Key Morningstar Metrics for Bank of Nova Scotia
- : C$104.00Fair Value Estimate
- : ★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : LowMorningstar Uncertainty Rating
What We Thought of Bank of Nova Scotia’s Earnings
Bank of Nova Scotia BNS reported strong fiscal third-quarter results, with adjusted net income growing 20% year over year. The results translated into an adjusted return on equity of 14.2%, reaching its medium-term target of 14.0%-plus ahead of its original fiscal 2028 plan.
Why it matters: The global banking and markets segment was the brightest spot, booking record earnings of C$647 million, up 37% year over year. Global wealth management also delivered solid growth of 23%.
- Diving deeper into the GBM segment, the bank booked record levels of underwriting and advisory revenue. We are glad to see Scotiabank has gained exposure to high-profile Canadian deals, such as the Apotex IPO.
- Markets revenue was also a record C$1.1 billion, with equities trading as the biggest driver. Although the third quarter is usually seasonally weaker in the trading business, we surmise high-profile US IPO filings and artificial intelligence-related trade were both strong drivers for higher equity trading volume.
The bottom line: As we incorporate third-quarter results, we plan to increase our fair value estimate for narrow-moat-rated Scotiabank by around a mid-to-high-single-digit percentage. We continue to view shares as overvalued.
- The valuation increase will be primarily driven by higher wealth management and underwriting and advisory fee income, as well as higher net interest income growth in fiscal 2026, partially offset by higher compensation expense growth.
Between the lines: Amid the latest tariff announcements between the US and Canada, Scotiabank did not make material changes to its credit guidance in fiscal 2026, similar to peer Bank of Montreal, which also reported earnings on Aug. 25.
- Management said it was comfortable with the bank’s current allowance levels and alluded to its original guidance of a lower impaired provision for credit loss ratio in the second half of fiscal 2026.
