July 21, 2017 / 7:31 PM / a year ago

Fitch Assigns 'A+' IDR to The PrivateBank and Trust Company; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, July 21 (Fitch) Fitch Ratings has assigned a Long-Term Issuer Default Rating (IDR) of 'A+' and Short-Term IDR of 'F1' to The PrivateBank and Trust Company (PVTBTC). The Rating Outlook is Stable. PVTBTC's ratings reflect Fitch's view of institutional support from Canadian Imperial Bank of Commerce (CIBC; Long-Term IDR 'AA-'). A full list of rating actions is at the end of this release. KEY RATING DRIVERS IDRs AND SENIOR DEBT In June 2017, CIBC completed the previously announced acquisition of Chicago-based, The PrivateBank. While PVTBTC's $20.4 billion in total assets at March 31, 2017 is relatively small in the context of CIBC's overall balance sheet, the acquisition is consistent with CIBC's U.S. expansion strategy. The acquisition provides CIBC's Canadian clients with access to U.S. banking services and expands its middle-market commercial and private banking capabilities. CIBC's ratings were affirmed at 'AA-/F1+' on Oct. 28, 2016 as part of Fitch's periodic review of Canadian banks. The affirmation is supported by the company's solid franchise in Canada, sound capital levels, strong asset quality, continued earnings stability, strong funding and liquidity position, and favorable credit metrics such as gross impaired loans and loan impairment charge ratios relative to international peers. PVTBTC's IDRs are linked to its parent company, CIBC. As such, Fitch has assigned PVTBTC a Support Rating of '1', indicating that there is an extremely high probability of institutional support from CIBC, if needed. Consistent with Fitch's rating criteria, specifically regarding parent and subsidiary relationships, PVTBTC's 'A+/F1' ratings are one notch lower from its parent, CIBC. Fitch considers PVTBTC to be a "strategically important" subsidiary for CIBC reflecting its role within the CIBC group, the level of integration, separate branding between the two entities, and full ownership stake. Fitch believes the acquisition of PVTBTC by CIBC will improve PVTBTC's overall financial profile, particularly as it helps diversify PVTBTC's overall funding profile and support for continued loan growth. As with any merger or acquisition, there are operational and execution-related risks, particularly for CIBC which has a limited track record of bank acquisitions. Fitch notes that PVTBTC will operate independently following the merger, maintaining a separate management team. Nonetheless, Fitch believes related risks will be managed well within CIBC's central risk management infrastructure. Further, PVTBTC's balance sheet is modest in complexity and therefore should minimize disruptions. PVTBTC, a Chicago-based commercial bank, reported $20.4 billion in total assets at 1Q17. On a pro forma basis, this acquisition represented less than 5% of CIBC's assets, which is considered manageable for CIBC, and its projected Common Equity Tier 1 ratio is to remain above 10%, consistent with CIBC's strong credit profile. CIBC has acquired all of PVTBTC's assets. PVTBTC has 36 locations, including 23 full-service branches, $9.8 billion in assets under administration (AUA) and $16.7 billion of deposits for a revised purchase price of $5 billion, nearly a 32% increase in value compared to the initial $3.8 billion purchase price which had reflected a 24% premium of over PVTBTC's implied stock price. The acquisition gives CIBC entry to the Chicago market, which has attractive demographics and creates good prospects for U.S. loan growth. CIBC's U.S. corporate loan book will more than double from $10.6 billion to over $24 billion with PVTBTC's $15.6 billion total loan book. Additionally, the acquisition potentially complements CIBC's Atlantic Trust ($27.5 billion in AUA) business, giving its clients access to U.S. banking capabilities. LONG- AND SHORT-TERM DEPOSIT RATINGS Fitch assigned The PrivateBank and Trust Company (PVTBTC) Long-Term and Short-Term deposit ratings of 'AA-' and 'F1+', respectively. PVTBTC's uninsured deposit ratings are one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. INSTITUTIONAL SUPPORT RATING Fitch assigned PVTBTC an Institutional Support Rating of '1', reflecting the extremely high probability of institutional support from CIBC. RATING SENSITIVITIES IDRs AND SENIOR DEBT The 'A+/F1' IDRs and senior unsecured debt ratings for PVTBTC are sensitive to any change in CIBC's ratings or change in Fitch's view of institutional support for PVTBTC. INSTITUTIONAL SUPPORT RATING PVTBTC's '1' Support Rating is sensitive to any change in Fitch's views regarding CIBC's propensity or ability to provide timely support to PVTBTC. Fitch has assigned the following ratings: The PrivateBank and Trust Company --Long-Term IDR at 'A+'; Outlook Stable; --Short-term IDR at 'F1'; --Long-Term deposits at 'AA-'; --Short-term deposits at 'F1+'; --Support at '1'. Contact: Doriana Gamboa Senior Director Financial Institutions +1 212-908-0865 33 Whitehall Street New York, NY 10004 Julie Solar Senior Director +1 312-368-5472 Committee Chairperson Joo-Yung Lee Managing Director +1 212-908-0560 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com; Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. 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