PrefBlog

Standard & Poor’s has announced:

• Following a review of Royal Bank of Canada (RBC) under Standard & Poor’s revised bank criteria (published Nov. 9, 2011), we are affirming the ‘AA-/A-1+’ issuer credit ratings on the bank. The outlook is stable.
• Our ratings on RBC are based on its strong business position, moderate capital and earnings, strong risk position, and average funding and adequate liquidity, as our criteria define these terms.
• The issuer credit rating on RBC receives one notch of uplift, reflecting RBC’s high systemic importance in Canada and our assessment of the Canadian government as supportive.
• We expect the bank to continue to generate consistent earnings supported
  by its premier business franchises in Canada with its stable retail banking operations and manageable loan losses.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ‘AA-/A-1+’ issuer credit ratings on Royal Bank of Canada (RBC). The stand-alone credit profile (SACP) is ‘a+’. The outlook is stable. At the same time, we lowered the ratings on the bank and its subsidiaries’ hybrid securities and preferred stock to ‘A-‘ from ‘A’, two notches below the SACP, consistent with application of our revised bank hybrid capital criteria (published Nov. 1, 2011).

We also lowered our ratings on RBC and its subsidiaries’ nondeferrable subordinated debt to ‘A’ from ‘A+’. RBC’s nondeferrable subordinated debt is rated off the ‘a+’ SACP as opposed to being notched from the ‘AA-‘ issuer credit rating, based on our new hybrid criteria. We stipulate that nondeferrable subordinated debt would be rated below a bank’s SACP in countries whose legal or regulatory frameworks may not support this type of debt in a stress scenario. Recent guidance from the Office of the Superintendent of Financial Institutions (OSFI) expresses an expectation that, after a transition period, all Tier 1 and 2 capital instruments “must be able to absorb losses in a failed financial institution”. Standard & Poor’s expects differentiated treatment would apply to capital instruments and senior debt as a Canadian bank approaches a state of nonviability.

The issues remain at P-1(low) on the Preferred Scale.

RY has the following preferred shares outstanding: RY.PR.A, RY.PR.B, RY.PR.C, RY.PR.D, RY.PR.E, RY.PR.F, RY.PR.G and RY.PR.H (DeemedRetractible); RY.PR.I, RY.PR.L, RY.PR.N, RY.PR.P, RY.PR.R RY,PR.T, RY.PR.X and RY.PR.Y (FixedReset); and RY.PR.W (PerpetualDiscount)

This entry was posted on Wednesday, December 14th, 2011 at 1:48 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.