Canadian banks spent years being treated like the sensible shoes of global investing. Reliable, profitable, and not exactly something international investors rushed across the border to buy.
Today, that’s changing. Foreign institutions owned 19.3% of Canada’s large banks in May 2026, according to an analysis from Brompton Funds. That was the highest level in roughly 25 years of data, up from 17.7% just one year earlier.
More buyers can support share prices. Unfortunately, they can also turn yesterday’s bargain into today’s considerably more expensive bank stock.
Source: Getty Images
Canada is back on the shopping list
Foreign investors have several reasons to look north. Canadian banks remain highly capitalized, while their wealth management and capital markets businesses have reduced dependence on traditional lending. Canada is also attracting more attention around infrastructure, energy and major-project investment, potentially creating more lending and advisory opportunities.
The catch is valuation. The Big Six recently traded around 15 times expected earnings, versus a 10-year average closer to 11 times. Investors buying Canadian bank stocks today are therefore paying considerably more for the same collection of mortgages, deposits and investment-banking desks.
That doesn’t necessarily make the banks bad investments. It means I’d rather look for the one where earnings are catching up with the share price. Bank of Nova Scotia (TSX: BNS) has a decent argument.
The turnaround
Scotiabank operates personal and commercial banking, wealth management and capital markets businesses, with operations stretching from Canada through the United States and Latin America. Management has been simplifying that sprawling footprint and focusing capital around a North American corridor connecting Canada, the United States, and Mexico.
The latest quarter provided something investors have been waiting for: evidence the strategy is actually improving returns. Third-quarter adjusted earnings per share jumped to $2.28 from $1.88 a year earlier. Adjusted return on equity (ROE) reached 14.2%, exceeding management’s medium-term target of greater than 14%.
Its capital cushion remained sturdy as well. Scotiabank finished the quarter with a 13.1% Common Equity Tier 1 ratio while still repurchasing 8.6 million shares.
Income incoming
Scotiabank increased its quarterly dividend to $1.14 this year. At a recent share price of $129.02, the $4.56 annualized payout produces a yield of about 3.5%. Here’s what $10,000 would currently produce.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| BNS | $129.02 | 77 | $4.56 | $351.12 | Quarterly | $9,934.54 |
That yield is no longer spectacular by bank-stock standards, largely because the shares have climbed. Yet dividend growth, buybacks, and improving earnings can still add to the return over time, which is the attraction of strong Canadian dividend stocks.
Not the bargain it was
This is where I’d temper the enthusiasm. BNS now trades around 13.9 times forward earnings. That remains below the roughly 15 times multiple recently attached to the Big Six overall, but it is well above the valuation investors became accustomed to over the last decade.
The shares are also around 26% above where they began 2026. Investors arriving after the foreign money shouldn’t expect the same easy rerating.
Credit remains another risk. Canada’s highly indebted consumers are vulnerable to weaker employment and higher borrowing costs, while Scotiabank’s international operations add currency, political and economic exposure.
Bottom line
Foreign investors discovering Canadian banks is good news for existing shareholders. New investors need to be more selective now that everybody else has discovered this corner of the market.
Scotiabank no longer looks cheap, yet its record quarter, improving ROE, strong capital position, and 3.5% dividend suggest the business is finally catching up with its rerated share price.
