Canada's Scotiabank beats profit expectations on capital markets boost, reports cautious optimism for 2026

By Nivedita Balu and Ateev Bhandari

Dec 2 (Reuters) - Bank of Nova Scotia BNS.TO said on Tuesday it was cautiously optimistic going into 2026 betting on Canada's ambitious energy projects despite global macroeconomic uncertainties, after the lender reported better-than-expected quarterly profit, powered by strength in its capital markets segment.

Scotiabank is the first of the big six Canadian banks to report fourth-quarter results, wrapping up a year marked by trade and tariff uncertainty, elevated unemployment in Canada and a sluggish housing market that has pushed lenders to set aside more money to safeguard against souring loans. Its shares were last up 2.5% in Toronto, and hit a record high of C$99.34.

The lender, Canada's fourth largest by market capitalization, said it expects loan and deposit growth to support double-digit profit growth as loan loss provisions moderate in fiscal 2026.

"The outlook reflects the expectation that we will continue to operate in an environment of elevated global macroeconomic uncertainty in fiscal 2026," Chief Risk Officer Phil Thomas told analysts.

"In Canada, the absence of a trade deal with the US and elevated unemployment continue to weigh on sentiment. However, we are cautiously optimistic that the federal budget will contribute to greater economic growth and improve consumer and business sentiment that will benefit the performance in the latter half of the year," Thomas said.

Canadian Prime Minister Mark Carney's first budget has focused on growth projects around infrastructure, pipelines and natural resources, an area that Scotiabank is well placed to advise on, CEO Scott Thomson said.

The bank took a C$373 million ($266.30 million) restructuring charge in the quarter due to layoffs at its Canadian banking business and at its Asian operations in Global Banking and Markets.

"We have a mildly positive view... International Banking results were weaker than expected as loan losses were higher than anticipated and this may persist for the foreseeable future," RBC Securities analyst Darko Mihelic said.

Scotiabank forecast impaired loans ratio, an indicator of credit risk, to be in the high 40s to mid 50s basis point range, compared with 49 basis points excluding divestitures in 2025.

Net income at Scotiabank's global banking and markets segment rose nearly 50% in the fourth quarter ended October 31, while it rose about 18% at its wealth management business, driven by higher mutual fund and investment management fees. In international banking, it rose 3%.

Net interest income - the difference between what banks make on loans and pay out on deposits - was C$5.59 billion, up from C$4.92 billion.

On an adjusted basis, it reported a profit of C$1.93 per share, compared with analysts' estimates of C$1.84, according to LSEG data.

($1 = 1.4007 Canadian dollars)