The Bank of Nova Scotia (BNS) Stock: Earnings Rise Despite Restructuring Costs

TLDR

• Scotiabank reports Q4 profit of $2.21B, beating forecasts despite a $373M restructuring charge.
• Capital markets, wealth management and international banking drive strong performance.
• Workforce reduced by 2,291 employees as part of strategy to streamline operations.
• ROE expected to move closer to 14% by next year, supported by fee growth and deposit improvements.
• BNS stock up 2.54% to $70.32 as long-term earnings power strengthens.

The Bank of Nova Scotia (NYSE: BNS) traded at $70.32, up 2.54%, after reporting fourth-quarter earnings that surpassed analyst expectations.

The Bank of Nova Scotia, BNS

The bank posted profit of $2.21 billion for the quarter ending Oct. 31, a notable increase from $1.69 billion in the same period last year. Scotiabank delivered this growth despite incurring a $373 million restructuring charge tied to layoffs, reflecting a shift toward a more efficient organizational structure.

Strong Quarterly Performance

CEO Scott Thomson described 2025 as “a year of execution,” emphasizing the bank’s ability to meet its strategic objectives even as trade-related challenges pressured the broader economy. Scotiabank’s Q4 results highlight the success of its two-year plan designed to improve profitability across major business lines. Wealth management, capital markets and international operations contributed meaningful gains.

The bank disclosed a headcount reduction of 2,291 employees, aligning with its focus on streamlining operations and freeing capacity for technology investments and revenue-driven roles. Thomson said these changes will position the bank for stronger performance as it accelerates efforts to become the primary financial partner for more clients.

Improving Return on Equity

A key milestone in Scotiabank’s strategic vision is reaching a minimum 14% return on equity (ROE). Thomson expressed confidence that the bank is on track to reach this goal sooner than planned. International banking, global markets and wealth divisions already show improved returns, while Canadian banking is expected to see major ROE expansion next year.

The bank anticipates nearly double-digit growth in fee income from insurance, mutual funds and premium credit cards. Mortgage renewals at higher rates and the gradual reduction of costly term deposits should also help profitability rise across 2026.

Credit Quality and Provisions

Provisions for credit losses totaled $1.11 billion, higher than the $1.03 billion recorded a year earlier. Chief strategy and operating officer Phil Thomas noted that while some clients face financial strain, the issues remain isolated, not systemic. Mortgage delinquencies rose modestly, driven mainly by softness in the Greater Toronto Area.

The bank expects provisions to rise in the first half of 2026, then trend downward toward normalized levels as economic conditions stabilize.

Economic Outlook and Growth Opportunities

Scotiabank remains cautiously optimistic about Canada’s economic direction. Thomas cited concerns including the absence of a U.S. trade deal and elevated unemployment, though he expects the federal budget to support improved business and consumer sentiment.

Thomson pointed to Canada’s renewed emphasis on energy and mining as a significant opportunity. The recent memorandum of understanding between Ottawa and Alberta on energy development signals a shift in economic trajectory, potentially benefiting loan growth and investment banking revenue.

Market Reaction and Performance Overview

Analysts welcomed the results, with margin expansion and capital markets strength highlighted as key contributors. On an adjusted basis, earnings reached $1.93 per diluted share, beating expectations of $1.84.

BNS shares reached a record high of C$99.34 in Toronto trading. Performance metrics also signal long-term strength:

• YTD Return: 36.34% vs. 25.93% for the S&P/TSX
• 1-Year Return: 28.88% vs. 20.89%
• 3-Year Return: 59.87% vs. 51.06%
• 5-Year Return: 83.50% vs. 79.26%

Scotiabank expects double-digit EPS growth next year as its strategic repositioning continues to take hold.

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