Abstract

Bank of Nova Scotia will report fiscal second-quarter 2026 results on May 27, 2026 Pre-Market; this preview compiles last quarter’s figures, segment trends, and current-quarter forecasts with analyst expectations and management’s latest indications.

Market Forecast

Consensus-style forecasts indicate fiscal Q2 2026 revenue of 9.65 billion Canadian dollars, up 6.23% year over year, EBIT of 4.28 billion Canadian dollars, up 12.56% year over year, and adjusted EPS of 1.93, up 23.54% year over year; no explicit company guidance for gross margin or net margin has been provided, and Street models imply stable to modestly improving profitability versus last year. Management has separately flagged a net income contribution from its KeyCorp stake in Q2, while market models anticipate an adjusted EPS advance supported by operating leverage and steadier credit costs.

The core banking franchise continues to anchor revenue with Canadian Banking at 3.51 billion Canadian dollars last quarter and International Banking at 2.96 billion Canadian dollars; outlook commentary points to stable loan growth and deposit mix management as key levers this quarter. The most promising near-term swing factor is Global Banking and Markets, which produced 1.77 billion Canadian dollars last quarter and stands to benefit from healthier capital-markets activity; year-over-year segment growth was not disclosed, but trading and underwriting volumes are expected to be seasonally supportive.

Last Quarter Review

In fiscal Q1 2026, Bank of Nova Scotia delivered revenue of 9.65 billion Canadian dollars, a net profit attributable to common shareholders of 2.29 billion Canadian dollars, a net profit margin of 27.04%, adjusted EPS of 2.05 (up 16.48% year over year), and gross profit margin was not disclosed; net profit increased 3.06% sequentially.

A notable highlight was adjusted EPS outpacing market expectations alongside year-over-year revenue growth of 2.92%, reflecting cost discipline and resilient noninterest income. By operating line, Canadian Banking contributed 3.51 billion Canadian dollars, International Banking 2.96 billion Canadian dollars, Global Wealth Management 1.80 billion Canadian dollars, and Global Banking and Markets 1.77 billion Canadian dollars, with total revenue advancing 2.92% year over year on a consolidated basis.

Current Quarter Outlook

Core banking earnings trajectory

The principal earnings engine remains the broad-based banking franchise spanning Canadian and international retail and commercial customers. With fiscal Q2 revenue projected at 9.65 billion Canadian dollars (up 6.23% year over year), the modeling implies moderate loan expansion and steadier net interest margin dynamics compared with the prior year period. Within Canadian operations, mortgage and commercial lending pipelines appear healthy while management continues to manage funding costs through deposit mix, which should buffer margin variability if policy rates remain range-bound. Credit quality is the other key determinant of quarterly earnings; after a period of normalization, provisioning trends are set to be a focal point, but a flatter provisioning profile relative to last year would align with the forecasted step-up in adjusted EPS to 1.93. Fee income tied to payments, cards, and service charges is expected to demonstrate seasonal resilience, supporting core revenue even if loan spreads stay contained.

Most promising revenue and fee catalyst

Global Banking and Markets is positioned to provide incremental upside in fiscal Q2 on the back of healthier client activity across rates, FX, and credit markets, as well as a constructive underwriting calendar. The unit generated 1.77 billion Canadian dollars last quarter and, given the more favorable backdrop for primary issuance and trading, could lift noninterest revenue mix if volatility remains within a manageable range that sustains client flows. Advisory and underwriting fees are sensitive to windows of opportunity; the quarter’s environment has opened more of those windows compared with the prior year, which offers support to the consolidated EBIT forecast of 4.28 billion Canadian dollars, up 12.56% year over year. Beyond capital markets, wealth-related fees from Global Wealth Management (1.80 billion Canadian dollars last quarter) may also benefit from positive asset flows and market levels, adding stability to noninterest income. The bank has additionally indicated that its strategic stake in KeyCorp is expected to contribute 77 million Canadian dollars in net income in Q2 (85 million Canadian dollars on an adjusted basis), providing a discrete boost below the revenue line that complements operating progress.

