Last Earnings Release 11/28/2017. Last Qtr. Actual vs. Est. $1.30 / $1.33. Next Release 02/27/2018 $1.31. Year Ending 10/31/2017 $4.

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1 Grade Earnings Last Earnings Release 11/28/2017 Last Qtr. Actual vs. Est. $1.30 / $1.33 Next Release 02/27/2018 $1.31 Year Ending 10/31/2017 $4.78 Quick Facts Dividend Yield 3.73% 52 Wk High $ Wk Low $54.50 Short Interest 0% of float $ /02/2018 Rated 'HOLD' since Jun 8th, 2017, when it was upgraded from 'SELL' Year Ending 10/31/2018 $5.13 Market Cap $77.2B Overview Narrowly Passing Grades Put Stock Near SELL Rating MarketGrader currently has a HOLD rating on Bank of Nova Scotia (BNS), based on a final overall grade of scored by the company's fundamental analysis. scores at the 74th percentile among all 5789 North American equities currently followed by MarketGrader. Our present rating dates to June 8, 2017, when it was upgraded from a SELL. Relative to the Major Banks sub-industry, which is comprised of 42 companies, 's grade of ranks 19th. The industry grade leader is Canadian Imperial Bank of Commerce (CM.CA) with an overall grade of The stock has performed poorly in the last six months in relative terms, up 6.93% compared with the Major Banks sub-industry, up 17.56% and the S&P 500 Index, up 16.21%. Please go to pages two and three of this report for a complete breakdown of BNS's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth B Acceptable Growth Track Record Offers Plenty of Room for Improvement 's recent jump in quarterly sales was a welcome improvement from a recent trend of Market Growth LT F long term decline. The bank booked $7.68 billion in revenue last quarter, 15.92% better than the $6.62 billion reported a year ago. By comparison, its $27.96 billion in 12-month trailing revenue represents a Market Growth ST A- 3.12% decline from the comparable period ended three years ago in which the bank had $28.86 billion in total sales. One or two more quarters of improved results will reverse 's top line growth Dividend Growth B- slide and likely provide a boost to its earnings growth as well. It also reported a healthy jump in profits last EPS Growth A+ quarter from the comparable period a year earlier, a marked contrast to its long term profit decline. We measure long term profit growth by comparing the latest full year (12-month trailing) results to the equivalent Earnings Impact D period three years before. 's Fourth quarter profit jumped 8.94% to $1.61 billion from Earnings Surprise B- $1.48 billion (excluding extraordinary items) reported in the year earlier period; on the other hand, also including its first quarter results, its 12-month trailing net income dropped 5.73% to $6.12 billion from the $6.49 billion it had earned in the 12 months ended three years earlier. A modest expansion in margins reported by the bank in the latest quarter, with average growth in EBITDA, operating and net margins of 3.92%, represents a slowdown from its margin growth of the two previous quarters. The company's November 28, 2017 Fourth quarter earnings report fell 2.26% below analysts' consensus estimates for the period, sending the stock down 2.84% from the day before to the day after the announcement. Despite this negative report, its earnings surprise record continues to be positive, having exceeded analysts' estimates by 3.01%, on average, in the last six reported quarters. The dividends paid by Bank of Nova Scotia to its shareholders during the last 12 months were 7.43% larger than they were a year earlier, a remarkable increase. However, they were still 0.62% below the dividend paid by the bank in the equivalent period ended three years ago, suggesting caution by management not to deplete its capital by increasing the payout too quickly. Growth Fundamentals Revenue Revenue Qtrly 10/31/2017 Revenue Qtrly Year Ago $7.7B $6.6B Revenue 1 Yr. Chg % Revenue 12 mo. tr. Latest $28B Revenue 12 mo. tr. 3Y Ago $28.9B Revenue 12 mo. tr. 3Y Chg. (3.12%) Net Income Net Income Qtrly 10/31/2017 Net Income Qtrly Year Ago $1.6B $1.5B Net Income 1 Yr. Chg. 8.94% Net Income 12 mo. tr. Latest Net Income 12 mo. tr. 3Y Ago $6.1B $6.5B Net Income 12 mo. tr. 3Y Chg. (5.73%) Cash Flow Cash Flow Qtrly 10/31/2017 $45M Cash Flow Qtrly Year Ago $4.3B Cash Flow 1 Yr. Chg. (98.96%) Cash Flow 12 mo. tr. Latest $13.6B Cash Flow 12 mo. tr. 3 Yrs. Ago $14.1B Cash Flow 12 mo. tr. 3 Yr. Chg. (3.16%) Total Interest Income 10/31/2017 $5.0B Total Interest Expense 10/31/2017 $1.9B Cash on Hand 10/31/

