Bank of Nova ScotiaFollow scotiabank.com

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Bank of Nova Scotia Earnings - Analysis & Highlights for Q1 2025

Overview

PositivesNegativesOutlook

Global Banking and Markets delivered a strong start to the year with earnings of CAD 517 million, up 33% YoY. Capital markets revenue was up 41% YoY and 47% QoQ, driven from higher equities and FICC revenues.
Operating leverage was a strong positive 2.3%.
Q1 for 2025 was the second-best quarter ever, with a record quarter on the first quarter of 2024.
The bank reported quarterly earnings of CAD 2.4 billion and diluted EPS of CAD 1.76, which improved CAD 0.07 YoY and CAD 0.19 QoQ.
The bank is well-capitalized, has a strong liquidity position, and is confident in its proven track record in managing through more challenging periods across all markets while supporting clients.

Q1 2025 Earnings Call

Expenses grew by 8% YoY, of which 3% was from higher performance and volume-driven expenses in GBM and Global Wealth. The rest of the increase related to higher technology and personnel costs to drive business growth.
The effective tax rate increased to 24.5% due to changes in earnings mix across jurisdictions.
Overall 90-day mortgage delinquency increased a modest 1 basis point QoQ, as delinquency in variable rate mortgage clients begins to stabilize as they experience relief from Central Bank rate cuts.
Provisions for credit losses in Q1 remained elevated, reflecting the toll on clients of higher interest rates and inflation over the past few years, in addition to the heightened current geopolitical uncertainty and its potential impact on economic growth.

Q1 2025 Earnings Call

The company expects the transaction to be capital-neutral and its earnings pick-up to be well ahead of what the Scotiabank franchise would have earned standalone.
The productivity ratio is expected to continue to improve as the benefits of the move towards a regional model take effect.
The company expects revenues to normalize towards a more normal level in the business.

Q1 2025 Earnings Call

Q&A Highlights from Bank of Nova Scotia Earnings Call Q1 2025

Analyst asked about the impact of higher for longer rates on the consumer base's ability to service their debt.
- The rate backdrop is no longer considered higher for longer, as customers are starting to benefit from rate cuts, particularly in the variable rate mortgage portfolio and those customers coming up for renewal. The company expects provisions to trend down in the latter half of the year, and the outlook is positive outside of the tariff landscape.
Analyst asked about initiating buybacks given the stock's discounted valuations and current capital levels.
- The management is pleased with the capital discipline and internal capital generation, and they expect to resume dividend growth, albeit at a modest level, next quarter. The company is hopeful to start returning capital to shareholders via share repurchases by the end of the year.
Analyst asked about the company's pipeline for advisory services and how it has been impacted by the strong growth in trading.
- Management stated that the pipeline remains strong, with client activity across all segments and sectors, and the market is robust. However, there are headwinds in the market, such as rate uncertainty, tariffs, geopolitical concerns, and the US stock market being priced for perfection.
Analyst asked about the company's league table performance in debt capital markets and M&A.
- Management highlighted the company's strong league table performance, with number one rankings in debt capital markets in Canada and LatAm, and number 11 in debt capital markets in the US. They also mentioned that the company had a great M&A performance in Canada.
Analyst asked about the impact of tariffs on impaired loans and the timing of the effect.
- The company expects to see an impact on impaired loans if meaningful tariffs are imposed, but it's unclear whether the effect will be abrupt or gradual. The company will assess the situation and take action accordingly.
Analyst asked about the timing of the expected impact on impaired loans.
- If tariffs are imposed, the company expects to see an impact on impaired loans in Q2. If there are no tariffs, the company will continue to deliver on its guidance for lower PCLs for the latter half of the year.
Analyst asked about the assumptions being tested in the ability to deliver on the 2028 growth plan.
- Lawren Scott Thomson, CEO of Bank of Nova Scotia, stated that the company is on track with its International business line and is ahead of its productivity ratio target. He also mentioned that the company has seen good progress in GBM, with a focus on fee income, and is making progress in Canada.

Q1 2025 Earnings Call