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DBRS has announced that it:

changed the trends on Canadian Western Bank’s (CWB or the Bank) long-term ratings to Stable from Negative and maintained the trends on all short-term ratings at Stable. DBRS Morningstar also confirmed its ratings on CWB, including the Bank’s Long-Term Issuer Rating at A (low) and Short-Term Issuer Rating at R-1 (low). The Bank’s Intrinsic Assessment of A (low) and Support Assessment of SA3 are unchanged. The SA3 designation, which reflects no expectation of timely external support, results in the final rating being equivalent to the Intrinsic Assessment.

KEY RATING CONSIDERATIONS
The trend changes to Stable from Negative reflect DBRS Morningstar’s view that, despite the potential for some near-term volatility, the economic uncertainties facing the Bank because of the Coronavirus Disease (COVID-19) pandemic have largely abated. Indeed, the Bank has maintained good asset quality metrics. Although impairments initially increased as expected, they reverted to the historical average in F2021, remaining at manageable levels. Additionally, CWB’s earnings have proved resilient and the Bank has continued growing and diversifying its franchise through further expansion into Ontario as well as improving its level of directly sourced deposits.

In confirming the ratings, DBRS Morningstar recognizes CWB’s well-established and growing franchise, operating in the middle-market commercial space across Canada. Furthermore, the Bank has been successful in executing strategically targeted wealth and loan portfolio acquisitions that augment its business while providing some geographic and revenue diversification. The ratings also consider the Bank’s high level of exposure to the real estate sector, specifically to development projects in Western Canada; its modest level of fee-based revenues; and its lower capitalization relative to peers.

RATING DRIVERS
DBRS Morningstar would upgrade its ratings if CWB further diversifies its revenue mix with a material and sustainable increase in the level of noninterest income. Increased diversification of the loan book, including a reduction in the relative exposure to real estate project finance, would also result in a ratings upgrade.

Conversely, a ratings downgrade would occur should there be significant losses in the loan portfolio or a perceived weakness in loan underwriting and/or risk management. Furthermore, operational issues that negatively affect the Bank’s implementation of its various organizational systems and data projects or a reduction in capitalization to levels closer to regulatory minimums would also result in a ratings downgrade.

Affected issues are CWB.PR.B and CWB.PR.D .

This entry was posted on Thursday, December 9th, 2021 at 10:37 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.