Bank of Nova Scotia (TSX:BNS) is up more than 15% from its 2025 low. Investors who missed the rebound are wondering if BNS stock is still undervalued and good to buy right now for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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Bank of Nova Scotia share price
Bank of Nova Scotia trades near $75 per share at the time of writing. The stock has endured some big moves over the past year, rising from $61 in August to $80 in November, before sliding all the way back down to $63 in April.
The stock was actually as high as $93 in early 2022, so there should still be decent upside as the bank works through a strategy shift launched by the new CEO, who took control two years ago.
Bank of Nova Scotia spent US$2.8 billion in 2024 to acquire a 14.9% stake in KeyCorp, an American regional bank. The deal is the bank’s plan to invest more growth capital in the United States in the coming years and focus less on Latin America where the company spent billions of dollars over the past two or three decades to acquire banks and credit card portfolios.
International investments primarily focused on Mexico, Peru, Colombia, and Chile. These are the core members of the Pacific Alliance trade bloc, which is home to more than 230 million people. As the middle class expands in these countries, demand for loans and investment products will grow. Unfortunately, investors have not benefited as anticipated. Bank of Nova Scotia’s share price has underperformed its large Canadian peers, who have focused international investments largely on the United States.
Risks
Bank of Nova Scotia sold its operations in Colombia, Costa Rica, and Panama at the start of this year. The bank booked an impairment loss of more than $1 billion on the deal. This likely contributed to the drop in the share price through Q1 2025. Investors will want to keep an eye on any additional sales in Latin America that might emerge to see if the bank will take additional hits.
Uncertainty around trade negotiations between the United States and its neighbours remains a headwind. Bank of Nova Scotia has large operations in both Canada and Mexico.
Provisions for credit losses in fiscal Q2 2025 came in at $1.4 billion compared to $1.01 billion in the same period last year and $1.16 billion in fiscal Q1 2025. The trend indicates that more customers are struggling with higher interest rates.
Upside
Bank of Nova Scotia is still a very profitable company. Adjusted net income for fiscal Q2 2025 came in at $2.07 billion compared to $2.1 billion in the same period last year. International Banking delivered a 7% increase in adjusted earnings year-over-year, so the group is performing well.
Mexico and Canada could get trade deals done with the United States before the end of the year and interest rates are widely expected to continue to decline, as long as there isn’t a big jump in inflation caused by tariffs.
Time to buy?
It will take time for Bank of Nova Scotia’s strategy shift to deliver results, so investors will need to be patient. Income investors, however, can pick up a solid dividend yield of 5.9% right now. Those seeking long-term capital gains might consider starting a position now and look to add on a pullback.
