Shares of Bank of Nova Scotia (TSX:BNS), or Scotiabank for short, and the rest of the Big Six Canadian banking stocks are fresh off earnings season. And, for the most part, it has been yet another solid round of results, with Scotiabank clocking in a nice beat Q1 2026, topping expectations by around a dime. Though it wasn’t a massive earnings blowout to park a big rally, I did think that the name remains one of the best banks for your buck for the rest of the year.
Undoubtedly, the big banks came into the first quarter with some fairly high expectations, but, despite this, they delivered. The big question moving forward is whether they can keep it up as the year-over-year comparables get a tad harder.
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Scotiabank looks pricey after a run, but it might actually be fairly priced
Price-to-earnings (P/E) multiples are quite a bit higher today than just over a year ago, but with improving fundamentals (think net interest margins, which rose a great deal in Scotiabank’s latest quarter), and more dividend growth to come, the banks seem like a great buy, even if it means paying up a bit of a premium.
While capital gains might get harder to come by (that’s to be expected after shares of BNS posted a past-year gain of nearly 45%), that certainly doesn’t mean the banks are destined for underperformance for some time. Of course, they did spend much of the post-pandemic period in the penalty box.
Either way, the big question is whether it still makes sense to buy Canada’s most international bank now that the shares trade at a hefty premium, rather than a slight discount to the peer group.
At the time of this writing, BNS stock goes for 18.3 times trailing price-to-earnings (P/E). That’s expensive. There’s no way around that. But given the improvements going on behind the scenes, is it still expensive for long-term investors who are content collecting that 4.2%-yielding dividend that’s poised for further, perhaps more attractive, growth?
While there’s more growth expected for the year ahead, I think it’ll be interesting to see how the bank fares as its global wealth management division really starts paying dividends. Indeed, international is starting to become a strong spot for Scotiabank, especially compared to the recent past. Arguably, the emerging markets exposure is a reason to prefer it to the peer group. While I’d be much more bullish on a pullback, I see no issue with continuing to buy at close to all-time highs of $103 and change per share.
The bank deserves to be expensive
Scotiabank is posting some really impressive returns on investment (ROE), and with the careful embrace of AI technologies, there’s room for further margin enhancement. Combined with a more favourable macro environment, I don’t see shares of BNS as an at-risk play, even if the multiple is slightly more on the rich side.
Either way, BNS stock stands out as a pricey stock that’s pricey for a very good reason. And if margin expansion and loan growth can surprise to the upside, perhaps I could be wrong to view the name as remotely pricey as the surface P/E suggests. Given the tailwinds riding behind the fundamentals, I’m inclined to view BNS stock as a buy at above $100, but more so on dips!
