While Scotiabank shares were down Thursday after the bank announced a takeover of ING Direct, at least one credit-rating agency viewed the deal as positive, for ING at least.
Scotiabank stock fell $1.30, almost 2.5 per cent, to close at $52.30 on the Toronto Stock Exchange.
Moody's Investors Service placed ING Bank of Canada's long-and shortterm deposit ratings on review for upgrade as a result of the acquisition from the Dutch parent company, whose credit rating is lower than Scotia's.
Scotiabank announced Wednesday that is buying ING Bank of Canada in a $3.13-billion deal that also includes putting more of its shares on the market, diluting the value for current investors.
ING Canada's long-term rating is currently Baa1, while its short-term ratings sit at Prime-2. The rating of its subordinated bonds was also placed on review for upgrade.
"If the transaction closes as outlined, ING Bank of Canada's supported ratings would be upgraded given BNS's stronger credit profile and its capacity to provide support to ING Bank of Canada if required," Moody's analyst William Burn said.
However, Moody's said it is maintaining ING's standalone rating of C/baa1 with a negative outlook given the "transition risk associated with its narrow business model in the context of an increasingly competitive operating environment."
