1. Executive Summary & Investment Thesis

This report provides a comprehensive analysis of The Bank of Nova Scotia (Scotiabank), one of Canada’s six largest banks. The central investment thesis revolves around a significant strategic pivot initiated by new leadership. For years, Scotiabank’s valuation has lagged its peers, a discount largely attributable to the lower profitability and higher risk profile of its extensive international operations, particularly in Latin America. The bank is now embarking on a deliberate capital reallocation strategy, prioritizing growth in the stable, high-return markets of the North American corridor (Canada, the U.S., and Mexico).

The success of this new strategy presents the primary catalyst for a potential re-rating of the stock. Early strategic actions, most notably the significant minority investment in U.S. regional bank KeyCorp, signal a credible commitment to this pivot. If management can successfully improve the return on capital deployed in its international segment or, more likely, redeploy that capital more profitably in North America, the bank could begin to close the persistent profitability and valuation gap with its peers.

This potential for capital appreciation is complemented by a compelling and sustainable dividend. Scotiabank’s attractive dividend yield offers investors a substantial income stream and a significant component of total shareholder return, providing a degree of downside protection while the long-term strategic realignment unfolds. However, the investment case is not without risk. Execution of this large-scale strategic shift carries inherent uncertainty, and the bank remains exposed to macroeconomic volatility in its Latin American markets and a highly leveraged Canadian consumer. The key for investors is to weigh the potential for a successful strategic turnaround against these considerable execution and market risks.

2. Company Overview & Business Model

2.1. Brief History and Current Positioning

The Bank of Nova Scotia was founded in 1832 in Halifax, Nova Scotia, with the primary purpose of facilitating the region’s trans-Atlantic trade.¹ After establishing a strong base in the Maritimes, the bank expanded nationally and internationally, relocating its headquarters to Toronto in 1900 to be at the center of Canadian finance.¹

Its international identity was forged early, with the opening of a branch in Kingston, Jamaica, in 1889, marking the first such move by a Canadian bank outside of the U.S. or the U.K..¹ This early expansion into the Caribbean and later into Latin America earned Scotiabank the moniker “Canada’s most international bank”.¹ The bank’s growth has been fueled by both organic expansion and strategic acquisitions, including McLeod Young Weir in 1988 to build its capital markets division (ScotiaMcLeod), and Grupo Financiero Inverlat in Mexico in the early 2000s, which established a strong presence in a key growth market.¹ The acquisition of ING Direct Canada, now operating as Tangerine, provided the bank with a leading digital-first platform.⁵

Today, Scotiabank is one of Canada’s “Big Six” banks, a globally significant financial institution with approximately C$1.4 trillion in assets and over 25 million clients worldwide.⁶ It is currently undergoing a significant strategic repositioning to prioritize growth and capital deployment within the integrated North American corridor of Canada, the United States, and Mexico.⁷

2.2. Primary Business Segments and Revenue Streams

Scotiabank’s operations are organized into four main business segments, which form the core of its revenue and earnings generation.⁶

• Canadian Banking: This is the bank’s largest and most profitable segment, serving as its foundational anchor. It provides a comprehensive suite of financial advice and banking solutions to retail, small business, and commercial banking clients across Canada. For fiscal year 2024, the segment delivered adjusted earnings of $4.28 billion, a 7% increase year-over-year, driven by robust growth in net interest income from both volume growth and margin expansion.¹⁰
• International Banking: This segment has historically been Scotiabank’s key differentiator among its Canadian peers. It focuses on providing financial products and services in the high-growth markets of the Pacific Alliance—Mexico, Peru, Chile, and Colombia—as well as the Caribbean.¹² While offering significant long-term growth potential, this segment also carries higher risk and has generated lower returns than its domestic counterpart. In fiscal 2024, International Banking generated adjusted earnings of $2.86 billion, an 11% increase from the prior year.¹⁰
• Global Wealth Management: This is a capital-light, fee-oriented business that provides wealth management solutions to clients in Canada and across 13 international markets.¹⁴ It is a key growth engine for the bank. In fiscal 2024, the segment produced adjusted earnings of $1.61 billion, up 10% year-over-year, with assets under management (AUM) reaching $373 billion.¹⁰
• Global Banking and Markets (GBM): This segment is the bank’s wholesale and capital markets arm. It serves corporate, government, and institutional clients globally, offering services such as corporate lending, investment banking, and sales and trading. The business was formally integrated from legacy operations like ScotiaMcLeod in the late 1990s and rebranded in 2012.⁴ For fiscal 2024, GBM reported earnings of $1.69 billion.¹⁰

2.3. Geographic Footprint and Operational Structure

Scotiabank’s geographic footprint is unique among its Canadian peers, positioning it as the only bank with a scaled presence across the Canada-U.S.-Mexico corridor.⁷ Its international operations are most concentrated in Latin America, where it has a 150-year history and deep local expertise in key markets including Mexico, Chile, Peru, Colombia, and Brazil.³ It also maintains a significant network of over 200 branches throughout the Caribbean.³

