Bank of Nova Scotia Earnings - Q3 2025 Analysis & Highlights
The Bank of Nova Scotia's Q4 2025 earnings call highlighted a year of strong financial performance with double-digit EPS growth and ROE expansion, driven by strategic execution and focus on client primacy. The company provided a positive outlook for 2026, anticipating continued earnings growth across all business segments, moderating loan losses, and positive operating leverage, despite an uncertain macroeconomic environment. Capital allocation priorities remain organic growth and share repurchases, with potential for small, tactical M&A in the US.
Key Financial Results
Adjusted diluted earnings per share for fiscal 2025 was CAD 7.09, up 10% compared to the prior year.
Return on equity for fiscal 2025 was 11.8%, up 50 basis points.
Return on tangible common equity for fiscal 2025 was 14.3%, up 60 basis points.
Revenue for fiscal 2025 was up 12% year-over-year.
Expenses for fiscal 2025 grew 9%, resulting in positive operating leverage of 3%.
Provision for credit losses for fiscal 2025 was CAD 4.7 billion, mainly driven by higher performing PCLs.
Q4 results delivered earnings of CAD 2.6 billion or CAD 1.93 per share, up 23% year-over-year.
Q4 ROE was 12.5%, up 190 basis points year-over-year.
Q4 efficiency ratio was 54.3%, an improvement of 180 basis points versus the prior period.
Net interest income in Q4 grew 13% year-over-year from higher net interest margin and loan growth.
All Bank NIM in Q4 expanded significantly, up 25 basis points year-over-year, mainly from lower funding costs.
Non-interest income in Q4 was CAD 4.2 billion, up 16% year-over-year.
Q4 expenses grew 11% year-over-year and 4% quarter-over-quarter.
Q4 PCLs were approximately CAD 1.1 billion, mostly impaired, and the PCL ratio was 58 basis points.
CET1 ratio ended the year at 13.2% after repurchasing 10.8 million shares in fiscal 2025.
Business Segment Results
Canadian Banking earnings for fiscal 2025 were CAD 3.4 billion, down 9%, impacted by higher PCLs of approximately CAD 600 million and lower margins.
Canadian Banking revenue grew 3% driven by solid asset and deposit growth, while expenses were up 5%.
Canadian Banking Q4 earnings were CAD 942 million, up 1% year-over-year.
Global Wealth Management earnings for fiscal 2025 were CAD 1.7 billion, up 17% year-over-year, benefiting from strong AUM growth of 16%.
Global Wealth Management revenues were up 15% driven by higher fee revenue and net interest income.
Global Wealth Management Q4 earnings were CAD 453 million, up 17%.
Global Banking and Markets (GBM) reported earnings for fiscal 2025 were CAD 1.9 billion, up 30%, driven by higher trading-related revenues, fees and commissions, underwriting and advisory revenues, and higher net interest income.
GBM Q4 earnings were CAD 519 million, up 50% year-over-year.
International Banking earnings for fiscal 2025 were CAD 2.7 billion, up 1% year-over-year.
International Banking revenues were up 2% while expenses were up 1% year-over-year, resulting in positive operating leverage.
International Banking Q4 earnings were CAD 638 million, up 3% year-over-year.
The other segment reported a loss of CAD 347 million in fiscal 2025, compared to a loss of CAD 815 million in 2024.
The other segment reported an adjusted net loss of CAD 34 million in Q4.
Capital Allocation
10.8 million shares were repurchased in fiscal 2025.
Share repurchases accounted for approximately 12 basis points of CET1 ratio allocation in Q4.
The Davivienda transaction creates additional scale in Colombia and is immediately accretive.
Capital deployment will prioritize organic growth.
The bank will continue repurchasing shares in 2026.
Tactical M&A in the US for product capabilities or to close gaps in wealth or GBM will be considered.
Industry Trends and Dynamics
Rising markets are helping drive assets under management higher.
Canada's renewed focus on natural resource development will drive higher GDP growth and improved national prosperity.
The federal government's Grow Canada initiative with a focus on energy and mining is well suited to the bank's core capabilities.
Global Banking and Markets continues to benefit from constructive markets.
Underwriting and advisory fees in fiscal 2025 rose 35%, the best year in the bank's history.
Competitive Landscape
The Prime Services business is a growing contributor to GBM's earnings, where the bank believes it has a competitive advantage relative to its Canadian bank peers.
The bank aims to build on its relationships with top-tier US managers.
The ability to connect clients from Canada to the US to Latin America is a powerful competitive advantage that no other bank can replicate.
The bank sees tremendous opportunities as other global banks leave their footprint in core operating countries.
Macroeconomic Environment
The bank continues to operate in a highly uncertain macroeconomic environment.
