DBRS Morningstar Finalizes Its Provisional Rating on TD’s NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes at A (low), Stable Trend

DBRS, Inc. (DBRS Morningstar) finalized its provisional rating of A (low) with a Stable trend on The Toronto-Dominion Bank’s (TD or the Bank) NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes (the Capital Notes).

Following the review of documentation associated with the recent offering, DBRS Morningstar confirmed that the terms of the issuance are consistent with those reviewed at the time the provisional rating was assigned on July 22, 2021. For further details on the provisional rating, please see the DBRS Morningstar press release entitled “DBRS Morningstar Assigns a Provisional Rating of A (low), Stable, to The Toronto-Dominion Banks’s NVCC AT1 Limited Recourse Capital Notes Series 1.”

The Bank will issue $1.75 billion of Capital Notes that will mature on October 31, 2081, and will have an initial five-year fixed rate of 3.60%. DBRS Morningstar notes that the Office of the Superintendent of Financial Institutions granted additional Tier 1 capital treatment to the Capital Notes.

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 TD 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. The last rating action on this issuer took place on July 22, 2021, when DBRS Morningstar assigned a provisional rating to the NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes..

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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