened in Kingston, Jamaica, in 1889.
Today, our retail and commercial operations span more than 40 countries, and
the scale, diversity and expertise of our global network are widely recognized
as a distinction that sets us apart from the other major Canadian banks and 2003 2004 2005
positions us well to build sustainable growth.
Scotiabank is the leading provider of financial services in the Caribbean – a presence that is further expanded through
our 35-year affiliation with Maduro & Curiel’s Bank of the Netherlands Antilles and Aruba. We are active in the Latin
American market through subsidiaries in Mexico, Costa Rica, El Salvador and Chile, as well as affiliates in Peru and
Venezuela. We also have a broad Asian network, including well-established bases in the fast-growing economies of
China and India.
Our global growth strategy has three main components: organic growth, acquisitions and efficiencies.
INTERNATIONAL BANKING
Main photo, page 18: Through its international wealth management operations, Scotiabank focuses on providing specialized solutions to meet the needs
of high net worth clients. To long-time client José Luis Barraza of Mexico, it is important to deal with a solid, reputable bank that provides financial and
investment solutions tailored to his personal risk profile.
Photo, above left: Scotiabank’s commitment to strong leadership and the advancement of women resulted in the appointment of Minna Israel as Managing
Director of Scotiabank (Bahamas) Limited – the first female head of a Scotiabank subsidiary in the Caribbean and Central America.
Photo, above right: Scotiabank (Bahamas) Limited provided a syndicated loan of US$233 million to Baha Mar Development Company Limited to assist with
the purchase and revitalization of three hotel properties on Cable Beach in the Bahamas. Seen here are Baha Mar’s Chairman and CEO Sarkis Izmirlian (left)
and Robert Sands, Vice-President, Administration and External Affairs.
Scotiabank 2005 Annual Report 19
REPORT ON BUSINESS LINES
Opportunity is around
the world.
Latin America – vital statistics
Total Branches & Offices Staff ABMs
Latin America* 651 11,266 1,324
Mexico 444 6,960 1,046
Chile 57 1,187 115
Venezuela 116 2,142 137
Peru 31 962 26
*6 countries including subsidiaries and affiliates
Mexico
Our greatest opportunity for international growth currently exists in Mexico, where our
subsidiary, Scotiabank Inverlat, contributed $348 million to International Banking’s
results this year. The Mexican market is still developing and expanding rapidly, and there
is also a substantial youthful demographic who need a broad range of financial services.
Scotiabank Inverlat has 444 branches and offices, a network of 1,046 ABMs, more than
1.3 million customers, and a strong share of the mortgage and automotive financing markets.
Caribbean and Central America
Scotiabank Inverlat has
We have 366 branches and offices, 775 ABMs and a large customer base in the
a strong share of the Caribbean and Central America, where we operate in 25 countries. We have particularly
mortgage and auto finance strong, long-established franchises in Jamaica, Trinidad and Tobago, the Bahamas and
Barbados. Thanks to acquisitions in the Dominican Republic and El Salvador, we now
markets. have significantly increased operations in these countries.
In fact, Central America and the Spanish-speaking Caribbean – particularly El
Mexico has the most youthful Salvador, Costa Rica, Panama, the Dominican Republic and Puerto Rico – represent a
population in North America – tremendous growth opportunity for us, given their large, young populations whose need
a demographic that appeals for financial services is increasing.
to Scotiabank, since younger Our goal is to leverage Scotiabank’s established capabilities to reinforce and further
people tend to consume and expand our reputation for strength, stability and outstanding customer service through-
borrow more. out the region.
Miriam Lino Pérez and Alejandro Latin America
Chávez Sánchez of Mexico City Our holdings in Latin America include Scotiabank Sud Americano in Chile, and affiliates in
are among the many dedicated Peru and Venezuela. In Chile, we operate 57 branches and offices and a network of 115
Scotiabank Inverlat employees ABMs in a relatively mature, competitive market. There are opportunities in these mar-
who are helping us grow our kets to increase our share with more aggressive advertising and marketing, especially in
lending portfolio. credit cards.
Asia Pacific
In Asia Pacific, we operate 24 branches and offices in nine countries, with China, India,
Malaysia, Thailand and Taiwan showing the greatest potential for growth. Our business
in these countries is primarily focused on commercial banking and trade finance, with
some wholesale banking.
20 Scotiabank 2005 Annual Report
INTERNATIONAL BANKING
Caribbean & Central America – vital statistics
Total Branches & Offices Staff ABMs
Caribbean & Central America* 366 10,049 775
Dominican Republic 55 1,088 74
Jamaica 45 1,469 156
Trinidad and Tobago 25 904 67
Bahamas 21 555 54
*25 countries including subsidiaries and affiliates
Our primary challenge is to expand our presence in this highly competitive market,
particularly by establishing a meaningful retail operation. Although China and India have
significant regulatory and foreign ownership restrictions, we will continue to look actively
for appropriate acquisitions. There is a large, growing population in many of these markets
with expanding needs for banking services.
2005 Achievements With the acquisition of BanCo,
Scotiabank’s international reach continued to grow this year. Scotiabank’s US$181 mil- we tripled our presence in
lion acquisition of Banco de Comercio (BanCo) in El Salvador in May gave us majority
ownership of the country’s fourth-largest bank, with $1.9 billion in assets and a consoli-
El Salvador and are now the
dated market share of 19 per cent. All BanCo branches were rebranded as Scotiabank. fourth-largest bank in
Additionally, Scotiabank de Puerto Rico acquired Pan American Financial, a mortgage
company which has been active in Puerto Rico since 1997.
the country.
