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BK OF NOVA SCOTIA

BK OF NOVA SCOTIA (BNS.TO) Q1 2026 Earnings Call Transcript

Neutral Banks - Diversified 95.55B Canada
Next Earnings
2026-05-25

The Bank of Nova Scotia provides various banking products and services in Canada, the United States, Mexico, Peru, Chile, Colombia, the Caribbean and Central America, and internationally. It operates through Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets segments. The company offers financial advice and solutions, and banking products, including debit and credit cards, chequing and saving accounts, investments, mortgages, loans, and insurance to individuals; and retail automotive financing solutions. It also provides business banking solutions comprising lending, deposit, cash management, and trade finance solutions to small, medium, and large businesses. In addition, it provides wealth management advice and solutions, including online brokerage, mobile investment, full-service brokerage, trust, private banking, and private investment counsel services; and retail mutual funds, exchange traded funds, liquid alternatives, and institutional funds. The Bank of Nova Scotia was founded in 1832 and is headquartered in Toronto, Canada.

Scotiabank delivered $2.7B adjusted earnings in Q1 2026 with ROE improving to 13% and continued margin expansion, supported by AI investments and strong performance across Canadian Banking, Wealth, and GBM, while reiterating a 14%+ ROE long-term target and elevated PCLs in the near term.

⭐ Key Highlights

Q1 adjusted earnings and momentum
Scotiabank posted adjusted earnings of $2.7 billion ($2.05 per share), up 16% year over year, driven by revenue growth and expense control despite higher PCLs.
Capital strength and ROE trajectory
CET1 ratio stood at 13.3% after buying back 4.9 million shares; ROE was 13% (up 120 bps YoY), with management targeting 14%+ mid-term, ahead of Investor Day plan.
Strategic focus: AI and technology investments
The bank is accelerating AI investments (Ask AI, AML AI pilot with 37% alert-volume reduction) to drive efficiency, risk management, and long-term growth.
Segment highlights and growth momentum
Canadian Banking showed margin expansion and 8% fee growth; Global Wealth Management delivered sixth consecutive quarter of positive net flows; International Banking and GBM also posted solid results with margin-driven strength.
Guidance and outlook for 2026 and beyond
Management reiterated a 14%+ ROE long-term target, expects ROE expansion across units, and maintained guidance for elevated impaired PCLs in early 2026 with gradual improvement later in the year.

✔Positive Signals

  • Adjusted earnings of $2.7B and EPS of $2.05, up 16% YoY
  • ROE of 13% with trajectory toward 14%+ in the medium term
  • Significant AI investments and efficiency gains (Ask AI, AML AI) with actionable results
  • Canadian Banking: margin expansion and 8% fee growth; wealth flows positive for sixth straight quarter
  • Global Banking and Markets margin expansion and strong US-oriented takeaways

✖Negative Signals

  • Impaired PCLs elevated vs. expectations, with full-year guidance implying higher near-term losses
  • PCLs impacted by Canadian Retail and GBM; macro uncertainty remains
  • Divestitures (Colombia and Central America) and noncore Chile Cencosud exposure add complexity
  • Tax rate increase to 25.7% YoY, partially offsetting earnings strength
  • Purchases of NCIB and buyback pacing with potential timing risks

📊Financial Results

  • Revenue up 11% YoY; Net interest income up 13% YoY; Noninterest income up 10% YoY
  • PCLs around $1.1B for all bank, with impaired PCLs rising; annualized ACL at ~94 bps
  • ROE at 13% (up ~120 bps YoY); CET1 at 13.3%; Tax rate 25.7% vs 23.8% prior year
  • EPS $2.05; ROE momentum ahead of Investor Day expectations
  • Depicts 16%+ ROE target feasibility with continued mix shifts and efficiency gains

🔮Future Guidance

  • Impaired PCL guidance remains elevated for H1 2026 with gradual improvement in H2; target range described as high 40s to mid-50s basis points for full year
  • ROE target of 14%+ in the medium term, with expansion across Canadian Banking, International Banking, and GBM; expect 2027 ROE to be higher than 2026
  • NCIB renewal expected in May; ongoing buybacks likely into 2027
  • Deposit funding strategy remains a key lever for margin expansion; focus on core deposits and mix shift to reduce wholesale dependency

💡Interesting Insights

  • AML AI pilot delivered a 37% reduction in existing alert volumes, highlighting cost and risk-management benefits from internal AI initiatives

Detailed Analysis

AI-generated summary of BK OF NOVA SCOTIA earnings call transcript.

In Q1 2026, Scotiabank extended its earnings momentum from 2025, delivering $2.7B in adjusted earnings and $2.05 per share, with ROE at 13% and a CET1 ratio of 13.3% even as it repurchased 4.9M shares under NCIB. Revenue grew 11% YoY, with net interest income up 13% and noninterest income up 10%, driven by strength in wealth and trading activities. The bank is investing in AI and technology to boost efficiency, risk detection, and client service, including successful AML pilot results and widespread query handling via Ask AI. Operating segments showed robust performance: Canadian Banking achieved margin expansion and 8% fee growth; Global Wealth Management posted six straight quarters of positive net flows; International Banking and Global Banking and Markets delivered solid results with notable margin expansion and concentration of earnings in US activities. Management reaffirmed a 14%+ ROE target in the medium term and signaled ROE expansion across units, aided by a more favorable mix, cost discipline, and investments in growth platforms. However, risk remains elevated due to impaired loan loss provisions, with PCLs higher year-over-year and the macro environment continuing to pose headwinds. The company maintained guidance for elevated impairments in the first half and gradual improvement in the latter part of the year, with a continued emphasis on deposit-based funding and strategic capital deployment, including ongoing buybacks and potential NCIB renewal in May.

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