Scotiabank Profit Jumps 17% to $2.95 Billion as Bank Calls Q3 a Record Quarter

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Scotiabank has delivered one of its strongest quarters in years, with profit climbing 17% as higher interest income, stronger fee revenue and record results in major business lines pushed earnings above expectations. The Bank of Nova Scotia reported net income of $2.95 billion for its fiscal third quarter ended July 31, 2026, compared with $2.53 billion a year earlier.

Chief executive Scott Thomson called it a record quarter, pointing to improved margins and fee income as the bank exceeded its 14% return-on-equity objective. The performance was not confined to one corner of the institution: Canadian banking, wealth management and global banking and markets all posted particularly strong results. Credit costs remain an important counterweight, however, leaving investors to judge whether the earnings momentum can persist as economic and trade uncertainty continues.

The Headline Profit Was Stronger Than Analysts Expected

Scotiabank’s reported net income reached $2.953 billion in the third quarter, up from $2.527 billion in the same period of 2025. That works out to an increase of almost 17%. Diluted earnings per share rose to $2.27 from $1.84. On an adjusted basis, which strips out specified items that management does not consider representative of ongoing performance, the bank earned $2.973 billion, an increase of roughly 18% from $2.518 billion a year earlier. Adjusted diluted EPS climbed even faster, reaching $2.28 compared with $1.88.

Those numbers also cleared the expectations that had been built into the quarter. Analysts surveyed by LSEG had been looking for adjusted earnings of about $2.10 per share, while FactSet’s consensus was also approximately $2.10. The difference matters because a strong quarter is easier to celebrate when expectations were low; Scotiabank instead delivered results above already established forecasts. Reported return on equity rose to 14.1% from 12.2%, while adjusted ROE reached 14.2%, exceeding management’s 14% objective and giving Thomson a concrete reason to characterize the period as a record quarter.

Revenue Growth Came From Both Lending and Fee-Producing Businesses

Scotiabank generated $10.535 billion of total revenue during the quarter, compared with $9.486 billion a year earlier, an increase of roughly 11%. The improvement came from both sides of the bank’s revenue engine. Net interest income — broadly the difference between interest earned on assets such as loans and interest paid on funding such as deposits — increased to $5.866 billion from $5.493 billion. That represents growth of nearly 7%, providing a substantial lift to the overall result.

Non-interest income grew even faster, rising approximately 17% to $4.669 billion from $3.993 billion. That category captures income streams such as investment management, brokerage, capital-markets and other fees, making the increase significant because it shows the quarter was not powered exclusively by lending spreads. Expenses did increase as well: non-interest expenses were $5.556 billion, compared with $5.089 billion a year earlier. Still, revenue grew faster than costs. For a large bank, that relationship is central to improving profitability because billions of dollars in additional business activity matter considerably less if an equivalent increase in expenses absorbs the gains.

Canadian Banking Crossed the $1 Billion Mark

Scotiabank’s Canadian banking operation generated $1.071 billion of net income in the quarter, up $113 million, or 12%, from $958 million a year earlier. It was also 14% above the $935 million earned in the second quarter. Management attributed the year-over-year improvement primarily to higher revenue, partially offset by increased expenses and provisions for credit losses. The division produced record revenue and recorded a fifth consecutive quarter of margin expansion, suggesting the profitability improvement has developed over more than a single reporting period.

Canadian banking also posted its fourth consecutive quarter of positive operating leverage, meaning revenue growth continued to outpace expense growth. Return on equity for the business improved to 19.4%. For everyday customers, this is the part of Scotiabank that encompasses much of the familiar banking relationship — mortgages, deposits, credit products and commercial banking. Its performance therefore provides a useful reading on the bank’s core domestic franchise. Year to date, Canadian banking income attributable to equity holders reached $2.966 billion, 19% higher than the comparable period a year earlier, reinforcing the importance of the domestic operation to Scotiabank’s broader earnings recovery.

International Banking Grew, but Currency Movements Tell an Important Story

Scotiabank reported $766 million of overall net income from International Banking, with $725 million attributable to the bank’s equity holders. The latter figure was 8% above the $670 million reported a year earlier. Management cited lower expenses, lower credit-loss provisions, lower taxes and favourable foreign-exchange translation as important contributors. Compared with the immediately preceding quarter, income attributable to equity holders increased 3% from $701 million. Those figures keep the international franchise an important source of earnings even as Scotiabank continues reshaping its geographic footprint.

