Bank of Nova Scotia Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Byline: The Bank of Nova Scotia's Q4 2025 earnings call highlighted strong financial performance, strategic execution, and a positive outlook for fiscal 2026, with a focus on Canadian banking, global wealth management, and global banking and markets. Key themes included earnings growth, efficiency improvements, client primacy, capital allocation, and strategic priorities for the coming year.
Key Financial Results
EPS grew by 10% for the full year.
Q4 earnings were CAD 2.6 billion, or CAD 1.93 per share, up 23% year-over-year.
ROE ended Q4 at 12.5%, up 190 basis points year-over-year.
The efficiency ratio was 54.3%, an improvement of 180 basis points versus the prior period.
Adjusted diluted earnings per share for fiscal 2025 were CAD 7.09, up 10% compared to the prior year.
Return on equity was 11.8%, up 50 basis points.
Return on tangible common equity was 14.3%, up 60 basis points.
Revenue was up 12% year-over-year, while expenses grew 9%, resulting in positive operating leverage of 3% for the year.
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.
Business Segment Results
Canadian Banking earnings were CAD 3.4 billion, down 9%, impacted by higher PCLs and lower margins due to rate cuts.
Global Wealth Management earnings of CAD 1.7 billion were up 17% year-over-year, benefiting from strong AUM growth of 16%.
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.
International Banking earnings were CAD 2.7 billion, up 1% year-over-year.
The Other segment reported a loss of CAD 347 million, compared to a loss of CAD 815 million in 2024, benefiting from significantly lower funding costs.
Canadian Banking reported earnings of CAD 942 million, up 1% year-over-year.
Global Wealth Management earnings of CAD 453 million were up 17%.
Global Banking and Markets delivered earnings of CAD 519 million, up 50% year-over-year.
International Banking delivered earnings of CAD 638 million, up 3% year-over-year.
The Other segment reported an adjusted net loss of CAD 34 million, an improvement of CAD 22 million compared to the prior quarter.
Capital Allocation
Ended the year with a CET1 ratio of 13.2% after repurchasing 10.8 million shares in fiscal 2025.
The bank's CET1 capital ratio was 13.2%, down approximately 10 basis points quarter-over-quarter.
Internal capital generation was 9 basis points, while gains from higher fair values of OCI securities contributed 5 basis points.
The bank remains committed to maintaining strong capital and liquidity ratios in 2026.
The focus is on organic capital deployment.
Share repurchases will continue, given the relative valuation and confidence in the plan.
Industry Trends and Dynamics
Canada's renewed focus on natural resource development will drive higher GDP growth and improved national prosperity over the medium-term.
The recent memorandum of understanding on energy between the Canadian Federal Government and the province of Alberta is a very significant development.
The federal government's Grow Canada initiative with a focus on energy and mining is well suited to the bank's core capabilities.
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 is well-positioned to contribute to the ambitious plans of the Major Projects Office by helping clients drive forward large-scale infrastructure projects.
Macroeconomic Environment
The bank continued to operate in a highly uncertain macroeconomic environment.
Shifting tariff policy and an unclear path forward in trade negotiations are muting economic activity.
In Canada, the absence of a trade deal with the US and elevated unemployment continue to weigh on sentiment.
International Banking outlook remains mixed, characterized generally by subdued economic activity and evolving political dynamics in Peru and Chile.
Trade negotiations continue to weigh on overall sentiment in Mexico, 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 until the next election.
Growth Opportunities and Strategies
Focus on client primacy is yielding results as the bank drives strong cooperation across the bank.
Emphasis on deposit gathering is paying off as the bank increased its mix of P&C deposits for the second year in a row.
Technology spend in 2026 will be concentrated in building out the global transaction banking platform, enhancing technology platforms (including AI), balancing security and client experience, and adding new product capabilities.
The Mortgage+ program remains a key contributor to the growth seen in multi-product banking relationships.
Global Wealth Management continued its positive momentum with record earnings across global asset management, Canadian wealth management, private banking, and ScotiaMcLeod.
Recently launched Singular retail brand and value proposition across Mexico, Peru, and Chile.
Continue to improve business mix as the bank further deepens client relationships.
Build a more efficient, digitally forward bank that seamlessly integrates the branch network with mobile customer service capabilities.
Pursue deeper connectivity as the bank continues to build out its global transaction banking business and optimize the value of its international footprint.
The Davivienda transaction creates additional scale in Colombia and is immediately accretive with further upside from the benefits of scale and diversification, as well as from future collaboration.
US contributed 50% of GBM earnings in fiscal 2025 and the bank will continue to invest in its US capabilities in fiscal 2026 to increase this contribution over time.
Launched US cash management business this fall after a successful pilot.
Increased the number of enterprise-wide cash management clients by 15,000 in fiscal 2025, exceeding internal targets.
Financial Guidance and Outlook
Entered into fiscal 2026 from a position of strength.
The bank expects to generate strong earnings growth in 2026, underpinned by growth in both net interest income and non-interest revenue.
Earnings are also expected to benefit from lower provision from credit losses, mainly performing, partially offset by a higher tax rate that is expected to be around 25%.
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.
Expect the full year impaired ratio to be in the high 40s to mid 50s basis point range.
Improved revenue growth coupled with positive operating leverage should help deliver double-digit annual EPS growth in fiscal 2026 despite what remains an uncertain operating environment.
The bank aims to achieve an ROE of 14% plus.
