THE BANK OF NOVA SCOTIA
The trend on all ratings is Stable. Scotiabank's Long-Term Issuer Rating is composed of an Intrinsic Assessment (IA) of AA (low) and a Support Assessment (SA) of SA2, which reflects the expectation of timely systemic support from the
KEY RATING CONSIDERATIONS
Scotiabank's ratings and Stable trends are underpinned by its highly diversified franchise, with the Bank's Canadian operations complemented by its International Banking (IB) business segment that is focused on the high-growth markets of
The ratings also consider that government support measures have largely mitigated the negative economic impacts of the Coronavirus Disease (COVID-19) pandemic. Positively, economic performance has rebounded, and the labour market is essentially at full capacity; however, headwinds persist from a potential aggressive interest rate tightening cycle to combat inflation, geopolitical tensions related to the
RATING DRIVERS
Over the longer term, the Bank's ratings would be upgraded if Scotiabank were to continue to build the depth and scale of its franchise, resulting in a sustained improvement in financial performance without substantially increasing its risk profile.
Conversely, the Bank's ratings would be downgraded if there were a sustained deterioration in earnings or asset quality, especially caused by deficiencies in risk management or an increase in risk profile. Significant operational issues, particularly in the
RATING RATIONALE
Franchise Combined
The ratings are underpinned by the Bank's highly diversified business mix that includes consumer and wholesale banking services, wealth management and capital markets businesses, which all contribute to Scotiabank's overall franchise strength. The Bank has essentially maintained its market position in Canadian Banking, ranking first in automotive lending, third in real estate secured lending and personal loans, and fifth in credit cards and business loans. In IB, the Bank has simplified its operational structure and geographical footprint, focusing on gaining scale in its core
Earnings Combined
Scotiabank generates solid underlying earnings, which contribute to the Bank's ability to absorb credit losses. In F2021, earnings were
Risk Combined
DBRS Morningstar views Scotiabank's risk profile as conservative, exhibited by its strong asset quality with a manageable level of PCLs and impaired loans. However, the Bank exhibits slightly weaker asset-quality metrics compared with its Canadian bank peers, reflecting Scotiabank's exposure to emerging markets, including the
Funding and Liquidity Combined
Overall, Scotiabank has a solid funding and liquidity profile, which benefits from a substantial retail deposit base. Scotiabank also makes use of wholesale funding, which DBRS Morningstar views as acceptable given the Bank's business model and that Scotiabank ensures that its IB subsidiaries are funded in their local markets. Over the last few years, Scotiabank has strategically reduced its wholesale funding reliance while remaining focused on raising additional deposit funding. As a result, the Bank's usage of wholesale funding is more in line with its Canadian bank peers. Wholesale funding usage is returning to pre-pandemic levels (21.3% of total assets at Q1 2022, compared with 16.9% at Q1 2021 and 23.5% at Q1 2020) driven by asset growth, partially offset by deposit retention. In addition, liquidity at Scotiabank remains strong as it reported a Q1 2022 liquidity coverage ratio of 123% and a net stable funding ratio of 108%, both comfortably above the regulatory minimums.
Capitalization Combined
DBRS Morningstar views the Bank's capitalization as strong, reflecting current capital levels as well as its significant internal capital generation. In Q1 2022, Scotiabank's CET1 ratio was 12.0%. At this level, the Bank's CET1 ratio was well above the regulatory minimum of 10.5% for Domestic Systemically Important Banks (D-SIBs). On
Further details on the Scorecard Indicators and
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Banks and Banking Organizations (
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This rating is endorsed by
Each of the principal methodologies/principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. Specifically, the Global Methodology for
Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are monitored.
For further information on DBRS Morningstar historical default rates published by the
Lead Analyst:
Rating Committee Chair:
Initial Rating Date:
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Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Long-Term Issuer Rating Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Issuer Rating Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Long-Term Deposits Confirmed AA Stb CA
U
E
20-Apr-22 Long-Term Senior Debt Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Instruments Confirmed R-1 (high) Stb CA
U
E
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Long-Term Issuer Rating Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Issuer Rating Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Bail-inable Senior Debt Confirmed AA (low) Stb CA
U
E
20-Apr-22 Long-Term Deposits Confirmed AA Stb CA
U
E
20-Apr-22 Long-Term Senior Debt Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Instruments Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 NVCC Subordinated Debt Confirmed A (low) Stb CA
U
E
20-Apr-22 Subordinated Debt Confirmed A (high) Stb CA
U
E
20-Apr-22 Non-Cumulative Preferred Shares Confirmed Pfd-2 (high) Stb CA
U
E
20-Apr-22 NVCC Preferred Shares Confirmed Pfd-2 Stb CA
U
E
20-Apr-22 NVCC Additional Tier 1 (AT1) Capital Notes Confirmed BBB (high) Stb CA
U
E
20-Apr-22 NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes Confirmed BBB (high) Stb CA
U
E
Montreal
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Long-Term Issuer Rating Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Issuer Rating Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Long-Term Deposits Confirmed AA Stb CA
U
E
20-Apr-22 Long-Term Senior Debt Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Instruments Confirmed R-1 (high) Stb CA
U
E
National
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Long-Term Issuer Rating Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Issuer Rating Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Long-Term Deposits Confirmed AA Stb CA
U
E
20-Apr-22 Long-Term Senior Debt Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Instruments Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Subordinated Notes Confirmed A (high) Stb CA
U
E
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Long-Term Issuer Rating Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Issuer Rating Confirmed R-1 (high) Stb CA
U
E
20-Apr-22 Long-Term Deposits Confirmed AA Stb CA
U
E
20-Apr-22 Long-Term Senior Debt Confirmed AA Stb CA
U
E
20-Apr-22 Short-Term Instruments Confirmed R-1 (high) Stb CA
U
E
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
20-Apr-22 Scotiabank Trust Securities Confirmed A (low) Stb CA
U
E
20-Apr-22 Scotiabank Trust Securities - Series 2006-1 (Scotia BaTS - Series 2006-1) Confirmed A (low) Stb CA
U
E
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