• Adjusted Earnings: $2.2 billion, or $1.76 per share.
• Noninterest Revenue Growth: 15% year-over-year.
• Provisions for Credit Losses: Approximately $1.2 billion, PCL ratio of 60 basis points.
• Capital Ratio Improvement: Improved by approximately 140 basis points since the end of 2022.
• Additional Allowances for Credit Losses: $1.6 billion built since the end of 2022, with $350 million added this quarter.
• Return on Equity (ROE): 11.8% for Q1.
• Global Wealth Management Earnings: $414 million.
• Assets Under Administration (AUA): Exceeded $730 billion.
• Global Banking and Markets Earnings: $517 million, up 33% year-over-year.
• Canadian Banking Earnings: $914 million, down 6% year-over-year.
• International Banking Earnings: $657 million, down 7% year-over-year.
• Common Equity Tier 1 (CET1) Ratio: 12.9%.
• Net Interest Income Growth: 8% year-over-year.
• Noninterest Income: $4.2 billion, up 15% year-over-year.
• Operating Leverage: Positive 2.8%.
• Productivity Ratio: 54.5%, improved 160 basis points sequentially.

• Warning! GuruFocus has detected 3 Warning Sign with BNS.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bank of Nova Scotia (NYSE:BNS) reported adjusted earnings of $2.2 billion, or $1.76 per share, with a 15% year-over-year growth in noninterest revenue.
• The bank improved its capital ratio by approximately 140 basis points since the end of 2022 and built $1.6 billion in additional allowances for credit losses.
• Global Wealth Management delivered $414 million in earnings, with assets under administration exceeding $730 billion.
• Global Banking and Markets had a strong start to the year, with earnings up 33% year over year, driven by capital markets businesses.
• The bank's productivity ratio improved to 51%, with a 4% revenue growth and disciplined 1% expense growth year over year.

Negative Points

• Provisions for credit losses remain elevated due to higher interest rates, inflation, and geopolitical uncertainty.
• Canadian Banking faced higher credit provisions due to portfolio migration and a cautious consumer outlook.
• The bank's CET1 capital ratio decreased by 20 basis points quarter over quarter.
• International Banking earnings were down 7% from last year, despite a 5% sequential increase.
• The potential impact of tariffs and geopolitical uncertainty poses risks to future economic growth and financial performance.

Q & A Highlights

Q: Can you provide an outlook on credit provisions, particularly in light of potential tariffs and interest rate changes? A: Phil Thomas, Chief Risk Officer, noted that while there is some softness in the Canadian retail portfolio, customers are benefiting from rate cuts, especially in variable rate mortgages. Provisions are expected to trend down in the latter half of the year, assuming no significant tariff impacts.

Q: With the stock at discounted valuations, why not initiate buybacks given current capital levels? A: CEO Scott Thomson stated that while pleased with capital discipline, the bank is cautious due to potential tariffs. They expect to resume modest dividend growth next quarter and are hopeful to start share repurchases by year-end.

Q: How should we interpret the strong performance in Global Banking and Markets this quarter? A: Travis Machen, CEO of Global Banking and Markets, explained that the strong performance was due to segments with great operating leverage. Revenues are expected to normalize, and the productivity ratio may adjust slightly higher.

Q: Regarding the Davivienda transaction, was taking back equity a strategic decision? A: CEO Scott Thomson clarified that the equity stake was not a strategic shift towards minority investments. The decision was made to avoid selling at a low point in the cycle and to benefit from synergies and long-term earnings accretion.

Q: How are potential tariffs affecting loan growth trends? A: It was noted that clients are cautious, leading to a pause in borrowing across retail, commercial, and corporate segments. However, mortgage demand is picking up due to rate cuts, though tariffs could impact this if implemented.

Q: What is the impact of potential tariffs on impaired loans? A: Phil Thomas indicated that tariffs would likely have a delayed impact on impaired loans, with significant effects expected in 2026 and beyond, assuming tariffs are imposed.

Q: How does the potential for tariffs influence your capital allocation strategy? A: CEO Scott Thomson stated that there is no immediate need to pivot from the North American corridor strategy. The focus remains on Canada, the US, and Mexico, with long-term strategic rationale supporting this approach.

Q: Given the uncertainty around tariffs, why not build more reserves now? A: Phil Thomas explained that reserves are built based on known information as of the quarter-end. The bank has incorporated potential tariffs into their scenarios but will adjust reserves as more information becomes available.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.