Bank of Nova Scotia Sees Commercial Growth as Digital, Fee Strategy Gains Traction

Commercial banking momentum is strengthening: Scotiabank reported a strong deal pipeline, 10% year-over-year small-business lending growth and five consecutive quarters of declining commercial credit-loss provisions. Growth opportunities include defense, energy, oil and gas, and regional expansion across Canada. Revenue diversification is improving returns: The bank is shifting beyond mortgage lending toward commercial banking, small business and cards. Fee revenue rose more than 20% over the past two quarters, while net interest margin expanded for five consecutive quarters. Digital and relationship-banking initiatives are gaining traction: Digital channels accounted for 40% of third-quarter sales, while bundled mortgage relationships are increasing account and card usage. Scotiabank is also deploying AI to improve underwriting and productivity, including nearly 70% time savings in parts of mortgage verification. Aris Bogdaneris, Group Head of Canadian Banking at Bank of Nova Scotia NYSE: BNS , said the lender is seeing progress from a strategy centered on deepening primary customer relationships, diversifying revenue sources and maintaining pricing and cost discipline. Speaking at a Barclays event, Bogdaneris said tariff and trade-policy uncertainty remains a factor for Canadian businesses, but he described the bank’s commercial clients as resilient. He said the commercial banking business has its strongest deal pipeline in a long time, while the retail bank is monitoring customers and sectors that may be more vulnerable to economic pressures. “We manage, and we continue to be vigilant,” Bogdaneris said. He added that Scotiabank is focused on clients in potentially affected sectors including trade, manufacturing, commercial real estate and agriculture, while maintaining careful underwriting and stress testing. Canadian investment and commercial banking Bogdaneris discussed Scotiabank’s commitment of CAD 100 billion to Canadian industry, saying the bank is already active with clients in oil and gas and defense. He said the commitment covers both the existing book and future activity, with the bank expanding its presence in Western Canada and other regions expected to benefit from investment. In commercial banking, the bank has added sales capacity, particularly in mid-market and small-business segments, as well as in the prairies, British Columbia and Quebec. Bogdaneris said the pipeline developed through those additions is beginning to translate into growth. Small-business lending is growing 10% year over year, according to Bogdaneris. Commercial banking provisions for credit losses have declined for five consecutive quarters. Coverage ratios in the commercial business are at their highest level, he said. He said the bank expects opportunities related to defense, energy, oil and gas to support commercial banking growth. However, he said a reduction in the Domestic Stability Buffer by the Office of the Superintendent of Financial Institutions does not materially alter Scotiabank’s lending approach. The bank remains focused on demand, customer needs and risk-adjusted returns rather than loosening standards because more capital is available, he said. Returns, margins and fee growth Bogdaneris said the Canadian banking unit’s return on equity expansion in the third quarter reflected two years of work rather than a single-quarter development. He identified four main drivers: a more diversified business mix, improvement in risk-adjusted margins, faster fee growth and productivity initiatives. On the lending side, the bank has shifted away from being primarily mortgage-driven an...