KBRA Affirms A- Issuer Rating for Computershare Trust Company, N.A.
5 Dec 2023 | New York
KBRA affirms the issuer rating of A- for Computershare Trust Company, N.A (CTCNA), headquartered in Canton, MA. The Outlook for the rating is Stable.
Key Credit Considerations
CTCNA successfully managed the integration of Wells Fargo Corporate Trust Services, acquired in November 2021, including the realization of synergies within the larger group, the retention of key personnel, and maintaining its position as one of the top providers of U.S. corporate trust services. CTCNA has a highly diversified business model with broad product/service offering and low concentration risk. The company’s fee driven business model focuses on EBITDA growth and resiliency. CTCNA benefits from relatively stable, capital light, and recurring fee-based revenue streams. The majority of revenues are typically derived from trust and custody fees driven by sizeable third-party assets under custody and administration (AUA). Over the last two years, the company has benefitted from higher interest rates which is reflected in substantial increase of margin income. CTCNA’s business model is generally low risk with key risk stemming from operational activities. Leverage and coverage are expected to remain at very conservative levels over the medium term, recognizing there can be some variability in EBITDA. CTCNA’s balance sheet strength, with sizeable cash levels and a large amount of equity capital, enhances its credit profile. KBRA considers CTCNA’s equity level as conservative in the context of the institution’s risk profile.
Rating Sensitivities
Given the Stable Outlook, an upgrade is not expected over the next one to two-year time frame. Over the longer term, there is potential for upward rating momentum if management achieves additional AUA growth and diversification while maintaining conservative leverage metrics. In the event of an unforeseen decline in AUA or other financial issues which result in lower fee generation and cash flow, pressure on ratings could ensue. That said, KBRA recognizes the resiliency of trustee and custodian operations compared with many other types of financial institutions. Materially higher-than-expected leverage could negatively affect the rating.
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