Bank of Nova Scotia Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Good morning. I guess maybe, Scott or Raj, I just wanted to spend some time on how you're thinking about capital and buybacks? So when we think about the CET1 at 13.3% [Aussie] I think I said last month, they feel good about 11.5% being the real reg minimum and apps management buffer to it. I'm just wondering given where the stock trades today from a valuation perspective, the progress you made in getting towards that 14% ROE? Like is there any sort of desire to be a little bit more aggressive on buybacks? And is a sub 13% CET1 an absolute no given where the peers are and no bank probably wants to be below 13%? And I just would love to hear how you're thinking about it because in a very simplistic way as a shareholder I think you would like management to lean in into buybacks and be a little more aggressive given where the stock is? But I would love some color there.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : That's helpful. And I guess maybe just one follow-up. Maybe for you, Scott, I think you talked about the focus, value over volume, enhancing sort of the velocity of the balance sheet. I think a few years removed now from the Investor Day and you will see -- when you look at the sort of the three big businesses, GBM, IB Canadian P&C, where do you think the progress has been slowest according to you? And what does it take to sort of kind of bridge that gap? Is there additional need for leaning on tech investments, et cetera? But yes, give us a sense in terms of a scorecard of where there are things where you think things have not moved as fast and where we could see an improved pace of execution over the coming year? Thanks.

Question: Ebrahim Poonawala - Bank of America Securities - Analyst : Good, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 12:15PM, BNS.TO - Q3 2025 Bank of Nova Scotia Earnings Call

Question: John Aiken - Jefferies - Analyst : Good morning, Phil, in your commentary, you talked about the negative credit migration within commercial and on the international side. Is there -- was there any particular region or particular sector that was causing that?

Question: John Aiken - Jefferies - Analyst : Thanks, Phil. If I can keep you on your toes and pivot to the domestic 90-day past due, we saw strong sequential improvement in credit cards. How much of that is seasonality and how much of that is actually more strengthened in terms of the Canadian household? Or am I just reading too much into this?

Question: John Aiken - Jefferies - Analyst : Thanks. I appreciate the call. Thank you.

Question: Matthew Lee - Canaccord Genuity - Analyst : Hi, morning. Maybe for the Canadian banking business, that goal for positive operating leverage, when you think about that inflection point, when do you think we can reach positive operating leverage? And can you do so even if loan growth at industry level stays pretty muted?

Question: Matthew Lee - Canaccord Genuity - Analyst : Is that like a 2026 thing or kind of longer term when you think about that?

Question: Matthew Lee - Canaccord Genuity - Analyst : Okay. Then maybe a follow-up for you, Aris. When we talk about multiproduct customers, this seems fit into that. Does that program resonate with customers? Or are there maybe other avenues to might explore to better cater to mass affluent and above audiences?

Question: Gabriel Dechaine - National Bank Financial - Analyst : First question is just for an updated outlook for the corporate segment. Obviously seeing the beneficial impact of lower rates on the revenue line there. If we get the type of rate cuts that are being forecasted in Canada and the US over the course of the next half year or so, does that go to zero? And then at some point, could we maybe see a profit? I just want to -- from the corporate segment, I just want to know what the likelihood of that scenario is?

Question: Gabriel Dechaine - National Bank Financial - Analyst : Right. Okay. And then just in the Canadian business, both sides of the balance sheet triggered some questions here. And then just a clarification. Is the message that the de-banking phase in the commercial business is at or near an end? And then sometime in next quarter or in 2026, we start having commercial loan growth again. And by extension, could that be one of the primary drivers of rebound in PTPP growth for the segment? And then on the other side of the balance sheet, I just noticed a small but notable personal deposits were down sequentially. That been doing nothing but increase over the last couple of years as you're trying to improve your loans to deposit ratio. Just wondering if there's a -- you've hit kind of like your target and maybe don't need to be as competitive on deposit pricing going forward, and that's another potential driver for next year in that segment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 12:15PM, BNS.TO - Q3 2025 Bank of Nova Scotia Earnings Call

Question: Gabriel Dechaine - National Bank Financial - Analyst : Okay, thanks.

