Summary of Scotiabank Q3 2026 Earnings Call

1Key Financial Results and Metrics

Earnings: Scotiabank reported record quarterly earnings of $3 billion, translating to diluted earnings per share of $2.28, up 21% year-over-year.

Return on Equity (ROE): Achieved 14.2%, an increase of 170 basis points year-over-year, surpassing the medium-term target of 14% earlier than expected.

Capital Ratios: The Common Equity Tier 1 (CET1) ratio stood at 13.1% after share repurchases of 8.6 million shares in the quarter.

Loan and Deposit Growth: Average loans increased by 4% year-over-year, while deposits grew by 5%.

2Strategic Updates and Business Highlights

Canadian Banking: Continued strong performance with a 19.4% ROE, driven by a 3% sequential growth in commercial loans and strong fee income growth. The bank is focusing on improving its business mix and enhancing productivity.

International Banking: Reported earnings of $725 million, up 6% year-over-year, with retail loans growing by 5%. The focus remains on deepening client relationships and driving efficiencies.

Global Wealth Management: Earnings increased by 23% year-over-year to $515 million, supported by strong mutual fund sales and improved connectivity with Canadian Banking.

Global Banking and Markets: Earnings surged 37% year-over-year to $647 million, driven by strong capital markets performance and increased loan growth.

3Forward Guidance and Outlook

Management expressed confidence in maintaining momentum into fiscal 2027, with expectations for continued improvement in ROE and business growth.

The bank anticipates ongoing improvements in loan growth and credit quality, particularly in Canadian Banking and International Banking segments.

Strategic investments in AI and technology are expected to enhance productivity and operational efficiency.

4Bad News, Challenges, or Points of Concern

Credit Quality: While credit trends are improving, there are concerns about elevated mortgage delinquencies and the potential impact of evolving trade relationships, particularly with the U.S.

Expense Growth: Expenses increased by 14% year-over-year, primarily due to higher compensation and technology investments, which could pressure margins if not managed effectively.

Regulatory Impact: A transition of certain international banking portfolios to the AIRB approach is expected to reduce capital ratios by 15 basis points, potentially impacting ROE in the short term.

5Notable Q&A Insights

Canadian Banking ROE: Executives discussed the path to increasing ROE in Canadian Banking from 18% to 20%+, emphasizing growth in mid-market and small business lending.

International Banking Growth: Management indicated a pivot to growth in International Banking, with expectations for revenue growth of 6-8% and stable expense growth around 4%.

Capital Markets Outlook: There was a discussion on the sustainability of capital markets revenue growth, with a focus on navigating macroeconomic volatility while maintaining strong client relationships.

Acquisition Strategy: The bank is prioritizing organic growth and small acquisitions to enhance capabilities, particularly in capital markets, while maintaining its investment in KeyCorp until the lockup period ends in December 2029. Overall, Scotiabank demonstrated robust financial performance in Q3 2026, with strategic initiatives aimed at sustaining growth and improving operational efficiency, despite facing some credit quality concerns and regulatory challenges.