Loans, Impaired Loans and Allowance for Credit Losses

3 Months Ended

Jan. 31, 2026

Loans, Impaired Loans and Allowance for Credit Losses

7.	Loans, impaired loans and allowance for credit losses

(a) Loans at amortized cost


	As at
	January 31, 2026						October 31, 2025
($ millions)	Gross carrying amount		Allowance for credit losses		Net carrying amount		Gross carrying amount		Allowance for credit losses		Net carrying amount
Residential mortgages	$	368,619	$	1,439	$	367,180	$	370,191	$	1,460	$	368,731
Personal loans		107,579		2,216		105,363		110,567		2,432		108,135
Credit cards		16,112		1,215		14,897		18,045		1,355		16,690
Business and government		270,167		2,132		268,035		279,705		2,216		277,489
Total	$	762,477	$	7,002	$	755,475	$	778,508	$	7,463	$	771,045

(b) Impaired loans

(1)


	As at
	January 31, 2026						October 31, 2025
($ millions)	Gross impaired loans		Allowance for credit losses		Net carrying amount		Gross impaired loans		Allowance for credit losses		Net carrying amount
Residential mortgages	$	2,955	$	834	$	2,121	$	2,903	$	840	$	2,063
Personal loans		1,063		570		493		1,071		604		467
Credit cards		–		–		–		–		–		–
Business and government		3,230		883		2,347		3,270		897		2,373
Total	$	7,248	$	2,287	$	4,961	$	7,244	$	2,341	$	4,903
By geography:
Canada	$	2,674	$	786	$	1,888	$	2,416	$	683	$	1,733
United States		158		17		141		–		–		–
Mexico		1,533		554		979		1,494		535		959
Peru		778		383		395		823		400		423
Chile		1,516		351		1,165		1,420		332		1,088
Other international		589		196		393		1,091		391		700
Total	$	7,248	$	2,287	$	4,961	$	7,244	$	2,341	$	4,903

(1)

Interest income recognized on impaired loans during the three months ended January 31, 2026 was $28 (October 31, 2025 – $23).

(i)

Key inputs and assumptions

The Bank’s allowance for credit losses is measured using a three-stage approach based on the extent of credit deterioration since origination. The calculation of the Bank’s allowance for credit losses is an output of a set of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Some of the key drivers include the following:

•

Changes in risk ratings of the borrower or instrument reflecting changes in their credit quality;

•

Changes in the volumes of transactions;

•

Changes in the forward-looking macroeconomic environment reflected in the variables used in the models such as GDP growth, unemployment rates, commodity prices, interest rates, and house price indices, which are closely related with credit losses in the relevant portfolio;

•

Changes in macroeconomic scenarios and the probability weights assigned to each scenario; and

•

Borrower migration between the three stages.

The Bank determines its allowance for credit losses using four probability-weighted forward-looking scenarios (base case, optimistic, pessimistic and very pessimistic).

The Bank considers both internal and external sources of information and data to achieve unbiased projections and forecasts in determining the allowance for credit losses. The Bank prepares the scenarios using forecasts generated by Scotiabank Economics (SE). The forecasts are generated using models whose outputs are modified by SE as necessary to formulate a ‘base case’ view of the most probable future direction of economic developments. The development of the base case and alternative scenarios is overseen by a governance committee that consists of internal stakeholders from across the Bank. The final base case and alternative scenarios reflect significant review and oversight, and incorporate judgement both in the determination of the scenarios’ forecasts and the probability weights that are assigned to them.

(ii)

Key macroeconomic variables

The inputs and models used for calculating expected credit losses may not always capture all characteristics of the market at the date of the financial statements. Qualitative adjustments or overlays may be made for certain portfolios or geographies as temporary adjustments in circumstances where, in the Bank’s view, the inputs, assumptions, and/or modelling techniques do not capture all relevant risk factors, including the emergence of economic or geopolitical events, up to the date of the financial statements. As required under IFRS 9, the allowance for credit losses at each reporting period must be based on inputs, assumptions and information available up to that date.

