DBRS Rates National Bank of Canada’s Non-Viability Contingent Capital Subordinated Debt at BBB (high), Stable Trend

DBRS Limited (DBRS) assigned a rating of BBB (high) with a Stable trend to National Bank of Canada’s (NBC or the Bank) Non-Viability Contingent Capital (NVCC) Subordinated Debt.

NBC’s NVCC Subordinated Debt rating is equal to that of the Bank’s Intrinsic Assessment (A (high)), less three rating notches, as the NVCC Subordinated Debt only has the Office of the Superintendent of Financial Institutions (OSFI)-compliant NVCC trigger, which is consistent with the OSFI requirements for NVCC instruments, and no additional triggers.

The aggregate gross proceeds from NBC’s inaugural NVCC Subordinated Debt issuance totalled $750 million, with an interest rate of 3.183% that matures on February 1, 2028. The aggregate gross proceeds from the issuance, which qualify as Tier 2 capital, will be used for general business purposes.

RATING DRIVERS
On an intrinsic basis, upward ratings momentum is unlikely as DBRS views the Bank as well placed within its rating category. Over the longer term, increased geographic diversification within Canada that would lead to an improvement in the franchise strength would be viewed positively. Conversely, a material increase in impaired loans, particularly as a result of underwriting weakness or a severe downturn in the housing market, or a significant increase in risk appetite in the capital markets business will likely have negative rating implications.

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

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 www.dbrs.com.

The applicable methodology is Global Methodology for Rating Banks and Banking Organisations (May 2017), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: Maria-Gabriella Khoury, Vice President, Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of NA FIG

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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