DBRS Comments on CIBC Mellon’s Sale of its Issuer Services Business

DBRS stated today that it does not expect the announced sale of the Issuer Services business (stock transfer and employee share purchase plan) of CIBC Mellon to have implications for the ratings of CIBC Mellon Trust Company (CMT) because: (1) CMT’s ratings continue to be a function of the ratings of the two co-owners; and (2) the Issuer Services business is a small proportion of the business of CIBC Mellon as a whole. CMT is expected to continue to operate its deposit business, which is derived from the asset servicing business.

The sale, which is subject to regulatory approval, is expected to close in October, 2010. Terms of the transaction have not been publicly disclosed.

CMT’s long-term rating of AA (low) with a Stable trend is composed of a support assessment of SA1, notched down by one rating level from the rating of The Bank of New York Mellon (BNY Mellon) (rated AA, with a Stable trend), one of the two joint venture owners. Although the anticipated support from its other joint venture owner, Canadian Imperial Bank of Commerce (CIBC) (rated AA, with a Stable trend) remains a material consideration in the rating, its support is not as critical because BNY Mellon’s primary businesses are asset servicing and issuer services globally, whereas CIBC Mellon is less of a core operation for CIBC. While the anticipated support from BNY Mellon is very strong, it is difficult for implicit support to match the clarity and legality of an unconditional guarantee; DBRS considers this difference to be worth one notch on the long-term rating. In the event BNY Mellon’s rating falls below CIBC’s rating, it is possible CIBC Mellon’s rating may be notched from the higher of the two ratings.

The intrinsic analysis is based on CIBC Mellon, which is composed of CMT and its larger sister company, CIBC Mellon Global Securities Services Company (GSS). Although separate legal entities, the two companies operate as a single firm and are viewed in the marketplace as one. Most senior executives have responsibilities for both CMT and GSS. Limited public financial information is available for CIBC Mellon as it is privately owned and not a reporting issuer. GSS is not directly regulated and does not have public financial statements. A significant portion of DBRS’s analysis is based on non-public financial statements and documentation.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organizations and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.