The Bank has generated a forward-looking base case scenario and three alternate forward-looking scenarios (one optimistic and two pessimistic) as key inputs into the expected loss provisioning models. Given the uncertainty surrounding U.S. trade policies and the direction of tariffs, the scenarios as at January 31, 2026 have varying assumptions of imposed tariffs. The base case scenario assumes tariffs announced and implemented, avoiding speculation on future announcements, including potential trade deals and tariff pauses. Differing assumptions are reflected in the alternate scenarios described below. As new information comes to light in the future, the scenarios and assumptions will be updated accordingly.

The economic landscape continues to be shaped by U.S. economic policy discussions and decisions – notably on trade – and the associated rise in uncertainty. As a result, economic growth slows in both the U.S. and Canada over the forecast horizon. In the U.S., the softening in growth through 2026 reflects an expected slowdown in business investment and weaknesses in the goods sector, the labour market, and consumer confidence. Over this same period, the Canadian economy continues to adjust to higher U.S. tariff rates and the associated rise in uncertainty, both of which reduce demand by households and businesses. The expected strengthening in fiscal support will help mitigate the resulting weakening in economic conditions. The U.S. economy has been more resilient than assumed in last quarter’s base case, which results in a modestly stronger near-term growth profile. For Canada, the combination of a significant upward revision to real GDP in the first half of 2025, better-than-expected performance in the second half of that year, and the upward revision to U.S. economic growth, lifts growth in 2025. Canada’s historical GDP data revisions also lead to a higher level of potential output across the entire forecast horizon, resulting in a higher level of real GDP throughout the projection period.

The optimistic scenario features somewhat stronger economic activity relative to the base case. The pessimistic scenario features a negative demand-type shock with globally tighter financial conditions, weaker growth and inflation, and lower monetary policy rates than in the base case scenario. It also assumes a combination of U.S. imposed tariffs on world economies, including an effective tariff of 7.5% on imports from Canada and Mexico, while facing no retaliation from these countries. The very pessimistic scenario features a strong stagflationary impulse that leads to a protracted period of financial market uncertainty. It also assumes U.S. imposed tariffs with a magnitude about three times that of the pessimistic scenario. Under this scenario, all countries retaliate. This results in higher inflation, requiring central banks to raise their policy rates to higher levels than in the base case in order to bring inflation under control, which is dampening economic activity.

The following tables show certain key macroeconomic variables used to calculate the modelled estimate for the allowance for credit losses. Further changes in these variables up to the date of the financial statements are incorporated through expert credit judgement. For the base case, optimistic and pessimistic scenarios, the projections are provided for the next 12 months and for the remaining forecast period, which represents a medium-term view.


	Base Case Scenario				Alternative Scenario Optimistic				Alternative Scenario Pessimistic				Alternative Scenario Very Pessimistic
As at January 31, 2026	Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period
Canada
Real GDP growth, y/y % change		1.5		1.9		2.2		2.8		-1.0		2.4		-4.3		3.1
Consumer price index, y/y %		2.2		2.2		2.4		2.6		1.7		2.0		5.4		2.4
Unemployment rate, average %		6.4		5.8		6.1		4.6		7.6		6.4		10.4		7.0
Bank of Canada overnight rate target, average %		2.4		3.0		2.8		3.7		2.1		2.5		3.3		3.5
HPI - Housing Price Index, y/y % change		3.5		5.4		4.3		6.9		-0.5		5.9		-3.9		5.5
USD/CAD exchange rate, average		1.35		1.31		1.34		1.30		1.41		1.30		1.50		1.31
U.S.
Real GDP growth, y/y % change		1.6		2.3		2.0		3.3		-0.9		3.0		-3.7		3.5
Consumer price index, y/y %		2.4		2.6		2.6		2.9		2.6		2.5		6.0		2.8
Target federal funds rate, upper limit, average %		3.1		3.3		3.2		3.7		3.0		2.9		3.8		3.9
Unemployment rate, average %		4.3		4.1		4.3		3.8		5.7		4.6		7.9		5.0
Mexico
Real GDP growth, y/y % change		0.6		2.0		1.1		2.8		-1.7		2.4		-4.8		3.1
Unemployment rate, average %		3.3		3.8		3.2		3.2		4.0		3.9		6.1		4.7
Chile
Real GDP growth, y/y % change		2.5		2.1		3.6		2.9		0.3		2.6		-3.7		3.5
Unemployment rate, average %		7.9		7.4		7.6		6.9		9.0		7.5		11.2		8.0
Peru
Real GDP growth, y/y % change		3.2		2.7		4.6		3.6		0.8		3.2		-0.8		3.8
Unemployment rate, average %		5.8		5.9		5.1		5.0		6.8		6.3		10.6		7.4
Caribbean
Real GDP growth, y/y % change		3.6		4.0		4.2		4.8		1.4		4.4		-1.8		5.1
Global
WTI oil price, average USD/bbl		60		61		63		72		52		56		45		51
Copper price, average USD/lb		4.75		5.09		4.85		5.49		4.42		5.00		4.08		4.85
Global GDP, y/y % change		2.5		2.8		3.2		3.6		0.5		3.3		-2.1		3.8