The bank’s operational structure is led by a President and Chief Executive Officer who oversees an Executive Management team. This team includes heads of the major business lines and key functions, as well as dedicated Country Heads for its most important international operations in Chile, Mexico, and Peru, reflecting the significance of these markets.¹⁷ Governance is overseen by a Board of Directors, which operates through several key committees, including Audit and Conduct Review, Corporate Governance, Risk, and Human Capital and Compensation.¹⁷

2.4. Key Subsidiaries and Business Units

Several key subsidiaries are integral to Scotiabank’s diversified business model:

• Tangerine Bank: A wholly-owned, digital-first bank in Canada. Acquired as ING Direct Canada, Tangerine operates with a lower cost structure and serves as a key platform for attracting digitally savvy customers and innovating in the online banking space.⁵
• Scotia Capital Inc.: This is the primary Canadian legal entity for the Global Banking & Markets division, providing investment dealer services and regulated by the Canadian Investment Regulatory Organization (CIRO).⁵
• 1832 Asset Management L.P.: The bank’s main asset management subsidiary, responsible for managing ScotiaFunds and other investment products.⁵
• RoyNat Inc.: A subsidiary specializing in providing alternative financing solutions, such as subordinated debt and mezzanine financing, to mid-market Canadian companies.⁵
• International Subsidiaries: The bank operates through a network of local subsidiaries in its key markets, including Scotiabank Inverlat in Mexico, Scotiabank Chile, and Banco Colpatria in Colombia.¹
• KeyCorp Investment: In a major strategic move, Scotiabank recently acquired a 14.9% equity interest in KeyCorp, a large U.S.-based regional bank, marking a significant expansion of its presence and capital deployment in the American market.²⁰

3. Industry Dynamics & Market Environment

3.1. Current State of the Canadian Banking Industry

The Canadian banking industry is best described as a stable and highly concentrated oligopoly. The “Big Six” banks—RBC, TD, Scotiabank, BMO, CIBC, and National Bank—dominate the landscape, collectively holding about 93% of the country’s banking assets.²¹ This structure contributes to the system’s renowned resilience; Canadian banks successfully navigated the 2008 global financial crisis and the COVID-19 pandemic without requiring government bailouts, a testament to prudent risk management and strong regulatory oversight.²² However, this concentration has drawn criticism for potentially limiting competition, which could lead to higher consumer fees and a slower pace of innovation compared to more fragmented markets.²¹

3.2. Regulatory Environment and Recent Changes

The primary prudential regulator for federally chartered banks in Canada is the Office of the Superintendent of Financial Institutions (OSFI).²⁶ OSFI’s mandate is to protect depositors and maintain public confidence by ensuring the financial soundness of institutions. It achieves this by setting and enforcing rules on capital adequacy, such as the Domestic Stability Buffer for Domestic Systemically Important Banks (D-SIBs) like Scotiabank, and by implementing macroprudential policies like the mortgage stress test.²⁶

The regulatory landscape is continuously evolving, with several recent developments directly impacting Scotiabank:

• Guideline B-15 (Climate Risk Management): Effective for D-SIBs at fiscal year-end 2024, this guideline mandates enhanced governance, risk management, and public disclosure of climate-related financial risks, increasing compliance and reporting burdens.²⁷
• Integrity and Security Guideline: OSFI’s mandate has been expanded to ensure institutions have adequate policies to protect against threats to their integrity and security, including foreign interference, requiring banks to bolster internal controls and cybersecurity.²⁷
• Consumer-Driven Banking Framework (Open Banking): The forthcoming Consumer-Driven Banking Act will establish a framework for open banking in Canada. This will require banks to build infrastructure to allow clients to securely share their financial data with accredited third-party fintechs, a change that will spur competition and necessitate significant technological investment.²⁷
• Operational Resilience: OSFI has implemented a new framework requiring banks to enhance their ability to prevent, respond to, and recover from severe operational disruptions, mandating more rigorous scenario testing and governance.²⁷

This tightening regulatory environment increases compliance costs and constrains certain risk-taking activities. Simultaneously, the industry must accelerate costly technology investments to fend off fintech competition. This creates a challenging dynamic where banks must spend more on both compliance and technology, putting pressure on efficiency ratios. The institutions that can most effectively leverage technology to also drive compliance efficiency will gain a significant competitive advantage.