Shifting tariff policy and an unclear path forward in trade negotiations are muting economic activity.
Elevated unemployment continues to weigh on sentiment in Canada.
The outlook across International Banking remains mixed, characterized by subdued economic activity and evolving political dynamics in Peru and Chile.
In Mexico, trade negotiations continue to weigh on overall sentiment, but GDP forecasts are being revised upwards.
Chile's forecast remains stable, supported by strong commodity prices, but unemployment remains elevated.
Peru's GDP outlook remains stable, but the benefit of pension fund withdrawals and client liquidity is tapering, and political uncertainty will linger.
Growth Opportunities and Strategies
Client primacy is yielding results, with closed referrals between Canadian retail, commercial, and wealth at CAD 15 billion for the year, up 18%.
Emphasis on deposit gathering is paying off, with an increased mix of P&C deposits for the second year in a row.
400,000 primary clients have been added since the launch of the new strategy.
The Mortgage+ program is a key contributor to multi-product banking relationships, with over 90% of mortgage originations including a product bundle.
Retail day-to-day and savings deposits rose by 6% year-over-year.
Closed referrals between retail banking and wealth management came in at CAD 8.1 billion, up 20% from fiscal 2024.
Commercial Banking pre-tax pre-provision earnings were up 21%, demonstrating a focus on value over volume.
Commercial bank referrals to Global Wealth Management were up 35%.
Global Wealth Management saw record earnings across all units.
Full year net sales in Global Wealth Management improved by CAD 11.5 billion versus fiscal 2024.
Canadian Wealth Management is seeing strong momentum in its private bank offering, including double-digit loan and deposit growth.
5,000 households were onboarded to the recently launched signature bank offering.
ScotiaMcLeod brokerage unit saw double-digit growth in fee-based assets, helped by net sales of approximately CAD 6 billion in fiscal 2025.
Retail net sales in Global Asset Management improved by almost CAD 7 billion in fiscal 2025.
Four new private asset funds were launched in the past year.
International Wealth earnings are up 14% for the year, with 20% growth in Mexico.
International Banking segment results in fiscal 2025 came in ahead of Investor Day commitments.
The Singular retail brand and value proposition was launched across Mexico, Peru, and Chile.
Global Banking and Markets benefited from organic investments and new capabilities, particularly in the US.
The US contributed 50% of GBM earnings in fiscal 2025.
The US cash management business was officially launched this fall after a successful pilot.
The number of enterprise-wide cash management clients increased by 15,000 in fiscal 2025.
GBM loan balances were down 13%, but earnings were up 30% and ROE increased by 320 basis points.
Mortgage growth in Canada is outpacing commercial loans and cards, but client relationships are deepening through core deposits and investments.
The bank aims to accelerate card growth by tapping into the Scene+ loyalty program and building on the Mortgage+ proposition.
The commercial pipeline is growing as the bank targets new markets and regions.
Global Wealth Management will continue to build on strong sales momentum and grow the number of relationship managers in private bank and ScotiaMcLeod.
GBM will focus on accelerating balance sheet velocity and optimizing capital use.
Deeper connectivity is being pursued across the North American corridor by building out the global transaction banking business.
GTB is connecting clients through cash management, with a clear rollout schedule throughout 2026.
Commercial Banking has shifted to a cash-first strategy, requiring cash management for loans.
Retail has rolled out a multi-country common value proposition for affluent clients under the Singular common brand.
Financial Guidance and Outlook
The bank expects to generate strong earnings growth in 2026, underpinned by growth in net interest income and non-interest revenue.
Earnings are also expected to benefit from lower provision from credit losses, partially offset by a higher tax rate around 25%.
Net interest income is expected to grow from loan and deposit growth and benefit from margin expansion.
Non-interest revenue is expected to grow across all business segments.
Expenses are expected to grow from increased technology spend.
The bank is expected to generate positive operating leverage in 2026.
Canadian Banking is expected to generate double-digit earnings growth, driven by good revenue growth and moderating loan losses.
International Banking earnings are expected to be modestly higher, adjusting for the impact of divestitures.
Global Wealth Management is expected to generate strong earnings growth in 2026.
Global Banking and Markets earnings are expected to grow modestly after a very strong fiscal 2025.
The full year impaired ratio is expected to be in the high 40s to mid 50s basis point range for fiscal 2026.
The bank aims to achieve an ROE of 14% plus.
Double-digit annual EPS growth is expected in fiscal 2026.
Organic capital generation is expected to progressively improve to 10 to 15 basis points quarterly by the end of 2026.
Capital ratios are expected to be around 13% plus.
Canadian Banking fee growth is expected to be close to double-digit, driven by mutual fund fees, card fees, insurance, and cash management.
International Banking expects mid-single digit PTPP growth in 2026.