	Base Case Scenario				Alternative Scenario Optimistic				Alternative Scenario Pessimistic				Alternative Scenario Very Pessimistic
As at October 31, 2025	Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period		Next 12 Months		Remaining Forecast Period
Canada
Real GDP growth, y/y % change		1.2		2.2		2.4		3.1		-1.1		2.7		-4.4		3.4
Consumer price index, y/y %		1.9		2.2		2.1		2.7		1.4		2.0		5.0		2.4
Unemployment rate, average %		7.0		5.8		6.6		4.7		8.2		6.4		11.2		7.0
Bank of Canada overnight rate target, average %		2.3		2.8		2.8		3.7		2.1		2.4		3.1		3.3
HPI - Housing Price Index, y/y % change		1.9		6.2		2.6		7.7		-2.0		6.7		-5.1		6.2
USD/CAD exchange rate, average		1.32		1.30		1.31		1.29		1.37		1.29		1.45		1.30
U.S.
Real GDP growth, y/y % change		1.4		2.3		1.9		3.2		-1.0		3.0		-3.7		3.5
Consumer price index, y/y %		2.6		2.5		2.7		2.8		2.7		2.4		6.0		2.7
Target federal funds rate, upper limit, average %		3.3		3.0		3.5		3.5		3.2		2.7		3.9		3.6
Unemployment rate, average %		4.5		4.3		4.4		4.0		5.8		4.8		8.1		5.2
Mexico
Real GDP growth, y/y % change		-0.2		2.2		0.6		2.9		-2.4		2.6		-5.5		3.3
Unemployment rate, average %		3.3		3.7		3.2		3.1		3.9		3.8		6.1		4.6
Chile
Real GDP growth, y/y % change		2.4		2.0		3.5		2.8		0.3		2.6		-3.7		3.5
Unemployment rate, average %		7.9		6.7		7.7		6.4		9.0		6.9		11.2		7.3
Peru
Real GDP growth, y/y % change		2.9		3.1		4.1		4.0		0.6		3.6		-1.0		4.1
Unemployment rate, average %		5.7		6.1		5.3		5.2		6.7		6.5		10.5		7.6
Colombia
Real GDP growth, y/y % change		2.9		2.5		4.0		3.4		0.7		3.0		-1.0		3.5
Unemployment rate, average %		10.3		9.9		10.0		9.1		12.0		10.5		18.9		12.5
Caribbean
Real GDP growth, y/y % change		3.7		4.0		4.4		4.7		1.6		4.4		-0.6		4.9
Global
WTI oil price, average USD/bbl		60		66		64		78		53		61		45		56
Copper price, average USD/lb		4.19		4.68		4.29		5.03		3.92		4.60		3.61		4.47
Global GDP, y/y % change		2.2		2.7		3.0		3.5		0.3		3.2		-2.2		3.7

(iii)

Sensitivity

Relative to the base case scenario, the weighting of these multiple scenarios increased the reported allowance for credit losses for financial assets in Stage 1 and Stage 2 to $4,898 million (October 31, 2025 – $5,313 million) from $4,598 million (October 31, 2025 – $5,018 million).

