Earnings beat signals growing lender confidence as mortgage loan growth and margin expansion drive performance
Scotiabank posted a sharp jump in second-quarter profit as a resurgent Canadian banking division, widening margins, and buoyant trading activity pushed net income well ahead of the same period a year earlier.
The Bank of Nova Scotia reported net income of C$2.63 billion for the three months ended April 30, 2026, compared with C$2.03 billion in the same quarter last year, with diluted earnings per share rising to C$2.00 from C$1.48.
On an adjusted basis, which strips out items including the impact of divested Latin American operations, the bank earned C$2.02 per share, surpassing analyst expectations of C$1.93 per share.
Revenue totalled C$9.84 billion for the quarter, up from C$9.08 billion in the same period last year.
Canadian banking leads the rebound
The clearest signal for the mortgage industry came from Scotiabank's domestic division, which delivered its strongest quarterly performance in several years.
Canadian Banking generated earnings of C$935 million, a 53% increase compared with the prior year, driven by double-digit pre-tax, pre-provision earnings growth and lower performing provisions for credit losses.
Loan balances rose 3% year-over-year, while the division delivered another quarter of positive operating leverage — a key metric that indicates revenue growth is outpacing expense growth.
Day-to-day and savings deposit growth also strengthened during the quarter.
This domestic momentum builds on the bank's stated ambition to reach a 14%+ return on equity by fiscal 2027, a timeline the bank revised earlier this year, indicating it expects to hit the target one year ahead of its original Investor Day commitment.
The bank's adjusted return on equity in the second quarter reached 13.2%.
Scott Thomson, president and CEO of Scotiabank, said the bank remained on track for its fiscal 2026 financial objectives, citing "strong revenue growth coupled with expanding margins and another quarter of positive operating leverage."
Margins, provisions, and the rate environment
A central driver of the result was a rise in net interest income — the spread between what the bank earns on loans and what it pays on deposits — a metric that closely tracks the borrowing costs relevant to variable-rate mortgage holders across Canada.
Net interest income reached C$5.52 billion in the quarter, up 4.8% from a year earlier, as Canada's rate-cut cycle reduced deposit costs while loan demand held broadly steady despite ongoing macroeconomic headwinds from geopolitical uncertainty and trade disruption.
Provisions for credit losses, or funds set aside to cover potential loan defaults, declined year-over-year. It fell to C$1.22 billion from C$1.40 billion in the same quarter last year.
The bank noted that prior-year provisions had been elevated to account for uncertainty tied to U.S. tariffs and deteriorating macroeconomic indicators.
Market volatility during the quarter also boosted activity in Scotiabank's trading division, as shifting rate expectations prompted investors to reposition portfolios. Global Banking and Markets profit rose 11% to C$457 million, driven by higher non-interest income.
The bank's Global Wealth Management division reported a 19% year-over-year increase in earnings to C$474 million, fuelled by growth in mutual fund fees, brokerage revenues, and net interest income.
Assets under management grew 18% year-over-year to C$450 billion, according to the bank's Q2 2026 Report to Shareholders.
Scotiabank also reported a Common Equity Tier 1 (CET1) capital ratio — a key measure of financial resilience monitored by the Office of the Superintendent of Financial Institutions (OSFI) — of 13.3% as at April 30, 2026, well above the regulator's minimum thresholds.
The bank declared a quarterly dividend of C$1.14 per share, representing a 4% increase.
Scotiabank is the first of Canada's Big Six banks to report earnings for the fiscal second quarter, with Bank of Montreal and National Bank reporting on the same day.
Meanwhile, Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will follow on Thursday, May 28.
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