For years, Bank of Nova Scotia (TSX: BNS) stock carried an unwelcome label on Bay Street: the industry laggard. Dragged down by capital-intensive, higher-risk operations across emerging international markets, Canada’s third-largest lender routinely traded at a discount to its Big Six banking peers.
Fast forward to 2026, and BNS stock’s fortunes and market sentiment have completely flipped. Scotiabank has staged a remarkable turnaround, driven by a multi-year strategic pivot under CEO Scott Thomson. Following a blowout third-quarter report for fiscal 2026, BNS stock has established itself as one of the standout Canadian bank stocks to buy on the TSX and hold for long-term gains.
With BNS stock surging roughly 46% over the past 12 months, investors are left asking: is there still room to buy, or has the easy money already been made?
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BNS stock’s inflection point: Profitability grows
Scotiabank’s turnaround in 2026 isn’t just a sentiment story — it’s backed by evident operating momentum. In its third quarter 2026 earnings report, BNS stock delivered a commanding top- and bottom-line beat. Net earnings hit a new record, with adjusted diluted earnings per share (EPS) soaring 21% year over year to C$2.28 to crush analyst estimates. That wasn’t all.
The group’s adjusted return on equity (ROE) expanded 170 basis points year over year to 14.2%, beating management’s medium-term target of 14% way ahead of schedule. Adjusted ROE measures the bank’s most-likely recurring profitability to shareholders, and BNS’s equity holders have seen the margins earned on their capital expand over the past few quarters as the bank rewrites its earnings story.
Most noteworthy, the group ROE has staged an impressive recovery from its low of 10.4% printed during the second quarter of 2025 (Q2 2025), marking the bank’s most capital-efficient position in over two years.
Equally important, BNS stock achieved its 10th consecutive quarter of positive operating leverage, as non-interest income growth comfortably outpaces cost inflation.
Doubling down on Canada
A cornerstone of CEO Thomson’s strategy has been reallocating capital into higher-margin, premium North American trade corridors. The strategy is proving its worth: Scotiabank’s Canadian Banking segment generated a stellar 19.4% ROE during the last quarter.
To capitalize on this domestic profitability momentum (while undoubtedly supporting an economy that is fighting a trade war), Scotiabank made headlines this month by committing over $100 billion in financing over the next five years to support Canadian business growth, alongside the launch of the Scotia Growth Institute. This aggressive domestic push positions BNS to capture lucrative commercial market share in key high-growth sectors.
Simultaneously, the bank’s rightsized International Banking segment is no longer a drag. It generated a respectable 15.7% ROE (up 80 basis points year over year). BNS stock’s international operations may complement domestic efficiency rather than penalize it.
Should you buy BNS stock in September?
Even after a 46% run-up over the past year, BNS stock retains compelling total return appeal — particularly for income-seeking investors. You can buy BNS for its dividend premium, its fair valuation, and its promising total shareholder returns.
BNS stock’s 3.5% dividend yield continues to offer an attractive yield profile relative to its peer group, including Royal Bank of Canada (2.5%), Toronto-Dominion Bank (2.7%), Bank of Montreal (2.8%), Canadian Imperial Bank of Commerce (2.7%), and National Bank of Canada (2.5%).
Trading at a forward price-to-earnings (P/E) multiple of about 14 times and a forward P/E-to-growth (PEG) ratio near one, BNS stock remains fairly valued relative to its double-digit earnings growth potential.
Further, the bank’s sustained capital strength, with a common equity tier-one (CET1) ratio of 13.1%, allows management to sustain accretive share repurchases while maintaining its decade-spanning dividend safety record.
Investor takeaway
Turnaround stories on Bay Street usually reward early investors, and BNS stock has delivered beautifully for loyal shareholders. That said, investors should keep an eye on elevated provisions for credit losses (PCLs) still. However, Scotiabank’s strategic repositioning is proving to be a genuine structural success rather than a temporary cyclical bounce.
BNS stock looks like a comforting buy for investors seeking a mix of reliable passive income, disciplined capital deployment, and ongoing operational momentum.
