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The Bank of Nova Scotia has introduced contingent income auto-callable securities maturing July 27, 2029, providing investors with a potential quarterly coupon equivalent to an 11.32% annual rate. These structured notes expose investors to principal risk tied to the worst-performing stock between Goldman Sachs and JPMorgan Chase. As detailed in a preliminary pricing supplement dated July 22, 2026, the notes carry significant downside risk, including the possibility of total principal loss if either underlying stock drops below 60% of its initial value. Investors should note there is no guarantee of interest payments, nor participation in any appreciation of the referenced equities.
Key Points
- NYSE: BNS
- The Bank of Nova Scotia priced contingent income auto-callable securities with a three-year term offering 11.32% annual contingent coupons
- References The Goldman Sachs Group, Inc. and JPMorgan Chase & Co. common stocks, with payments linked to the worst-performing underlying equity
- Principal-at-risk structure featuring automatic early redemption if both stocks stay above call thresholds on determination dates
Investment Structure and Reference Stocks
The Bank of Nova Scotia issued these contingent income auto-callable notes as senior unsecured debt under its Senior Note Program, Series A. These principal-at-risk instruments do not guarantee principal repayment or fixed interest payments. Instead, investors may earn contingent quarterly coupons if specified performance criteria are met on scheduled determination dates during the three-year term.
The securities reference common shares of two major U.S. financial institutions: The Goldman Sachs Group, Inc. (Bloomberg ticker GS UN) and JPMorgan Chase & Co. (Bloomberg ticker JPM UN). All payments depend on the worst-performing stock between the two, meaning that even if one stock performs well, a significant decline in the other reduces or eliminates coupon payments and risks principal loss at maturity. This "worst-of" design concentrates risk on a single reference asset’s performance, creating asymmetric downside exposure.
Coupon Payment Conditions and Mechanics
These securities offer a contingent quarterly coupon of $28.30 per $1,000 principal, equivalent to an 11.32% annual rate, provided both underlying stocks close at or above their respective coupon threshold prices on each determination date. If either stock closes below 60% of its initial price on any determination date, no contingent coupon is paid. The notes include a memory feature that accumulates unpaid coupons, allowing potential recovery of missed payments if both stocks later exceed coupon thresholds.
The Bank of Nova Scotia set 12 quarterly determination dates from October 26, 2026, through July 24, 2029, with corresponding coupon payment dates following each determination. The final coupon payment occurs at maturity on July 27, 2029. Investors must accept the risk that no coupons will be paid if either stock remains below coupon thresholds on all determination dates.
Automatic Early Redemption and Call Features
The notes include an automatic early redemption feature that can terminate the investment before maturity. If both stocks close at or above their call threshold prices on any determination date before maturity, the notes will be redeemed on the next coupon payment date. Upon early redemption, investors receive the principal amount plus accrued contingent coupons, including any accumulated unpaid coupons.
This early call option allows the issuer to cap investor upside when both stocks perform well. Once early redemption occurs, no further payments are made, and investors forfeit any potential appreciation beyond the call date. Early redemption timing depends solely on both stocks meeting call thresholds on a determination date.
Principal-at-Risk and Downside Exposure
The primary risk is the principal-at-risk structure tied to the worst-performing stock. If either stock’s final price falls below 60% of its initial price at maturity, investors receive less than 60% of principal, potentially losing their entire investment. Investors bear a one-to-one loss exposure based on the worst-performing stock’s decline.
The disclosure stresses investors will not benefit from any appreciation in the reference stocks and may receive no coupons if either stock falls below coupon thresholds. The structure concentrates risk on the worst-performing stock, meaning significant loss is possible even if the other stock performs well. These securities suit investors willing to risk full principal loss based on the worst-performing underlying stock.
Issuer Credit Risk and Unsecured Debt Status
Investors also face credit risk of The Bank of Nova Scotia, the issuer. Payments depend on the issuer’s creditworthiness, and default could result in total loss. The securities are senior unsecured debt with no collateral backing, ranking as general unsecured creditors in insolvency. This combination of issuer credit risk and principal risk tied to stock performance creates layered risks that investors must evaluate carefully.
Offering Details, Pricing, and Settlement
The notes have a stated principal of $1,000 each, issued at $1,000 plus applicable commissions and adjustments per the preliminary pricing supplement. The minimum investment is one note. Pricing occurred on July 24, 2026, with an issue date of July 29, 2026, and maturity on July 27, 2029, subject to postponement for market disruptions.
Settlement is on a T+3 basis (three business days post-trade), differing from the standard T+1 for most secondary market securities. Buyers wishing to trade before one business day prior to delivery must arrange alternative settlement to avoid failures, posing operational considerations for early trading.
Determination Dates and Coupon Payment Schedule
Determination dates are quarterly: October 26, 2026; January 25, April 26, July 26, October 25, 2027; January 24, April 24, July 24, October 24, 2028; January 24, April 24, and July 24, 2029, with adjustments for non-trading days and disruptions. Coupon payments follow shortly after each determination date, concluding with the final payment at maturity on July 27, 2029. Investors have 12 opportunities to receive contingent coupons if performance conditions are met.
Investment Suitability and Risk Summary
The Bank of Nova Scotia states these securities are intended for investors willing to risk their entire principal based on the worst-performing underlying stock, seeking potentially above-market coupon rates in exchange for risk of no coupons and principal loss. The 11.32% annual coupon compensates for the risk of zero coupons and principal loss. Coupons are contingent and not guaranteed.
Risks include no coupons if either stock falls below coupon thresholds, principal loss if either stock falls below 60% at maturity, total loss if declines are severe, concentration on worst-performing stock, no participation in stock appreciation, and issuer credit risk. Investors should review all offering documents, including the prospectus and supplements dated November 8, 2024, and the preliminary pricing supplement, before investing.
Regulatory Filings and Documentation
The preliminary pricing supplement was filed under SEC Rule 424(b)(2) on July 22, 2026, and remains subject to completion. The Bank of Nova Scotia will not sell the notes until final pricing supplement, product supplement, prospectus supplement, and prospectus are delivered in final form. The offering documents do not constitute an offer in jurisdictions where sales are prohibited.
The notes are part of registration statement 333-282565, with supporting documents dated November 8, 2024. Final offering details may differ from the preliminary version based on market conditions and pricing determinations. Investors should expect final documents prior to settlement.