Currency effects, however, make the headline growth rate less straightforward. On Scotiabank’s constant-dollar basis, which recalculates prior-period results using current-period exchange rates, International Banking earnings attributable to equity holders were $725 million versus $733 million a year earlier — a decline of about 1%. That distinction shows why investors often look beyond reported growth when evaluating an international bank. Scotiabank has also been simplifying its Latin American exposure: its banking businesses in Colombia, Costa Rica and Panama were sold to Davivienda Group, leaving Scotiabank with an ownership interest in the combined company rather than the same direct operating footprint it previously maintained.

Wealth Management Had Its Own Record Quarter

Global Wealth Management was one of the clearest standouts. Reported earnings reached $518 million, while net income attributable to equity holders was $515 million, up 23% from $417 million in the third quarter of 2025. The division also improved sequentially, with attributable earnings rising 9% from $474 million in the second quarter. Scotiabank said higher mutual-fund fees, brokerage revenue and net interest income across its Canadian wealth operations were major contributors, partly offset by higher volume-related expenses.

The size of the underlying asset pool helps explain why changes in investment activity can quickly become meaningful to earnings. Scotiabank reported assets under management of $474 billion, 16% higher than a year earlier, while highlighting continued retail mutual-fund sales through its branch network. When markets rise or clients move more money into managed products, fee revenue can benefit because many charges are tied to the amount of assets being managed. Year-to-date attributable wealth-management earnings reached $1.47 billion, 20% above the comparable 2025 period. The record result gives Scotiabank another earnings engine beyond traditional lending, particularly valuable when interest-rate conditions become less favourable to bank margins.

Capital Markets Delivered the Quarter’s Fastest Earnings Growth

Global Banking and Markets produced $647 million of net income attributable to equity holders, up 37% from $473 million a year earlier. The increase was even larger when measured against the second quarter, with earnings rising 41% from $457 million. Scotiabank said strong capital-markets revenue and record underwriting and advisory fees helped produce record earnings for the division. Reuters similarly identified the business as a major contributor to the bank’s better-than-expected quarter.

The result illustrates how investment banking can change the earnings mix of a large financial institution. Corporate clients raising debt or equity, completing acquisitions or restructuring businesses can generate advisory and underwriting fees that are very different from the spread income earned on a conventional mortgage. That diversification was especially visible this quarter because wealth management and capital markets grew strongly at the same time as Canadian banking. Global Banking and Markets has generated $1.649 billion of attributable income during the first nine months of fiscal 2026, an increase of 18% from $1.403 billion a year earlier. Higher expenses, taxes and credit provisions absorbed part of the revenue improvement, but not enough to prevent the division from posting the fastest year-over-year earnings growth among Scotiabank’s major business lines.

Credit Losses Remain the Number Investors Cannot Ignore

The earnings strength did not eliminate concerns around borrower stress. Scotiabank recorded $1.079 billion in provisions for credit losses during the quarter, slightly above the $1.041 billion recorded a year earlier. The bank’s provision-for-credit-loss ratio increased one basis point year over year to 56 basis points. The quarterly number was nevertheless considerably better than the second quarter’s $1.217 billion, declining by $138 million as provisions on both performing and impaired loans fell sequentially.

There were still signs that credit normalization has not completely run its course. Provisions on impaired loans totalled $1.018 billion, up from $975 million a year earlier. Gross impaired loans reached $7.801 billion at July 31, compared with $7.608 billion three months earlier. Scotiabank said the increase reflected foreign-exchange translation effects and new formations in Canadian Banking and International retail portfolios. Its total allowance for credit losses also increased to $7.551 billion from $7.344 billion in the prior quarter. Those figures do not erase the strong earnings result, but they provide an important counterweight: continued profit growth depends partly on the bank preventing deteriorating borrower performance from consuming a larger portion of operating income.

Scotiabank Has More Capital Than Regulators Currently Expect

Scotiabank finished the quarter with a Common Equity Tier 1 capital ratio of 13.1%. That was 20 basis points lower than in the previous quarter, reflecting factors including business growth, higher risk-weighted assets and share repurchases. Even after that decline, the ratio remained comfortably above the supervisory expectation applying to Canada’s largest banks. In June 2026, the Office of the Superintendent of Financial Institutions lowered the Domestic Stability Buffer and set the CET1 supervisory expectation for domestic systemically important banks at 11% of risk-weighted assets.

The capital cushion has given Scotiabank room to return money to shareholders while still expanding its businesses. The bank repurchased 8.6 million shares during the third quarter and said it had returned $6.3 billion of capital to shareholders through dividends and buybacks during the fiscal year to date. That combination of profitability, capital strength and shareholder distributions helps explain why management placed so much emphasis on exceeding its return-on-equity objective. The question now is whether the bank can repeat the formula. Revenue is expanding, fee businesses are contributing more and multiple divisions are setting records, but credit conditions and a complicated Canada-U.S. trade environment remain variables that could make the next stage of growth harder than this quarter’s numbers suggest.

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