S&P Affirms RY, Revises Outlook to Stable

Standard & Poor’s has announced:

  • •We believe that the Canadian banking sector is encountering incremental pressure from headwinds facing the Canadian economy, which is heightening economic risk in the banking system.
  • •We also believe that industry risk for the Canadian banking sector is increasing. We expect that intensifying competition for loans and deposits will lead to pressure on profitability growth, especially in banks’ retail businesses.
  • •We are affirming our ‘AA-‘ long-term and ‘A-1+’ short-term issuer credit ratings on Royal Bank of Canada as well as the ‘AA-‘ issue ratings on the bank’s senior unsecured debt. We are revising the outlook to stable from negative. We have affirmed the stand-alone credit profile on Royal Bank of Canada as the bank’s stronger Standard & Poor’s projected risk-adjusted capital ratio led to a reassessment of the capital and earnings score to “adequate” from “moderate”.
  • •The stable outlook reflects our expectation that Royal Bank of Canada’s credit fundamentals will remain consistent with its current ratings over the next 24 months.

RBC’s funding and liquidity positions are viewed as “average” and “adequate”, respectively, and reflect the bank’s stable domestic retail deposit franchise and its strengthening funding and liquidity positions to meet final Basel III liquidity and funding requirements while recognizing a material wholesale funding component.

It is our view that RBC is a systemically important bank and that it would likely benefit from extraordinary government support in times of stress.

The stable outlook reflects our expectations that RBC will continue to manage its balance sheet prudently, maintain peer-leading asset quality, and generate consistent though slower earnings growth through its premier business franchises in Canada and diversified revenue sources to support its RAC ratio, and for the funding and liquidity profile to strengthen further due to more stringent regulatory liquidity measures.

S&P’s prior negative outlook was reported on PrefBlog.

RY has the following preferred share issues outstanding: RY.PR.A (series AA); RY.PR.B (Series AB); RY.PR.C (Series AC); RY.PR.D (Series AD); RY.PR.E (Series AE); RY.PR.F (Series AF); RY.PR.G (Series AG); RY.PR.H (Series AH); RY.PR.I (Series AJ); RY.PR.L (Series AL); RY.PR.N (Series AN); RY.PR.P (Series AP); RY.PR.R (Series AR); RY.PR.T (Series AT); RY.PR.W (Series W); RY.PR.X (Series AV) and RY.PR.Y (Series AX).

Note that S&P does not discriminate between RY.PR.W and the other issues, even though RY.PR.W has a potential NVCC clause.

One Response to “S&P Affirms RY, Revises Outlook to Stable”

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