Bank of Nova Scotia Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
The Bank of Nova Scotia's Q4 2025 earnings call highlighted strong financial performance, strategic execution, and a positive outlook for 2026, driven by growth in key business segments, disciplined capital allocation, and leveraging emerging technologies. The call also addressed industry trends, the macroeconomic environment, and specific growth opportunities.
Key Financial Results
Q4 2025 Earnings: The bank reported earnings of CAD 2.6 billion, or CAD 1.93 per share, up 23% year-over-year.
Full Year EPS Growth: Earnings per share grew by 10% for the full year.
ROE: The bank ended Q4 with an ROE of 12.5%, up 190 basis points year-over-year.
Efficiency Ratio: The efficiency ratio was 54.3%, an improvement of 180 basis points versus the prior period.
Revenue: Revenue was up 12% year-over-year.
Operating Leverage: Positive operating leverage of 3% for the year.
CET1 Ratio: Ended the year with a CET1 ratio of 13.2%, after repurchasing 10.8 million shares in fiscal 2025.
Net Interest Income: Grew 13% year-over-year from higher net interest margin and loan growth.
All Bank NIM: Expanded significantly, up 25 basis points year-over-year mainly from lower funding costs.
Effective Tax Rate: Increased to 23.6% from 21.8% last year.
Business Segment Results
Canadian Banking: Earnings were CAD 3.4 billion, down 9%, impacted by higher PCLs and lower margins. Q4 earnings of CAD 942 million, up 1% year-over-year.
Global Wealth Management: Earnings of CAD 1.7 billion, up 17% year-over-year, benefiting from strong AUM growth of 16%. Q4 earnings of CAD 453 million were up 17%.
Global Banking and Markets: Reported earnings of CAD 1.9 billion, up 30%, driven by higher trading-related revenues, fees and commissions, underwriting and advisory revenues, and higher net interest income. Q4 earnings of CAD 519 million, up 50% year-over-year.
International Banking: Earnings were CAD 2.7 billion, up 1% year-over-year. Q4 earnings of CAD 638 million, up 3% year-over-year.
Other Segment: Reported a loss of CAD 347 million, compared to a loss of CAD 815 million in 2024. Q4 adjusted net loss of CAD 34 million, an improvement of CAD 22 million compared to the prior quarter.
Capital Allocation
Share Repurchases: Repurchased 10.8 million shares in fiscal 2025.
Organic Growth: Focus on organic deployment of capital within existing business segments.
Technology Investment: Increased technology spend to strengthen and strategically grow the bank.
US Expansion: Pursuing organic growth strategy in the US, expanding product offerings.
Industry Trends and Dynamics
Natural Resource Development: Canada's renewed focus on natural resource development is expected to drive higher GDP growth.
Energy Sector: Memorandum of understanding on energy between the Canadian Federal Government and the province of Alberta is viewed as a significant development.
Major Projects Office: The bank is well-positioned to contribute to the ambitious plans of the Major Projects Office by helping clients drive forward large-scale infrastructure projects.
Trade-Related Economic Challenges: Emergence of unexpected trade-related economic challenges.
Global Macroeconomic Uncertainty: Elevated global macroeconomic uncertainty is expected to persist in fiscal 2026.
Competitive Landscape
Prime Services Business: The bank believes it has a competitive advantage in its Prime Services business relative to its Canadian bank peers.
US Market: Focus on organic growth in the US, avoiding areas where the bank does not have the scale to compete.
North American Corridor: Focused on further improving connectivity across the North American corridor.
Global Transaction Banking: Building out global transaction banking business to optimize the value of the international footprint.
Macroeconomic Environment
Trade Uncertainty: Trade uncertainty continues to be a factor across the bank's markets.
Economic Activity: Shifting tariff policy and unclear path forward in trade negotiations are muting economic activity.
Canadian Economy: Absence of a trade deal with the US and elevated unemployment continue to weigh on sentiment in Canada.
International Markets: Outlook across international markets remains mixed, characterized generally by subdued economic activity and evolving political dynamics in Peru and Chile.
Mexico: Trade negotiations continue to weigh on overall sentiment in Mexico, but GDP forecasts are being revised upwards.
Chile: Chile's forecast remains stable, supported by strong commodity prices, but unemployment remains elevated.
Peru: Peru's GDP outlook remains stable, but the benefit of pension fund withdrawals and client liquidity is tapering, and political uncertainty will linger until the next election.
Growth Opportunities and Strategies
Client Primacy: Focus on client primacy is yielding results as the bank drives strong cooperation across its various units.
Deposit Gathering: Emphasis on deposit gathering is paying off as the bank increases its mix of P&C deposits.
Mortgage+ Program: Mortgage+ program remains a key contributor to growth in multi-product banking relationships.
Commercial Banking Referrals: Commercial bank is an important and growing source of referrals with the Global Wealth Management unit.
Singular Retail Brand: Launched Singular retail brand and value proposition across Mexico, Peru, and Chile.
US Expansion: Continued investment in US capabilities to increase contribution to GBM earnings.
Global Transaction Banking: Building out global transaction banking platform.
AI Investments: Enhancing technology platforms, including AI investments.
North American Corridor: Pursuing deeper connectivity across the North American corridor.
Scene+ Loyalty Program: Aim to accelerate card growth by further tapping into the Scene+ loyalty program.
Financial Guidance and Outlook
EPS Growth: Expects to deliver double-digit annual EPS growth in fiscal 2026.
ROE Target: Aiming to achieve an ROE of 14% plus.
Revenue Growth: Improved revenue growth coupled with positive operating leverage.
Net Interest Income: Expected to grow from both loan and deposit growth and benefit from margin expansion.
Non-Interest Revenue: Expected to grow across all business segments.
Expense Growth: Expenses are expected to grow from increased technology spend.
Operating Leverage: The bank is expected to generate positive operating leverage in 2026.
Canadian Banking Outlook: Expected to generate double-digit earnings growth, driven by good revenue growth and moderating loan losses.
International Banking Outlook: Earnings are expected to be modestly higher, adjusting for the impact of divestitures.
Global Wealth Management Outlook: Expected to generate strong earnings growth in 2026.
Global Banking and Markets Outlook: Earnings are expected to grow modestly after a very strong fiscal 2025.
Impaired Ratio: Expects the full year impaired ratio to be in the high 40s to mid 50s basis point range.
