The Bank of Nova Scotia (NYSE:BNS) reported third-quarter adjusted net income of C$2.97 billion, adjusted diluted earnings of C$2.28 per share and adjusted return on equity of 14.2%, compared with 12.4% a year earlier. The company-defined non-GAAP figures exceeded management’s 14%+ medium-term ROE objective for the quarter.
The adjustment was modest. The Bank of Nova Scotia (NYSE:BNS) reported C$2.95 billion of IFRS net income, diluted EPS of C$2.27 and ROE of 14.1%. Both reported and adjusted ROE exceeded the bank’s 14%+ objective during Q3. Adjusted results excluded C$20 million after tax of acquisition-related intangible-asset amortization. The bank’s NYSE-listed shares closed at $93.10 on August 25, up 7.2% following the report.
Bull Case
The improvement at The Bank of Nova Scotia (NYSE:BNS) extended beyond Global Banking and Markets. Canadian Banking earnings increased 12% to C$1.07 billion, supported by record revenue, a fifth consecutive quarter of margin expansion and positive operating leverage. Global Wealth Management earnings increased 23%, reflecting higher mutual-fund fees, brokerage revenue and net interest income.
Using reported segment earnings attributable to equity holders, Canadian Banking and Global Wealth Management added a combined C$211 million from a year earlier, exceeding the C$174 million increase from Global Banking and Markets. That comparison supports the view that The Bank of Nova Scotia (NYSE:BNS) produced a bankwide improvement rather than relying exclusively on Global Banking and Markets.
Total net interest income at The Bank of Nova Scotia (NYSE:BNS) increased to C$5.87 billion from C$5.49 billion a year earlier and C$5.52 billion in the preceding quarter. International Banking earnings also increased 8% on a reported basis, although they declined 1% on the bank’s company-defined non-GAAP constant-dollar basis.
The 13.1% Common Equity Tier 1 ratio remained above regulatory minimums while The Bank of Nova Scotia (NYSE:BNS) repurchased 8.6 million shares during the quarter. Dividends and buybacks returned C$6.3 billion to shareholders during the first nine months of fiscal 2026.
Bear Case
Global Banking and Markets delivered the largest individual segment increase. Earnings at The Bank of Nova Scotia (NYSE:BNS) rose 37% to a record C$647 million, driven by strong capital-markets revenue and record underwriting and advisory fees. Those fees depend on issuance, transaction activity, and market conditions that may not repeat each quarter.
Credit trends were mixed. Provisions for credit losses at The Bank of Nova Scotia (NYSE:BNS) increased to C$1.08 billion from C$1.04 billion a year earlier, although they declined from C$1.22 billion sequentially. Impaired-loan provisions rose C$43 million year over year to C$1.02 billion because of higher provisions in corporate and Canadian retail portfolios. Gross impaired loans increased to C$7.80 billion from C$7.61 billion in the preceding quarter.
Capital also moved lower despite the earnings strength. The CET1 ratio declined 20 basis points sequentially as business growth, the recall of a synthetic risk-transfer securitization, and repurchases outweighed part of the capital generated after dividends. Continued buybacks therefore depend on capital generation after dividends and other capital movements outpacing risk-weighted-asset growth while preserving regulatory buffers.
Hedge Fund Sentiment
The filings available so far reflect positions held before BNS reported results. Insider Monkey’s database showed 24 hedge funds holding BNS at the end of 2Q2026, up from 19 funds three months earlier.
Conclusion
The Bank of Nova Scotia (NYSE:BNS) benefited from record Global Banking and Markets earnings, but Canadian Banking, Global Wealth Management, and higher net interest income show that the ROE improvement was broader. The near-identical reported and adjusted returns also indicate that the result was not primarily an adjustment story.
For The Bank of Nova Scotia (NYSE:BNS), repeating ROE above 14% without another quarter of record underwriting and advisory fees would provide stronger evidence that the medium-term objective is sustainable. The current results support the recovery thesis, but one quarter does not establish a durable return level.
READ NEXT: ConocoPhillips (COP): Wall Street Sees More Upside Despite Leadership Shakeup and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds
Disclosure: None. This article is originally published at Insider Monkey.
