New York, November 12, 2020 -- Moody's Investors Service ("Moody's") has affirmed
all of the ratings and assessments of The Bank of New York Mellon Corporation
(BNY Mellon), Northern Trust Corporation (Northern Trust) and State
Street Corporation (State Street), and the ratings of their respective
subsidiaries. The rating outlooks for all three firms are stable.
BNY Mellon is rated A1 for long-term senior unsecured debt.
The Bank of New York Mellon, its lead operating bank, has
deposit ratings of Aa1/Prime-1, Counterparty Risk Ratings
(CRR) of Aa2/Prime-1, a standalone Baseline Credit Assessment
(BCA) of a1, and Counterparty Risk (CR) Assessments of Aa1(cr)/Prime-1(cr).
Northern Trust is rated A2 for long-term senior unsecured debt.
Northern Trust Company, its lead operating bank, has deposit
ratings of Aa2/Prime-1, CRRs of A1/Prime-1,
a standalone BCA of a1, and CR Assessments of Aa3(cr)/Prime-1(cr).
State Street is rated A1 for long-term senior unsecured debt.
State Street Bank and Trust Company, its lead operating bank,
has deposit ratings of Aa1/Prime-1, CRRs of Aa2/Prime-1,
a standalone BCA of a1, and CR Assessments of Aa1(cr)/Prime-1(cr).
A full list of affected ratings can be found at the end of this press
release.
"The ratings affirmation reflects the firms' resilient performance
in a particularly uncertain operating environment and the sustainability
of their franchises", said Allen Tischler, Senior Vice President.
"Although depressed interest rates and adverse secular trends are undermining
the banks' current profitability potential, they have strong
balance sheets and enviable franchises in global institutional investment
and asset servicing. These healthy investment servicing businesses
are complemented by large asset and/or wealth management businesses that
enhance the banks' earnings diversity. Finally, each
of the banks has a strong liquidity profile and limited asset risk."
The uncertain operating environment stems from the coronavirus pandemic
outbreak, which Moody's regards as a social risk under its
environmental, social and governance (ESG) framework, given
the substantial implications for public health and safety.
RATINGS RATIONALE
The affirmation of the ratings and assessments for all three US trust
and custody banks considers the banks' fundamental credit strengths,
which include contained credit risk and robust capital and liquidity.
Although credit risk is limited, the large processing volumes fundamental
to the banks' global operations give rise to notable operating risk,
which Moody's has incorporated in the assigned ratings. At
a1, the banks' respective BCAs are notably superior to the
current a3 median for rated US banks, which reflects not only their
credit fundamentals, but also their defensible global franchises.
Nonetheless, Moody's notes that all three banks face profitability
challenges. Indeed, profitability is the weakest credit metric
in the banks' respective financial profiles, as assessed under
Moody's bank rating methodology. In particular, historically
low global interest rates in 2020 have compressed the banks' net
interest income, driven money market fee waivers and weakened the
revenue potential of their securities finance businesses.
The revenue constraints associated with lower-for-longer
interest rates compound the long-present secular pressures affecting
the banks' ability to organically grow their fee income.
Specifically, despite the banks' strong global franchises,
they lack meaningful pricing power, particularly for core custody,
fund accounting and related services. This is a function of their
largest clients' desire to reduce their own expenses amidst the
shift away from higher-fee active management toward less-lucrative
passive management, and towards more packaged investment products.
In response, the trust and custody banks have focused on enhancing
their product set to deliver revenue growth, partly through acquisition
and/or third-party partnerships. However, given the
challenging operating environment and the time needed for some of these
initiatives to gain traction, Moody's does not anticipate
robust organic revenue growth for the banks in 2021. The banks
have also responded to their profitability pressures with various efficiency
initiatives, but their cost/income ratios remain elevated as they
continue to make necessary investments in technology and automation to
remain competitive, notwithstanding good expense discipline overall.
The banks' large global asset and investment servicing businesses
expose them to heightened operational risk. In fact, Moody's
considers operational risk to be more prominent than credit risk for these
banks given both the composition and comparatively modest size of their
loan books. With respect to operational risk, all three banks
have experienced material operational miscues in recent years, but
none significant enough to reflect negatively on Moody's assessment
of their overall asset risk.