3.3. Interest Rate Environment Impact on Banking Operations

The Bank of Canada manages monetary policy primarily by adjusting its target for the overnight rate, with the goal of controlling inflation around a 2% target.³⁰ Changes in this policy rate have a direct and significant impact on commercial banks. The policy rate influences banks’ prime lending rates, which affects the interest charged on variable-rate products like mortgages and lines of credit.³³ It also influences bond yields, which are a key determinant in the pricing of fixed-rate loans.³⁰

For banks like Scotiabank, a rising interest rate environment is typically positive for Net Interest Margins (NIMs), as the interest earned on assets tends to reprice upwards more quickly than the interest paid on deposits. However, this benefit can be muted by factors such as an inverted yield curve or intense competition for deposits.³⁴ Conversely, a rapid and significant increase in rates can pose a major risk by increasing the debt service burden on households and businesses, potentially leading to higher loan delinquencies and increased provisions for credit losses.³¹

3.4. Competitive Landscape among Canada’s Big Six Banks

Competition within the Big Six oligopoly is intense across all business lines. The banks are tiered by size and market capitalization, with RBC and TD forming the top tier, followed by Scotiabank, BMO, and CIBC.²² National Bank of Canada is the smallest of the group and is primarily focused on its home province of Quebec.³⁶ While they offer similar product suites, each bank has distinct strategic focuses and areas of strength, from TD’s large U.S. retail presence to Scotiabank’s unique Latin American footprint.³⁵

3.5. International Banking Market Conditions, particularly in Latin America

The Latin American banking market represents a key growth vector for Scotiabank. The region is projected to experience robust growth, with a forecasted Compound Annual Growth Rate (CAGR) of 7% through 2033.⁴⁰ This growth is propelled by powerful secular trends, including the rapid adoption of fintech, increasing smartphone and internet penetration that brings financial services to a large and historically underserved population, and a young, tech-savvy demographic eager for digital banking solutions.⁴⁰ Brazil and Mexico are the largest and most dynamic markets in the region.⁴⁰

However, this high-growth potential is accompanied by significant risks. The region is prone to economic volatility, political instability, and complex, often shifting regulatory environments.⁴⁰ While some countries have made strides in regulatory reform, navigating bureaucracy can be challenging.⁴¹ This creates a high-risk, high-reward operating environment that demands deep local expertise and prudent risk management.

3.6. Key Industry Trends Affecting Traditional Banking

• Digital Transformation: The most profound trend is the customer-led shift away from physical branches toward digital platforms. In Canada, 77% of consumers now conduct most of their banking through online and mobile channels.⁴² This has forced all banks, including Scotiabank, to make massive, ongoing investments in technology to enhance the customer experience, streamline operations, and offer digital-first services like remote onboarding and AI-powered financial advice.⁴⁴
• Fintech Disruption: The rise of financial technology (fintech) companies and digital-only neobanks is challenging the dominance of traditional incumbents.⁴⁵ These agile competitors often target specific, profitable niches (e.g., payments, foreign exchange, personal lending) and compete aggressively on price and user experience, unburdened by the legacy costs of branch networks and older IT systems.²⁵ This has forced the Big Six to innovate, acquire, or partner with fintechs to remain competitive.

4. Competitive Position Analysis

4.1. Market Share Analysis

Scotiabank holds a solid, but not leading, market share position within the Canadian banking oligopoly.

• Retail & Commercial Banking: In the overall Canadian banking market, Scotiabank’s market share is approximately 13.4%. This places it in the second tier of the Big Six, trailing the market leaders RBC (21.9%) and TD (22.5%) but on par with BMO (13.4%).³⁷ An earlier analysis of the commercial banking segment specifically pegged its share at 13.5%.⁴⁷
• Wealth Management: Scotiabank is a major competitor in the Canadian wealth management space. As of Q3 2024, it ranked fifth among the Big Six with an 11.6% share of Assets Under Management (AUM), equivalent to $364 billion.⁴⁸ The bank has built leading positions in specific niches, holding a top-three market share among bank-owned peers in Canadian Retail Mutual Funds and operating the largest Private Investment Counsel business in the country.⁴⁹
• Capital Markets: While RBC Capital Markets is the undisputed leader in Canadian investment banking ⁵⁰, Scotiabank’s Global Banking and Markets division is a formidable competitor. It is consistently ranked as a “Highly Recommended” firm for M&A advisory in Canada.⁵¹ Some analyses suggest that, relative to their overall size, BMO and National Bank can be more leveraged to capital markets revenue, but Scotiabank remains a core player in the top tier of the industry.⁵²

4.2. Competitive Advantages and Differentiators

Scotiabank possesses several key attributes that differentiate it from its domestic peers. The most significant of these has been its international footprint, which provides exposure to higher-growth economies. However, this has historically come at the cost of lower overall profitability. The bank’s return on equity (ROE) in its international segment (12.8%) is substantially lower than that of its Canadian banking division (29.7%), creating a drag on consolidated returns.¹² This performance gap has contributed to the bank’s persistent valuation discount relative to peers that are more focused on the North American market. Consequently, the bank’s new strategic direction under CEO Scott Thomson aims to address this very issue by reallocating capital to higher-return geographies and improving the profitability of the international business.⁵³ The success of this strategic pivot is the central factor in the investment case for Scotiabank.

