(Adds share price move in second paragraph and includes updates on the performance of different banking units from paragraph eleven)
The Bank of Nova Scotia (BNS.TO, BNS) has turned negative in New York premarket trading Wednesday although it kicked off the second-quarter earnings season for Canada's big banks by posting an earnings beat, supported by growth across all of its business lines, with credit losses edging lower and management saying the bank "remains on track to achieve its financial objectives for fiscal 2026", prompting it to increase the dividend.
Shares in BNS were last seen down near 0.7% in US premarket trade, having been slightly higher immediately after the release of its result. But the stock did strike 52 week highs on the NYSE yesterday.
On a reported basis, the bank posted net income of $2,632 million in Q2, up 29.5% on an annual basis from $2,032 million a year earlier. Diluted earnings per share were $2.00, compared with $1.48 in the prior-year period.
On an adjusted basis, net income rose 28% year over year to $2,652 million, from $2,072 million a year ago. Adjusted diluted earnings per share climbed to $2.02, from $1.52 last year, surpassing $1.93 estimates compiled by FactSet.
Revenue for the three months ended April 30 increased 8.1% to $9,837 million, from $9,098 million, exceeding the C$9,696.5 million consensus estimate from FactSet.
Adjusted return on equity was 13.2% compared to 10.4% a year ago. The bank reported a Common Equity Tier 1 (CET1) capital ratio of 13.3%.
Among other highlights, the provision for credit losses was $1,217 million compared to $1,398 million, a decrease of $181 million. The provision for credit losses ratio decreased by nine basis point to 66 basis points. The provision for credit losses on performing loans was $88 million compared to $346 million, a decrease of $258 million.
The bank said, the "provision this quarter was due primarily to the impact of the unfavourable macroeconomic outlook impacting the Canadian Banking portfolios, as well as credit migration in the International commercial portfolio".
The bank also declared a dividend of $1.14 per share, an increase of $0.04 per share on the outstanding common shares This dividend is payable on July 29, 2026, to shareholders of record at the close of business on July 7, 2026.
"The Bank delivered another strong quarter as we continue to execute on our strategy, with strong revenue growth coupled with expanding margins and another quarter of positive operating leverage," said Scott Thomson, CEO of Scotiabank.
"The Bank remains on track to achieve its financial objectives for fiscal 2026 and its 14%+ ROE objective in fiscal 2027. Our focus on evolving our business mix drove strong fee income and wealth management revenues, along with sequential Canadian commercial and small business loan growth," he added.
Among units, Canadian Banking delivered earnings of $935 million, up 53% year-over-year, primarily driven by higher revenues and lower provision for credit losses on performing loans, partly offset by higher non-interest expenses. "The business grew day-to-day and savings deposits and delivered another quarter of solid positive operating leverage, in line with its strategic objectives," Scotiabank said.
International Banking generated earnings of $701 million, up 4% year-over-year on the back of lower non-interest expenses, lower income taxes and the positive impact of foreign currency translation, the bank said, adding it was "was partly offset by lower net interest income, lower non-interest income and higher provision for credit losses".
Global Wealth Management segment delivered adjusted earnings of $474 million, up 19% year-over-year driven by higher mutual fund fees, brokerage revenues and net interest income across the Canadian wealth business. This was partly offset by higher volume-related non-interest expenses, the lender noted.
Shares closed up C$0.02 up at C$111.00 in Toronto on Tuesday.