Early in fiscal 2005, we opened a new representative office in Shanghai, the financial
hub of China, positioning us to explore new business opportunities in this rapidly grow- A major media campaign and
ing economy. Scotiabank was also approved as a foreign institutional investor by regula- rebranding – captured in these photos,
tors in India, permitting the Bank to invest in local Indian securities. courtesy of the daily newspaper El Diario
Around the globe, we continued to improve the products and services we offer to our de Hoy – introduced Salvadoreans to
customers. Income from retail loans and deposits was significantly higher in the Caribbean, the significantly expanded Scotiabank
Mexico and Chile. Credit cards are an important element of our retail strategy, and so El Salvador.
Scotiabank Inverlat renewed its agreement with Fiesta, the leading loyalty program in
Today, we offer customers an extensive
Mexico, and issued a co-branded credit card.
range of retail, commercial and corporate
We continued to expand our delivery network, opening 16 branches in Mexico and
banking services through 67 branches
expanding our Internet banking, which is now in nine Caribbean countries.
across the country.
Our ScotiaGlobe systems platform now supports almost all the countries in the
Caribbean and Central America Region. Despite the different languages, currencies,
products and services offered in each country, the system is able to support customer,
product and account administration, branch sales, customer relationship management,
forms-free teller processing and self-service banking.
Scotiabank received a number of important international awards this year. Latin
Finance recognized Scotiabank’s achievements in 2005 by giving us three “Bank of the
Year” awards for our operations in Mexico, Jamaica and the Caribbean. Scotiabank
Inverlat was named one of the 50 best companies to work for in Mexico by The Great
Scotiabank 2005 Annual Report 21
REPORT ON BUSINESS LINES
Place to Work Institute, reflecting our efforts to become an employer of choice globally.
We were also recognized as one of the top 20 employers in Jamaica in a survey con-
ducted by the Jamaica Employers’ Federation and the University of the West Indies.
2006 Priorities
Organic growth
Organic growth involves retaining and deepening relationships with current customers
as well as acquiring new ones, and continuing to implement our sales disciplines and
culture across our network.
We plan to obtain new customers by expanding our sales network, increasing our
spending on advertising, particularly in Spanish-speaking markets, and leveraging our
strengths in database marketing across the divisions.
In Mexico, Scotiabank Inverlat is continuing to use specialized sales forces (for example,
in auto finance and mortgages), and adding 20 to 30 branches to our network each year
in prime urban growth areas.
Growth in the English-speaking Caribbean will be challenging, because of the matu-
rity and competitiveness of these markets. Nevertheless, we believe growth is possible
by continuing to build deeper relationships with our customers – in part by offering them
The Caribbean and Central more complementary services, such as insurance and wealth management.
In Chile, we continue to seek new customers and improve the profitability of existing
America offer growth relationships through marketing, external sales forces and cross-selling, including instal-
opportunities in the sale lation of a new customer management information system.
Through the Bank’s new Global Transaction Banking unit, we believe we can achieve
of insurance products.
a competitive advantage by bringing together our capabilities in global payments, trade
finance and cash management to meet the needs of our multinational customers.
Leveraging capabilities developed
in Jamaica and Trinidad, we are Acquisitions
focusing on offering a variety of We are actively seeking international acquisitions as part of our global growth strategy.
creditor, disability and wealth More than 40% of International Banking’s 2005 earnings were generated by acquisitions
insurance products in other made since 1999.
countries throughout the region.
Acquisitions – A critical component of our growth
(% of net income) Key acquisitions since 1999
40%
El Salvador
Dominican Republic
Mexico Chile
60%
1999 2005
22 Scotiabank 2005 Annual Report
INTERNATIONAL BANKING
Our primary acquisition focus is on markets where we have a presence, especially
the Caribbean, Central America and Latin America, with a secondary focus on Asia,
given its long-term potential. However, opportunities vary from market to market and, in
some cases, particularly in Asia, they are limited by foreign ownership restrictions.
We are also increasing revenues by expanding into complementary businesses, such as
insurance and wealth management, in areas where we already have a large, well-developed
customer base. In wealth management, we are looking to expand our ScotiaMcLeod
International branch in Mexico, and add new locations in Chile, Barbados, Trinidad,
Jamaica and the Bahamas.
Increasing efficiency
Our International Shared Services initiative, which Scotiabank Inverlat
lowers overall costs by delivering economies of productivity ratio
scale, and frees up more employees to focus on (%)
revenue growth through sales and customer serv-
90
ice, will be continually improved, taking advantage
of our Canadian experience with shared services. 80
We also plan a number of major technology ini- 70
tiatives to improve efficiency and support
60 Asia continues to offer
growth in Internet banking and business bank-
ing, call centres and voice and data capacity. 2001* 2002* 2003 2004 2005
long-term potential.
We continue to improve the efficiency ratios
* As per published numbers and not
of acquired operations. For example, Scotiabank restated for preferred shares
To further tap the potential
Inverlat’s productivity ratio has improved steadily
of the Chinese market, we
over the past five years and is now approaching the all-Bank target of below 58%. This
opened another representative
has been achieved through rapid revenue growth, while costs have been well controlled.
office – in Shanghai – in 2005.
Summary
International Banking continues to play an important role in Scotiabank’s success. Our goal
is to create a truly global organization that enables each country where we operate to meet
local market needs by drawing on our breadth of common expertise and best practices.
Scotiabank 2005 Annual Report 23
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