A Scotiabank branch in Vancouver.Isabella Falsetti/The Globe and Mail
Bank of Nova Scotia BNS-T chief executive officer Scott Thomson says the violence in Mexico – a key market for the lender – is stabilizing and the bank’s operations have not been affected by the upheaval triggered by the killing of a drug cartel boss.
Mr. Thomson made the comments during a conference call Tuesday morning discussing the bank’s first-quarter results, which topped analysts’ estimates as profit rose across its businesses.
While the unrest seemed to subside Monday as the Mexican government deployed additional soldiers to the area amid lingering concerns, the violence has continued across the country.
“If you take a step back and think about what President Sheinbaum is doing, she’s addressing the three areas that the U.S. has been concerned about – immigration, Chinese investment and rule of law. And now she’s in the third pillar of that,” Mr. Thomson said referring to Mexico’s President Claudia Sheinbaum, in response to an analyst question. “We’ve seen a much more stable environment this morning than we did yesterday.”
Mr. Thomson said the bank’s employees and clients are safe and its branches in the country are open today. He does not expect any impact to the bank’s financial performance.
Mexico is a major market for Scotiabank. While the bank’s turnaround strategy is focused on building its Canadian business, it also hinges on improving its international unit.
International banking head Francisco Aristeguieta said Scotiabank does not finance vacation resorts in Mexico and he is not concerned about any specific exposure in the country.
While Scotiabank is monitoring the impact to tourism and economic growth in Mexico, Mr. Aristeguieta said the bank remains positive on the country’s long-term outlook.
“It is not short-term good news, but it is a necessary set of actions that the government is implementing for the long-term benefit of the country,” Mr. Aristeguieta said during the call. “We’re going to go through some short-term volatility, but very much in line with what we want to see the country do in the long term, given our commitment to the country.”
Scotiabank is the first major Canadian bank to report earnings for the fiscal first quarter. Bank of Montreal and National Bank of Canada will release results on Wednesday. Royal Bank of Canada RY-T, Toronto-Dominion Bank TD-T and Canadian Imperial Bank of Commerce will close out the week on Thursday.
Scotiabank earned $2.29-billion, or $1.73 per share, in the three months that ended Jan. 31. That compared with $993-million, or $0.66 per share, in the same quarter last year, which included an impairment loss of $1.36-billion on the sale of banking operations in Colombia, Costa Rica and Panama.
Adjusted to exclude certain items, the bank said it earned $2.05 per share, beating the $1.95 per share analysts expected, according to data from S&P Capital IQ.
The bank also improved its profitability, posting a 13 per cent adjusted return on equity (ROE), up from 12.5 per cent in the previous quarter. Scotiabank now expects to hit its 14-per-cent target in 2027, a year earlier than expected.
The Canadian banking business is at the core of its profitability goals. The unit posted ROE of 18.1 per cent this quarter, but the lender is still trailing its peers in this category and expects to improve this metric to 24 per cent by 2028.
The lender is grappling with slower loan growth as economic uncertainty weighs on the wallets of consumers and businesses. In Canadian banking, loan balances rose a slim 3 per cent as mortgages increased 5 per cent and business and personal loans fell 1 per cent respectively.
The bank has been working on growing its deposit base in its Canadian business. To do this, Scotiabank has been building its book of customers that have a daily chequing account as well as another payment or investment service, rather than clients that hold only one lending product from the bank.
Overall deposit balances in Canadian banking fell 2 per cent in the quarter as customers shift money away from fixed-term deposits, but personal daily savings deposits increased by 5 per cent.
“Going forward, we expect to see return on equity expansion across each of our business units, with the largest increase coming from Canadian banking,” Mr. Thomson said.
“Fiscal 2026 stands as a pivotal year for our Canadian banking unit, where we expect earnings to grow by double digits.”