FitchRatings on April 8 affirmed the national ratings of Scotiabank El Salvador SA and holding company at AAA(slv). The outlook for the ratings is stable.
The ratingsreflect the support that the bank would likely receive from its parent, Canada'sBank of Nova Scotia, inaddition to their synergies in terms of products and services, Fitch said.
The capitallevels of both entities are solid and above average for the system due to theirinternal capital generation, Fitch said. However, their profitability remains limiteddue to high expenses on provisions, limited operating efficiency and modest non-operatingincome.
The reasonfor the high provisions is a voluntary increase in the bank's reserves, which althoughnot required given the real guarantees offered by its mortgages portfolio is stilla "prudent practice," Fitch pointed out.
ScotiabankEl Salvador's loan portfolio compares unfavorably with the local system given itshigh level of non-performing loans, which is mitigated by its relatively high reserves,Fitch added.
Holdingcompany Inversiones Financieras Scotiabank shows lower operating indicators thanthe bank, but these are compensated by income from its other subsidiary, , Fitch noted.