Scotiabank Q3 Earnings Beat on Record Wealth and Markets Profit

A record quarter that beat forecasts

Bank of Nova Scotia's fiscal third quarter beat analyst expectations on both profit and revenue, and the beat came from more than one business. For the three months ended July 31, 2026, the bank reported net income of C$2.953 billion, up from C$2.527 billion a year earlier. Diluted earnings per share were C$2.27, compared with C$1.84.5 Adjusted net income was C$2.973 billion and adjusted diluted EPS was C$2.28, up from C$1.88.17

That adjusted figure was well above what the market expected. Coverage disagrees slightly on the consensus number. Some reports put the analyst forecast at C$2.08 per share14, while others cite LSEG and FactSet consensus figures of roughly C$2.10.1316 Measured either way, the beat was large: about 9.6% against the lower estimate and about 8.6% against the higher one.3 The bank has now beaten estimates in five of its last six quarters, according to one tally.3

Revenue also came in above forecasts. Total revenue was C$10.535 billion, up from C$9.486 billion a year earlier.5 Analysts had expected between C$9.93 billion and C$9.98 billion, depending on the survey.316 Chief executive Scott Thomson called it a record quarter in which every business line was strong and the bank exceeded its medium-term objectives.19

Why the revenue growth figures differ

Reports gave different growth rates for the same revenue, and the reason is worth explaining. Measured directly against last year, revenue grew about 11%.1316 Some summaries of the earnings call say 12%12, and management's own figure was 16%.4 The difference comes from adjustments. Chief financial officer Rajagopal Viswanathan said his comparisons strip out operations Scotiabank has divested.18 Taking out that shrinking footprint makes underlying growth look much faster.

Both figures are accurate. The 11% figure is what the income statement actually shows. The 16% figure is management's case that the businesses it is keeping are growing much faster than the total suggests. The financial statements back up part of that case. Reported non-interest income rose about 17%. Divested operations reduced it by 4 percentage points, so the remaining businesses grew it by about 21%.17

The mix of revenue matters too. Net interest income rose 6.8% to C$5.87 billion, while non-interest revenue rose 17% to C$4.67 billion.16 Lending margins helped. Net interest margin was 18 basis points higher than a year earlier, though flat from the previous quarter.18 But fees grew fastest: wealth management revenue, underwriting and advisory fees, and banking fees.17

Wealth management and capital markets lead

Global Wealth Management earned a record C$518 million, up 23% from a year earlier. The bank credited higher mutual fund fees, brokerage revenue and net interest income.14 Assets under management grew 16% to C$474 billion.19 Some reports give the division's profit as C$515 million instead. That is the amount attributable to equity holders, which is up 23% from C$417 million and 9% from the previous quarter.13

According to management, the growth came from more than rising markets. Wealth net sales were C$3 billion, a record for a third quarter, up 14% from a year earlier, and the eighth straight quarter of positive net flows.12 So far this year, customers referred from Canadian Banking to wealth management have brought in C$14 billion. Referrals from commercial banking were up 33% from a year earlier.18 Among bank-owned asset managers, Scotiabank says it now ranks third in long-term retail mutual fund sales. It was fifth a year earlier.12 The division's return on equity rose 290 basis points to 18.6%.

Global Banking and Markets grew faster still. Its earnings rose 37% to a record C$647 million, helped by strong capital markets revenue and record underwriting and advisory fees.11 Earnings were also 41% higher than the previous quarter.13 Before the results, a preview noted that management had guided the unit toward roughly C$475 million to C$500 million a quarter, since the year-earlier quarter had also been a record.6 Earning C$647 million when the bank had pointed to a range topping out at C$500 million was a big reason the quarter beat expectations. On the call, the unit's head said the record was broad, covering capital markets, investment banking, loans and deposits.18

The rest of the bank

Canadian Banking earned C$1.071 billion, up 12% from a year earlier and 14% from the previous quarter.13 It recorded a fifth straight quarter of margin expansion, and its return on equity improved to 19.4%.19 International Banking earned C$766 million on a reported basis, up 8%.17 Excluding currency effects and divested operations, management put the figure at C$725 million, up 6%.7 That segment has now earned more than C$700 million for three quarters in a row.12

Credit costs did not get in the way this quarter. Provisions for credit losses were C$1.08 billion, down from C$1.22 billion in the previous quarter and below the roughly C$1.12 billion analysts expected. They were still higher than C$1.04 billion a year earlier.16 Management said provisions on impaired loans fell partly because of lower charges tied to a single corporate account in International Banking and partly because Canadian retail loans performed better.7

The return-on-equity milestone

The number that matters most for the bank's strategy may be return on equity. Adjusted return on equity reached 14.2%, up from 12.4% a year earlier.17 That passed the 14% target Scotiabank had set itself, sooner than management had projected.12 Thomson said the bank does not consider 14% a ceiling, while cautioning that results will vary from quarter to quarter.12 He also said strong markets helped, alongside the bank's strategic repositioning and better capital allocation.18

Capital stayed strong. The common equity tier 1 ratio ended the quarter at 13.1%, and the bank bought back 8.6 million shares.19 Including dividends, Scotiabank returned C$2.4 billion to shareholders in the quarter.

What to watch

The weak spot is costs. Expenses rose 14% from a year earlier. Management attributed the increase mainly to performance-based and share-based pay and to technology spending, which grew 16% to C$1.5 billion.7 The bank still achieved positive operating leverage, meaning revenue grew faster than expenses, for the tenth straight quarter.12 But much of the cost growth rises and falls with how well capital markets and wealth management are doing.

That points to the real risk. Capital markets fees and market-driven wealth revenue drove the beat, and both can fall back if deal activity slows or markets lose ground. The shares fell after the release despite the results11, which suggests investors questioned how repeatable the trading and advisory gains are. The 12 brokerages tracked in one survey have a consensus Moderate Buy rating and an average 12-month price target of C$129.50. Their individual targets range from C$120 to C$152.8

The broader point is that Scotiabank no longer looks like a turnaround story dependent on lending spreads. The record wealth flows, the referrals between divisions and the steady margin gains in Canada look like lasting improvements. The capital markets result probably does not. The next test comes when the bank reports fourth-quarter results on December 2, 2026. Analysts expect EPS of about C$2.1910, below this quarter's C$2.28. In effect, they are betting part of the quarter's strength will fade. If Scotiabank holds return on equity above 14% after the capital markets boost eases, Thomson's claim that 14% is not a ceiling will carry more weight.