The Bank

enhanced certain of its IFRS 9 models in the prior year, with the enhanced models exhibiting higher sensitivity to changes in the macroeconomic outlook. If the Bank was to apply a probability weighted average of its two pessimistic scenarios for the measurement of allowance for credit losses for such assets, the allowance for credit losses on performing financial instruments

would be $607 million

higher than the reported allowance for credit losses as at January 31, 2026 (October 31, 2025

– $786 million), excluding the consideration of changes in qualitative overlays or expert credit judgement. Actual results will differ as this does not consider the migration of exposures or incorporate changes that would occur in the portfolio due to risk mitigation actions and other factors.

Under our current probability-weighted scenarios, if all performing financial assets were in Stage 1, reflecting a 12 month expected loss period, the allowance for credit losses would be $753 million

(October 31, 2025

– $801 million) lower than the reported allowance for credit losses on performing financial assets.

(iv)

Allowance for credit losses


Allowance for credit losses
($ millions)	Balance as at November 1, 2025		Provision for credit losses (1)		Net write- offs			Other, including foreign currency adjustment			Balance as at January 31, 2026
Residential mortgages	$	1,460	$	69	$	(27	)	$	(63	)	$	1,439
Personal loans		2,432		468		(419	)		(265	)		2,216
Credit cards		1,355		351		(316	)		(175	)		1,215
Business and government		2,392		289		(187	)		(192	)		2,302
	$	7,639	$	1,177	$	(949)		$	(695)		$	7,172
Presented as:
Allowance for credit losses on loans	$	7,463									$	7,002
Allowance for credit losses on acceptances (2)		1										–
Allowance for credit losses on off-balance sheet exposures (3)		175										170

(1)

Excludes amounts associated with other assets of $

(1).

The provision for credit losses, net of these amounts, is $

1,176.

(2)

Allowance for credit losses on acceptances is recorded against the financial asset in the Consolidated Statement of Financial Position.

(3)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.


($ millions)	Balance as at November 1, 2024		Provision for credit losses (1)		Net write- offs			Other, including foreign currency adjustment		Balance as at January 31, 2025
Residential mortgages	$	1,208	$	64	$	(16	)	$	24	$	1,280
Personal loans		2,319		548		(485	)		44		2,426
Credit cards		1,160		325		(331	)		31		1,185
Business and government		2,036		243		(122	)		17		2,174
	$	6,723	$	1,180	$	(954)		$	116	$	7,065
Presented as:
Allowance for credit losses on loans	$	6,536								$	6,857
Allowance for credit losses on acceptances (2)		1									1
Allowance for credit losses on off-balance sheet exposures (3)		186									207

(1)

Excludes amounts associated with other assets and reversal of impairment losses of $(18). The provision for credit losses, net of these amounts, is $1,162.

(2)

Allowance for credit losses on acceptances is recorded against the financial asset in the Consolidated Statement of Financial Position.

(3)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of

nancial Position.


Allowance for credit losses on loans	As at January 31, 2026
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	194	$	411	$	834	$	1,439
Personal loans		535		1,111		570		2,216
Credit cards		257		958		–		1,215
Business and government		648		601		883		2,132
Total (1)	$	1,634	$	3,081	$	2,287	$	7,002

(1)

Excludes allowance for credit losses of $183 for other financial assets including acceptances, investment securities, deposits with banks,

off-balance

sheet credit risks and reverse repos.


	As at October 31, 2025
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	196	$	424	$	840	$	1,460
Personal loans		613		1,215		604		2,432
Credit cards		338		1,017		–		1,355
Business and government		713		606		897		2,216
Total (1)	$	1,860	$	3,262	$	2,341	$	7,463

(1)

Excludes allowance for credit losses of $191 for other financial assets including acceptances, investment securities, deposits with banks,

off-balance

sheet credit risks and reverse repos.


	As at January 31, 2025
($ millions)	Stage 1		Stage 2		Stage 3		Total
Residential mortgages	$	160	$	409	$	711	$	1,280
Personal loans		554		1,225		647		2,426
Credit cards		295		890		–		1,185
Business and government		614		520		832		1,966
Total (1)	$	1,623	$	3,044	$	2,190	$	6,857

(1)

Excludes allowance for credit losses of $223 for other financial assets including acceptances, investment securities, deposits with banks,

off-balance

sheet credit risks and reverse repos.

