Scotiabank Q1 Profit Soars as Strategic Reset Begins to Pay Dividends

TORONTO, ON – February 24, 2026 – The Bank of Nova Scotia kicked off the earnings season for Canada's major banks with a robust first-quarter performance, reporting adjusted profits that surpassed analyst expectations and signaling that its strategic overhaul is bearing fruit. The bank posted a remarkable year-over-year surge in earnings, driven by growth across all its business lines and the clarifying financial impact of its recent international divestitures.

For the quarter ending January 31, 2026, Scotiabank reported an adjusted net income of $2.7 billion, or $2.05 per diluted share. This represents a 16% increase in adjusted earnings per share from the $1.76 recorded in the same period last year. The strong results prompted an optimistic outlook from the bank's leadership, with President and CEO Scott Thomson declaring that "2026 is off to a strong start for Scotiabank."

"We saw earnings growth across all of our business lines this quarter," Thomson stated in the release, highlighting the bank's progress. "We are confident that we can deliver on our medium-term objectives in 2027, including a return on equity above 14% – one year ahead of our Investor Day commitments."

However, despite the strong beat on both earnings and revenue, the bank's stock saw a slight dip in trading, reflecting investor unease over a notable increase in provisions for credit losses, particularly within its Canadian retail loan book.

A Strategy Vindicated by the Numbers

A key theme of Scotiabank's first-quarter results was the stark difference between its reported and adjusted figures, which underscores the impact of its strategic pivot. The bank's reported net income was $2.3 billion, a massive jump from the $993 million reported in Q1 2025. This comparison, however, is skewed by significant one-time items in both periods.

The prior-year quarter was weighed down by a hefty $1.36 billion impairment charge related to the announced sale of its banking operations in Colombia, Costa Rica, and Panama. Conversely, the current quarter's reported income includes a $423 million loss on the completion of that very sale. By stripping out these and other non-recurring items, the adjusted figures provide a clearer view of the bank's underlying operational health, which is strong.

The strategic divestitures are central to Scotiabank's plan to streamline its international footprint and focus on higher-growth, higher-return markets, primarily in North America and key Latin American corridors like Mexico and Chile. In exchange for its operations in Colombia, Costa Rica, and Panama, Scotiabank received a roughly 20% stake in the buyer, Davivienda Group. Analysts see this move as a critical reshaping of the bank's geographic exposure, allowing it to de-risk and reallocate capital more effectively.

The Canadian Paradox: Profit Growth Meets Consumer Strain

Scotiabank's domestic engine, the Canadian Banking division, was a major contributor to the quarter's success, delivering earnings of $960 million, up 5% from the previous year. The bank attributed this to strong revenue growth and disciplined cost control. Yet, beneath the surface of these strong profits lies a growing concern about the health of the Canadian consumer.

The bank set aside $1.18 billion in total for provisions for credit losses (PCL), a slight increase from the prior year but a more significant 6% jump from the previous quarter. A closer look reveals that the increase is being driven by domestic stress. Provisions for impaired loans in the Canadian retail and corporate portfolios rose, reflecting what the bank's Chief Risk Officer described as "heightened macroeconomic uncertainty."

Net impaired loans in the Canadian Banking segment climbed by $148 million from the last quarter to reach $1.76 billion, a trend attributed to new formations in retail loans. Management specifically pointed to emerging stress in mortgages originated during the pandemic's rock-bottom interest rate environment, especially in the Greater Toronto Area, as well as rising delinquencies in credit card loans for younger clients.

This trend at Scotiabank mirrors a troubling national picture. Recent economic reports indicate many Canadian households are struggling with the rising cost of living and higher debt servicing costs. With inflation and increasing mortgage payments straining budgets, a growing number of consumers are reportedly close to insolvency, forcing them to prioritize debt repayment and cut back on spending.

A Streamlined Global Footprint and Tighter Risk Profile

While credit risks are mounting in Canada, Scotiabank's international restructuring appears to be paying off from a risk management perspective. The International Banking segment saw its net impaired loans decrease by a substantial $240 million from the previous quarter, a direct result of the completed divestitures. The sales also contributed to a $103 million reduction in provisions for impaired loans within the international retail portfolio compared to the prior year.

This demonstrates the dual benefit of the bank's strategy: not only does it free up capital for more profitable ventures, but it also sheds assets in regions that may have carried a higher risk profile, thereby improving the overall quality of the bank's loan book. The International Banking division still generated solid earnings of $737 million, up 7% year-over-year, driven by margin expansion.

Across the enterprise, Global Wealth Management was a standout performer, with adjusted earnings surging 18% to $491 million, fueled by higher mutual fund fees and brokerage revenues as assets under management grew 10% to $436 billion. The Global Banking and Markets division also had a strong start, with earnings up 5% to $544 million on the back of robust capital markets activity.

Scotiabank's capital position remains robust, with its Common Equity Tier 1 (CET1) capital ratio—a key measure of a bank's financial resilience—increasing to 13.3%. This strong capital base provides a crucial buffer as the bank navigates the uncertain economic environment while continuing to execute its strategic priorities and return capital to shareholders.