Bank of Nova Scotia (TSX:BNS) saw a strong rebound in 2024, gaining 20% as interest rate cuts fueled optimism in the second half of the year. However, 2025 has started with renewed uncertainty, as BNS stock has dropped 5.5% year to date, even as the TSX Composite has risen 3.4%. Bank investors seem cautious about the future path of interest rates and the ongoing trade negotiations between Canada and the United States.
With a market cap of $90.8 billion, Scotiabank is currently the fourth-largest bank in Canada, as its stock trades at $72.93 per share. At this market price, it offers a 5.8% annualized dividend yield.
The big question now is whether BNS stock can regain momentum in 2025. In this article, I’ll break down Scotiabank’s outlook for 2025 and beyond by analyzing key fundamentals, growth potential, and the challenges it may face.
Analyzing Scotiabank’s financial growth trends
While BNS is expected to release its January 2025 quarter earnings report later this month, its financial growth in the fourth quarter of its fiscal year 2024 (ended October 2024) looked strong. During the quarter, Scotiabank’s net profit surged 25% YoY (year over year) to $1.69 billion. Even more impressive, adjusted net income jumped 29% from a year ago to $2.12 billion with the help of solid revenue growth and a lower provision for credit losses.
A major highlight was the strength in Scotiabank’s Canadian Banking segment, which delivered a 7% YoY rise in adjusted earnings due mainly to double-digit growth in its net interest income. Meanwhile, the bank’s international banking division posted an 11% YoY earnings jump with margin expansion and efficiency improvements in many key regions like Mexico and Chile. At the same time, its global wealth management business continued to strengthen as its earnings climbed by 10% YoY due to strong asset growth.
Despite higher operating expenses, Scotiabank managed to achieve a positive adjusted operating leverage of 2.3% in the fiscal 2024. That means its revenue growth outpaced expense growth, which is always a good sign. With these strong results, it’s easy to see why BNS stock surged in 2024.
Scotiabank’s outlook for 2025
While short-term macroeconomic challenges and uncertainties about future interest rate moves could keep the banking sector volatile, Scotiabank’s continued focus on long-term growth initiatives brightens its growth outlook for 2025 and beyond.
For example, the bank is striving to further strengthen its position within its core North American markets, focusing on growth in Canada, the U.S., and Mexico. It’s also continuing to invest heavily in digital transformation to enhance customer experience and operational efficiency. This includes expanding mobile banking services and leveraging artificial intelligence (AI) to streamline operations. These initiatives could have a positive impact on the bank’s profitability in the years to come. As investors take note of these strategic efforts, BNS stock could continue to soar.
Besides that, its impressive 5.8% dividend yield makes it even more attractive for long-term income investors, especially those who want exposure to Canada’s banking sector to stabilize their portfolios.
