DBRS, Inc. (DBRS Morningstar) confirmed U.S. Bank Trust Company, National Association’s (USBTC) Long-Term Issuer Rating of AA (high) and Short-Term Issuer Rating of R-1 (high). The trend on the ratings remains Stable. The Support Assessment (SA) is SA1, which reflects the implied strong support from its parent, U.S. Bank National Association (USBNA), if required.
KEY RATING CONSIDERATIONS
Last year, U.S. Bancorp (USB) moved USBTC from a subsidiary of the holding company to a subsidiary of USBNA. Following this, USB moved corporate trust accounts to USBTC for trustee services while USBNA retained the associated deposits. This satisfies OCC collateralization requirements as contractual trustee duties and the deposits reside in different entities allowing collateral usage to be avoided.
OCC regulations governing self-deposits had required USBNA to hold collateral in an amount equal to the portion of customer funds that are not insured by the FDIC, representing a significant cost for USB’s Corporate Trust Business. This requirement no longer applies since trustee or agency responsibility has been transferred from USBNA to USBTC, thus resulting in the roles of depositor and trustee being performed by two separate legal entities.
An upgrade of USBTC’s ratings would be linked to improvement in the USBNA’s long-term ratings. However, given USBNA’s very high rating level, upward ratings momentum is unlikely. Conversely, a ratings downgrade of USBNA would result in a downgrade to USBTC’s ratings.
As a supported rating with a SA1 designation, USBTC’s ratings would typically move in tandem with the USBNA’s Long-Term Issuer Rating. DBRS Morningstar considers USBTC’s importance within the corporate trust business and overall franchise of USBNA and has equalized the ratings.
ENVIRONMENTAL, SOCIAL, 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 DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings. (May 17, 2022)
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Banks and Banking Organisations https://www.dbrsmorningstar.com/research/398692/global-methodology-for-rating-banks-and-banking-organisations (June 23, 2022).
In addition, DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).
The primary sources of information used for this rating include Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:
The last rating action on this issuer took place on January 10th, 2022.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
Lead Analyst: John Mackerey, Senior Vice President, North American Financial Institutions – Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of North American FIG – Global FIG
Initial Rating Date: January 10, 2022
For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
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