Scotiabank Is Downgraded by Moody's One Level on Riskier Lendingby
Moody's cited focus on credit cards, international expansion
Scotiabank ratings on par with other Canadian banks except TD
Bank of Nova Scotia, Canada’s third-largest lender by assets, had its credit rating cut one level by Moody’s Investors Service for its focus on credit cards and auto financing while expanding internationally.
Scotiabank was cut to Aa3 from Aa2, Moody’s said Monday in a statement. That’s the same rating Moody’s assigned to Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada. Toronto-Dominion Bank, the largest lender, is the highest-rated at Aa1.
Moody’s put Scotiabank under review for downgrade on Nov. 2 because the Toronto-based lender was pursuing “significant measures" to increase profitability that signaled a fundamental shift away from its traditionally low-risk appetite. Those measures included accelerating growth of credit cards and auto financing, and pursuing acquisitions in higher growth but less stable international markets.
The last time Moody’s cut a Canadian bank’s credit rating was in 2013, when Toronto-Dominion was reduced to Aa1 from Aaa and Montreal-based National Bank of Canada was cut to Aa3 from Aa2.