Bank of Nova Scotia (NYSE:BNS) CEO Scott Thomson told conference attendees that the bank is entering fiscal 2026 “with a lot of momentum” following a stronger-than-expected 2025, as management pivots toward a growth outlook anchored by double-digit earnings expansion and continued share repurchases.
In a fireside chat, Thomson said the bank exceeded its 2025 targets laid out at an Investor Day two years ago, pointing to 10% earnings growth, positive operating leverage, a 13% common equity tier 1 (CET1) ratio, and the repurchase of 11 million shares. He said the bank has “telegraphed double-digit earnings growth again in 2026,” supported by growth across several business lines.
2026 growth outlook by business line
For the international banking segment, Thomson said Scotiabank expects mid-single-digit pre-provision, pre-tax profit (PTPP) growth but only modest NIAT growth, reflecting elevated impaired provisions for credit losses (PCLs) in certain markets. He described the outlook for global banking and markets (GBM) as “flat-ish or modest NIAT growth” after a record quarter in Q4 2025, noting that momentum continued in the first couple months of the year but that he did not want to overcommit given the market-driven nature of results.
- International banking: Mid-single-digit PTPP growth; modest NIAT growth due to impaired PCLs in Mexico and Chile in certain segments.
- GBM: Modest NIAT growth target following a record quarter; early-year momentum has continued.
- Wealth: High single-digit NIAT growth, with momentum tied to improved execution and a focus on high-ROE activities.
- Canadian banking: Double-digit NIAT growth driven by yield improvement, deposit mix, productivity gains, and fee income growth.
Thomson said 2026 growth in Canada is expected to come from a combination of asset yield improvement, better deposit mix, productivity improvements following restructuring, continued fee income growth, and positive operating leverage.
What exceeded expectations in 2025
Asked what surprised him in 2025, Thomson highlighted two areas that outperformed relative to Investor Day objectives: international banking and GBM.
In international banking, Thomson said Scotiabank deployed less capital, improved ROE by 250 basis points, and built a foundation for future growth through “capital and cost discipline.” He cited regionalization initiatives to reduce costs, a segmented retail strategy, and leading with global transaction banking (GTB) to improve funding.
In GBM, Thomson said investments in new product capabilities—including CLOs, leveraged lending, securitization, debt capital markets (DCM), and investment banking capabilities—helped drive a 300 basis point improvement in ROE year-over-year, with 14% lower capital deployed and improved fee income. He acknowledged a constructive market backdrop in 2025, but emphasized an approach focused on “high capital velocity” and aiming for 14% ROE with lower volatility.
International banking: credit headwinds and LATAM backdrop
Thomson said the international banking segment’s modest NIAT growth outlook for 2026 is largely tied to impaired PCLs amid a difficult macro environment in some areas, specifically mentioning Mexico and Chile. However, he said Scotiabank has put foundations in place—including regionalization, retail value propositions, and client optimization—that should position the segment to grow as GDP growth allows. He suggested modeling higher growth into 2027 alongside a 15% ROE in the segment as a “pretty good value proposition” for shareholders.
On Venezuela, Thomson said Scotiabank exited the country in 2014 and has no direct exposure. He described recent developments as potentially a medium- to long-term positive for the region, citing what he views as shifting political dynamics and increased U.S. emphasis in the Western Hemisphere. He also noted an area of focus for Canada: the impact on heavy oil markets and the importance of pipeline capacity.
Canada: primacy, deposits, and business mix
Thomson said Scotiabank’s Canadian strategy rests on three pillars: primacy, business mix, and operational excellence/productivity. He noted the bank has added 275,000 primary clients since Investor Day and rolled out its Mortgage+ offering, which he said represents 95% of originations.
He also pointed to deposit growth since Investor Day, including more than CAD 55 billion of new deposits. Day-to-day deposits and savings accounts were up 7% and 6% year-over-year, respectively, while he said the “Red Bank” saw higher growth. He added that Scotiabank has improved wealth distribution through branches, describing a move in retail mutual fund sales rankings from sixth to second at one point, driven by increased coordination between Canadian banking and wealth. Referrals between those groups were up 18% year-over-year, he said.
Thomson discussed Tangerine, describing it as being repositioned more toward a challenger bank model, including a partnership with Engine by Starling Bank in the U.K. He said there was some deposit runoff at Tangerine as the bank was “being thoughtful” about pricing for deposits.
Capital, buybacks, and investment priorities
On ROE, Thomson emphasized a “value versus volume strategy,” aiming to align deposit growth with asset growth. He cited a reduction in wholesale funding from roughly 23% to 18.5% over the last two and a half years, and a decline in the loan-to-deposit ratio from 115% to 104%.
He said the biggest ROE opportunity lies in business mix—particularly in the Canadian bank, where Scotiabank has historically been strong in mortgages and autos but underpenetrated in other areas such as small business, cards, and commercial mid-market.
On capital deployment, Thomson said the bank sees “so many organic opportunities for growth” and cited planned increases in technology spending to CAD 5.8 billion in the current year from CAD 5.3 billion. He said Scotiabank expects to continue investing while also maintaining positive operating leverage and buying back shares, arguing buybacks remain attractive due to a valuation disparity with peers. He said the bank believes it can pursue investments and repurchases while keeping CET1 at 13%.
Thomson also addressed the bank’s investment in Key, saying Scotiabank is “pretty happy” with the position, which he said contributes $350 million of NIAT at a 15%–20% return on capital, and noted the stock was up 25% from where Scotiabank bought it. He said priorities in the U.S. remain focused on organic buildout, closing product gaps, and potential small tuck-in acquisitions rather than larger-scale deals.
In closing remarks, Thomson reiterated his message of being “the bank of no surprises,” saying the bank has built credibility over eight quarters of meeting or exceeding expectations. He said Scotiabank is focused on maintaining momentum through 2026 and into 2027, with continued ROE improvement and earnings growth as key objectives.
About Bank of Nova Scotia (NYSE:BNS)
Bank of Nova Scotia, commonly known as Scotiabank, is a Canadian multinational banking and financial services company founded in 1832 and headquartered in Toronto, Ontario. It is one of Canada’s largest banks and provides a broad range of financial services to retail, commercial, corporate and institutional clients. The bank combines a domestic Canadian franchise with an extensive international presence to serve customers across multiple markets.
Scotiabank’s core activities include personal and commercial banking, wealth management, corporate and investment banking, capital markets, and global transaction banking.