Other key competitive advantages include:

• Tangerine Digital Bank: The ownership of Tangerine gives Scotiabank a powerful, separate brand to compete in the digital-only banking space. Tangerine consistently ranks highest in customer satisfaction among mid-sized banks and serves as an important platform for innovation and customer acquisition.¹⁸
• Scene+ Loyalty Program: The strategic partnership with Empire Company (owner of Sobeys, Safeway, and other grocery banners) has dramatically expanded the reach of the Scene+ loyalty program. With over 4 million new members since the partnership began, Scene+ has become a valuable ecosystem for attracting new primary banking clients and deepening existing relationships.¹⁸
• Unique North American Corridor Strategy: Scotiabank is the only Canadian bank with a significant, scaled presence in Canada, the United States, and Mexico. This unique footprint positions it to capitalize on the growing economic integration and nearshoring trends within the North American trade bloc.⁸

4.3. Brand Strength and Customer Loyalty

Scotiabank maintains a strong brand presence in Canada. The 2025 Brand Finance Canada 100 report ranked Scotiabank as the sixth most valuable brand in the country, with a brand value of C$14.3 billion. This places it behind peers TD and RBC but ahead of BMO and CIBC.⁵⁵ The bank’s reputation for providing quality advice is also strong; it ranked third in the J.D. Power 2025 Canada Retail Banking Advice Satisfaction Study, ahead of several peers.⁵⁷ Furthermore, its comprehensive product suite has earned it accolades from MoneySense as the “best all-in-one bank” in Canada, with specific recognition for its offerings for students and seniors.⁴⁵

4.4. Digital Banking Capabilities and Technology Investments

Scotiabank has invested significantly in its digital capabilities for both retail and commercial clients. For consumers, the Scotia online and mobile banking platforms offer a full range of services, including bill payments, international money transfers, and investment management.⁵⁸ For business clients, the ScotiaConnect® platform provides sophisticated cash management tools, host-to-host integration with corporate ERP systems, and API-based solutions (Scotia TranXact™) for embedded finance.⁵⁹ The bank’s digital transformation strategy is focused on leveraging cloud technology, artificial intelligence, and partnerships with leading tech firms like Google Cloud and NVIDIA to enhance efficiency and customer experience.¹⁸ Despite these investments, external rankings suggest there is room for improvement. A 2025 Surviscor review of online banking firms placed Scotiabank in a tie for sixth place, behind leaders TD, CIBC, and RBC, indicating that its digital user experience may not yet be considered best-in-class.⁶²

4.5. International Presence Compared to Canadian Peers

Scotiabank’s international presence is its most defining characteristic and stands in stark contrast to its Canadian peers.³ While other Big Six banks have international operations, they are largely concentrated in the United States. TD and BMO both have substantial U.S. retail banking franchises, and RBC has a significant U.S. presence through its wealth management business and City National Bank.³⁹ However, none of these peers have the same depth or breadth of exposure to Latin America and the Caribbean as Scotiabank.³⁹ This makes Scotiabank a unique vehicle for investors seeking exposure to the high-growth banking markets of the Pacific Alliance, a region where its peers have a minimal presence.¹²

5. Financial Performance & Growth History

An examination of Scotiabank’s financial performance over the past decade reveals a story of steady but unspectacular growth, with profitability metrics that have consistently lagged its top-tier Canadian peers. This historical context is crucial for understanding the rationale behind the current strategic pivot.

5.1. Revenue Growth Trends

For the fiscal year ended October 31, 2024, Scotiabank reported total revenue of $33.67 billion, a 5% increase over the prior year.⁶³ This growth was broad-based, with Canadian Banking benefiting from strong net interest income growth, International Banking seeing solid revenue from margin expansion, and Global Wealth Management delivering robust results from both fee income and higher net interest income.¹⁰ The Global Banking and Markets segment was the exception, where lower net interest income weighed on results.¹⁰ Over a five-year period from fiscal 2018 to 2023, the Global Wealth Management segment has been a consistent performer, delivering a 6% compound annual growth rate (CAGR) in revenue.⁴⁹

5.2. Net Interest Margin (NIM) Trends and Drivers

The bank’s Net Interest Margin (NIM), a key measure of lending profitability, was 2.16% for fiscal 2024, representing a modest expansion of 4 basis points from the previous year.⁶³ NIM has shown positive momentum into 2025, reaching 2.36% in the third quarter, up 22 basis points year-over-year, as the bank benefited from higher interest rates.⁶⁴ A key strategic challenge for the bank has been its historically high loan-to-deposit ratio, which has made its margins more reliant on rate-sensitive and volatile wholesale funding sources. A core objective of the new strategy is to address this by growing its base of stable, low-cost deposits from primary clients.⁵³

5.3. Credit Loss Provisions and Asset Quality

In line with the broader industry trend, Scotiabank’s provisions for credit losses (PCLs) have been normalizing from the artificially low levels seen during the pandemic. The PCL ratio for fiscal 2024 was 53 basis points, up 9 basis points from the prior year, reflecting the more challenging macroeconomic environment.⁶³ Credit trends appear to be stabilizing in 2025; the PCL ratio in Q3 2025 was 55 basis points, and the absolute dollar amount of provisions, at $1.04 billion, declined significantly from the $1.4 billion set aside in the previous quarter.⁶⁴

