Bank of Nova Scotia Issues Autocallable Contingent Barrier Notes Linked to Bank ETF Through 2031

Structured Note Design and Payoff Mechanics

The Bank of Nova Scotia structured these notes to provide investors with multiple potential outcomes depending on the performance of the Invesco KBW Bank ETF over the five-year term. The notes will automatically call if the closing value of the reference asset reaches or exceeds 100% of the initial value on any review date, delivering to investors the principal amount plus a call premium of $142.50 per $1,000 principal amount, equivalent to 14.25% additional compensation. This autocall feature effectively caps the investor's upside in scenarios where the bank ETF appreciates significantly during the structured note period.

If the notes are not automatically called and the reference asset appreciates above its initial value by the final valuation date, investors receive a return equal to 125% times the positive performance of the Invesco KBW Bank ETF. This 125% participation rate means that if the ETF gains 10%, note holders would receive a 12.5% return on their investment. However, this upside potential is contingent on the notes not being called earlier and requires positive performance from the underlying banking sector ETF through the maturity date.

Principal Protection Threshold and Downside Risk Parameters

The notes incorporate a contingent barrier level set at 75% of the initial value of the Invesco KBW Bank ETF. If the notes are not automatically called and the final closing value of the reference asset remains at or above this 75% barrier, investors receive their full principal amount returned at maturity, regardless of whether the ETF declined during the holding period. This barrier structure provides partial downside protection, limiting losses to scenarios where the banking sector ETF experiences severe depreciation exceeding 25% from the initial valuation level.

Investors face full principal risk if the reference asset declines below the barrier level to 75% of initial value. In such scenarios, note holders suffer losses equal to the depreciation of the Invesco KBW Bank ETF and may lose up to 100% of their principal amount. This downside exposure represents a significant structural risk distinct from investing directly in the underlying ETF, as the notes do not provide any interest or coupon payments during the approximately 60-month term to offset potential losses from adverse market movements in the banking sector.

Terms of the Offering and Investment Requirements

The Bank of Nova Scotia issued these notes with an original issue price of 100% of principal amount, with Scotia Capital (USA) Inc., an affiliate of the bank, managing the distribution. The underwriting commission structure provides Scotia Capital with up to 2.50% discount on the principal amount of notes sold to other registered broker-dealers, while direct investors purchasing through Scotia Capital would pay the full original issue price. The bank expects to retain at least 97.50% of proceeds per note, with the remaining portion allocated to underwriting and distribution costs. The trade date for these notes was expected to be July 31, 2026, with settlement occurring on August 5, 2026.

Investors must commit a minimum of $1,000 to purchase these notes, with additional investments required to be in integral multiples of $1,000. The securities are identified by CUSIP number 063941DZ8 and ISIN US063941DZ89. The preliminary pricing supplement was filed pursuant to SEC Rule 424(b)(3) with registration number 333-282565 and reflects an amendment dated July 22, 2026. Investors should note that the notes are not listed on any U.S. securities exchange or automated quotation system, meaning secondary market liquidity and trading availability remain uncertain.

Estimated Value and Initial Pricing Considerations

The Bank of Nova Scotia disclosed that the initial estimated value of the notes at the time the specific terms were set on the trade date was expected to range between $911.23 and $941.23 per $1,000 principal amount. This estimated value range falls notably below the original issue price of $1,000 per note, a gap attributable to the bank's internal funding rate, underwriting commissions, and the costs associated with selling and structuring the notes, including hedging arrangements. The bank's internal funding rate, which reflects what the bank would pay to borrow funds through market-linked note issuances, is typically lower than the rate the bank would pay when issuing conventional fixed-rate debt securities.

The disclosure indicates that the value gap between issue price and estimated value reflects the economic costs embedded in the structured product that investors bear upfront. The bank noted that the value of the notes at any time will reflect many factors and cannot be predicted with accuracy. Additionally, the bank stated that Scotia Capital may initially buy or sell the notes in secondary markets at prices that may temporarily exceed the estimated value on the trade date, as the bank may elect to effectively reimburse investors a portion of estimated hedging costs and other structural costs over an anticipated reimbursement period of approximately three months following the original issue date.

Credit Risk and Unsecured Debt Characteristics

The notes represent unsubordinated and unsecured debt obligations of The Bank of Nova Scotia, meaning that all payments on the notes depend entirely on the creditworthiness and ability of the bank to perform its payment obligations. Unlike deposits held at the bank, the notes are not insured by the Canada Deposit Insurance Corporation pursuant to the CDIC Act, the U.S. Federal Deposit Insurance Corporation, or any other government agency in Canada, the United States, or any other jurisdiction. Investors accepting these notes assume the full credit risk of The Bank of Nova Scotia as the obligor, and any deterioration in the bank's financial condition or credit rating could affect the bank's ability to make scheduled payments or the final maturity payment.

