DBRS Confirms CIBC Mellon Trust Company Deposit Ratings at AA (low) and R-1 (middle) with Stable Trends

DBRS has today confirmed CIBC Mellon Trust Company’s (CMT) Long-Term Deposits and Senior Debt rating at AA (low) and Short-Term Deposits rating at R-1 (middle), both with Stable trends. The ratings apply only to wholesale deposits; CMT has no plans to issue debt under these ratings or to take in retail deposits.

The long-term rating is composed of a support assessment of SA1, notched down by one rating level from the rating of one of the two joint venture owners, The Bank of New York Mellon (BNY Mellon; rated AA, Stable trend). BNY Mellon’s support is given greater significance given its primary business is asset servicing globally. Anticipated support from its other joint venture owner, Canadian Imperial Bank of Commerce (CIBC; rated AA, Stable trend) remains a material consideration in the rating; however, CMT and its larger sister company CIBC Mellon Global Securities Services Company (GSS) (collectively referred to as CIBC Mellon) make up 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. If BNY Mellon’s rating were to fall below CIBC’s rating, it is possible that CIBC Mellon’s rating might be notched from the higher of the two ratings.

The analysis is based on CIBC Mellon, which is composed of CMT and its larger sister company GSS; although separate legal entities, the two companies are operated as a single firm and are viewed in the marketplace as one. CIBC Mellon’s business model revolves around leveraging BNY Mellon’s technology platform in a business where economies of scale are critical.

CIBC Mellon continues to compete with RBC Investor Services (formerly RBC Dexia Investor Services) as its main competitor within the Canadian market, as well as State Street Corporation, which holds the third-largest Canadian market position. CIBC Mellon reported strong profitability in 2012, even within the low interest rate environment, and it is well positioned to benefit from interest rate increases, which would result in a material lift to earnings.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organizations and DBRS Criteria: Intrinsic and Support Assessments, which can be found on our website under Methodologies.

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

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 to be of satisfactory quality.