Bank of Nova Scotia Q4 2025 Earnings Call Transcript

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

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Hey, good morning. I guess maybe, Raj, I think you mentioned double-digit EPS growth in the Canadian Banking segment. If you don't mind unpacking that for us in terms of -- how much of that is like PCL normalization relative to the impaired guidance you just put out? And then what should we expect in terms of the PTPP growth? Is it loan growth that's going to be driving it? Is it margin expansion? If you could just dig into that a little.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. Thank you for that. And I guess maybe one, Scott, for you. you made significant progress over the last two years as we think about the ROE journey from here, two questions. One, structurally, like a lot of your peers are targeting a 15%, 16% ROE structurally, are there any reasons that Scotia cannot attain a 16% ROE, number one? And second, in terms of capital deployment, talk to us in terms of priorities, good M&A, you've talked about US being obviously the second most important market. Is there any tactical M&A that you would look to do over the course of the next year? Thanks. L. Scott Thomson Right. So as we said when we rolled out the Investor Day two years ago, we said 14%-plus, and we thought 14% was a conservative estimate. And we are tracking ahead of that plan to date, seen good ROE expansion in our international bank, good ROE expansion in our GBM Bank continued growth in wealth, which we know is ROE accretive. And next year, you're going to see significant earnings growth in our Canadian bank and significant ROE expansion in our Canadian bank. And so as we sit here next year at this time, I'm confident you're going to see another step in that ROE journey, which is going to get us a lot closer to that 14%, probably a year earlier than we thought. And so is 14%-plus conservative. I continue to believe it's conservative. But part of this journey is continuing to deliver day in and day out for our shareholders on a consistent basis and do what we say we're going to do. And we're eight quarters now into doing that. So we're going to continue on that journey. In terms of your question on capital allocation, the focus is on organic -- we've got so many opportunities with organic deployment, and we saw what GBM is doing in terms of new product capabilities and opportunity there. You see this new economic trajectory in Canada, where I do think there's going to be a demand for capital. We have a pivot to growth in IB, which will start to come in the back half of this year. And then our Canadian and commercial business as well. I think in the back half of this year, we'll start to attract some capital in segments that we haven't historically been in. So that would be priority one. Priority two, given the relative valuation and given our confidence in our plan, we will continue to be repurchasing shares. And you've seen us do that in the last year, you'll continue to see us do that in 2026. And then lastly, if there's some product capabilities or some capabilities that we can fill via tuck-ins in the US, I'm thinking wealth here, as we've talked about that, relatively small tuck-ins that help Jacqui grow her business or help Travis close a couple of gaps, and we'll think about that, but that would be certain on the priority list, and there's nothing in the hopper right now for us to be thinking about in that regard.

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Hey, good morning. I was wondering, Scott, Raj, if you can just walk me through or maybe confirm some of my high-level conclusions here on your double-digit EPS growth outlook for next year. So on a segment basis, double digits in Canada, probably the same for wealth, mid-singles for capital markets and international from the sounds of it. Corporate at least the back half will be flat, probably, but who knows. So overall, high single digits plus the buybacks to get into double digits? Is that how you're thinking about it?

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Just to find your point on capital markets, the implication there is that your earnings in that business are going to be above the run rate, which the guidance run rate is $425 million to $450 million of earnings per quarter maybe stale at this point? Is that.

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Okay. Great. And then we talk a lot about buybacks these days for obvious reasons. But what happens, Scott, if you own 15% of KeyCorp, and they decided to participate in the M&A consolidation trend in US regional banking. Would you -- I mean the details, of course, if you like the deal or not, let's say you do like it. And do you want to be diluted? Or do you want to maintain your position? What's your thought process? L. Scott Thomson Yeah. I think we're really happy with the KeyCorp stake. Jacqui is sitting on the Board now. I think we're getting a lot of good insights into the kind of the overall environment. It's contributing now from a dividend perspective on a very attractive basis given it's in the significant investment bucket. There's not a plan here to increase beyond our current 15%. And I think we'll just have to see what KeyCorp does from a strategic perspective and then deal with it at that time. But I think we're pretty comfortable with the stake we have. And I'll leave it at that.

Question: Doug Young - Desjardins Securities Inc - Analyst : Yeah, good morning. Just something on capital, Raj, organic capital generation of CET1 generation 9 basis points. Is this around what we should expect for Scotia net of dividends. And can you maybe talk a bit about the puts and takes that maybe take you higher over the next few years, if that's something that you think? And then Scott, can you remind us what the minimum CET1 ratio target is for the Bank and what you're comfortable going down to?