3 Value B- Capital Ratio P/E Analysis Price/Book Ratio F F F Price/Cash Flow Ratio A Price/Sales Ratio B- Market Value A- Company's Shares Seem Fully Priced and Buying at this Level Would Be Highly Speculative Shares of, trading at times trailing 12-month earnings per share, are very expensive when compared to our "optimum" P/E ratio of 7.50, a 55.66% premium. The MarketGradercalculated optimum P/E is derived from the company's five year EPS growth rate, looking at quarterly earnings in rolling 12-month periods. By this measure, 's earnings per share have declined at a -0.91% annualized rate during the last five years. The company's recent margin expansion and healthy Profitability indicators might help reverse this negative growth rate, which would in turn provide some support for the stock. The stock is also valued at times the company's forward earnings estimates for the next four quarters, which means that it trades below its trailing P/E and the market's forward P/E of (based on earnings estimates for the S&P 500). Therefore investors may see the current valuation as fully reflecting the company's EPS growth prospects and its current fundamentals. current market value is 3.95 times its book value, which seems like an attractive valuation. However, when intangible assets such as goodwill are excluded from the company's stockholders' equity its price to book ratio is a much higher This discrepancy is explained by the fact that 's intangible assets account for a substantial 53.96% of the company's total stockholders' equity. Were the bank forced to write down a significant portion of these assets in a short period of time, the current valuation would not seem so low. Our bank Price to Book Ratio indicator not only looks at the ratio itself on an absolute scale to determine if the bank's shares are expensive or not. It combines it with the bank's actual tangible equity per share relative to the average of all banks in the MarketGrader system. This is important for investors to analyze since a bank can look cheap simply because the price of the stock is depressed without regard for the actual amount of tangible book value in each share. Two banks with identical ratios seem, from a value perspective, the same at first glance yet one may be a lot riskier than the other if it has little tangible equity. In 's case, its $16.30 in tangible equity per share is % higher than the $4.68 per share bank average. The company's low price to cash flow ratio of 5.73, based on the $11.23 it generated in cash flow per share over the last four quarters, would be an attractive valuation if its overall fundamentals weren't so poor. Therefore such a low ratio could mean investors aren't willing to pay much for the company's earnings prospects. Its price to sales ratio of 2.76 is slightly higher than the Major Banks's average of 2.58, both based on trailing 12-month sales. Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. According to this indicator 's $77.22 billion valuation is reasonable at times its most recent quarterly net income plus depreciation. Value Fundamentals Value Ratios P/E Ratio 12 mo. tr. 10/31/ Optimum P/E Ratio 7.50 Forward P/E Ratio S&P 500 Forward P/E Ratio Price to (tangible) Book Ratio 3.95 Price-to-Cash Flow Ratio 5.73 Price-to-Sales Ratio

4 Profitability B While Company's Profitability Grades Are Pretty Solid, They Offer Plenty of Room for Improvement has a strong 12-month trailing profitability record based on solid returns on shareholder equity, operating margins that exceed its peer group average and a remarkable net profit Net Interest Margin C margin. The $6.12 billion net profit earned by the bank in the last four quarters was equivalent to 21.89% of Return on Assets C total sales. The bank reported a modest increase in its net interest margin last quarter from the year earlier period but the latest number for this important profitability indicator still reflects significant weakness in its Operating Margins A- operations. It said net interest income during the period represented 2.84% of average interest earning Relative Margins B+ assets compared to 2.72% a year earlier and still below the 4.25% net interest margin average of all banks that MarketGrader covers. This indicator measures the profitability of the bank's loans and similar Return on Equity B+ produictive assets after accounting for the cost of funding them, primarily the interest paid to its depositors. Solvency Ratio A- 's net interest margin is 2.37 percentage points above three month Libor, a widely referenced benchmark of short term funding based on interbank lending, a pretty slim margin. Bank of Nova Scotia's return on equity--an important measure used by MarketGrader to gauge management efficiency--is very strong, at 14.00% based on how much the bank has earned in the last year. This represents an improvement from the year-earlier 13.42% return on equity, a very healthy sign of profitable growth. Even though the bank's return on assets improved during the last 12 months to 0.88% from 0.79% in the equivalent period ended a year earlier, based on assets that averaged $ billion, such a poor result underscores its ongoing operating problems. The 12-month trailing bank average return on assets was 1.08%. In its most recently reported period 's assets deteriorated so much that its core capital reserves (Tier 1 capital) fell to 0.00% of risk weighted assets from 12.40% a year ago, not only a steep decline, but putting the bank in violation of the 4% regulatory minimum. This drop likely happened because assets once labeled as safe based on historical default