Scotiabank’s Earnings Beat Estimates on Growth Across Units

A Scotiabank branch in Toronto Photographer: Galit Rodan/Bloomberg Photo by Galit Rodan /Bloomberg

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(Bloomberg) — Bank of Nova Scotia topped estimates on better-than-expected results at its Canadian banking division even as pressure on loans in that business increased. 

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The first of Canada’s big banks to report fiscal first-quarter results, Scotiabank earned C$2.05 a share on an adjusted basis, according to a statement Tuesday, more than analysts’ C$1.95 average estimate. 

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Net income at the Toronto-based lender’s domestic banking business totaled C$960 million ($700 million) in the three months through January, better than the C$928 million average forecast of two analysts in a Bloomberg survey. The bank’s wealth-management, capital-markets and international divisions also topped estimates.

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“Fiscal 2026 stands as a pivotal year for our Canadian banking unit, where we expect earnings to grow by double digits,” Chief Executive Officer Scott Thomson said on a conference call with analysts. The firm has been pushing to improve performance at its most important unit.   

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The firm also benefited from higher markets-related earnings, with net income at its capital-markets unit totaling C$544 million, higher than the C$498 million average forecast. And it earned C$484 million at its wealth-management business, topping the average forecast of C$457 million. 

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Adjusted return on equity was 13% in the quarter, up from 11.8% a year earlier. The company said it now expects to meet its medium-term ROE target of 14% in 2027 rather than 2028.   

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Scotiabank has been slashing expenses to improve its operating leverage — it recorded C$373 million in costs tied largely to job cuts in the fiscal fourth quarter — and Thomson has said earnings growth should accelerate this year. 

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On credit, Scotiabank set aside C$1.18 billion in provisions for possible loan losses in the quarter, more than the C$1.1 billion average forecast, and several analysts raised questions about the outlook during the conference call. 

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Consistent with earlier guidance, the bank expects provisions for impaired loans to be elevated for the first half of the year and come down in the last six months, though all of that is contingent on the broader economic outlook, Chief Risk Officer Shannon McGinnis said on the call. 

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At the Canadian banking unit, where provisions for credit losses were up both from a year earlier and sequentially, Scotiabank has improved its efforts on collections and is also seeing signs of improvement as the country’s unemployment rate trends downward, she said.  

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One area of concern is mortgages taken out during the pandemic, she said, when home prices were elevated and borrowing costs extremely low. Loan-to-value levels remain high, but many borrowers are now facing renewals at higher interest rates while home prices have softened and even declined.