Scotiabank (NYSE:BNS) Rises on 5.9% Yield, Latin America Tailwind, and Undervalued Valuation

NYSE:BNS Enters 2025 Undervalued With Resilient Capital, 5.9% Yield, and Latin America Tailwind

Robust Balance Sheet and Capital Buffers Reinforce Stability for NYSE:BNS

Bank of Nova Scotia (NYSE:BNS) enters the second half of 2025 with capital ratios that command confidence. The CET1 ratio reached 13.2%, up from the prior quarter and well above the Canadian regulator’s 11.5% minimum. Total capital ratio came in at 17.1%, more than double the Basel III 8.0% requirement. TLAC, or total loss-absorbing capacity, stood at 30%, up from 29% YoY. These cushions provide NYSE:BNS with flexibility to continue lending, absorbing macro shocks, and defending its 5.9% dividend yield, underpinned by a 65% payout ratio. The dividend, raised by 4% this year, marks 14 consecutive years of growth.

BNS Loan Portfolio Shows Resilience Through Fixed/Variable Split

At a time when interest rate paths remain volatile, BNS has positioned its residential mortgage book with 67% fixed-rate and 33% variable-rate exposure, mitigating downside pressure on earnings. Only 11.5% of the portfolio matures in FY25 under variable rates, reducing delinquency risk from borrowers as BoC rate cuts (from 5.5% to 2.75%) ripple through the system. Meanwhile, delinquency remains contained at 0.30%, flat vs Q2 2024 and down from 0.31% in Q1 2025, with credit card delinquency at 1.13%, the highest but still manageable. With consumer loans making up 62% and commercial loans 38%, the mix remains conservative, especially with most consumer exposure linked to residential assets.

Diversified Revenue Streams and Global Wealth Momentum Drive Growth

While Canadian banks face domestic headwinds, NYSE:BNS leverages its international exposure. Earnings from Global Banking and Markets Latin America (Mexico, Chile, Peru) rose 8% YoY, and the Global Wealth Management division grew earnings 17% YoY, powered by inflows and trading activity. Total revenue rose 9% YoY in Q1 2025, aided by loan growth of 4% and deposit growth of 5%. Despite a 31% decline in net income YoY (driven by credit loss provisioning amid tariff risks), operating leverage stayed positive for a fifth straight quarter, driven by tech-enabled cost efficiencies including AI-based commercial client servicing, which now handles 70% of Canadian client email flow.

Valuation Still Cheap With 11.0x Forward PE, Yield Tops Peers

At $54.55, NYSE:BNS trades at 11.0x forward PE, below its 5-year average of 11.7x, and cheaper than TD, BMO, and RY which range from 12.6x to 13.6x. The Price/Book ratio of 1.12x remains under its historical 1.21x, with fair value estimates pointing to $60.31 per share (9% upside). Dividend Discount Model yields a target of $56.99, assuming a 5.79% yield and 3.5% dividend growth. With total return estimates near double digits and dividend four times that of the S&P 500’s 1.25%, the valuation case is compelling.

Technicals Reinforce Upside: Golden Cross, $57.03 Fibonacci Target

Technically, NYSE:BNS maintains strong bullish posture with price action above the 50-day and 200-day SMAs, and a Golden Cross pattern in place. RSI recently peaked above 70, signaling short-term overbought levels, but dips have been bought aggressively. Most recent pullback to $54.5–54.6 was met with heavy bid activity. Current Fibonacci retracement projects a move to $57.03, in line with both fundamental models. Histogram remains positive, while MACD shows bullish but steady momentum.

Insider Activity, Share Profile, and Strategic EPS Outlook

Insider transactions are available at this link, reflecting institutional confidence in the medium-term earnings path. Management projects 5–7% EPS growth in FY2025 even after credit provision build, and double-digit EPS growth in FY2026 assuming normalizing loss expectations. BNS aims for 14% ROE medium-term. Strategic partnerships such as its exposure to KeyCorp (KEY) further diversify earnings. Sell-side estimates forecast 8% EPS growth in 2025, rising to 13% in 2026, in line with guidance.

Macro and Risk Considerations for NYSE:BNS

Canadian unemployment rose to 6.9%, up 10 bps MoM, reflecting potential stress ahead for mortgage-heavy banks. BNS holds 17% of its mortgage book in condo loans, a potential vulnerability if housing markets reverse under tariff pressure. Latin American exposure, while a source of growth, also introduces volatility from regional political and inflation dynamics.

BUY NYSE:BNS: Undervalued, Resilient, and Technically Bullish with 5.9% Yield

NYSE:BNS remains significantly undervalued on both earnings and book value metrics. The bank’s balance sheet is fortified, dividend yield is elite at nearly 6%, and technical indicators remain bullish. With international expansion driving earnings, operating leverage improving, and fixed mortgage risk managed, BNS offers an attractive Buy case for yield-seeking investors positioning for upside in FY2025–26.

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