rates, and thus assigned a small weight in reserve calculations, stopped performing in large quantities, forcing the bak to raise their risk profile and thus requiring additional capital reserves. This will force the bank to raise fresh capital or shed assets, or both, which could be problematic as the market probably anticipates the magnitude of its problems making investors unwilling to risk injecting more capital into the bank. On average, all banks followed by MarketGrader have average Tier 1 capital, which is defined as common stock plus noncumulative prefered stock, of 11.07% of total risk weighted assets. During the last year the bank successfully reduced its non-performing assets to 11.01% of its tangible equity plus its reserves for loan and asset losses, from 12.85% a year ago. This drop in its solvency ratio, as we refer to this number, suggests the bank is managing its balance sheet conservatively and has built up a comfortable cushion against potential future losses. It also compares very favorably to the average of all banks in our coverage universe, in which non-performing assets account for 7.00% of their tangible equity plus loss reserves. 's goodwill and other intangibles, which we exclude from our solvency ratio calculation, account for 53.96% of its common equity. Profitability Fundamentals Profitability Net Interest Margin 2.84% Net Interest Margin Yr. ago 2.72% Return on Assets 0.88% Return on Equity 12 mo. tr. 14% Dividend Growth 1Y Avg. 7.43% Dividend Growth 3Y Avg. (0.62%) Dividend Yield 3.73% Balance Sheet Total Assets Total Assets Yr. Ago Goodwill Other Intangibles Tangible Assets Non-Performing Assets Reserves for Loan & Asset Losses Common Equity Tangible Equity $710.0B $668.7B $5.6B $17.6B $686.8B $4.1B $3.4B $43.0B $19.8B 4

5 Cash Flow C Management of the Company's Cash Flow Is Generally Poor and Should Be Watched Closely ' cash flow fell considerably during the latest quarter to $44.72 million, a 98.96% decline from the $4.30 billion reported after the same quarter last year. What's more important and worth Cash Flow Growth F highlighting is the fact that up to the most recent quarter the company's twelve month trailing cash flow was Tangible Com. Equity D growing very healthily, up 45.49% compared to the same period ended a year before. This marks a sharp slowdown in the company's business environment and is likely to put considerable pressure on its margins. Loss Reserve Ratio D At the end of last quarter was supporting $ billion of tangible assets on just Yield Analysis B- $19.81 billion of tangible common equity, equivalent to times leverage. Or, looked differently, this amounts to a 2.88% tangible common equity ratio, a sign of poor capital adequacy despite a modest Interest Ratio B- improvement from 2.57% a year earlier. Our Tangible Equity Ratio indicator is a good complement to our Dividend Yield B+ Capital Ratio, as it focuses on common equity, while Tier 1 capital includes preferred stock, and also since it excludes goodwill and all other intangible assets usually included in banks' reporting of total common equity. This indicator therefore offers a clear picture of the bank's financial strength and true leverage. Even though the bank recently increased its loan and asset loss reserves and now has $0.82 for every dollar of non-performing assets compared to $0.80 in the fourth quarter of 2016, the latest comparable period reported of data available to us, this level is still extremely low. However, given that its $4.07 billion in non-performing assets account for a small portion of its tangible equity plus its reserves, as measured by our Solvency Ratio indicator, the bank seems comfortable with its current level of reserves, especially since boosting them would probably come at the expense of future earnings per share. Also according to last quarter's financials, the bank's total interest expense, which is mainly what it pays its depositors, made up 38.68% of the interest income it earned on its assets, a relatively high amount. This was above the 21.15% interest ratio average of all banks followed by MarketGrader, suggesting 's core operations need to improve the productivity of its assets. In this case it's important to pay close attention to the quality of the bank's balance sheet, particularly the percentage of its income producing assets that is not performing. The bank increased its quarterly common dividend on October 31, 2017 by 9.82%, to $0.632 cents a share from $0.575 cents. It has paid a dividend for at least 17 years and, based on this latest payout, the stock is currently yielding 3.73%., which recently increased its payout ratio, has spent $2.90 billion in common dividend payments during the last 12 months. This represents 21.27% of total cash flow and 47.41% of after-tax earnings, a modest increase from the 46.48% of earnings it paid out in the year ended a quarter earlier. The increasing trend of an already elevated payout is worth monitoring for signs fo liquidity problems even though the company's fundamentals are generally healthy. Cash Flow Fundamentals Financial Strength Capital Ratio - Core Capital Ratio - Total N/A N/A Solvency Ratio 11.01% Tangible Common Equity Ratio 2.88% Loss Reserve Ratio 0.82% Goodwill & Intangibles / Com. Equity 53.96% 5