5.4. Return on Equity (ROE) and Return on Assets (ROA)

Profitability, as measured by Return on Equity (ROE), has been a persistent area of underperformance for Scotiabank relative to its peers. The bank’s adjusted ROE for fiscal 2024 was 11.3%, down slightly from 11.6% in 2023.¹⁰ Performance has improved in 2025, with adjusted ROE reaching 12.4% in the third quarter.⁶⁴ Despite this improvement, Scotiabank’s ROE remains below that of its top competitors. For comparison, normalized ROE figures show Scotiabank at 11.04%, while RBC and CIBC stand at 15.69% and 14.80%, respectively.⁶⁷ This profitability gap is a primary driver of the bank’s valuation discount. Similarly, its Return on Assets (ROA) of 0.57% also trails peers.⁶⁷

5.5. Efficiency Ratio Trends and Cost Management

Cost management has been a key focus for the new leadership team. The adjusted productivity (efficiency) ratio for fiscal 2024 was 56.1%, a notable improvement from the prior year.⁶³ The bank has continued this positive momentum into 2025, with the ratio improving further to 53.7% in the third quarter.⁶⁴ Management has set an ambitious medium-term target of lowering the efficiency ratio to approximately 50%, signaling a strong commitment to disciplined expense control.⁵³ Historically, the bank’s cost structure, particularly within the sprawling international segment, has been considered less efficient than its peers.¹²

5.6. Book Value Growth and Tangible Book Value Progression

The growth in book value per share represents the accretion of value to shareholders over time. A consistent increase in this metric is a hallmark of a well-managed financial institution that is retaining earnings and growing its capital base. The progression of Scotiabank’s book value and tangible book value per share will be detailed in the 10-year financial summary table below, constructed from the bank’s historical financial disclosures.

Table 1: Scotiabank 10-Year Financial Summary

Fiscal Year	Total Revenue (C$ MM)	Net Income (C$ MM)	Diluted EPS (C$)	Dividends Per Share (C$)	Net Interest Margin (%)	PCL Ratio (bps)	Efficiency Ratio (Adj., %)	Return on Equity (Adj., %)	Book Value Per Share (C$)	CET1 Ratio (%)
2015	24,007	7,220	5.67	2.84	2.27	37	56.4	14.6	41.33	10.3
2016	26,333	7,368	5.77	2.96	2.29	43	54.3	13.8	44.49	11.0
2017	27,153	8,244	6.49	3.12	2.37	36	53.0	14.3	48.01	11.5
2018	28,758	8,724	6.80	3.37	2.43	33	52.9	14.0	50.84	11.1
2019	31,568	8,798	6.83	3.52	2.41	38	53.2	13.0	54.06	11.1
2020	31,299	6,854	5.36	3.60	2.23	87	53.9	10.1	55.67	12.1
2021	31,250	9,959	7.70	3.60	2.10	11	52.4	15.0	58.62	12.3
2022	31,980	10,174	7.99	4.06	2.12	24	54.4	14.6	60.38	11.5
2023	32,100	7,450	5.72	4.24	2.12	44	57.3	11.6	61.25	13.0
2024	33,670	7,892	5.87	4.28	2.16	53	56.1	11.3	62.50	13.1
Note: Data compiled and synthesized from annual and quarterly reports.10 Ratios are on an adjusted basis where specified and available to reflect underlying performance. Book Value Per Share is estimated based on available data. Some historical figures may be restated by the company in subsequent reports.

Table 2: Financial Performance by Business Segment (FY2021-2024, Adjusted Net Income in C$ MM)

Segment	FY2021	FY2022	FY2023	FY2024
Canadian Banking	$3,850	$4,586	$3,997	$4,277
International Banking	$1,731	$2,583	$2,580	$2,862
Global Wealth Management	$1,556	$1,614	$1,465	$1,612
Global Banking & Markets	$2,279	$2,106	$1,789	$1,688
Note: Data compiled from company financial reports.10 Figures represent Adjusted Net Income Attributable to Equity Holders.

6. Growth Opportunities & Strategic Initiatives

6.1. The New Strategic Focus: The North American Corridor

Since taking the helm in February 2023, President and CEO Scott Thomson has initiated a fundamental strategic shift for Scotiabank.⁵³ The new plan pivots away from the bank’s historical identity of broad international expansion and focuses capital deployment on a more concentrated geographic footprint. The bank intends to direct approximately 90% of its incremental capital to the high-return, lower-risk markets of Canada, the United States, and Mexico.⁵⁴ This “North American Corridor” strategy is designed to leverage the bank’s unique scaled presence across the USMCA trade bloc and capitalize on long-term trends like nearshoring of supply chains.⁵⁴ The explicit goal is to improve profitability and address the capital deployment performance that has lagged peers.⁵³

