DBRS Morningstar Assigns Provisional Rating of BB (high), Stable, to Laurentian Bank of Canada’s NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes

DBRS Limited (DBRS Morningstar) assigned a provisional rating of BB (high) with a Stable trend to Laurentian Bank of Canada’s (LBC or the Bank) NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes (the Capital Notes). DBRS Morningstar assigned the rating equal to the Bank’s Intrinsic Assessment of A (low) less four rating notches, which is consistent with DBRS Morningstar’s standard notching for capital instruments with contingent risks and its ratings for the Bank’s NVCC Preferred Shares. The provisional rating for the Capital Notes is one notch below the rating of LBC’s NVCC Subordinated Debt.

DBRS Morningstar notes that the Office of the Superintendent of Financial Institutions granted Tier 1 capital treatment to the Capital Notes.

RATING DRIVERS
Over the longer term, a sustained improvement in the level of earnings and operating efficiency and the strengthening of capital buffers would result in an upgrade of ratings.

Conversely, material losses caused by operational difficulties as the Bank implements various organizational projects, sustained negative operating leverage, or significant losses in the loan portfolio as a result of unforeseen weaknesses in the risk management process would lead to a downgrade.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

The Grid Summary Grades for LBC are as follows: Franchise Strength – Strong/Good; Earnings Power –Good; Risk Profile – Good; Funding & Liquidity – Strong/Good; and Capitalization – Good/Moderate.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 8, 2020; https://www.dbrsmorningstar.com/research/362170). Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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