Canada's Scotiabank beats profit on wealth, capital markets strength

By Nivedita Balu and Ateev Bhandari

Feb 24 (Reuters) - Canadian lender Bank of Nova Scotia BNS.TO on Tuesday reported quarterly earnings that beat analysts' estimates, supported by strong growth at its wealth management and capital markets segments, which benefit from fee-based revenue.

Canadian banks this year are betting on a promising IPO pipeline and higher deal activity as gold and oil prices rise to boost income at their capital markets business and broader demand for wealth management services - both segments that are high-margin and service-based.

The wealth management segment reported an 18% rise in net income helped by higher mutual fund fees, brokerage revenues, while the capital markets segment showed a 5% increase in earnings as M&A and IPO activity recovered.

At the same time, Scotiabank's Canadian banking business's earnings also grew 5%, helped by a rise in net interest income - the difference between what banks earn on loans and pay on deposits. The international banking segment, which includes Mexico, Peru and the Caribbean, recorded a 10% rise in net income.

"2026 is off to a strong start for Scotiabank," CEO Scott Thomson said in a press release. "We saw earnings growth across all of our business lines this quarter."

TRUMP TARIFFS CLOUD TRADE OUTLOOK

Scotiabank has increased its focus on North America, betting on booming trade between Canada, U.S. and Mexico. But an uncertain trade path and U.S. President Donald Trump’s tariffs have weighed on cross-border trade and the bank’s international segment, which also includes Mexico, Peru, the Caribbean and Central America.

While Prime Minister Mark Carney has stepped up efforts to diversify Canada's trade ties amid steep tariffs imposed by Trump, the country's economy has sidestepped much of the turbulence created by the shifting trade policy.

Scotiabank's net interest income, the difference between what banks make on loans and pay out on deposits, stood at C$5.58 billion ($4.07 billion) during the quarter. That compares with C$5.17 billion reported a year earlier.

Its provision for credit losses was C$1.18 billion, up from C$1.16 billion a year earlier, reflecting expectations of higher loan defaults.

"We have a positive view... While PCLs were higher than anticipated we expect they will decline from these levels," RBC Capital Markets analyst Darko Mihelic said.

The Canadian lender posted an adjusted profit of C$2.70 billion for the quarter ended January 31, compared with C$2.36 billion a year earlier.

On a per share basis, it earned C$2.05, beating the average estimate of C$1.95, according to LSEG data.

Scotiabank is the first of the big six Canadian banks to report first-quarter results.

($1 = 1.3705 Canadian dollars)