Fitch Ratings on Aug. 9 affirmed the long- and short-term ratings of Mexico's Scotiabank Inverlat SA Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat SA de C.V., and Scotia Inverlat Casa de Bolsa SA de C.V. at AAA(mex) and F1+(mex), respectively. The outlook for the long-term rating is stable.
The ratings consider the capacity of the parent, Bank of Nova Scotia, which is rated AA- by Fitch, to provide support if necessary.
Fitch believes Bank of Nova Scotia has a strong propensity to provide support to its Mexican unit given the high level of operational integration, and the brand-identity, commercial, and financial synergies. Mexico is considered a strategic market for the Canadian bank, which has provided support in the past through its capital contributions to support Scotiabank Inverlat's growth plans, and a $250 million contingency credit line, the rating agency noted.
Scotiabank Inverlat's recurrent profitability since 2014 as a result of operational improvement initiatives and new technological tools as well as the stabilization of credit costs and a slightly better net interest margin have helped bring higher profit generation. Profit-to-risk-weighted assets ratio was at 2.3% in the second quarter of 2017, compared to 2.06% in the year-ago period.
In addition, its capitalization levels are adequate and similar to its peers, supported by solid internal capital generation as well as capital support from shareholders.