The Bank of Nova Scotia (NYSE:BNS) is one of the best Goldman Sachs bank stocks. On June 9, Fitch Ratings maintained the Bank of Nova Scotia’s long-term and short-term issuer default ratings at ‘AA-’ and ‘F1+’, respectively, maintaining a stable outlook.
These ratings indicate the constraints in Scotiabank’s operating environment, reflected by its average operating environment score of ‘aa-’. This score factors in the risks and revenue from primary end markets, such as Canada, the United States, Chile, Mexico, Peru, and Colombia.
BNS maintains a leading retail banking position in Canada. Scotiabank is working on a five-year plan launched in December 2023 to grow its core businesses, strengthen relationships with clients, and improve how the bank operates. As part of this plan, BNS bought a 14.9% stake in KeyCorp (NYSE:KEY) and simplified its operations in Latin America by exiting Colombia, Costa Rica, and Panama.
Fitch observed that, given its significant presence in Mexico, BNS could feel more of an impact from new US tariffs than other Canadian banks. Broader economic challenges in Mexico and Canada could also put pressure on the quality of its loan book. In Q2 2025, the percentage of impaired loans rose to 90bps, up from 83bps the year before, mostly due to weaker performance in Canadian retail and commercial lending. Credit quality has been a consistent challenge for BNS compared to other domestic banks, again tied to its international exposure.
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Revenue at BNS has improved due to better loan management and stronger margins, but near-term profit pressure remains as the bank continues to realign its operations. To guard against tariff-related risks, it has increased loan-loss provisions. Capital levels are solid, with a CET1 ratio of 13.2%, providing a strong buffer in uncertain conditions.
Fitch does not expect a ratings upgrade soon. A more optimistic outlook would require lower exposure to emerging markets and reduced risk from Canadian household debt and housing.
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