Morningstar DBRS Upgrades Canadian Western Bank's Credit Ratings, Including the Long-Term Issuer Rating to AA from A (low), Following Acquisition by National Bank of Canada

DBRS Limited (Morningstar DBRS) has today taken a number of credit rating actions following the completion of the acquisition of Canadian Western Bank (CWB or the Bank) by National Bank of Canada (National; rated AA with a Stable trend). Morningstar DBRS has equalized all CWB's credit ratings with those of National, including upgrading the Bank's Long-Term Issuer Rating to AA from A (low) and Short-Term Issuer Rating to R-1 (high) from R-1 (low), and assigned Stable trends. The Support Assessment (SA) designation of SA1 is assigned to the Bank, reflecting Morningstar DBRS' expectation of timely internal support from National. These actions remove CWB's credit ratings from Under Review with Positive Implications where they were placed on June 12, 2024. The full list of credit ratings is provided in the table at the end of this press release.

KEY CREDIT RATING CONSIDERATIONS
Following the close of the acquisition, Morningstar DBRS considers CWB as a core banking subsidiary of National. This is a key element underpinning the equalization of the Bank's credit ratings with those of National. CWB's credit ratings will be maintained as the Bank will operate with a separate bank charter until its amalgamation with National, which is expected to occur on March 1, 2025.

In Morningstar DBRS' view, the acquisition will bolster National's diversification of revenue, both geographically and by product. CWB helps National become less concentrated in Québec, significantly bolstering National's presence in Western Canada, including British Columbia and Alberta.

CREDIT RATING DRIVERS
As a fully owned banking subsidiary, CWB's credit ratings will move in tandem with National's credit ratings. Over the longer term, Morningstar DBRS would upgrade the credit ratings if National were to further build scale and diversification, both geographically as well as by revenues, while maintaining a similar risk profile.

Conversely, National's credit ratings would be downgraded if there were significant integration issues with the acquisition. A sustained deterioration in asset quality or an inability to rebuild capital post-acquisition, would also result in a credit ratings downgrade.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on National will have an impact on CWB's credit ratings. ESG factors that have a significant or relevant effect on the credit analysis of National are discussed separately at https://dbrs.morningstar.com/issuers/275/national-bank-of-canada.

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 Canadian dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 4, 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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

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 https://dbrs.morningstar.com.

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 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' trends and credit ratings are under regular surveillance.

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

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