DBRS Morningstar Confirms Ratings of NBC Legislative Global Covered Bonds at AAA

DBRS Limited (DBRS Morningstar) confirmed the AAA ratings of the following outstanding series issued under the National Bank of Canada Legislative Global Covered Bond Programme (the Programme) as part of its continued efforts to provide timely credit rating opinions and increased transparency to market participants:

-- Covered Bonds, Series CBL3
-- Covered Bonds, Series CBL5
-- Covered Bonds, Series CBL6
-- Covered Bonds, Series CBL7
-- Covered Bonds, Series CBL8
-- Covered Bonds, Series CBL10
-- Covered Bonds, Series CBL11
-- Covered Bonds, Series CBL12
-- Covered Bonds, Series CBL13
-- Covered Bonds, Series CBL14
-- Covered Bonds, Series CBL15

The confirmations are based on the following analytical considerations:

-- A Covered Bond Attachment Point of AA (low), which is the DBRS Morningstar Long-Term Senior Debt rating of the National Bank of Canada (NBC). NBC is the Reference Entity for the Programme.
-- A Legal and Structuring Framework (LSF) assessment of Strong associated with the Programme.
-- A Cover Pool Credit Assessment of A (high).
-- An LSF-Implied Likelihood (LSF-L) of AA (high).
-- A one-notch uplift from the LSF-L for high recovery prospects to achieve the AAA ratings. Based on the recovery notching scale, an uplift of up to two notches from the LSF-L is possible.
-- A level of overcollateralization of 9.1% (based on the Asset Percentage of 91.7% as at February 26, 2021) to which DBRS Morningstar gives credit.

DBRS Morningstar considered the following factors in its analysis described above, each of which include additional analysis and, where appropriate, additional stresses to expected performance as a result of the global efforts to contain the spread of the Coronavirus Disease (COVID-19). On March 17, 2021, the DBRS Morningstar Sovereigns group published its updated outlook on the impact on key economic indicators for the 2020–22 time frame, which was updated from the initial outlook that was published on April 16, 2020, and has been updated periodically since. For details see https://www.dbrsmorningstar.com/research/375376. For the ratings assigned, DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced commentary.

ESG CONSIDERATIONS
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/373262.

Notes:
The principal methodology is Rating and Monitoring Covered Bonds (April 27, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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 the Programme took place on March 26, 2021, when DBRS Morningstar discontinued its rating on the Covered Bonds, Series CBL2 as the series was fully repaid.

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: Jiani Xi, Vice President, Canadian Structured Finance
Rating Committee Chair: Tim O’Neil, Managing Director, Head of Canadian Structured Finance
Initial Rating Date: December 9, 2013

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Principal methodology: Rating and Monitoring Covered Bonds (April 27, 2020)
Link: https://www.dbrsmorningstar.com/research/360260/rating-and-monitoring-covered-bonds

Predictive model: Canadian RMBS Model (October 2020; Version 5.0.0.2)
Link: https://www.dbrsmorningstar.com/models/