Morningstar DBRS Upgrades Computershare Trust Company, National Association's Long-Term Issuer Rating to BBB (high); Stable Trend

DBRS, Inc. (Morningstar DBRS) upgraded the credit ratings of Computershare Trust Company, National Association (CTCNA or the Company), including the Company's Long-Term Issuer Rating to BBB (high) from BBB and Short-Term Issuer Rating to R-1 (low) from R-2 (high). The trend on all credit ratings is Stable. The Support Assessment (SA) is SA1, which reflects the expectation of strong support from its parent, Computershare Limited (CPU or the Parent), if required.

KEY CREDIT RATING CONSIDERATIONS
The upgrade of the credit ratings reflects our view that, as a highly regulated entity in an overseas subsidiary, CTCNA benefits from the concept of "ringfencing", which includes limits on capital distributions from CTCNA to CPU (in essence, trapping capital in that business). Moreover, CTCNA's primary regulator, the OCC, sets its capital and liquidity requirements. Given this regulatory protection, it is our view that CTCNA is sufficiently ringfenced to prevent CPU from unexpectedly materially weakening the credit profile of CTCNA.

Despite being ringfenced, Morningstar DBRS still believes that CPU would support CTCNA, if needed, resulting in an SA1 designation. This designation is supported by CTCNA's strategic importance within CPU's global franchise that includes its large contribution to overall earnings, as well as a shared brand name. As a supported credit rating with a SA1 designation, the Company's credit ratings would typically move in tandem with the Parent's Long-Term Issuer Rating.

CREDIT RATING DRIVERS
Any further upgrades of CTCNA's credit ratings would be linked to improvement in the Parent's long-term credit ratings. Conversely, a credit ratings downgrade of CPU would result in a downgrade to CTCNA's credit ratings. In addition, in the unlikely event that the entity is viewed as no longer benefiting from ringfencing, the Company's credit ratings would be downgraded.

CREDIT RATING RATIONALE
CTCNA is captured in CPU's Computershare Corporate Trust business, one of CPU's three core businesses. The Computershare Corporate Trust business comprises trust and agency services in connection with the administration of debt securities in the U.S. as well as the legacy corporate trust business in Canada and the U.S. CPU acquired Wells Fargo's Corporate Trust Services (CTS) business in November 2021, achieving significant scale.

Morningstar DBRS notes that CPU is highly acquisitive, with a long track record of successfully integrating these deals. CPU reported high levels of client retention in the business. The integration included a two-year transitional services agreement (TSA) with Wells Fargo to cover various infrastructure, administrative, and support services. The TSA with Wells Fargo ended on November 1, 2023.

In FY 2024, Computershare Corporate Trust generated $938.6 million in total revenue, a decrease of 2% from FY 2023. Additionally, management EBITDA decreased 7% compared to FY 2023. Computershare Corporate Trust accounted for 28% of CPU's revenue and 38% of EBITDA by product for FY 2024.

As a trust company, CTCNA takes little credit risk, but is exposed to operational risk. Additionally, CTCNA is subject to market trends and business cycles, and its largely digital platforms are subject to data privacy risks and cybercrime. CTCNA is highly regulated as a licensed non-deposit taking Trust Company in the U.S., with the OCC as its primary regulator. CTCNA can rely on additional capital support from CPU if needed. 

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 04, 2024) https://dbrs.morningstar.com/research/433881. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The following methodology has also been applied:

Morningstar DBRS Global Corporate Criteria (April 15, 2024) https://dbrs.morningstar.com/research/431186

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit dbrs.morningstar.com.

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