6 Profile The operates as a diversified financial services institution that provides a wide range of financial products and services to retail, commercial and corporate customers. Its businesses are grouped into four segments: Canadian Banking; International Banking; Global Wealth & Insurance; and Global Banking & Markets. The Canadian Banking segment provides a full suite of financial advice and banking solutions to personal and business customers across Canada. This segment includes two businesses: Retail & Small Business Banking; and Commercial Banking. The Retail & Small Business Banking provides financial advice, solutions and day-to-day banking products, including debit cards, deposit accounts, credit cards, investments, mortgages, loans, and related creditor insurance products, to individuals and small businesses. The Commercial Banking delivers advice and a full suite of customized lending, deposit, cash management and trade finance solutions to medium and large businesses. The International Banking segment encompasses retail and commercial banking operations in Latin America, the Caribbean and Central America, and Asia regions. The Global Wealth & Insurance segment combines the bank's wealth management and insurance operations, and Global Transaction Banking. The Global Wealth business comprises of asset management and client-facing businesses. The Global Insurance has four main businesses in Canada: creditor, life & health, home and auto & travel. The Global Transaction Banking offers comprehensive business solutions such as cash management, payment services, electronic banking, business deposits, and trade services. The Global Banking & Markets segment provides corporate lending, equity & debt underwriting, and mergers & acquisitions advisory services, as well as capital markets products and services, such as fixed income, derivatives, prime brokerage, securitization, foreign exchange, equity sales, trading & research, energy and agricultural commodities. The bank was founded on March 30, 1832 and is headquartered in Toronto, Canada. Key Facts: 40 King Street West Toronto,ON M5H 1H1 Phone: Biggest Company in Sub-Industry Bank of America Corporati Grade 56.1 Market Cap:$ billion Smallest Company in Sub-Industry Community First Bancshare Grade 22.7 Market Cap:$84.43 million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary *EPS Latest $1.31 *EPS Year Ago $1.19 EPS Change 1 Yr. 10% C. Shares - Latest(M) 1,215 C. Shares - Yr Ago(M) 1,226 C. Shares - 1Yr Chg. (1%) EPS if Yr. Ago Shares $1.30 EPS Chg. if Yr. Ago 9% EPS Loss from Dilution $0.01 *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Income Statement Last Qtr (10/2017) 12 Mo. Trailing Revenue $7.7B $28.0B Op. Income $2.0B $7.5B Net Income $1.6B $6.1B *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Balance Sheet Total Assets Total Debt Latest $710.0B $110.3B Stockholders Eq. $46.6B All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible Book 3.95 Price/Cash Flow 5.73 Price/Sales 2.76 Earnings Yield 0% Net Interest Margin 2.84% Return on Equity (12 mo. trailing) 14.00% Total Assets Intangible Assets Long Term Debt Total Debt Book Value Enterprise Value $710.0B $23.2B $30.7B $110.3B $43.0B $110.3B '13 '14 '15 '16 '17 Qtr Qtr Qtr Qtr Return on Assets (12 mo. trailing) 0.88% Capital Ratio - Core 0.00% Tangible Common Equity Ratio 2.88% 6

7 Top Down Analysis Financials Stocks in Sector: 1206 Buys: 285 (23.63%) Holds: 274 (22.72%) Sells: 647 (53.65%) No. of stocks at: 52-Wk. High: Wk. Low: 106 Above 50 & 200-day MA: 465 Below 50 & 200-day MA: 456 Major Banks Stocks in Sub-Industry: 42 Buys: 11 (26.19%) Holds: 11 (26.19%) Sells: 20 (47.62%) No. of stocks at: 52-Wk. High: 0 52-Wk. Low: 1 Above 50 & 200-day MA: 33 Below 50 & 200-day MA: 3 # Ticker Grade Sentiment Name Price Next EPS 1 NLY N Annaly Capital Management, Inc. $ /08/ CHP.UT N Choice Properties Real Estate Investment $ /21/ SPG N Simon Property Group, Inc. $ /02/ LAMR N Lamar Advertising Company Class A $ /21/ IVR N Invesco Mortgage Capital Inc. $ /20/ DX N Dynex Capital, Inc. $ /21/ CHMI N Cherry Hill Mortgage Investment Corp. $ /09/ PZN P Pzena Investment Management, Inc. $ /24/ PK N Park Hotels & Resorts, Inc. $ /29/ IIP.UT.C N InterRent Real Estate Investment Trust $ /07/ BNS P $ /27/2018 # Ticker Grade Sentiment Name Price Next EPS 1 CM.CA N Canadian Imperial Bank of Commerce $ /01/ HOPE N Hope Bancorp, Inc. $ /27/ PEBO N Peoples Bancorp Inc. $ /26/ CMA P Comerica Incorporated $ /19/ TD.CA N Toronto-Dominion Bank $ /01/ CM P Canadian Imperial Bank of Commerce $ /01/ KEY P KeyCorp $ /25/ USB P U.S. Bancorp $ /18/ TD P Toronto-Dominion Bank $ /01/ RY.CA N Royal Bank of Canada $ /30/ BNS P $ /27/ Price Trend. B+ 2. Price Momentum. D 3. Earnings Guidance. B+ 4. Short Interest. A+ 7.6 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 7