What may drive the stock this quarter

Three drivers appear set to influence the share price reaction to results. The first is the interplay between net interest income and funding costs. Investors will parse management’s commentary on deposit pricing, deposit migration between term and noninterest-bearing accounts, and outlooks for asset yields as rates expectations evolve. Even small changes in margin can have an outsized effect on quarterly EPS; the Street’s 23.54% year-over-year EPS growth assumption implies either modest margin improvement or meaningful help from noninterest income and expenses. The second driver is credit provisioning. Evidence that provisions have peaked or are trending within prior expectations could validate the EPS trajectory and reduce uncertainty around the back half of fiscal 2026. Conversely, any signs of stress concentrated in specific portfolios would be viewed through the lens of sustainability of earnings. The third is operating leverage. The path to the 4.28 billion Canadian dollar EBIT estimate assumes continued expense discipline; investors will monitor the efficiency ratio and any reinvestment commentary that might signal near-term cost pressure. Better-than-expected fee income in Global Banking and Markets and wealth, coupled with controlled expense growth, would provide a clear positive earnings surprise setup.

Analyst Opinions

Across recent publications since January 2026, the balance of opinions tilts toward a neutral-to-cautious stance rather than outright bullishness. Counting Buy/Outperform recommendations as bullish and Hold/Neutral as cautious, the ratio skews in favor of cautious views given multiple reaffirmed or revised Hold ratings. Noteworthy cautious takes include reiterations from Bank of America Securities and National Bank of Canada, as well as Hold ratings from Desjardins; in early March, TD Cowen also moved to Hold, and Canaccord Genuity followed with a Hold rating later in March. By contrast, Raymond James maintained a Buy with a price target in the mid-teens (Canadian dollars scale in the low 100s), and UBS reiterated Buy with an increased target, representing the minority bullish camp.

The cautious majority emphasizes three near-term considerations. Analysts highlight that net interest margin stabilization is still in progress as deposit costs remain elevated relative to asset yield repricing. This dynamic may limit the pace of revenue expansion even with steady loan growth and places more burden on fee income and cost control to deliver the modeled 23.54% adjusted EPS increase year over year. Commentary also underlines the importance of credit normalization; while there are signs that provisions may be leveling, any reacceleration in specific consumer or commercial buckets would challenge the EBIT forecast of 4.28 billion Canadian dollars and keep valuation anchored. Finally, expense discipline remains central to the thesis; achieving positive operating leverage is seen as a prerequisite for multiple re-rating, and analysts will be looking for tangible progress in the efficiency ratio alongside investment priorities.

Within this cautious frame, several institutions still acknowledge constructive supports for the quarter. Reports note that capital levels are sound and that the bank continues to allocate capital efficiently, which underpins medium-term EPS potential even if the near-term revenue environment is mixed. The expected contribution of approximately 77 million Canadian dollars in net income from the KeyCorp stake in fiscal Q2 serves as an identifiable tailwind, helping bridge from revenue to earnings and reinforcing the plausibility of the Street’s EPS projection. Additionally, those with a more positive tilt, such as Raymond James and UBS, argue that improving capital-markets conditions should aid Global Banking and Markets revenue, and that top-line diversity across Canadian Banking, International Banking, Global Wealth Management, and capital markets provides multiple avenues to meet or exceed consolidated forecasts.

In sum, the consensus skew is neutral to cautious: the majority expect a solid but not dramatic beat, with the outcome hinging on a balance of steady net interest income, manageable credit costs, and supportive fee income from markets and wealth. Should management deliver within the projected revenue of 9.65 billion Canadian dollars (up 6.23% year over year) and adjusted EPS of approximately 1.93 (up 23.54% year over year) while demonstrating clear expense control and stable provisions, the cautious camp suggests the stock reaction could be constructive but measured. A stronger-than-modeled contribution from Global Banking and Markets or confirmation that credit costs have peaked would push sentiment toward the minority bullish view, whereas any shortfall on margin, an uptick in provisions, or unexpected cost pressure would validate the cautious majority stance for the near term.