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 entails 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; AA, Stable). BNY Mellon’s support is of greater significance, given its business is more closely aligned with CMT and, its larger sister company, CIBC Mellon Global Securities Services Company (GSS; collectively, CIBC Mellon). Anticipated support from its other joint venture owner, Canadian Imperial Bank of Commerce (CIBC; AA, Stable) remains a material consideration in the rating; however, CIBC Mellon is less of a core operation for CIBC. While 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 therefore considers this difference to be worth one notch on the long-term rating.

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 as its main competitor within the Canadian market, as well as State Street Corporation, which holds the third-largest position. Profitability was respectable in 2013, even within the low interest rate environment. CIBC Mellon is well-positioned to benefit from interest rate increases, which would materially lift the spread generated on its sizable deposit base and increase earnings accordingly.

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 Criteria: Support Assessments for Banks and Banking Organisations, 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.