Net income was $1,394 million in 1998, which represented a return on equity of 15.3%. While 1998 net income was 8% lower than in 1997, this was because last year’s results included several unusual items. If these are excluded, earnings in 1997 were $1,223 million. Compared to this, 1998 net income showed a solid increase of 14%.

The Bank benefited in 1998 from a strong economy in North America, the full year contribution of National Trust which was acquired in late 1997, and very good operating results across most of the Bank’s operations, particularly in the United States and in the Caribbean. Areas of particular success were personal and small business lending, and syndicated lending to major corporate customers. As well, there was excellent growth in fee income except in Investment Banking, where revenues were below the prior year. The Bank’s expenses remained well controlled throughout 1998, notwithstanding significant investments in new products, in better sales and service methods, and in the Year 2000 initiative.

RETURN TO COMMON SHAREHOLDERS

Return to common shareholders – which includes both dividends and appreciation in the market value of the Bank’s common shares – was 6.1% in 1998. This was lower than the excellent returns of 1996 and 1997, but was nonetheless among the better returns provided by Canadian banks. Ownership of Scotiabank has provided shareholders with a compound average annual return of 21.7% over the past five years and 21.4% over the past decade.

DIVIDENDS GROWING CONSISTENTLY

The Bank has had consistent growth in the dividends on its common shares, with the dividend rate having been increased in 33 of the past 35 years. In 1998, dividends per share increased to 80 cents, 8% higher than the 74 cents of the prior year (adjusted for the 2 for 1 stock split on February 12, 1998). In addition, on December 2, 1998, the Board of Directors announced an increase in the quarterly dividend on common shares to 21 cents per share (84 cents annualized) effective in the first quarter of 1999.

STRONG BUSINESS LINES

The Bank’s main business lines are well diversified, providing protection against risk, and many opportunities for profitable expansion. In 1998, the Bank benefited from this diversity of its earnings streams, as growth in Canadian Retail and Commercial Banking and in Corporate Banking more than offset the lower results in Investment Banking caused by turbulence in global capital markets in the latter part of 1998. Business line results are summarized in the table below, and are reviewed on the following pages.

Four profitable business lines

* includes gains on sales of businesses, items related to National Trust (1997),
  certain overhead expenses and corporate items