The following table presents the changes to the allowance for credit losses on loans.


	As at and for the three months ended
	January 31, 2026												January 31, 2025
($ millions)	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Retail loans:
Residential mortgages
Balance at beginning of period	$	196		$	424		$	840		$	1,460		$	165		$	398		$	645		$	1,208
Provision for credit losses
Remeasurement (1)		(62	)		43			90			71			(58	)		36			89			67
Newly originated or purchased financial assets		11			–			–			11			12			–			–			12
Derecognition of financial assets and maturities		(2	)		(11	)		–			(13	)		(2	)		(6	)		–			(8	)
Changes in models and methodologies		–			–			–			–			(2	)		(14	)		9			(7	)
Transfer to (from):
Stage 1		68			(58	)		(10	)		–			53			(43	)		(10	)		–
Stage 2		(10	)		64			(54	)		–			(10	)		55			(45	)		–
Stage 3		–			(26	)		26			–			–			(25	)		25			–
Gross write-offs		–			–			(34	)		(34	)		–			–			(24	)		(24	)
Recoveries		–			–			7			7			–			–			8			8
Foreign exchange and other movements (2)		(7	)		(25	)		(31	)		(63	)		2			8			14			24
Balance at end of period	$	194		$	411		$	834		$	1,439		$	160		$	409		$	711		$	1,280
Personal loans
Balance at beginning of period	$	613		$	1,215		$	604		$	2,432		$	544		$	1,154		$	621		$	2,319
Provision for credit losses
Remeasurement (1)		(163	)		228			374			439			(162	)		279			390			507
Newly originated or purchased financial assets		82			–			–			82			101			–			–			101
Derecognition of financial assets and maturities		(21	)		(32	)		–			(53	)		(23	)		(41	)		–			(64	)
Changes in models and methodologies		–			–			–			–			(7	)		3			8			4
Transfer to (from):
Stage 1		152			(149	)		(3	)		–			150			(146	)		(4	)		–
Stage 2		(40	)		66			(26	)		–			(58	)		85			(27	)		–
Stage 3		(1	)		(117	)		118			–			(2	)		(124	)		126			–
Gross write-offs		–			–			(489	)		(489	)		–			–			(558	)		(558	)
Recoveries		–			–			70			70			–			–			73			73
Foreign exchange and other movements (2)		(87	)		(100	)		(78	)		(265	)		11			15			18			44
Balance at end of period	$	535		$	1,111		$	570		$	2,216		$	554		$	1,225		$	647		$	2,426
Credit cards
Balance at beginning of period	$	338		$	1,017		$	–		$	1,355		$	288		$	872		$	–		$	1,160
Provision for credit losses
Remeasurement (1)		(72	)		197			218			343			(81	)		168			239			326
Newly originated or purchased financial assets		21			–			–			21			32			–			–			32
Derecognition of financial assets and maturities		(8	)		(5	)		–			(13	)		(13	)		(11	)		–			(24	)
Changes in models and methodologies		–			–			–			–			(2	)		(7	)		–			(9	)
Transfer to (from):
Stage 1		80			(80	)		–			–			88			(88	)		–			–
Stage 2		(27	)		27			–			–			(27	)		27			–			–
Stage 3		–			(98	)		98			–			–			(88	)		88			–
Gross write-offs		–			–			(375	)		(375	)		–			–			(373	)		(373	)
Recoveries		–			–			59			59			–			–			42			42
Foreign exchange and other movements (2)		(75	)		(100	)		–			(175	)		10			17			4			31
Balance at end of period	$	257		$	958		$	–		$	1,215		$	295		$	890		$	–		$	1,185
Total retail loans
Balance at beginning of period	$	1,147		$	2,656		$	1,444		$	5,247		$	997		$	2,424		$	1,266		$	4,687
Provision for credit losses
Remeasurement (1)		(297	)		468			682			853			(301	)		483			718			900
Newly originated or purchased financial assets		114			–			–			114			145			–			–			145
Derecognition of financial assets and maturities		(31	)		(48	)		–			(79	)		(38	)		(58	)		–			(96	)
Changes in models and methodologies		–			–			–			–			(11	)		(18	)		17			(12	)
Transfer to (from):
Stage 1		300			(287	)		(13	)		–			291			(277	)		(14	)		–
Stage 2		(77	)		157			(80	)		–			(95	)		167			(72	)		–
Stage 3		(1	)		(241	)		242			–			(2	)		(237	)		239			–
Gross write-offs		–			–			(898	)		(898	)		–			–			(955	)		(955	)
Recoveries		–			–			136			136			–			–			123			123
Foreign exchange and other movements (2)		(169	)		(225	)		(109	)		(503	)		23			40			36			99
Balance at end of period	$	986		$	2,480		$	1,404		$	4,870		$	1,009		$	2,524		$	1,358		$	4,891
Non-retail loans:
Business and government
Balance at beginning of period	$	854		$	640		$	897		$	2,391		$	739		$	508		$	788		$	2,035
Provision for credit losses
Remeasurement (1)		(55	)		114			260			319			(11	)		67			179			235
Newly originated or purchased financial assets		333			–			–			333			358			–			–			358
Derecognition of financial assets and maturities		(298	)		(61	)		(3	)		(362	)		(315	)		(27	)		(8	)		(350	)
Changes in models and methodologies		–			–			–			–			–			–			–			–
Transfer to (from):
Stage 1		26			(26	)		–			–			25			(25	)		–			–
Stage 2		(19	)		19			–			–			(22	)		23			(1	)		–
Stage 3		–			(15	)		15			–			(1	)		(5	)		6			–
Gross write-offs		–			–			(198	)		(198	)		–			–			(140	)		(140	)
Recoveries		–			–			11			11			–			–			18			18
Foreign exchange and other movements (2)		(57	)		(36	)		(99	)		(192	)		17			10			(10	)		17
Balance at end of period including off-balance sheet exposures	$	784		$	635		$	883		$	2,302		$	790		$	551		$	832		$	2,173
Less: Allowance for credit losses on off-balance sheet exposures (3)		(136	)		(34	)		–			(170	)		(176	)		(31	)		–			(207	)
Balance at end of period ( 3 )	$	648		$	601		$	883		$	2,132		$	614		$	520		$	832		$	1,966

