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, on 13% revenue growth; net interest income rose 10%, noninterest income rose 17%, expenses rose 7%, and pretax pre-provision profit increased 20%. The productivity ratio improved to 52.5%, and CET1 was 13.3% after repurchasing 6.4 million shares. Total RWA was $474 billion, up $1.6 billion quarter over quarter excluding FX, and the bank added $159 million to allowances, bringing total reserves to $7.3 billion or 96 basis points. For guidance, management expects impaired PCLs to settle in the mid-50 basis points range for the remainder of 2026 and still expects them to moderate from first-half levels, though more gradually than earlier anticipated. They also said International Banking NIM should be around 4.65% to 4.74% for Q3 and Q4, and the corporate/gains line should return to a modest loss next quarter.

Scott Thomson emphasized that the quarter showed progress across the franchise even amid geopolitical and macro uncertainty. He highlighted stronger client relationships, a business mix shifting toward higher-growth and higher-return activities, and confidence that ROE can exceed 14% in fiscal 2027, a year ahead of the Investor Day target. He also pointed to continued emphasis on organic growth first, then buybacks, then selective tuck-in acquisitions, and framed AI, deposits, and cross-sell as key strategic priorities.

Raj Viswanathan said the quarter was driven by 13% revenue growth, with net interest income up 10% year over year and noninterest income up 17%. Expenses rose 7%, including technology spend up 9% to $1.4 billion, but pretax pre-provision profit still grew 20%, productivity improved to 52.5%, and YTD operating leverage was 4.9%. He also noted CET1 of 13.3%, 6.4 million shares repurchased, total RWA of $474 billion, and a $159 million reserve build to $7.3 billion. On segment detail, he said Canadian Banking earnings were $935 million, Wealth was $474 million, GBM was $457 million, and International Banking was $701 million.

Analysts focused heavily on credit costs, asking whether the mid-50 basis point impaired PCL outlook means a higher full-year level and what supports second-half moderation. Shannon McGinnis said the macro has worsened since December, but she still expects moderation from first-half levels, citing Canadian retail collections, lower expected non-retail stress, and portfolio monitoring; she also said about $50 million of the performing PCL build reflected forward-looking indicators. Questions also centered on the large International Banking corporate impairment: management said it was a single investment-grade Brazil exposure, company-specific rather than systemic, with non-retail watch list below 2% of outstandings and no similar stress seen broadly in the portfolio. On capital allocation, Scott Thomson said buybacks should remain consistent while tuck-in deals would be small, potentially $200 million to $400 million, aimed at mortgage capital markets and a U.S. offshore booking point for Mexican wealth.