DBRS Morningstar Comments on Credit Union Central of Saskatchewan’s Sale of Concentra Bank

DBRS Limited (DBRS Morningstar) commented that Credit Union Central of Saskatchewan’s (SaskCentral) ratings, including its Short-Term Isser Rating and Short-Term Instruments rating at R-1 (low), both with Stable trends, remain unchanged following the February 7, 2022, announcement of the planned sale of its 84% ownership stake in Concentra Bank (Concentra; rated A (low) Under Review with Negative Implications by DBRS Morningstar) to Equitable Bank (Equitable; rated BBB with a Positive trend). The transaction is targeted to close in the second half of 2022, subject to customary closing conditions and required regulatory approvals.

Concentra is a Schedule 1 bank set up to provide wholesale banking services to the credit union industry in Canada and is the most significant of SaskCentral’s investments, comprising 40% of the Saskatchewan credit union system’s (the System) total assets at September 30, 2021. Concentra’s large size as well as, in DBRS Morningstar’s view, it undertaking more business activities outside the scope of directly supporting the credit unions results in DBRS Morningstar’s credit-neutral view of the sale. Indeed, the sale of Concentra removes the contingent risk to the System through SaskCentral’s ownership, as any shortfall in capital resulting from losses at Concentra would indirectly be provided by the System and, therefore, a significant and sustained financial weakness at Concentra would negatively affect SaskCentral’s ratings.

Under the agreement, SaskCentral will receive approximately $470 million from the sale of Concentra’s $11.3 billion in assets, $8.9 billion in loans, and $6.3 billion in deposits. SaskCentral is the steward of Saskatchewan credit union capital allocated to strategic investments and holds these investments to provide financial returns or access to products and services needed by credit unions.

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

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

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