The Bank of Nova Scotia dropped its fourth-quarter results yesterday, painting a picture that’s both reassuring and cautious for Canada’s third-largest lender. Against the backdrop of a challenging economic environment, Scotiabank managed to clear analysts’ expectations—though not by the wide margins we’ve seen in previous years.
The numbers themselves tell an interesting story. Adjusted earnings came in at $2.18 per share, edging past the consensus estimate of $2.11. Total revenue hit $8.7 billion, up a modest 2.3% compared to the same period last year. While these figures might not set the world on fire, they represent a steady performance in uncertain times.
What caught my attention was the bank’s loan loss provisions—the money set aside for loans that might not be repaid. At $893 million, these provisions were slightly lower than the previous quarter but still reflect ongoing concerns about consumer financial health. Chief Financial Officer Raj Viswanathan acknowledged this during the earnings call, noting that “while we’re seeing some stabilization in consumer delinquencies, we remain prudent given the current economic backdrop.”
The bank’s Canadian banking segment, which has traditionally been its bread and butter, posted adjusted earnings of $1.2 billion, essentially flat year-over-year. Mortgage growth slowed to just 1.8%, reflecting the impact of higher interest rates on housing market activity. This slowdown isn’t unique to Scotiabank—it’s a pattern we’re seeing across the Canadian banking sector as consumers grapple with higher borrowing costs.
International banking, however, provided a much-needed bright spot. The division, which focuses primarily on Latin America, reported earnings of $729 million, up 4.5% from the previous year. Growth in Mexico and Chile drove much of this improvement, offsetting weaker performance in Colombia and Peru.
“Our diversified footprint continues to serve us well,” CEO Scott Thomson told analysts during the earnings call. “The strategic investments we’ve made in our priority markets are yielding results, even as we navigate regional economic challenges.”
The wealth management division also showed resilience, with earnings up 3.2% to $412 million. Assets under management increased by 7.1% to $637 billion, benefiting from improved market conditions and positive net sales.
Capital markets results were mixed. While trading revenue surged 9% to $478 million on increased client activity, investment banking fees declined by 5.3% as deal-making remained subdued compared to historical levels. Overall, the division posted earnings of $517 million, up 2.1% from a year ago.
From a capital perspective, Scotiabank remains well-positioned. Its Common Equity Tier 1 (CET1) ratio—a key measure of financial strength—stood at 13.2%, well above regulatory requirements and slightly higher than last quarter. This gives the bank considerable flexibility for future investments, dividends, or share buybacks.
Speaking of dividends, Scotiabank maintained its quarterly payout at $1.19 per share. While some investors might have hoped for an increase, management emphasized the importance of capital preservation given the uncertain economic outlook.
Efficiency metrics showed modest improvement. The bank’s adjusted efficiency ratio—a measure of expenses as a percentage of revenue—improved to 51.3% from 52.1% a year ago, reflecting ongoing cost-control efforts. Thomson highlighted the bank’s technology investments, which he said are “streamlining processes and enhancing customer experience while containing long-term cost growth.”
Looking ahead, Scotiabank’s guidance struck a balanced tone. Management expects mid-single-digit earnings growth for fiscal 2026, with continued pressure on net interest margins offset by volume growth and expense management. Thomson described the bank’s approach as “disciplined growth”—maintaining strategic investments while remaining vigilant about risks.
Analysts’ reactions have been generally positive, though not effusive. Gabriel Dechaine of National Bank Financial noted that “the results reflect solid execution in a challenging environment,” while maintaining his “outperform” rating on the stock. Meanwhile, Meny Grauman of Scotiabank (covering his own employer) described the quarter as “steady but unspectacular.”
The market’s immediate reaction was muted, with Scotiabank shares edging up 0.7% following the announcement. Year-to-date, the stock has gained about 5.2%, lagging the broader S&P/TSX Composite Index’s 7.8% advance.
What’s particularly interesting is the broader context of these results. Canadian banks are navigating a delicate transition as central banks potentially pivot toward rate cuts. After a period of margin expansion driven by rising rates, banks now face the prospect of compressed margins as rates eventually decline. At the same time, they’re dealing with cautious consumers, a cooling housing market, and the ongoing digital transformation of financial services.
For Scotiabank specifically, its international strategy remains both a differentiator and a source of volatility. While Latin American operations offer higher growth potential than the mature Canadian market, they also come with increased economic and political risks. The bank’s recent focus on its “priority markets” (Mexico, Chile, Colombia, and Peru) represents an attempt to balance growth opportunities with risk management.
As we look toward 2026, several key questions remain for Scotiabank and its peers. How quickly will central banks cut rates, and what impact will this have on net interest margins? Will consumer delinquencies continue to rise, or have we reached a plateau? And how will ongoing technology investments translate into improved customer acquisition and retention?
For investors, Scotiabank’s latest results offer neither reason for celebration nor cause for alarm—just a reminder that in banking, steady progress often trumps spectacular results, especially in uncertain times.
