Scotiabank (BNS) Q3 review: Q3 Proved The Gears Are Turning
Finally some fire in the belly. Margins up, costs down, credit outlook better.
The BTSX27-Investor Highlights
Q3/25 EPS: $1.88 (+15% y/y)
Trading revenue + lower expenses did the heavy lifting
Caribbean Unit 35% ROE
Net Interest Margin(NIM) still expanding, unlike peers (Scotia actually benefits from lower rates)
Credit costs easing, impaired PCLs down q/q & management sounding upbeat
CET1 ratio +10bps
3.2M shares repurchased
Equal Weight
What Happened
Scotia’s EPS of $1.88 despite a higher tax rate dinging results by $0.08. Lower provisions (PCLs) helped add back $0.11.
Margins (NIM): Rising both q/q and y/y thanks to cheaper funding and fatter deposit spreads. Lower rates = good news here, unlike some peers.
Credit: PCLs moved lower. Management guiding clearly more confident in 2026. Last quarter’s conservative reserves (tariff fears) are easing.
Capital & Buybacks: CET1 up 10bps, even after 3.2M shares bought back. Balance sheet optimization plus strong earnings are generating capital nicely.
Business lines: Domestic and International both improved, supporting a stronger 2026 setup once loan growth resumes.
The Verdict: New CEO proving his worth.
Scott Thompson steering the ship with prior investments, slashing of useless upper management and divisions are starting to payoff. This is the Scotia we’ve been waiting for. Better margins, cleaner credit, and steady buybacks. The next big thing to watch is loan growth returning in 2026 once balance sheet optimization is done. Consitant dividend raises back on the table?
Buy, Sell, Hold Verdict: Steadying the ship.
Our average cost on BNS is $64.90 with a dividend yield of 6.78%. BNS is currently trading at a price of $85.70 of which gives us an allocation of 4% of the portfolio (just slightly overweight vs. 3.3% equal-weight). BNS current dividend yield is 5.18% with a 5 year average of 5.70%. We are not adding or selling shares of BNS. We still see some future value, however, the unusual money has been made( took a long time). With the 8 metrics we follow, BNS is trading in the range of fair value. Therefore, we will be boring and HOLD
Hold if you already own equal weight or are overweight
Nibble if you don’t own, but wait for a better entry prices if adding equal weight
Final Thoughts:
Scotia is still the “turnaround bank” of the Big Six, but Q3 proved the gears are turning. At the end of the day, the reality is, Scotia has been in the shitter for years and viewed as the crappy of the big six(performance backs that up). On the bright side, Scotia’s last 2 quarters finally showed some operational momentum. With margins expanding, credit stabilizing, and capital deployment steady, the path to stronger EPS in 2026 looks realistic. Loan growth is the last piece of the puzzle and maybe their global diversification will finally payoff.
Maybe its the “turnEDaround bank” when compared to materially higher PE banks. cough, cough $RY.TO PE of 16
Sincerely,
Keeping it Stupid Simple
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