DBRS Confirms Credit Union Central Alberta at R-1 (low) and “A” with Stable Trend

DBRS has today confirmed the ratings of Credit Union Central Alberta Limited (Alberta Central) at R-1 (low) and “A”; the trends remain Stable.

The primary factor in determining the ratings remains the low-risk business and strong financial risk profile of the Alberta Credit Union System (the System). While the assessment of the System provides the starting point for Alberta Central’s rating, there are no material deficiencies at Alberta Central that would affect the rating relative to the assessment of the System; while profitability is limited, earnings are not a material rating factor for a central. Alberta Central’s asset quality and financial risk profile metrics remain acceptable.

While the System’s asset quality has come under some modest pressure as a result of the lingering effects of the recession and the housing situation in Alberta, generally it remains in good shape and is a positive factor in the rating. The outlook for the System is inevitably linked to the economic environment in Alberta, which in turn is materially affected by volatility related to energy prices. However, it is possible that the growing importance to the economy of the capital-intensive oil sands production, compared to conventional oil and gas, may reduce this volatility in the future, which would be a positive factor for the System.

Under DBRS’s methodology “Rating Canadian Provincial Credit Union Centrals, Credit Unions and Desjardins Group and Related Entities” Alberta Central’s Senior Long-Term Debt rating, at “A”, is composed of its intrinsic assessment at A (low) and its support assessment at SA2 (reflecting the expectation of systemic and timely external support by the Government of Alberta). The SA2 results in a one-notch rating benefit to the intrinsic assessment.

Notes:
The applicable methodologies are Rating Canadian Provincial Credit Union Centrals, Credit Unions and Desjardins Group (April 2011), Global Methodology for Rating Banks and Banking Organizations (January 2010) and DBRS Criteria: Intrinsic and Support Assessments (February 2009), which can be found on the DBRS website under Methodologies.

The sources of information used for this rating include company documents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

Lead Analyst: John van Boxmeer
Rating Committee Chair: Brenda Lum
Initial Rating Date: April 20, 1998
Most Recent Rating Update: May 19, 2011