Safe and Sound

Scotiabank de Puerto Rico

San Juan, PR
4
Star Rating
San Juan, PR-based Scotiabank de Puerto Rico is an FDIC-insured bank founded in 1979. Regulatory filings show the bank having equity of $923.3 million on $4,145,913,000 in assets, as of June 30, 2017.

Thanks to the work of 1,047 full-time employees, the bank holds loans and leases worth $2.84 billion, including real estate loans of $2.14 billion. The bank currently holds $3.07 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Scotiabank de Puerto Rico exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three major criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and affords protection for accountholders during periods of financial instability for the bank. It follows then that a bank's level of capital is a valuable measurement of an institution's financial strength. From a safety and soundness perspective, more capital is better.
Scotiabank de Puerto Rico racked up 30 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Scotiabank de Puerto Rico's Tier 1 capital ratio was 35.77 percent, higher than the 6 percent level regulators consider adequate, and exceeding the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, Scotiabank de Puerto Rico held equity amounting to 22.27 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with lots of these kinds of assets could eventually have to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

Scotiabank de Puerto Rico scored 20 out of a possible 40 points on Bankrate's asset quality test, lower than the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 20.87 percent of Scotiabank de Puerto Rico's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Scotiabank de Puerto Rico's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Scotiabank de Puerto Rico scored 6 out of a possible 30, coming in below the national average of 16.52.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Scotiabank de Puerto Rico was 2.88 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $13.2 million on total equity of $923.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.63 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.