Scotiabank Leans Into AI and Digital Channels as Commercial Lending Gains Velocity

Bank of Nova Scotia is accelerating its technology integration and commercial expansion, according to statements made by Aris Bogdaneris, Group Head of Canadian Banking, at a Barclays event covered by Yahoo Finance. The Canadian financial institution, operating as Scotiabank, is leaning into artificial intelligence, digital delivery channels, and cross-product customer relationships as it aims to shift its operational mix away from standalone mortgage lending toward commercial banking, small business, and cards.

Artificial intelligence has become a focal point of the bank's operational efficiency push. Scotiabank has rolled out an enterprise-wide AI platform to 18,000 associates while utilizing AI tools to assist software engineers, aid relationship managers in meeting preparation, and speed underwriting processes. Within mortgage underwriting specifically, the bank reported that AI applications have reduced processing times by nearly 70% in parts of the verification process. The firm is pairing these digital upgrades with structural changes to its delivery network, adding 500 virtual advisers while reducing physical branch space and investing in cybersecurity and digital tools.

Digital engagement is serving as a primary sales growth engine for the Toronto-based bank. Digital channels accounted for 40% of total sales during the third quarter, and executive leadership has set a target to increase the share of revenue generated through digital channels from about 18% to 30%. Additionally, Scotiabank is preparing to unveil an updated version of Tangerine, its digital banking subsidiary serving 2 million customers. Built with AI-enabled capabilities developed over the past 18 months, the platform is expanding into wealth management and small-business services.

Alongside its technological initiatives, Scotiabank reported strengthening momentum across its commercial banking business. Small-business lending grew 10% year-over-year, supported by five consecutive quarters of declining commercial credit-loss provisions and elevated coverage ratios. The lender has committed CAD 100 billion to Canadian industry, prioritizing opportunities in defense, energy, oil, and gas, alongside geographic expansion in Western Canada, Quebec, British Columbia, and the Prairies. Despite trade policy and tariff uncertainties facing Canadian businesses, commercial deal pipelines remain at multi-year highs.

The strategy to diversify income streams has supported Scotiabank's return on equity expansion in Canadian banking. Net interest margins have widened for five consecutive quarters, while operating leverage has demonstrated four quarters of improvement. Supported by cards, mutual funds, and insurance, fee revenue climbed by more than 20% across the past two quarters. Non-mortgage lending is growing faster than mortgage lending for the first time in two years, reflecting a deliberate effort to avoid competing solely on price for lower-margin home loans.

To optimize its residential portfolio, Scotiabank projects roughly 4% mortgage growth this year while managing upcoming repricing cycles. Approximately CAD 80 billion in mortgages are undergoing repricing across this year and next, followed by roughly CAD 35 billion in renewals in 2026 and between CAD 75 billion and CAD 80 billion coming due in fiscal 2027. Under its 'primacy' model, 95% of new mortgage inflows now incorporate a Mortgage+ bundle featuring at least three bank products. This cross-selling approach has driven 10% increases in day-to-day transaction account volume and credit card volume through mortgage relationships, cutting the proportion of single-product mortgage holders to 13%.

Retail deposit capture has outpaced industry benchmarks following the March launch of a high-interest savings account, which generated CAD 6 billion in balances, 70% of which originated from clients and funds outside the bank. Day-to-day retail and savings deposit growth reached 1.2% quarter-over-quarter in Q3, about double the Big Six average. In credit cards, premium products represented 45% of new accounts, backed by engagement across the 50-million-member Scene+ loyalty network. Addressing external investments, Bogdaneris noted that Scotiabank remains satisfied with its equity stake in KeyBank and anticipates no change to its position.