DBRS Confirms Canadian Western Bank Rating at A (low), Stable Trend

DBRS has today confirmed Issuer Rating and Deposits & Senior Debt rating of Canadian Western Bank (CWB or the Bank) at A (low) and its Subordinated Debt rating of BBB (high). All trends remain Stable. CWB’s most important strengths are its strong asset quality as evidenced by its very long history of low write-off rates, its proven niche strategy using relationship-based lending, its low cost base (partially a result of its business mix) and its strong internal capital generation characteristics. Funding diversification has improved over the past several years. DBRS does not anticipate any change in strategy as a result of the change in CEO scheduled for next year.

Challenges include concentration in the loan book, both geographically (Alberta and British Columbia) and by industry (commercial and construction and real estate lending), although the secured nature of the loan book and low write-off rates suggest this issue has been well managed throughout the Bank’s history.

Using the International Financial Reporting Standard (IFRS) for the first time this year, CWB recently reported earnings available to common shareholders of $129 million (a return on equity of 15.4%) for the nine months ended July 31, 2011, a 14% increase over the same period in 2011 using the same accounting basis. CWB experienced relatively minor changes as a result of the new accounting standard. CWB’s 97th consecutive profitable quarter was accompanied by low loan loss provisions relative to average loans of 20 basis points (annualized) in the first three quarters of 2012, unchanged from the same period in 2011. Capital levels are strong with a Tier 1 ratio of 10.5%, and the Bank is well positioned for the new regulatory reporting standards with an estimated Basel III Common Equity Tier 1 (CET1) ratio of 8.0%, safely above the 7% minimum expected by the Canadian regulator.

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

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (June 2012), and DBRS Criteria: Intrinsic and Support Assessments (February 2009), which can be found on the DBRS website.

The sources of information used for this rating include information provided by Canadian Western Bank and the Office of the Superintendent of Financial Institutions Canada. 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.

Lead Analyst: John van Boxmeer
Rating Committee Chair: Brenda Lum
Initial Rating Date: November 22, 2010
Most Recent Rating Update: October 28, 2011