The Bank of Nova Scotia

The stable outlook reflects our expectation that over our two-year outlook horizon, BNS will remain well positioned to absorb any remaining fallout from the pandemic, including possibly higher charge-offs, although we expect loan losses will be manageable. We also expect operating performance will continue to strengthen. We expect the S&P Global Ratings' forecast RAC ratio will remain in the adequate range (7.8% versus the peer average of almost 9%) over the next 18-24 months, reflecting improving operating performance in 2021 from sharply lower provisions for loan losses; this will likely be somewhat offset by higher RWA growth as loan growth continues to rise in international banking, as it has been lagging the Canadian banking business, and share repurchases and dividend

...A strong domestic retail and commercial franchise and diversified international banking underpin BNS' operations. The Bank of Nova Scotia (BNS) benefits from a longstanding and well-established Canadian retail and commercial franchise that provides stability to its operating performance. BNS has scaled back its international footprint over many years by exiting noncore countries and operations, which we view positively, and which has reduced the bank's risk profile and earnings volatility. BNS' exposure to residential mortgages and other consumer loans is slightly higher than that of peers. The bank is more vulnerable to a significant drop in home prices than some peers due to its higher exposure to residential mortgages; however, we do not expect home prices will decline meaningfully, as immigration (to Canada) levels are expected to pick up, which will help support home prices, and there continues to be a shortage of supply. Exposure to unsecured consumer lending also is slightly higher...

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