The banks' asset and wealth management franchises provide diversification.
However, Moody's noted that both asset and wealth management are
much more fragmented markets than investment and asset servicing,
and are exposed to significant nonbank competition.
Moody's added that robust liquidity is a key credit strength of all three
banks. The liquidity stems from their investment servicing businesses,
which generate sizable low-cost deposit balances. Indeed,
given the prevailing negative interest rates in Europe and near-zero
rates elsewhere, all three of the banks reported deposit costs below
zero for the third quarter of 2020. All three banks also have sizable
holdings of liquid assets, protecting them from market shocks.
With respect to capital, the trust and custody banks' position is
solid. The banks performed well in regulatory stress tests and
their capital has strengthened in 2020, in part due to the cessation
of share buybacks at the behest of their regulators. As measured
by their common equity Tier 1 ratios at 30 September 2020, Northern
Trust's was 13.4%, BNY Mellon's was 13.0%
and State Street's was 12.4%, calculated as
the lower of either the advanced or standardized approach.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
For all three banks, the stable outlook indicates that a BCA and
rating upgrade is not likely over the next 12-18 months.
Moreover, given the banks' strong relative positioning on
Moody's rating scale, the pathways toward positive rating
pressure are limited. However, in a scenario where any of
the banks can demonstrate a material and enduring improvement in core
profitability, while also maintaining robust capital and liquidity,
positive rating pressure could emerge.
The BCA and ratings at any of the banks could be downgraded if their profitability
weakens below current levels and appears unlikely to rebound or if outsized
operational risk shortcomings emerge that undermine the banks' franchises.
On the other hand, a modest reduction in any of the banks'
capitalization in a more predictable operating environment would not result
in negative rating pressure, though materially lower capitalization
could have negative rating implications.
Affirmations:
..Issuer: Northern Trust Corporation
....LT Issuer Rating, Affirmed A2,
Stable
....Pref. Stock Non-cumulative,
Affirmed Baa1 (hyb)
....Subordinate Regular Bond/Debenture,
Affirmed A2
....Senior Unsecured Regular Bond/Debenture,
Affirmed A2, Stable
..Issuer: Northern Trust Company
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed A1
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed A1
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed A2,
Stable
....LT Bank Deposits, Affirmed Aa2,
Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Bank Note Program,
Affirmed (P)A2
....Subordinate Bank Note Program, Affirmed
(P)A2
....ST Bank Note Program, Affirmed (P)P-1
..Issuer: NTC Capital I
....Backed Pref. Stock, Affirmed
A3 (hyb)
..Issuer: NTC Capital II
....Backed Pref. Stock, Affirmed
A3 (hyb)
..Issuer: Bank of New York Mellon Corporation (The)
....LT Issuer Rating, Affirmed A1,
Stable
....Commercial Paper, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A1, Stable
....Pref. Stock Non-cumulative,
Affirmed Baa1 (hyb)
....Senior Subordinate Regular Bond/Debenture,
Affirmed A2
....Senior Unsecured Shelf, Affirmed
(P)A1
....Senior Subordinate Shelf, Affirmed
(P)A2
....Pref. Shelf, Affirmed (P)A3
....Pref. Shelf Non-cumulative,
Affirmed (P)Baa1
....Senior Subordinate Medium-Term
Note Program, Affirmed (P)A2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A1
..Issuer: BNY Mellon National Association
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa2,
Stable
....LT Bank Deposits, Affirmed Aa1,
Stable
....ST Bank Deposits, Affirmed P-1
..Issuer: BNY Mellon Trust of Delaware
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa2,
Stable
....LT Bank Deposits, Affirmed Aa1,
Stable
....ST Bank Deposits, Affirmed P-1
..Issuer: Bank of New York Mellon (The)
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa2,
Stable
....LT Bank Deposits, Affirmed Aa1,
Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa2
....Senior Unsecured Bank Note Program,
Affirmed (P)Aa2
....ST Bank Note Program, Affirmed (P)P-1
....Commercial Paper, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, Stable
..Issuer: Bank of New York Mellon SA/NV (The)
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating (Local Currency),
Affirmed Aa2, Stable
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed Aa2, Stable
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
....LT Bank Deposits (Local Currency),
Affirmed Aa1, Stable
....ST Bank Deposits (Local Currency),
Affirmed P-1
....LT Bank Deposits (Foreign Currency),
Affirmed Aa1, Stable
....ST Bank Deposits (Foreign Currency),
Affirmed P-1
..Issuer: BANK OF NEW YORK MELLON SA/NV (Lux.
