Fitch Affirms The Bank of Nova Scotia's IDRs at 'AA-/F1+'; Outlook Stable <Origin Href="QuoteRef">BNS.TO</Origin>

(The following statement was released by the rating agency)

CHICAGO, January 25 (Fitch) Fitch Ratings has affirmed The Bank of Nova Scotia's
(BNS) long- and short-term Issuer Default Ratings (IDRs) at 'AA-' and 'F1+'
respectively. The Rating Outlook is Stable.

This rating action follows Fitch's periodic review of the Canadian Banks Peer
Group, which includes Bank of Montreal (BMO), Bank of Nova Scotia (BNS),
Canadian Imperial Bank of Commerce (CIBC), Caisse Centrale DesJardins (CCD),
National Bank of Canada (NBC), Royal Bank of Canada (RBC) and Toronto-Dominion
Bank (TD).

For further discussion, please refer to the Canadian Banks Peer Review Special
Report to be published shortly.

KEY RATING DRIVERS

IDRS, VRs AND SENIOR DEBT

The affirmation of BNS' ratings reflects the company's good earnings performance
over time accompanied by a stable earnings contribution from its international
deposit and lending platforms throughout Latin America, the Caribbean, Central
America, South America, and Asia. Earnings from less developed countries
constituted 28% of net income as of the end of fiscal year 2015.

Fitch believes the stability of this earnings diversity has helped support the
company's overall ratings. This is particularly important should there be
weakness in the company's Canadian operations due to either a slowing housing
market or the impact of lower oil prices on the company's commercial lending
operations. BNS's earnings performance could be sheltered.

At the same time, Fitch acknowledges that BNS's operations in largely less
developed international countries exposes the company to comparatively higher
geopolitical and foreign exchange risk than other similarly rated Canadian or
global peer banks. To date, however Fitch believes these risks have been well
managed.

Further supporting today's rating action is the company's healthy Basel III
Common Equity Tier 1 (CET1) ratio of 10.3%, which grew in the wake of the
company's sale of its stake in CI Investments, an asset manager in Canada.

Fitch believes this additional capital should shelter the company's balance
sheet in the event of economic stress, in either its domestic or international
markets.

BNS - as well as other Canadian Banks - continues to benefit from a strong and
diverse funding profile which is supportive to ratings.

SUPPORT RATING AND SUPPORT RATING FLOOR

The affirmation of BNS's SR of '2' and SRF of 'BBB-' reflect Fitch's view that
the likelihood of support remains high for Canadian Banks due to their systemic
importance in the country, significant concentration overall of Canadian banking
assets, which account for over 90% of total banking assets, the large size of
the banking sector with banking assets at 2.1x Canada's GDP, and Canadian Banks'
position as key providers of financial services to the economy.

In Fitch's view, Canadian banking authorities, through the CDIC Act, have wide
latitude to resolve a troubled bank situation including re-capitalizing the
institution, creating a bridge bank, or imposing losses on creditors.

Fitch recognizes that the government's willingness to provide support for
D-SIFIs in Canada has been reduced, as demonstrated by a Department of Finance
consultation paper which outlines the proposed bail-in regime as banking
regulators seek to protect taxpayers from the risk of a large financial
institution failing. This is evidenced by the issuance of non-viable contingent
capital (NVCC) instruments, resolution powers given regulatory authorities under
the CDIC Act, and other initiatives that demonstrate the Canadian government's
progress in reducing the propensity of state support for banks going forward.

BNS's IDRs and senior debt ratings do not benefit from support because their
Viability Ratings (VRs) are all currently above their SRFs.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by BNS and its subsidiaries
are all notched down from the VR in accordance with Fitch's assessment of each
instrument's respective non-performance and relative loss severity risk
profiles, which vary considerably.

BNS's subordinated debt is notched one level below its VR of 'aa-' for loss
severity in accordance with Fitch's assessment of each instrument's respective
non-performance and relative loss severity risk profiles.

The preferred securities of Scotia Capital Trust are non-cumulative preferred
securities which are notched five below the VR, made up of two notches for
non-performance and three notches for loss severity.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SENIOR DEBT

Given the already high level of BNS's ratings, Fitch notes that potential upside
for ratings is viewed as minimal over a medium-term time horizon.

Fitch notes that BNS has comparatively higher energy exposure relative to
domestic peers. At fiscal year-end 2015, pipeline, oil, & gas loans amount to
approximately 10% of business and government loans for BNS compared to a
Canadian peer group average of 5% of business and government loans. As such,
BNS's ratings would be more sensitive to growth in gross-impaired loans in its
energy portfolio relative to peers.

Additionally, while the contribution to earnings from less developed markets has
resulted in good and stable earnings performance for BNS and supportive to its
high ratings, should currencies or economic conditions begin to fluctuate such
that Fitch believes it will result in higher earnings volatility, this could
also be a catalyst for a negative rating action.

Similarly, BNS' ratings would be sensitive in the event that the company makes
an acquisition that either erodes regulatory or tangible capital ratios or
creates the potential for more overall earnings volatility.

SUPPORT RATING AND SUPPORT RATING FLOOR

A SR of '2' incorporates Fitch's expectation that there could be some level of
support for the Canadian Banks going forward, although it has been weakened
given existing resolution powers and expected bail-in legislation. Although
Canadian authorities have taken steps to improve resolution powers and tools,
they maintain a flexible approach to bank resolution.

Fitch's assessment of continuing support for Canadian D-SIFIs has to some extent
relied upon resolution powers granted regulators under the CDIC ACT as well as
the potential size, structure, and feasibility of NVCC implementation.
Furthermore, continued regulatory action to ensure sufficient contingent capital
has been implemented for all Canadian banks.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The subordinated debt and hybrid capital ratings are primarily sensitive to any
change in the VRs of the banks (or bank subsidiaries).

Fitch has affirmed the following ratings; with a Stable Outlook:

Bank of Nova Scotia

--Long-term IDR at 'AA-', Outlook Stable;

--Short-term IDR at 'F1+';

--Market-linked notes at 'AA-';

--Long-term deposits at 'AA-';

--Senior debt at 'AA-';

--Subordinated debt at 'A+';

--Short-term debt at 'F1+';

--VR at 'aa-';

--Support Rating at '2';

--Support Rating Floor at 'BBB-'.

Scotiabank Capital Trust

--Trust Securities at 'BBB'.

Contact:

Primary Analyst

Justin Fuller, CFA

Senior Director

+1-312-368-2057

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

Secondary Analyst

Doriana Gamboa

Director

+1-212-908-0865

Committee Chairperson

Christopher Wolfe

Managing Director

+1-212-908-0771

Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email:
hannah.james@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

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