Morningstar DBRS Confirms Computershare Trust Company, National Association's Long-Term Issuer Rating at BBB; Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of Computershare Trust Company, National Association (CTCNA or the Company), including the Company’s Long-Term Issuer Rating of BBB. The trend on all credit ratings is Stable. The Support Assessment (SA) is SA1, which reflects the implied strong support from its parent, Computershare Limited (CPU or the Parent), if required.

KEY CREDIT RATING CONSIDERATIONS
CTCNA is a wholly-owned subsidiary of CPU. CPU Is a global market leader in transfer agency and share registration, employee equity plan administration, proxy solicitation, and stakeholder communications with a market cap of approximately $10.1 billion. As a supported credit rating with a SA1 designation, the Company’s credit ratings would typically move in tandem with the Parent’s Long-Term Issuer Rating. Morningstar DBRS considers CTCNA’s importance within CPU’s global franchise. In addition, Morningstar DBRS considers CTCNA as highly integrated with CPU from an operational and strategic perspective. As such, Morningstar DBRS strongly believes that CPU would fulfill the obligations of CTCNA.

CREDIT RATING DRIVERS
An upgrade of CTCNA’s credit ratings would be linked to improvement in the Parent’s long-term credit ratings. Conversely, a credit ratings downgrade of CPU would result in a downgrade to CTCNA’s credit ratings. In addition, any indication of a reduced ability or willingness to support CTCNA by CPU would result in a downgrade of the Company’s credit ratings.

CREDIT RATING RATIONALE
CTCNA is captured in CPU’s U.S. Corporate Trust business, one of CPU’s three core businesses. The Computershare Corporate Trust business comprises trust and agency services in connection with the administration of debt securities in the U.S. CPU acquired Wells Fargo’s Corporate Trust Services (CTS) business in November 2021 achieving significant scale.

Morningstar DBRS notes that CPU is highly acquisitive, including multiple carve-out deals of other financial institutions, with a long, track record of successfully integrating these deals. CPU reported high levels of client retention in the business. The integration included a two-year transitional services agreement (TSA) with Wells Fargo to cover various infrastructure, administrative, and support services. The TSA with Wells Fargo ended on November 1, 2023 and around 75% of the approximately $230 million of integration costs were incurred by this date. Additionally, cumulative synergies of $26 million are expected by the end of FY 2024.

In FY 2023, Computershare Corporate Trust generated $848 million in total revenue, an increase of 152% from FY 2022, which only included a partial year contribution from CTS. Computershare Corporate Trust accounted for 26% of CPU’s revenue by product for FY 2023. Additionally, management EBITDA increased 403% over FY 2022 reflecting strong growth in earnings despite weaker bond issuance which was not sufficient to offset maturities. Overall, Computershare Corporate Trust accounted for 37% of CPU’s EBITDA by product.

As a trust company, CTCNA takes little credit risk, but is exposed to operational risk. Additionally, CTCNA is subject to market trends and business cycles, and its largely digital platforms are subject to data privacy risks and cybercrime. CTCNA contributed significant levels of new client balances to CPU, and has enhanced sources of liquidity. Moreover, CPU’s overall business is highly cash-generative and business volumes are the main determinant of cash generation levels.

CTCNA is highly regulated as a licensed non-deposit taking Trust Company in the U.S., with the OCC as its primary regulator. CTCNA relies on the capital strength of CPU to support ongoing capital needs.

ENVIRONMENTAL, SOCIAL, AND 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 Morningstar DBRS considers ESG factors within the Morningstar DBRS 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)

Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology: Global Methodology for Rating Banks and Banking Organizations (June 23, 2023): https://www.dbrsmorningstar.com/research/415978/global-methodology-for-rating-banks-and-banking-organisations.

The following methodologies have also been applied: DBRS Morningstar Criteria: Guarantees and Other Forms of Support: (March 28, 2023): https://www.dbrsmorningstar.com/research/411694/dbrs-morningstar-global-criteria-guarantees-and-other-forms-of-support. In addition Morningstar DBRS uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings, https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (July 4, 2023) 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.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/397223.

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 this 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.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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