- Adjusted Earnings Growth Scotiabank reported adjusted earnings of $2.7 billion or $2.05 per share, a 16% YoY increase, with ROE rising to 13% (up 120 bps).
- Segment Performance Canadian Banking ($960M, +5%), Global Wealth ($488M, +18%), and International Banking ($717M, +8%) drove 11% YoY revenue growth.
- Capital Strength CET1 ratio at 13.3% after repurchasing 4.9 million shares, with positive operating leverage of 4.2% and a 200 bps improvement in productivity to 52%.
- Credit Risk Metrics Provision for credit losses (PCL) at $1.1 billion, with impaired PCL at 58 bps and a strong ACL ratio of 94 bps.
- International Focus International Banking delivered 16% ROE, with mixed macroeconomic outlooks in Mexico, Chile (stable), and Peru (uncertain), but low average LTVs (55%) in Canadian mortgages mitigated risk.
Segment Performance
Canadian Banking reported earnings of $960 million, up 5%, with ROE of 18.1%. Global Wealth Management earnings were $488 million, up 18%, with ROE of 17.9%. International Banking delivered earnings of $717 million, up 8%. Global Banking and Markets reported earnings of $545 million, up 5%, with ROE of 14.3%. The bank's provision for credit losses (PCL) was $1.1 billion, with an impaired PCL ratio of 58 basis points.
Asset Quality and Credit Performance
The Canadian Retail portfolio shows mixed results, with mortgage 90-plus day delinquency increasing quarter-over-quarter due to COVID-era mortgages concentrated in Ontario and the GTA. However, impaired PCLs remain low due to strong credit quality and low average LTVs of approximately 55% in the uninsured portfolio. In International Banking, impaired PCLs remain elevated but stable across key markets.
Outlook and Guidance
The bank's operating environment is expected to reflect ongoing challenges, with impaired PCLs remaining elevated in the near term before gradually trending lower as the economic outlook improves. The guidance for impaired PCLs remains high 40s to mid-50s, and the bank is comfortable with the adequacy of allowances and underlying portfolio quality. ROE is expected to reach 14% plus in 2027, driven by margin expansion.
Valuation
With a P/E Ratio of 16.44 and a P/TBV of 1.47 (implied by 'P/B Ratio': 1.47), the market is pricing in a certain level of growth and profitability. The Dividend Yield of 4.22% is attractive, indicating a stable return for investors. Analysts estimate next year's revenue growth at 5.3%, which is slightly higher than the current valuation multiples, suggesting that the stock may be fairly valued.