Fitch Affirms Scotiabank Uruguay S.A.'s IDR at 'A-'; Outlook Stable

Published: 2026-04-28 06:15:25 ET BNS.TO

Published on 04/28/2026 at 06:15 am EDT

Fitch Ratings has affirmed Scotiabank Uruguay S.A.'s (Scotiabank Uruguay) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'A-'.

The Rating Outlook is Stable. Fitch has also affirmed the bank's Shareholder Support Rating (SSR) at 'a-' and Viability Rating (VR) at 'bb+'.

Key Rating Drivers

IDRs Driven by Support: Scotiabank Uruguay's IDRs of 'A-' and SSR of 'a-' are driven by expected support that the bank would receive from its ultimate parent, The Bank of Nova Scotia (BNS; AA-/Stable). The subsidiary's Long-Term Foreign Currency IDR is capped by Uruguay's Country Ceiling of 'A-' due to transfer and convertibility risks and is two notches above the sovereign's Foreign Currency IDR.

Strong Synergies with BNS: Fitch considers Scotiabank Uruguay a subsidiary of limited importance for its parent. However, we believe that there is a significant probability of support from the parent due to reputational risks and the potential negative impact that a default might have on other subsidiaries, especially when considering the subsidiary's small size. There are multiple synergies with the parent, even though Scotiabank Uruguay plays a limited role in BNS's strategy, and Uruguay is not a core market for the parent.

Stable Operating Environment: Fitch's operating environment (OE) assessment of 'bbb-' for Uruguay is based on two key metrics: the Fitch Operational Risk Index (ORI) and GDP per capita. Fitch believes these metrics have the greatest explanatory power in determining the bank's ability to generate business volumes within acceptable risk levels. As of December 2025, Uruguay's GDP per capita was USD24.0 thousand, and Fitch's ORI percentile rank was 57.2%.

Well-Established Franchise: Scotiabank Uruguay's VR of 'bb+' is in line with its implied VR and is driven by qualitative and quantitative factors. Its business profile of 'bb+' is determined by the bank's four-year average total operating income (TOI) of USD243 million, which aligns with the 'bb' category. Scotiabank Uruguay is moderately sized as the fourth largest privately owned bank in the country, with diversified lending and bank services.

In addition to its corporate and small and medium-sized enterprise (SME) services, the bank is one of the key players in retail loans through its competitive credit card, mortgage and auto loan products. Scotiabank Uruguay's VR also reflects its financial profile, which has demonstrated stable profitability and asset quality while improving capitalization. Liquidity remains strong.

Stable Asset Quality: Scotiabank Uruguay's asset quality was satisfactory as of December 2025, with a low Stage 3 impaired loans-to-total loans ratio of 1.8%, in line with that of private sector peers. As of the same date, loan loss reserves comfortably covered impaired loans, by nearly 200%. Fitch expects Scotiabank's asset quality will remain at satisfactory levels and fully provisioned over the rating horizon which is reflected in the Asset Quality score of 'bbb' (which was upgraded from 'bbb-).

The bank's securities portfolio represented 29% of total assets as of December 2025. It is mostly comprised liquid, highly rated securities of mostly U.S., Uruguayan and Canadian sovereign securities.

Stable Profitability: The four-year operating profit-to-risk-weighted assets (RWA) average rose to 2.0% from 1.5% despite the bank's earnings and profitability ratios seeing a slight weakening during 2025, evidenced by an operating profit-to-risk-weighted assets (RWA) ratio of 2.2%, compared to the 2.4% reported in the previous year. The slightly lower profitability in 2025 was affected mainly by lower net interest margins and higher personnel expenses despite a 15% growth in loans and a 5% increase from commissions. Fitch expects the bank's Operating Profit/ RWA to remain above 2.0% over the Outlook horizon, supporting its 'bb+' profitability score.

Strong Capital Levels: The bank's capitalization ratios continue to improve and have been on a positive trend during the past five years culminating at YE 2025 with a Fitch Core Capital ratio of 12.5% (11.7% 2024) which compares well to other private sector peers as reflected in the score of 'bb'. We expect BNS to continue to support this subsidiary with strong capitalization for future RWA growth.

Strong Liquidity: The bank's funding is based primarily on customer deposits, which account for nearly 90% of total liabilities. The bank had a very conservative loan-to-deposits ratio (68%) as of December 2025, higher than its 4-year average of 59%. Scotiabank Uruguay operates with very comfortable liquidity; its liquidity coverage ratio was 424% as of the same date. Securities are mostly in the form of U.S., Uruguayan and Canadian securities. Most loan tenors are under one year, and longer-tenor loan funding is matched with inflation-indexed issuance. The bank has a comprehensive liquidity contingency plan, and BNS is a reliable source of additional funding. The Funding and Liquidity score is 'bbb'

The outcome of the rating committee would have been the same whether Fitch applied its methodology registered in Uruguay (from Sept. 28, 2023) or its new Bank Rating Methodology published on March 21, 2025.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Scotiabank Uruguay's IDRs and SSR would likely move in line with any negative change to Uruguay's sovereign rating and country ceiling. In the event of changes in the sovereign ratings and/or country ceiling, Fitch expects that the bank's Local Currency IDR will likely remain two notches above the Local Currency sovereign rating.

The IDRs and SSR are also sensitive to a change in Fitch's views on BNS's ability and propensity to provide support, a scenario Fitch considers unlikely at present.

The bank's VR could be downgraded if there is a relevant deterioration in the bank's asset quality and risk profile, together with a failure to maintain its four-year average operating profits/risk weighted assets (RWA) metric above 0.5% and Fitch Core Capital above 9.0%.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Scotiabank Uruguay's IDRs and SSR would likely move in line with any positive change to Uruguay's sovereign rating. In the event of changes in the sovereign ratings and/or country ceiling, the bank's Local Currency IDR will likely remain two notches above the Local Currency sovereign rating.

The IDRs and SSR are also sensitive to a change in Fitch's views on BNS's ability and propensity to provide support, a scenario Fitch considers unlikely at present.

The bank's VR could eventually be upgraded if the bank enhances its business profile and maintains a financial profile consistent with recent performance metrics.

VR ADJUSTMENTS

Fitch has assigned an Earnings and Profitability score of 'bb+', which is below the implied score of 'bbb', due to Historical and Future Metrics (Negative).

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

Scotiabank Uruguay's ratings are driven by the support of its ultimate parent, The Bank of Nova Scotia (IDR: AA-/Stable)

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.