Analysis Update: Scotiabank Chile

The negative outlook on Scotiabank Chile for the next 24 months reflects the potential impact of heightened economic risks for entities operating in Chile. This could take a toll on the financial institutions' profiles, including that of Scotiabank Chile, particularly in terms of asset quality and capital and earning. A potential weakening of Scotiabank Chile's intrinsic credit quality wouldn't automatically result in a downgrade because of potential extraordinary support from the parent. We could revise the outlook on Scotiabank Chile to stable in the next 24 months if we were to revise the negative trend in the economic risk on Chile's Banking Industry Country Risk Assessment's (BICRA) to stable while all other specific factors remain unchanged. Criteria Financial Institutions

...Key Strengths Key risks Potential extraordinary support provided by its parent The Bank of Nova Scotia (BNS; A+/Stable/A-1) given the strategic importance of Chilean operations for the group; and Weak investor sentiment in Chile due to the political uncertainty caused by the proposed constitutional amendments. Enhanced competitive position after the merger with BBVA Chile. Lower income levels as well as higher leverage of companies and enterprises in Chile versus global peers. Funding profile somewhat concentrated in institutional investors....

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