The disclosure emphasizes that investment in the notes involves substantial risks beyond the reference asset performance risk. The notes do not constitute a direct investment in the Invesco KBW Bank ETF or any of its constituent securities, and note holders do not acquire any direct economic interest, ownership, voting rights, or entitlement to dividends or distributions from the reference asset or its components. This structure means investors bear both the credit risk of The Bank of Nova Scotia and the market risk of the banking sector ETF without the potential upside benefits of direct ETF ownership such as dividend participation.

Distribution Structure and Market-Making Activities

Scotia Capital (USA) Inc., an affiliate of The Bank of Nova Scotia, plays a central role in the distribution of these notes to the market. Scotia Capital purchases the notes from the bank at the principal amount and subsequently sells them to other registered broker-dealers at a discount of up to $25.00 (2.50%) per principal amount of notes, or offers the notes directly to investors at the original issue price. This distribution arrangement means that retail investors purchasing through Scotia Capital directly would pay the full $1,000 per note price, while broker-dealers receive a wholesale discount that they may pass through to their clients or retain as part of their own margin.

The preliminary pricing supplement disclosure indicates that Scotia Capital may use the final pricing supplement to engage in market-making transactions in the notes after their initial sale, potentially buying and selling the notes in secondary markets if Scotia Capital elects to do so. The document notes that unless otherwise specified in the confirmation of sale, the preliminary pricing supplement is being used in a market-making transaction. This market-making activity introduces potential conflicts of interest, as Scotia Capital's secondary market pricing and liquidity provision may diverge from the initial estimated value and could be influenced by the bank's ongoing hedging positions and costs.

Invesco KBW Bank ETF as Reference Asset

The notes are linked to the Invesco KBW Bank ETF, a publicly traded fund that focuses on the U.S. banking sector. The ETF serves as the reference asset for determining all payoff outcomes under the structured note agreement, with the closing value of the ETF shares measured on specific dates including any review date for automatic call determination and the final valuation date at maturity. The performance of the banking sector, banking regulations, interest rate movements, and competitive dynamics within the financial services industry all directly influence the valuation of this reference asset and therefore the ultimate return or loss for note investors.

By linking the notes to a broad banking sector ETF rather than individual bank stocks, the Bank of Nova Scotia created a diversified exposure to banking industry performance. However, the specific structure of the autocallable notes with the barrier level means that investors benefit from ETF appreciation only up to the automatic call trigger or within the specific performance parameters defined by the structured product. Investors do not receive the full benefit of banking sector strength if it pushes the ETF significantly above 100% before maturity, as the autocall feature terminates the note investment at that point.

Tax Treatment and Legal Considerations

The notes are issued as unsubordinated and unsecured debt securities of The Bank of Nova Scotia and do not constitute a direct investment in any securities, shares, or units of the reference asset. The distinction matters for tax purposes, as the notes represent derivative products with payoffs linked to an underlying ETF rather than direct ownership interests in that ETF. The pricing supplement references accompanying product supplement, prospectus supplement, and prospectus documents that presumably contain detailed tax treatment information, which investors must review independently before purchasing the notes.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or adequacy of the preliminary pricing supplement. The filing states that any representation to the contrary would constitute a criminal offense. Investors should recognize that the preliminary pricing supplement was subject to completion and that final terms would be set on the trade date. The preliminary pricing supplement amendment dated July 22, 2026, superseded any prior preliminary pricing supplement dated the same date, indicating that the bank made material revisions to the offering terms before final pricing.

Risks and Investor Considerations for Bank ETF Exposure

Structured notes linked to banking sector performance carry risks specific to both the financial services industry and the derivative product structure. The banking sector faces regulatory pressures, interest rate sensitivity, credit cycle risks, and competitive pressures from fintech firms and nonbank financial institutions. A prolonged period of economic weakness affecting loan demand or credit quality could significantly depress the Invesco KBW Bank ETF and push the reference asset below the 75% barrier level, resulting in substantial principal losses for note holders. Additionally, specific banking regulations or macroeconomic policy changes affecting banks could rapidly move the reference asset below the protective barrier.

The autocallable structure itself introduces timing risk for investors. If the banking sector ETF appreciates rapidly and triggers the automatic call, note investors receive the 14.25% call premium but forgo all additional upside beyond that point. Conversely, if the ETF declines modestly but remains above the barrier, investors receive principal protection but no positive return, representing an opportunity cost compared to holding the underlying ETF directly. The initial estimated value gap between the $1,000 issue price and the $911-$941 range further indicates that investors pay a structural premium for these features that is not subsequently recovered.