Is Bank of Nova Scotia a Buy?

Bank of Nova Scotia (TSX:BNS) has been one of the top-performing Canadian bank stocks for the last year as it has surged by nearly 22%. That’s not a small jump, especially in a market where most big banks are struggling to keep pace with investor expectations. But what’s behind this steady climb? Is it simply a reaction to falling interest rates, or is Scotiabank actually getting stronger from within?

In this article, let’s dig into what’s been working for Scotiabank lately, highlight some of its key financial metrics, and explore the bigger fundamental picture to find out whether this momentum could be just the beginning of a long-term rally.

Bank of Nova Scotia stock

Based in Toronto, Scotiabank is currently Canada’s fourth-largest bank by market cap. It offers a broad mix of retail, commercial, and investment banking services. After witnessing sharp gains in the last year, BNS stock currently trades at $78.70 per share with a market cap of $97.8 billion. At this market price, it has a solid annualized dividend yield of 5.6%, paid out on a quarterly basis.

What makes this performance worth noting is that it runs in line with a broader rally among Canadian banks. While Scotiabank’s over 20% gain over the past year might not be the highest in the group, it shows that investor sentiment has turned positive again for the big banks.

A closer look at recent results

In the second quarter of its fiscal year 2025 (ended in April), there were signs of strength across many parts of Scotiabank’s business. For example, the bank’s international banking division posted a 7% YoY (year-over-year) jump in adjusted earnings with the help of strong revenue and better productivity. Similarly, its global wealth management segment saw earnings rise 17% YoY due mainly to higher mutual fund fees and improved interest income.

However, Scotiabank’s Canadian banking segment posted a sharp 31% YoY drop in its adjusted quarterly earnings to $613 million. This was mainly due to a big jump in performing credit loss allowances, which the bank increased in anticipation of continued macroeconomic risks in Canada, the U.S., and Mexico.

While that drop might look alarming at first, the bank’s management made it clear this was a cautious move to stay ahead of potential risks. At the same time, the rest of its business remained stable, and the bank still generated strong deposit and asset growth on the Canadian side.

The key here is that the recent pullback in Scotiabank’s Canadian earnings may be more of a short-term adjustment than a sign of deeper issues.

Is Bank of Nova Scotia a buy?

Given all these fundamental factors, it’s easy to see why investors are showing confidence in Scotiabank. While it’s true that the bank is dealing with credit-related challenges in its home market, the strength in its international, wealth, and capital markets businesses is clearly balancing that out. The bank’s decision to boost credit reserves shows it’s managing risk proactively, rather than reacting to problems after they appear. And with interest rates heading lower, lending activity could bounce back across the board in the months ahead.

In addition, Scotiabank is continuing to invest in advice-driven relationships and productivity initiatives, which should support more efficient growth going forward.

So while BNS stock has already moved up significantly, the bigger picture shows there’s still value to be unlocked – especially for investors looking for stable dividends with potential for more upside.