Fitch Ratings has assigned credit ratings to Bank of Nova Scotia’s Salvadoran subsidiary, Scotiabank El Salvador.

The rating agency says that SES’s ratings reflect the support it would receive from its parent company should it be required. It says it believes there is a “moderate probability that support from BNS would be forthcoming, if required”. Fitch says it considers SES a key component in BNS’ strategy to build a strong Central American franchise.

SES’ ratings also reflect its overall adequate performance, while recognizing the need to improve asset quality, efficiency, and profitability in an increasingly competitive environment. “Despite carrying wider net interest margins than its competitors due to its leading position in mortgage loans, cost-to-income remains high, hindering profitability,” it notes.

In 1997, BNS acquired Ahorromet, a local financial company, which was subsequently renamed SES. SES has traditionally targeted the retail market, primarily through mortgage loans and deposit products for individuals.

In May 2005 SES acquired and merged Banco de Comercio, one of the top performing banks in El Salvador, becoming the fourth largest bank in the country, with a market share of 14.9% in terms of assets at the end of June, and reducing the significant gap in terms of size with the three dominant banks in the market, Fitch explains. Banco de Comercio provided more than 70% of the consolidated assets and equity after the merger.