Fitch Affirms Support Ratings and Support Rating Floors for Large Canadian Banks

CHICAGO--()--Fitch Ratings has affirmed the Support Ratings (SRs) and Support Rating Floors (SRFs) at '1' and 'A-', respectively, for BMO Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CIBC), Caisse Centrale Desjardins (CCD), National Bank of Canada (NBC), Royal Bank of Canada (RY), and Toronto-Dominion Bank (The) (TD), collectively referred to as 'Canadian Banks'. The rating actions have been taken in conjunction with a review of support for banks globally.

BMO, BNS, CIBC, CCD, NBC, RY, and TD's Long-term Issuer Default Ratings (IDRs) do not currently incorporate any government support, and reflect their standalone strengths only. As such, absent a material in change economic conditions or the companies' stand-alone credit profiles; any change to their SRs or SRFs in the future will have no impact on the companies IDRs.

Fitch has also affirmed the Support Ratings of BMO Harris Bank National Association, CIBC World Markets PLC, TD Bank U.S. Holding Company and TD Bank, NA at '1'. These ratings are driven by institutional support from their respective parent companies, and are not subject to Fitch's evolving view of support noted in this release.

KEY RATING DRIVERS - SUPPORT RATINGS AND SUPPORT RATING FLOORS

The affirmation of the Canadian Banks' SRs and SRFs reflect Fitch's expectation that there remains an extremely high probability of support from the Canadian government ('AAA'; Rating Outlook Stable) if required. This expectation reflects Canada's extremely high ability to support its banks especially given its financial flexibility, though propensity is becoming less certain.

Specific to the Canadian Banks, our view of support likelihood is based mostly on their systemic importance in Canada, significant concentration overall Canadian banking assets amongst the institutions noted above, which account for over 90% of banking assets, the large size of the banking system with banking assets at 2.1 times Canada's GDP, and the Canadian Banks' position as key providers of financial services to the Canadian economy. The Canadian Banks' IDRs and senior debt ratings do not benefit from support because their VRs are all currently above their SRFs.

However, in Fitch's view, there is a clear intention to reduce support for D-SIFI's in Canada, as demonstrated by commentary and actions from Canadian banking regulators seeking to protect tax payers from the risk of a large financial institution failing. This is further supported by the proposed issuance of non-voting contingent capital (NVCC) instruments, resolution powers given regulatory authorities under the CDIC Act, and other initiatives that demonstrate the Canadian government's progress to reduce the propensity of state support for banks going forward. Fitch believes this increases the likelihood of NVCC and potential senior debt losses if one or more of the Canadian Banks run afoul of solvency assessments.

RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

Fitch is classifying Canada as a Path 2 country as defined in its September 2013 report, 'Bank Support: Likely Rating Paths', and given the factors noted above, Fitch expects there to be some level of support for the Canadian Banks going forward, and as such does not expect the SR to be impacted.

The SRF ratings are more likely to be impacted and are sensitive to progress made in completing NVCC issuances and any additional regulatory initiatives that may be imposed on the Canadian D-SIFIs. Fitch's assessment of continuing support for Canadian D-SIFI's has to some extent relied upon resolution powers granted regulators under the CDIC ACT as well as the potential size, structure, and feasibility of NVCC implementation.

Fitch expects that the continued regulatory action to ensure sufficient contingent capital will be implemented for all Canadian banks in the near term, but regardless of its finalization, Fitch believes that sufficient regulatory progress continues to be made over the ratings time horizon. Therefore, Fitch expects to revise the Canadian Banks' SRFs to 'BBB-' over a typical rating outlook horizon.

Absent a material in change economic conditions or the companies' stand-alone credit profiles, a revision of the SRFs to 'BBB-' would mean no change to the Canadian Bank's Long-term IDR and debt ratings because their viability ratings are all above the SRF.

Fitch has affirmed the following ratings. All other ratings are unaffected.

BMO Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank of Commerce
Caisse Centrale Desjardins
National Bank of Canada
Royal Bank of Canada
Toronto-Dominion Bank (The)
--Support Rating at '1';
--Support Rating Floor at 'A-'.

BMO Harris Bank National Association (formerly Harris N.A.)
CIBC World Markets Plc
TD Bank U.S. Holding Company
TD Bank, NA
--Support Rating at '1';

Fitch will hold a teleconference to discuss sovereign support for banks and give an update on rating paths on Friday, March 28 at 15:00 GMT.

Callers must register in advance using the link below and are requested to dial in early: http://event.onlineseminarsolutions.com/r.htm?e=773507&s=1&k=E99B5BCE23C11883F75DA40C4B1FED21

Additional information is available at www.fitchratings.com.

In addition to the source(s) of information identified in Fitch's Master Criteria, these actions were additionally informed by information provided by the companies.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (January 2014);
--'Sovereign Support for Banks: Update on Position Outlined in 3Q13' (December 2013);
--'Bank Support: Likely Rating Paths' (September 2013);
--'The Evolving Dynamics of Support for Banks' (September 2013).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397
Sovereign Support For Banks: Update on Position Outlined in 3Q13
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726698
Bank Support: Likely Rating Paths
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715001
The Evolving Dynamics of Support for Banks
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715000

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=825133
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Contacts

Fitch Ratings
Justin Fuller, CFA (Primary Analyst for RY, BNS, BMO, CCD), +1-312-368-2057
Senior Director
Fitch Ratings, Inc., 70 West Madison Street, Chicago, IL 60602
or
Meghan Neenan, CFA (Primary Analyst for CIBC, TD), +1-212-908-9121
Senior Director
or
Ryan Doyle (Primary Analyst for NBC), +1-212-908-0358
Director
or
Committee Chairperson:
Nathan Flanders, +1-212-908-0827
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Justin Fuller, CFA (Primary Analyst for RY, BNS, BMO, CCD), +1-312-368-2057
Senior Director
Fitch Ratings, Inc., 70 West Madison Street, Chicago, IL 60602
or
Meghan Neenan, CFA (Primary Analyst for CIBC, TD), +1-212-908-9121
Senior Director
or
Ryan Doyle (Primary Analyst for NBC), +1-212-908-0358
Director
or
Committee Chairperson:
Nathan Flanders, +1-212-908-0827
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com