(1)

Includes credit risk changes as a result of significant increases in credit risk, changes in credit risk that did not result in a transfer between stages, changes in model inputs and assumptions and changes due to drawdowns of undrawn commitments.

(2)

Includes impact of divested operations.

(3)

Allowance for credit losses on

off-balance

sheet exposures is recorded in other liabilities in the Consolidated Statement of Financial Position.

(d)

Carrying value of exposures by risk rating


Residential mortgages	As at January 31, 2026								As at October 31, 2025
Category of PD grades ($ millions)	Stage 1		Stage 2		Stage 3 (1)		Total		Stage 1		Stage 2		Stage 3 (1)		Total
Very low	$	221,430	$	3,223	$	–	$	224,653	$	219,905	$	3,983	$	–	$	223,888
Low		83,734		3,843		–		87,577		83,755		4,820		–		88,575
Medium		15,911		8,660		–		24,571		15,870		8,618		–		24,488
High		2,516		5,613		–		8,129		3,002		6,007		–		9,009
Very high		9		3,090		–		3,099		48		3,170		–		3,218
Loans not graded (2)		16,939		696		–		17,635		16,937		1,173		–		18,110
Default		–		–		2,955		2,955		–		–		2,903		2,903
Total	$	340,539	$	25,125	$	2,955	$	368,619	$	339,517	$	27,771	$	2,903	$	370,191
Allowance for credit losses		194		411		834		1,439		196		424		840		1,460
Carrying value	$	340,345	$	24,714	$	2,121	$	367,180	$	339,321	$	27,347	$	2,063	$	368,731

(1)

Stage 3 includes purchased or originated credit-impaired loans.

(2)