The Bank of Nova Scotia

The bank reported adjusted earnings of $2.7 billion and diluted EPS of $2.02. ROE was 13.2%, up 270 basis points year over year, while pretax pre-provision profit grew 20% year over year. Revenue increased 13% year over year, net interest income rose 10%, noninterest income increased 17%, and expenses grew 7%; productivity ratio improved to 52.5%. CET1 was 13.3%, and the bank repurchased 6.4 million shares in the quarter. On guidance, management said impaired PCLs are expected to settle in the mid-50 basis points range for the remainder of 2026, with PCLs moderating from first-half levels but more gradually than previously expected. The CFO also guided International Banking NIM to roughly 4.65% to 4.74% for Q3 and the rest of the year, and said the corporate segment should return to a modest loss next quarter.

Scott Thomson framed the quarter as evidence that Scotiabank is executing through macro volatility, with a shift in business mix driving higher revenue and returns. He highlighted momentum in Canadian Banking, better deposit mix, stronger wealth referrals, and growth in capital markets, and said the bank remains focused on organic growth first, then buybacks and selective tuck-in acquisitions. He was notably constructive on Canada’s medium-term outlook, citing oil prices, fiscal support, foreign investment interest, and the importance of the Canada-U.S.-Mexico trade bloc.

Raj Viswanathan emphasized the quality of earnings and balance sheet strength, noting 13% revenue growth, 24 basis points of net interest margin expansion year over year, and a 290 basis-point improvement in the productivity ratio to 52.5%. He said technology spend rose 9% to $1.4 billion to support strategic initiatives, CET1 remained 13.3%, and the quarter included 6.4 million shares repurchased across two buyback programs. On credit, he pointed to $7.3 billion of allowances, $159 million of reserve builds, and total risk-weighted assets of $474 billion, up $1.6 billion quarter over quarter excluding FX.

Analysts focused heavily on credit guidance, especially the move to mid-50 basis-point impaired PCLs for the rest of 2026 and whether that implies a higher full-year credit-cost outlook. Management said the macro backdrop has worsened since December, but still expects moderation from first-half levels; Shannon McGinnis added that about $50 million of the performing PCL build reflected forward-looking indicators. Questions also probed the large corporate impairment in International Banking; management said it was a company-specific Brazil file, not a systemic issue, and noted the non-retail watch list remains below 2% of outstandings. On margin outlook, Raj said International Banking NIM should remain elevated around 4.65% to 4.74% due to lower Latin American funding costs and a stable Caribbean deposit franchise.