Safe and Sound

Scotiabank de Puerto Rico

San Juan, PR
4
Star Rating
Scotiabank de Puerto Rico is an FDIC-insured bank started in 1979 and currently based in San Juan, PR. Regulatory filings show the bank having equity of $872.2 million on $4.13 billion in assets, as of December 31, 2017.

Thanks to the work of 1,029 full-time employees, the bank has amassed loans and leases worth $2.54 billion, $2.03 billion of which are for real estate. U.S. bank customers currently have $3.10 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Scotiabank de Puerto Rico exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is important. It works as a cushion against losses and affords protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, more capital is better.

Scotiabank de Puerto Rico racked up 30 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Scotiabank de Puerto Rico's Tier 1 capital ratio was 42.82 percent, exceeding the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Scotiabank de Puerto Rico held equity amounting to 21.11 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets suggests a bank may eventually have to use capital to cover losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Scotiabank de Puerto Rico scored 32 out of a possible 40 points, below the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 14.36 percent of Scotiabank de Puerto Rico's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Scotiabank de Puerto Rico's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's test of earnings, Scotiabank de Puerto Rico scored 0 out of a possible 30, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one widely used measure of a bank's earnings. Scotiabank de Puerto Rico's most recent annualized quarterly return on equity was -4.15 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $-37.8 million on total equity of $872.2 million. The bank reported an annualized return on average assets, or ROA, of -0.91 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 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.