$65.35
$99.77
bear $65.35
base $88.03
bull $99.77
margin of safety $56.00
market price* $91.60
The Bank of Nova Scotia (Scotiabank) is one of Canada's five large banks. In fiscal 2025 (year ended October 31) its net income of C$7.76 billion came from Canadian Banking (about C$3.4B), International Banking (C$2.8B, mainly Mexico, Peru, Chile and the English-speaking Caribbean), Global Wealth Management (C$1.7B) and Global Banking and Markets (C$1.9B), less about C$2.1B of corporate and other costs. Canada produced about 44% of earnings, the United States 14%, Mexico 10% and the English-speaking Caribbean 12%. Scotiabank reports in Canadian dollars and files annual reports on the foreign-issuer form (40-F) rather than a 10-K, so every figure below comes from the company's own earnings releases and annual report, not from standardized filing data. All per-share values are converted to US dollars at C$1.42 per US$1, the rate on the day of this analysis; the US-dollar value of these shares will therefore also move with the Canadian dollar, which we do not forecast. How we measured earnings. For a bank, deposits and borrowings are the raw material of the business and interest is an operating cost, so we value earnings after interest and subtract no debt. Cash flow from operations is not meaningful for a bank, so we start from net income to common shareholders, which already carries every provision for loan losses, and treat stock-based pay as immaterial (the equity-settled part is a tiny fraction of earnings). We add back non-cash write-downs only where the company disclosed them: C$379M in fiscal 2024 (impairment of the Bank of Xi'an investment in China and software) and C$1,354M in fiscal 2025 (mostly non-cash losses on the sale of the Colombia, Costa Rica and Panama banks, including release of accumulated currency translation losses). Restructuring, severance and legal charges are real costs and stay in. On that basis earnings per share over fiscal 2016 to 2025 were C$5.77, 6.49, 6.82, 6.68, 5.30 (COVID credit losses), 7.70 and 8.02 (both flattered by low loan-loss provisions after COVID), 5.72, 6.18 and 6.75. Over the decade our earnings per share grew only about 1.8% a year, and reported per-share earnings ended where they began (C$5.77 in 2016, C$5.67 in 2025), so we credit no growth in any case. Starting level. The 10-year median is about C$6.6. Fiscal 2025 earnings were C$6.75, up 9.2% from C$6.18 in 2024. The business is now different: the sale of the Colombia, Costa Rica and Panama operations closed in the first quarter of fiscal 2026, and Scotiabank holds about 14.9% of KeyCorp (US$2.8 billion, equity-accounted since December 2024). The first three quarters of fiscal 2026 corroborate a higher level: earnings per share of about C$2.08 (Q1, after adding back the C$434M non-cash loss on the sale), C$2.00 (Q2) and C$2.27 (Q3, a record, with return on equity of 14.1%) against about C$1.69 a quarter in fiscal 2025 on the same basis. That run rate is roughly C$8.5 a year. We do not adopt it in full, because part of it comes from market-linked wealth-management fees (Wealth earnings grew 19% in Q2 on mutual-fund fees and brokerage) and because loan-loss provisions have not fallen much (C$1,079M in Q3 versus C$1,041M a year earlier, and 66 basis points of loans in Q2, still elevated). We start the base case at C$7.50, about 11% above fiscal 2025 and about 12% below the current run rate. That is roughly the 11.8% adjusted return on equity earned in fiscal 2025, applied to today's larger equity base, and below the 13% to 15% returns on equity of 2016-2019 and 2021-2022. Trailing actual earnings growth in fiscal 2025 was +9.2%; the base case assumes 0% growth from the C$7.50 starting level in year 1 and after, so no deceleration has to reverse. Base case, US$88.03 per share. Earnings hold at C$7.50 per share indefinitely, which at a 6% discount rate is worth C$125 or US$88.03. What keeps it going: the Canadian Banking franchise (about 44% of earnings, in a heavily regulated five-bank market) plus a ten-year record in which earnings per share never fell below C$5.30 and were C$5.7 or higher in nine of ten years. We credit no growth because the decade shows none that was steady (fiscal 2019 was C$6.68 against C$6.75 in fiscal 2025), and no value for surplus capital. The bank's core capital ratio was 13.1% in Q3 fiscal 2026 against a 12%-plus target; the excess is being spent on share buybacks (8.6 million shares in Q3) and is not counted separately. The business is worth US$88.03 per share, it owes nothing that is subtracted (deposits are the bank's funding), so the difference is US$88.03. Bear case, US$65.35 per share. A repeat of the fiscal 2020 credit shock: earnings then fell 21% (C$6.68 to C$5.30) when provisions reached C$6,084M, and provisions are already rising (C$4,714M in fiscal 2025 versus C$4,051M in 2024, with the loan-loss allowance up 14% to C$7,654M). We apply the same 21% fall to a lower C$5.70 baseline, the level of fiscal 2023 to 2025 reported earnings (C$5.72, 5.87 and 5.67): C$4.50 per share for two years, then a return to C$5.70 permanently with none of the recent margin and fee gains kept. That is worth C$92.80 or US$65.35; nothing is subtracted for debt, so the difference is US$65.35. We did not build in a permanent loss of the franchise because nothing in the filings names one. The bank's China investment (Bank of Xi'an) has already been written down in fiscal 2023 and 2024. Bull case, US$99.77 per share. The fiscal 2026 run rate is simply maintained, C$8.50 per share (a 13% to 14% return on equity, which the bank has earned on an adjusted basis in each of the last three quarters and in most years from 2016 to 2022) with no growth: C$141.67 or US$99.77, nothing subtracted, difference US$99.77. Management's stated ambition of 7%-plus annual earnings growth is a target and is not credited. Testing the case. The most load-bearing assumption is the C$7.50 level. Against it: gross impaired loans were C$7.8 billion (1.00% of loans) in Q3 fiscal 2026 and provisions have stayed high, which is why the base case sits below the current run rate rather than at it. In its favor, provisions of C$1.2B and C$1.1B a quarter are being absorbed while earnings still rise, so the higher level is not a provision-release effect. Change since the last analysis (August 2026, base US$65.50, bear US$35, bull US$100). The business itself has not changed materially since then (the record third quarter and the completed Latin American exit were already known), so the increase in the base case comes mostly from how we discount future earnings: we now use a flat 6% discount rate for all companies rather than 8.5% to 12% for this one, and we no longer add a separate value for surplus capital. The bull case is roughly unchanged because it is limited by the same no-growth rule. What would make this wrong: a credit downturn deeper than fiscal 2020, a fall in market-linked wealth and trading fees, or a weaker Canadian dollar for US-dollar holders.