Branch)
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating (Local Currency),
Affirmed Aa2, Stable Outlook Assigned
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed Aa2, Stable Outlook Assigned
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
....LT Bank Deposits (Local Currency),
Affirmed Aa1, Stable Outlook Assigned
....ST Bank Deposits (Local Currency),
Affirmed P-1
....LT Bank Deposits (Foreign Currency),
Affirmed Aa1, Stable Outlook Assigned
....ST Bank Deposits (Foreign Currency),
Affirmed P-1
..Issuer: BANK OF NEW YORK MELLON SA/NV (Milan Branch)
....LT Counterparty Risk Assessment,
Affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating (Local Currency),
Affirmed Aa2, Stable
....ST Issuer Rating (Local Currency),
Affirmed P-1
....LT Issuer Rating (Foreign Currency),
Affirmed Aa2, Stable
....ST Issuer Rating (Foreign Currency),
Affirmed P-1
....LT Bank Deposits (Local Currency),
Affirmed Aa2, Stable
....ST Bank Deposits (Local Currency),
Affirmed P-1
....LT Bank Deposits (Foreign Currency),
Affirmed Aa2, Stable
....ST Bank Deposits (Foreign Currency),
Affirmed P-1
..Issuer: Bank of New York Mellon Trust Company,
N.A.
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa2,
Stable
..Issuer: Mellon Capital IV
....Backed Pref. Stock, Affirmed
Baa1 (hyb)
..Issuer: Mellon Funding Corporation
....Backed Commercial Paper, Affirmed
P-1
..Issuer: State Street Corporation
....Junior Subordinated Regular Bond/Debenture,
Affirmed A3 (hyb)
....Pref. Stock Non-cumulative,
Affirmed Baa1 (hyb)
....Subordinate Regular Bond/Debenture,
Affirmed A2
....Senior Unsecured Regular Bond/Debenture,
Affirmed A1, Stable
..Issuer: State Street Bank and Trust Company
....Adjusted Baseline Credit Assessment,
Affirmed a1
....Baseline Credit Assessment, Affirmed
a1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....LT Counterparty Risk Rating (Local Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....LT Counterparty Risk Rating (Foreign Currency),
Affirmed Aa2
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....LT Issuer Rating, Affirmed Aa3,
Stable
....LT Bank Deposits, Affirmed Aa1,
Stable
....ST Bank Deposits, Affirmed P-1
Outlook Actions:
..Issuer: Northern Trust Corporation
....Outlook, Remains Stable
..Issuer: Northern Trust Company
....Outlook, Remains Stable
..Issuer: Bank of New York Mellon Corporation (The)
....Outlook, Remains Stable
..Issuer: BNY Mellon National Association
....Outlook, Remains Stable
..Issuer: BNY Mellon Trust of Delaware
....Outlook, Remains Stable
..Issuer: Bank of New York Mellon (The)
....Outlook, Remains Stable
..Issuer: Bank of New York Mellon SA/NV (The)
....Outlook, Remains Stable
..Issuer: BANK OF NEW YORK MELLON SA/NV (Lux.
Branch)
....Outlook, Remains Stable
..Issuer: BANK OF NEW YORK MELLON SA/NV (Milan Branch)
....Outlook, Remains Stable
..Issuer: Bank of New York Mellon Trust Company,
N.A.
....Outlook, Remains Stable
..Issuer: State Street Corporation
....Outlook, Remains Stable
..Issuer: State Street Bank and Trust Company
....Outlook, Remains Stable
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Allen Tischler
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