Question: Doug Young - Desjardins Securities - Analyst : Hi, good morning. Phil, I guess the last comment you had in your prepared remarks was impaired PCLs are below guidance that you're cautious. And if I go back to last quarter, I think you thought or you stated, I think, the second half of fiscal '25 will be at or slightly above Q2 levels on an impaired basis. I think that was 57 basis points. So you came in 51 basis points. And I know there's a lot going on here between impaired and performing and macro on trends. But can you maybe dig a little bit more into what you mean by cautious relative to in the fourth quarter? And if you could kind of care to talk about next year, that would be great? I'm trying to just get a sense of how we should be thinking about the trend on impaired PCLs.

Question: Doug Young - Desjardins Securities - Analyst : No, no, it is. And then, Raj, just if I look on slide 7, your internal capital generation, 13 basis points. I'm more interested in through a cycle, what you think that should be? And obviously, ROE improvement kind of what helped kind of benefit that metric. But when you think of a target or what

Question: Doug Young - Desjardins Securities - Analyst : Appreciate the color. Thank you.

Question: Paul Holden - CIBC Capital Markets - Analyst : Thank you. Good morning. I want to ask a question on the trading. You called out very good quarter for fixed income trading. We see that in the numbers, I think [$4.32], significantly higher than we've seen in any previous quarter. Maybe you can talk through that? Like how much of it is sustainable? How much of it might have been more specific to Q3? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 12:15PM, BNS.TO - Q3 2025 Bank of Nova Scotia Earnings Call

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay. And I want to go back to Phil for my second question. So (inaudible) formations were up 7% quarter-over-quarter, not a huge move, but still directionally going the opposite way of impaired PCLs. Sometimes when investors see that, they're like, oh, great, is that a sign that impaired PCLs next quarter are going to be higher. And we know that's not always the case. So maybe you can talk through in Scotia's specific circumstance, why hopefully, is not true, but why or why not it might be an indication of future impaired PCLs? Thanks.

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay, that's it for me. Thanks for the time.

Question: Jill Shea - UBS - Analyst : Good morning. Thanks for taking the question. Perhaps just on the margin, the Canadian banking margin was up a little bit this quarter, and I think you had mentioned the deposit mix was a helper and Aris talked about the core deposit growth. Should we expect that deposit mix improvement to continue? And maybe bigger picture, how should we think about the Canadian NIM going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 12:15PM, BNS.TO - Q3 2025 Bank of Nova Scotia Earnings Call

Question: Jill Shea - UBS - Analyst : Okay. Very helpful. And then perhaps just turning to the international banking segment as well and just same theme, the margin was a little bit better than we expected. I think it's trending better than that $4.45, $4.50 range you guys have talked about. And the margin has been sort of drifting higher over the past year. Could you just talk about the puts and takes there and how we should think about the international banking margin as well?

Question: Jill Shea - UBS - Analyst : Okay, thank you. Very, helpful.

Question: Darko Mihelic - RBC Capital Markets - Analyst : Hi, thank you. Good morning. My questions are for Francisco. And maybe it's easiest to do this if you look at slide 27 and slide 28 of your presentation. And if what I'm getting -- I'm getting the sense that maybe the client's deselection program is sort of nearing its end. And I'm trying to get a sense of magnitude. So for example, if I look at slide 27, I see the balances down year-over-year. And let's say, on a constant currency basis, that's $5 billion. But there's two moving parts, right? There's the part where you've deselected and there's originations. And so for all I know, you've removed $10 billion and you've had originations of $5 million. So that's what I'm trying to get at, Francisco is, how much of this has been client selection? What's the underlying sort of origination rate? And as we get past the deselection, like could we be expecting significant growth once your -- what sounds like you're done with the selection? I hope you understand that question, and maybe you can give me an order of magnitude, please?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. And just a follow-up on the commercial and corporate books, proportionately a bigger decline in investment grade. Is that the way forward to think of really a bigger push on noninvestment grade? Is that how we should think about that?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay, I think I've formed a view. Thank you very much for those answers. It's been good.

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay, thank you. I appreciate you squeezing me in. Maybe just to bring it all together, I mean, we've heard from Aris, he is targeting positive operating leverage. Francisco has turned things around. Which one of these two segments is likely to outgrow the other segment when you think over the next six quarters?

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : I appreciate you squeezing in. Thank you.