6.2. U.S. Expansion and the KeyCorp Investment

The cornerstone of the new U.S. strategy was unveiled in August 2024 with the announcement of a strategic investment in KeyCorp.²⁰ Scotiabank agreed to acquire a 14.9% stake in the Cleveland-based regional bank, which has approximately US

187billioninassets,foratotalcashconsiderationofUS2.8 billion.²⁰ This move is a strategically prudent method of deploying capital into the priority U.S. market. Rather than undertaking a large, complex, and risky full acquisition, this minority stake provides immediate exposure and earnings accretion while creating what management calls “future optionality” for a deeper partnership or eventual takeover.²⁰ This approach allows Scotiabank to build its presence and understanding of the U.S. market with significantly less integration risk and capital outlay than a traditional acquisition.

6.3. Domestic Market Initiatives

In conjunction with its international refocus, Scotiabank is “doubling down” on its core Canadian Banking business, with the goal of having this segment drive approximately 50% of the entire bank’s earnings growth.¹⁸ The strategy is centered on acquiring and deepening relationships with “primary clients”—customers who hold an active chequing account plus at least one other payment or investment product. These clients are identified as being twice as profitable and five times more loyal than other customers.¹⁸

Key initiatives to drive this domestic growth include:

• Harnessing the Potential of Scene+: The scaled-up loyalty program, in partnership with Empire, is a critical tool for customer acquisition and cross-selling financial products to a large and engaged member base.¹⁸
• Unlocking the Full Value of Tangerine: The bank aims to better leverage its digital-first subsidiary to grow its customer base and expand its offering of non-deposit revenue streams.¹⁸
• Leveraging Product Bundles: Offerings like the “Mortgage+ bundle” are designed to ensure that new mortgage clients are onboarded with additional Scotiabank products, increasing customer stickiness from the outset.¹⁸

6.4. Digital Transformation Initiatives

Digital transformation is a critical enabler of the bank’s overall strategy, aimed at both improving customer experience and driving operational efficiency. Scotiabank is making significant investments in end-to-end digitization of processes, enhancing its data and analytics capabilities, and forming strategic partnerships with technology leaders like Google Cloud and NVIDIA.¹⁸ The objective is to increase the volume of digital sales, achieve higher rates of straight-through processing to lower costs, and deliver a seamless and integrated client experience across all channels, from mobile apps to physical branches.¹⁸

6.5. Wealth Management and Capital Markets Growth Potential

• Global Wealth Management: This segment is a key growth area due to its low capital intensity and strong fee-based earnings. The bank is focused on accelerating growth by evolving its “Total Wealth” advice model in Canada and expanding its footprint in targeted international markets. The international wealth business, in particular, is a priority, having demonstrated strong momentum with 19% earnings growth in fiscal 2023.¹⁴
• Global Banking and Markets: The GBM strategy is increasingly aligned with the North American focus. The division aims to leverage its expertise in key sectors like technology, digital infrastructure, and sustainable finance to serve clients across the corridor.⁷⁰ Growing the U.S. GBM business and capitalizing on cross-border trade and investment flows is a central objective.⁶⁴

7. Capital Allocation & Shareholder Returns

7.1. Capital Allocation Priorities and Strategy

The bank’s capital allocation strategy has been clearly redefined under new leadership. The primary objective is to shift incremental capital deployment towards the North American corridor, focusing on businesses and geographies that can generate higher and more stable returns.⁵⁴ The investment in KeyCorp is the first tangible result of this disciplined approach.²⁰ This represents a meaningful shift from the previous strategy of broader international expansion and is aimed at improving the bank’s overall return profile and closing the valuation gap with peers.⁵³

7.2. Dividend History, Yield, and Sustainability

Scotiabank has one of the longest and most consistent dividend payment histories in Canada, having made distributions to shareholders every year since 1833.²² This track record underscores its commitment to shareholder returns. The dividend is a core component of the stock’s investment appeal, with a 20-year compound annual growth rate of 8.4%.¹³ As of August 2025, the forward dividend yield is an attractive 5.59%.⁶⁷ The bank’s dividend payout ratio has historically been managed within a sustainable range, typically targeted between 40% and 50% of earnings by Canadian banks, ensuring the dividend is well-covered by profits.

7.3. Share Buyback Programs and Their Effectiveness

In addition to dividends, Scotiabank returns capital to shareholders through share repurchase programs. The bank has an active Normal Course Issuer Bid (NCIB) and had repurchased 3.2 million shares under its current 20 million share authorization as of the third quarter of 2025.⁶⁴ Share buybacks are an effective tool for enhancing earnings per share and signaling management’s confidence in the stock’s value. The pace of buybacks is balanced against the capital needs for organic growth and strategic investments like the KeyCorp transaction.

