DBRS Morningstar Assigns a Provisional Rating of A (low), Stable, to The Toronto-Dominion Bank’s NVCC AT1 Limited Recourse Capital Notes Series 1

DBRS Inc. (DBRS Morningstar) assigned a provisional rating of A (low) with a Stable trend to The Toronto-Dominion Bank’s (TD or the Bank) NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes Series 1. DBRS Morningstar assigned the rating equal to the Bank’s Intrinsic Assessment of AA 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. This is one notch below the rating of TD’s NVCC Subordinated Debt.

RATING DRIVERS
Given TD’s high rating level, an upgrade of the ratings is unlikely. Ratings would be downgraded if there were a sustained deterioration in asset quality, especially if it were related to deficiencies in risk management. Additionally, a sustained weakening of profitability metrics would also result in a downgrade of ratings.
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 The Toronto-Dominion Bank are as follows: Franchise Strength – Very Strong; Earnings Power – Very Strong/Strong; Risk Profile – Strong; Funding & Liquidity – Very Strong/Strong; Capitalization – Very Strong/Strong.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (July 19, 2021; https://www.dbrsmorningstar.com/research/381742/global-methodology-for-rating-banks-and-banking-organisations) 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 primary sources of information used for this rating include Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

Each of the principal methodologies/principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. Specifically, the Global Methodology for Rating Banks and Banking Organisations (July 19, 2021) was used to evaluate the Issuer, and DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021) was used to assess ESG factors.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

The last rating action on this issuer took place on May 14, 2021, when the Bank’s ratings were confirmed.

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

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: John Mackerey, Senior Vice President
Rating Committee Chair: Michael Driscoll, Managing Director, Head of NA FIG
Initial Rating Date: December 19, 2005

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