Standard & Poor’s Ratings Services has raised its long-term counterparty credit and senior unsecured debt ratings on the Bank of Nova Scotia and its subsidiaries to ‘AA-‘ from ‘A+’. The outlook is currently stable.

“The ratings on Scotiabank reflects its track record of generating strong and consistent earnings, despite the asset quality issues that it faced with its U.S. leverage-lending portfolio in the early 2000s, its problems with Argentina, and the negative effect of currency translation on U.S. and other foreign denominated earnings,” said Standard & Poor’s credit analyst Donald Chu. “The high quality of the bank’s earnings are supported by its broad business mix, geographic diversification, and the high-margined foreign banking operations.”

S&P says that Scotiabank’s retail and commercial banks, both in Canada and internationally, represent about 70% of the bank’s earnings base and remain one of the key drivers to its solid operating performance. The bank continues to take steps to improve and refine its credit risk management function, it notes, and it’s taking more of a portfolio approach in managing its corporate lending book. Asset quality within the bank’s retail and commercial lending portfolio has remained consistently high, the wholesale lending portfolio has stabilized, and net impaired loans and provisions for credit losses continue to decline, the rating agency says.

The bank now has a very strong capital base even when adjusted for its higher risk activities, S&P says. Although current capital levels might not be sustained, Standard & Poor’s expects the bank to maintain a higher level of capital adequacy than its peers to offset its slightly higher risk profile, as Scotiabank’s business activities would include participation in leverage lending activities, and investments and activities in emerging markets.

Finally, the stable outlook reflects Standard & Poor’s expectation that the bank will continue to maintain its solid earnings performance; asset quality will remain at a manageable level, and a very strong level of capital adequacy and reserves will be maintained.