Bank of Nova Scotia Reports Balanced Earnings Growth

Bank Of Nova Scotia ((TSE:BNS)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call of the Bank of Nova Scotia reflected a balanced sentiment, showcasing strong financial performance and strategic execution. The bank reported notable growth in earnings per share (EPS) and return on equity (ROE), despite facing challenges related to credit losses and adjusting items that impacted net income. Overall, the sentiment was positive, with robust earnings growth across key segments, although headwinds were noted in credit provisions and Canadian banking earnings.

Strong EPS and ROE Growth

The Bank of Nova Scotia reported a 10% growth in EPS for the full year, with the fourth quarter ending with an ROE of 12.5%, marking an increase of 190 basis points year-over-year. This growth highlights the bank’s effective financial management and strategic focus on enhancing shareholder value.

Significant Revenue and Profit Increases

The bank experienced significant revenue and profit increases, with Global Wealth Management earnings rising by 17% year-over-year and Global Banking and Markets earnings increasing by 30%. Overall revenue was up 12% year-over-year, demonstrating positive operating leverage of 3%.

Successful Strategic Initiatives

Strategic initiatives proved successful, with closed referrals between Canadian retail, commercial, and wealth reaching $15 billion for the year, an 18% increase over the previous year. The Mortgage+ program was instrumental in driving multiproduct banking relationships, contributing to deposit and card growth.

Capital and Shareholder Returns

The bank’s capital and shareholder returns were strong, with the CET1 ratio ending at 13.2% after repurchasing 10.8 million shares in fiscal 2025. Additionally, the wholesale funding ratio was reduced by 60 basis points, reflecting prudent capital management.

Improvement in Canadian and International Banking

Canadian Banking saw increased efficiency and sales capacity, while International Banking earnings rose by 1% year-over-year, with significant gains in Mexico, indicating a positive trajectory in these segments.

Global Transaction Banking Expansion

The launch of new cash management capabilities in North America is expected to enhance client connectivity and drive revenue growth, marking a strategic expansion in Global Transaction Banking.

Adjusting Items Impact

Net income was impacted by $299 million of adjusting items, including a $268 million charge related to simplifying Canadian operations and rightsizing Global Banking and Markets in Asia, which affected overall profitability.

Increased Loan Loss Provisions

The provision for credit losses was $4.7 billion, driven mainly by higher performing PCLs, with credit loss ratios slightly elevated, indicating a cautious approach to credit risk management.

Decline in Canadian Banking Earnings

Canadian Banking earnings were down 9%, affected by higher PCLs and lower margins due to rate cuts, highlighting challenges in maintaining profitability in this segment.

Challenges in Retail Portfolios

Impaired PCLs in retail portfolios increased, driven by Canadian and international markets, with certain areas like the GTA showing increased mortgage delinquencies, posing challenges to retail banking stability.

Forward-Looking Guidance

Looking ahead, Scotiabank aims for double-digit EPS growth and an ROE of 14% plus in fiscal 2026, supported by improved revenue growth, positive operating leverage, and strategic investments in technology and client relationships. The bank’s focus on driving client primacy, enhancing technology, and optimizing capital allocation is expected to support these ambitious targets.

In conclusion, the Bank of Nova Scotia’s earnings call presented a balanced sentiment, with strong financial performance and strategic execution. While challenges in credit provisions and Canadian banking earnings were noted, the bank’s robust growth in key segments and forward-looking guidance provide a positive outlook for the future.