7.4. Capital Ratios and Regulatory Requirements

Scotiabank maintains a robust capital position. As of Q3 2025, its Common Equity Tier 1 (CET1) ratio stood at 13.3%.⁶⁴ This level is comfortably above the 11.5% minimum required by OSFI for Canada’s Domestic Systemically Important Banks (D-SIBs).⁶⁵ This strong capital buffer provides significant financial flexibility, allowing the bank to absorb potential losses in a stressed economic scenario while continuing to invest in its strategic priorities and return capital to shareholders.¹³

7.5. Balance Sheet Management and Leverage Metrics

As of the second quarter of 2025, Scotiabank’s total assets were C$1.42 trillion.⁷ A key focus of balance sheet management under the new strategy is to improve the bank’s funding mix. The CEO has publicly acknowledged that the bank’s historically high loan-to-deposit ratio has led to a greater reliance on more expensive and volatile wholesale funding.⁵³ The strategic emphasis on acquiring and deepening relationships with primary clients is aimed directly at growing a more stable, lower-cost base of core deposits, which should improve net interest margin stability over the long term.

8. Recent Developments & Challenges (Past 24 Months)

The past 24 months have been a period of significant transition and challenge for Scotiabank and the broader banking industry.

• Major Corporate Developments: The most significant corporate development has been the strategic pivot announced by the new leadership team. This culminated in the August 2024 agreement to acquire a 14.9% stake in KeyCorp, marking a decisive step in the bank’s renewed focus on the U.S. market.²⁰
• Management Changes: The appointment of Scott Thomson, an executive from outside the banking sector, as President and CEO in February 2023 was a pivotal event. This move signaled the Board’s desire for a fresh perspective to address the bank’s long-standing underperformance relative to its peers.⁵³
• Interest Rate Sensitivity and Impacts: The aggressive series of interest rate hikes by the Bank of Canada throughout 2022 and 2023 was a dominant environmental factor. While this has provided a tailwind to net interest margins, it has also dampened loan growth across the industry and put financial pressure on Canadian households and businesses.³⁰
• Credit Quality Trends and Provision Expenses: As a result of the higher interest rate environment and a slowing economy, provisions for credit losses have been trending higher. PCLs have been increasing from the unsustainably low levels of the post-pandemic period as the bank builds reserves for potential future loan losses, a trend seen across all Canadian banks.⁶³
• International Market Challenges: The bank’s large international segment has faced headwinds from economic and political instability in certain Latin American markets. This was evident in fiscal 2023, when adjusted earnings from the segment declined by 3%, a sharp reversal from the 23% growth seen in the prior year, highlighting the segment’s inherent volatility.⁵³
• Technology Investments and Progress: Scotiabank has continued to push forward with its digital transformation. The bank reported a 17% increase in digital adoption since fiscal 2020 and has launched a refreshed user experience for its main Scotia online banking platform.¹⁸

9. Risk Factors & Headwinds

An investment in Scotiabank is subject to a number of material risks that could impact its financial performance and stock valuation.

• Credit Risk: The bank has significant exposure to the Canadian consumer, who is carrying record levels of debt, particularly in mortgage loans. A sharp economic downturn or a significant correction in the Canadian housing market could lead to a material increase in loan losses.⁷³ Internationally, credit risk is elevated due to the inherent economic volatility and political uncertainty in its core Latin American markets.¹²
• Interest Rate Risk: The bank’s earnings are highly sensitive to movements in interest rates. While the recent rising rate cycle has been beneficial for margins, a rapid reversal to a lower-rate environment could compress NIMs. Conversely, interest rates remaining higher for longer could further strain the financial health of borrowers, leading to higher credit losses.³⁰
• Regulatory and Compliance Risks: As a D-SIB, Scotiabank operates in a highly regulated environment. The bank faces a constantly evolving and increasingly stringent set of rules from OSFI and other global regulators. New requirements related to climate risk disclosure (Guideline B-15), operational resilience, and cybersecurity increase compliance costs and carry the risk of significant financial penalties and reputational damage for any lapses.²⁶
• Geographic Concentration and Currency Risk: With a significant portion of its earnings generated outside of Canada, Scotiabank’s results are exposed to the economic cycles of the Pacific Alliance countries.¹³ Furthermore, earnings generated in foreign currencies are subject to translation risk when converted back to Canadian dollars for reporting purposes.
• Execution Risk: The bank is in the early stages of a major strategic overhaul. There is considerable execution risk associated with this pivot. The successful integration of the North American strategy, realizing the anticipated synergies from the KeyCorp investment, and improving the profitability of the remaining international assets are all significant challenges that could fall short of expectations.
• Competition from Fintech: Non-traditional financial services providers continue to disrupt the banking industry. These agile competitors can erode market share in profitable niches like payments, wealth management, and consumer lending by offering superior digital experiences and lower costs.²⁵

10. Valuation Analysis

Scotiabank’s valuation reflects a market that is pricing in its lower profitability and higher risk profile relative to its top-tier Canadian peers. The core valuation question is whether this discount is sufficient to compensate for the risks, and whether the new strategic plan can act as a catalyst to close this gap.

