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Scotiabank T&T on parent downgrade: No negative impact expected
Scotiabank in T&T will in no way be impacted by the downgrade of its parent bank in Canada. A statement from Scotiabank yesterday read: “Scotiabank Toronto has the most diversified earnings profile of its peer group at the business segment level and arguably the most line of business diversification within those segments, given the numerous geographies in its international division and its diversified capital markets lines of business.”
The statement added that Scotiabank in T&T has a strong portfolio and expects no negative repercussions. ”Because of the strength of our parent organisation, combined with Scotiabank T&T's consistent record of growth and profitability, we do not anticipate any negative impact.” Scotiabank was among five big Canadian banks and a credit union downgraded on Monday by Moody's rating agency. The long-term senior debt ratings of the banks were all downgraded one notch.
Toronto-Dominion Bank (TSX:TD) is the highest rated of the six, at AA1 (down from AAA). Scotiabank and Desjardins drop to AA2 (from AA1), CIBC (TSX:CM), Bank of Montreal (TSX:BMO) and National Bank (TSX:NA) slip to AA3 (from AA2). The rating agency said National, BMO and Scotiabank face additional risk from the amount of their profit that comes from capital markets operations, which lend large amounts to corporations and advise businesses on debt and stock issues.
Canadian Finance Minister Jim Flaherty was quick to reiterate his confidence in Canada's banking system, which is regarded as one of the world’s safest banking systems. "For five years in a row, the World Economic Forum has ranked Canada's banking system as the soundest in the world. Moody's rating of Canadian banks continues to be among the highest in the world."