Question: Doug Young - Desjardins Securities Inc - Analyst : Okay. And then just second, just back to the guidance, Phil, the PCL, I just want to confirm this a little slow this point but guidance that you gave, I assume that's for total. And if that's the case, can you break it out between impaired and performing or any sense? Or -- and then on the International Banking, modest earnings growth. I assume that's off the base excluding Colombia for fiscal '25. Just wanted to confirm those two items. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 1:15PM, BNS.TO - Q4 2025 Bank of Nova Scotia Earnings Call

Question: Doug Young - Desjardins Securities Inc - Analyst : Okay.

Question: Doug Young - Desjardins Securities Inc - Analyst : Perfect. Thank you.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Good morning. First question is for Francisco. So just going back to the 2026 growth guidance of low single digits or modest growth. I think that's probably a little bit lower than what was originally in the plan, which would have been, I think, high single digits for this year. So maybe talk about some of the factors that are contributing to it, assuming it's macro, but maybe we can understand better just the intended pivot to balance sheet growth? I know that was an important part of the plan for '26 and if that's still part of the plan LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 1:15PM, BNS.TO - Q4 2025 Bank of Nova Scotia Earnings Call

Question: Paul Holden - CIBC World Markets Corp - Analyst : All right. Okay. That's helpful. Thanks a lot. And then a question for Travis, and I guess it's almost kind of a long similar vein. -- because we've talked about a number of drivers, I think, for your business, Travis. Maybe you could highlight sort of, I don't know if it's top 3 or whatever the right number is. What would you say are the top drivers that are going to contribute to that revenue earnings growth in 2026. In other words, what should we be tracking for success in '26.

Question: Paul Holden - CIBC World Markets Corp - Analyst : I'll leave it there. Thank you.

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Good morning. Can we start on the deposit strategy first. Maybe just in Canada specifically speak to the sort of runoff of these commercial deposits that we saw this quarter -- or not commercial, I'm sorry, term deposits that we saw this quarter and the growth in retail maybe just describe what you experienced in the quarter and what your outlook is on the domestic deposit front.

Question: Mario Mendonca - Cowen and Company LLC - Analyst : All right. If we could move over to mortgages, again, domestic. Could you help me understand that the origination dynamics this quarter, like 30% up in the it was down sort of meaningfully last quarter. So obviously, something changed in mortgage originations in the GTA. And then also help me understand that, the extent to which mortgage growth is emerging in the broker channel versus, say, Scotia's advisers or the branch channel. Those are the two mortgage questions I have.

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Thank you.

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Hi. Thank you, good morning. My question is also for Aris. And I'm just trying to pin down a better understanding of your comment that fee revenue will also be stronger in 2026. And what I'm specifically after is I'm trying to understand private equity and how that's helped you. This is the second quarter this year where you mentioned that private equity gains have somehow benefited the Canadian business. So I'm wondering if you can maybe just size that like annually, how much are you getting from private equity gains, where it's coming from, a little bit unclear to me. And what your expectation is for 2026 on that front?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : That's very helpful. Thank you, Aris. I appreciate that. And for the purposes of this call, I'm going to try and keep my last question, very, very simple and straightforward. I think it's aimed at Travis, but maybe, Phil, you can also speak to this as well. I'm getting a lot of questions on private credit. And essentially, what we're looking for is we really want to be able to measure Scotia sort of exposure to private credit relative to others that actually have a call report. So I wonder if, Travis, maybe you can -- I'm assuming most of this is coming from the capital markets business. I wonder if you can tell us sort of the on-balance sheet exposure to private credits and maybe even off-balance sheet or like non-committed lines? And then, Phil, the pertinent question might be what do losses look like for this kind of business in the stress test?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Thank you. That's very helpful. Travis, just a quick question. If $31 billion, if half of that is private credit, what's the other half? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 1:15PM, BNS.TO - Q4 2025 Bank of Nova Scotia Earnings Call

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. Thank you.

Question: Jill Shea - UBS AG - Analyst : Thanks, good morning. Perhaps just piggybacking on Mario's earlier question on deposits. You already addressed some of the nice progress you're seeing on your deposit strategies. But perhaps just tying that to your net interest margin outlook, like when we look at the year-over-year margin that's improved with lower funding costs. I'm just curious if there's any more room to go with funding costs continuing to come down or a favorable mix shift away from term?

Question: Jill Shea - UBS AG - Analyst : Okay. Very helpful. Thank you.