DBRS Confirms CIBC Mellon Trust Company at AA (low); Maintains Stable Trend

DBRS, Inc. (DBRS) has today confirmed CIBC Mellon Trust Company’s (CMT or the Company) Long-Term Deposits and Senior Debt rating of AA (low) and Short-Term Deposits rating at R-1 (middle). The trend for both ratings remains Stable. DBRS notes that the ratings apply only to wholesale deposits as CMT has no plans to issue debt under these ratings.

CMT along with its sister company, CIBC Mellon Global Securities Services Company (GSS; jointly, CIBC Mellon), collectively represent one of the leading custodians operating in Canada. With two strong owners, each with a 50% ownership stake, including The Bank of New York Mellon (BNY Mellon; rated AA, Stable trend, by DBRS), the largest global custodian with US$28.9 trillion of assets under custody and/or administration, and Canadian Imperial Bank of Commerce (CIBC; rated AA, Negative trend, by DBRS), CIBC Mellon maintains a strong Canadian asset servicing business.

Although the Company is strong intrinsically, especially given its scale, deep service offering, and technologically advanced operating and risk management platforms, CMT’s ratings primarily reflect BNY Mellon’s ownership, as CMT’s business is core to BNY Mellon and they also leverage BNY Mellon’s advanced technology platform. Although anticipated support from CIBC is also strong, it is DBRS’s view that the custody business is not as core to CIBC’s business model.

Given the important role CMT plays for BNY Mellon’s global custody business, DBRS has assigned a SA1 designation, which implies strong and predictable support from BNY Mellon. The one notch differential in ratings between CMT and BNY Mellon reflects the lack of an explicit guarantee from BNY Mellon, and that the joint venture is in a foreign country with low cross border risk. As a supported rating with a SA1 designation, the ratings would likely move in tandem with BNY Mellon’s rating.

CIBC Mellon is a top tier market share leader in the Canadian asset servicing business reflecting approximately C$1.6 trillion in assets under administration, as of December 31, 2015. Although pressured, CIBC Mellon’s FY15 performance remained solid, despite considerable headwinds, including the volatility in foreign exchange markets, and lower interest rates, including the Bank of Canada’s January 2015 and July 2015, 25 basis point reductions in the overnight rate.

Overall, balance sheet fundamentals remain solid, reflecting strong asset quality and manageable operating risk. Meanwhile, CIBC Mellon’s funding and liquidity profile remain strong, and its capital position remains sound.

With a top tier market share in Canada, CIBC Mellon’s asset servicing business provides a diverse set of custody and related services to institutions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (December 2015) and the DBRS Criteria: Support Assessments for Banks and Banking Organisations (March 2016). These can be found at: http://www.dbrs.com/about/methodologies.

The primary sources of information used for this rating include company documents and the Office of the Superintendent of Financial Institutions. 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: Mark Nolan
Rating Committee Chair: William Schwartz
Initial Rating Date: April 27, 2009
Most Recent Rating Update: March 4, 2015

For additional information on this rating, please refer to the linking document under Related Research.