10.1. Current Valuation Metrics vs. Historical Ranges

• Price-to-Earnings (P/E) Ratio: As of August 2025, Scotiabank’s P/E ratio stands at approximately 12.4x on a trailing twelve-month basis.⁷⁴ This is above its 10-year historical average, which has typically been in the 10x to 11x range, but well below recent peaks.⁷⁴
• Price-to-Book (P/B) Ratio: The bank’s P/B ratio is approximately 1.33x.⁶ This is also above its recent historical average, which has hovered in the 1.0x to 1.2x range since 2020, but remains significantly below the 1.5x to 2.0x multiples it commanded in the previous decade.⁷⁵

10.2. Peer Comparison Valuation

A comparison with its Big Six peers clearly illustrates Scotiabank’s valuation discount. The bank consistently trades at lower P/E and P/B multiples than market leaders RBC and TD. This discount is a direct reflection of its lower return on equity. While peers like RBC generate an ROE in the mid-teens, Scotiabank’s has been closer to the low double-digits, justifying a lower valuation multiple from the market.⁶⁷

Table 3: Peer Comparison – Valuation and Key Ratios

Metric	BNS	RBC (RY)	TD	BMO	CIBC (CM)	National Bank (NA)
Market Cap (C$ B)	$86	$187	$154	$94	$59	$29
P/E Ratio (Fwd)	~12.4x	~14.1x	~11.5x	~10.8x	~12.5x	~9.5x
P/B Ratio	~1.3x	~2.2x	~1.4x	~1.3x	~1.7x	~1.6x
Dividend Yield (%)	~5.6%	~4.1%	~4.8%	~4.8%	~5.5%	~4.2%
ROE (Adj., TTM)	~11.8%	~15.7%	~13.5%	~9.8%	~14.8%	~16.7%
CET1 Ratio (%)	13.3%	13.5%	13.1%	13.5%	13.3%	13.7%
Note: Data as of Q3 2025 or latest available. Market data is illustrative and subject to change. Ratios are based on a synthesis of available data from sources.6

10.3. Dividend Yield Analysis and Sustainability

With a forward dividend yield of approximately 5.6%, Scotiabank offers one of the most attractive income streams among the Big Six banks.⁶⁷ This high yield provides a substantial portion of the expected total shareholder return and can offer a cushion against stock price volatility. Given the bank’s long history of dividend payments and a payout ratio that is managed within a sustainable range, the dividend appears secure and is a key pillar of the investment case.¹³

10.4. Return on Equity Relative to Cost of Equity

A fundamental driver of value for a bank is its ability to generate an ROE that exceeds its cost of equity (CoE). For a large, stable bank like Scotiabank, the CoE is typically estimated to be in the 9% to 11% range. The bank’s recent adjusted ROE of 11.3% for fiscal 2024 and 12.4% in Q3 2025 suggests it is creating economic value, albeit at a smaller spread than its higher-ROE peers.¹⁰ The primary objective of the new strategy is to widen this spread by improving the overall profitability and ROE of the consolidated enterprise.

10.5. Sum-of-the-Parts Valuation for Different Business Segments

A sum-of-the-parts (SOTP) analysis can provide an alternative valuation perspective. By applying market-derived multiples to the earnings of each of Scotiabank’s four business segments, it is possible to assess whether the market is appropriately valuing the entire enterprise. Such an analysis could reveal that the market is applying an overly punitive discount to the International Banking segment’s earnings or failing to fully appreciate the stable, high-quality earnings stream from the Canadian Banking and Global Wealth Management divisions. The valuation of the Canadian segment at a peer-average multiple, combined with a discounted multiple for the international business, could suggest that the consolidated company’s shares are undervalued.

11. Key Metrics to Monitor

To track the progress of Scotiabank’s strategic pivot and the health of its underlying business, investors should closely monitor the following key performance indicators:

• International Segment Return on Equity (ROE): This is the most critical metric for validating the new strategy. A sustained improvement in the profitability of this segment is essential for closing the valuation gap with peers.
• Canadian Banking Primary Client Growth: Monitor the net new primary client additions on a quarterly basis. Success here is fundamental to the domestic growth strategy and improving the bank’s funding mix.
• Net Interest Margin (NIM) Trends: Track the consolidated and segmental NIM each quarter to assess the bank’s ability to manage its funding costs and lending spreads in the prevailing interest rate environment.
• Provision for Credit Losses (PCL) as % of Loans: Watch for any unexpected acceleration in this ratio, which could signal deteriorating credit quality in either the Canadian or international loan portfolios.
• Operating Leverage (Revenue Growth vs. Expense Growth): The bank is targeting positive operating leverage. Achieving this consistently demonstrates disciplined cost control and is key to improving the efficiency ratio.
• Capital Ratios (CET1): Ensure the bank maintains its strong capital position well above regulatory minimums, which provides the foundation for its strategic flexibility.
• Digital Adoption Rates: Track metrics on mobile usage and digital sales to gauge the success of the bank’s ongoing digital transformation efforts.

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