PrefBlog

DBRS has announced that it:

upgraded the long-term ratings of the Royal Bank of Canada (RBC or the Bank) and its related entities, including RBC’s Long-Term Issuer Rating, to AA (high) from AA. DBRS also changed the trend on all long-term ratings to Stable from Positive. The Bank’s Short-Term Issuer Rating was confirmed at R-1 (high) with a Stable trend. RBC’s Long-Term Issuer Rating is composed of an Intrinsic Assessment (IA) of AA and Support Assessment of SA2, which reflect the expectation of timely systemic support from the Government of Canada (rated AAA with a Stable trend by DBRS). The SA2 designation results in a one-notch uplift to the Long-Term Issuer Rating. Under the new Canadian Bank Recapitalization Regime (the Bail-In Regime), DBRS expects to eventually remove the uplift from systemic support, once the Bank has issued a sufficient level of bail-inable senior debt, which would thereby provide an adequate buffer for non-bail-inable obligations and is then expected to offset the removal of systemic support.
…
DBRS remains concerned over the combination of Canadian household indebtedness and elevated housing prices, particularly in and around Vancouver and Toronto, and the potential impact of a housing downturn on the Canadian economy as well as to other consumer-related loan portfolios. Nonetheless, RBC’s residential-secured portfolio, like all the large Canadian banks, appears conservatively underwritten, with 37% of RBC’s Canadian residential mortgage loans insured. The average loan-to-value ratio of the uninsured portfolio is a conservative 57%, providing a substantial buffer for a decline in housing prices.
…
RBC’s Q2 2019 Common Equity Tier 1 ratio increased 90 basis points YoY to 11.8%, primarily due to strong earnings generation. While overall capital levels remain well above regulatory minimums, they are at the low end of some global peers. However, DBRS views capital levels as strong given the Bank’s asset mix and ability to generate capital. The Bank has begun issuing Bail-inable Senior Debt as part of the Bail-In Regime. It is expected that the Bank will exceed the total loss absorbing capacity requirements issued by the Office of the Superintendent of Financial Institutions as it replaces maturing legacy senior debt.
…
18-Jun-19 NVCC Preferred Shares Upgraded Pfd-2 (high) Stb
18-Jun-19 Non-Cumulative Preferred Shares (Excluding Series W) Upgraded Pfd-1 (low) Stb
18-Jun-19 Preferred Shares, Series C-1 Upgraded A Stb
18-Jun-19 Preferred Shares, Series C-2 Upgraded A Stb

Affected issues are:
NVCC-compliant : (Straights) RY.PR.N, RY.PR.O, RY.PR.P
(FixedReset) RY.PR.H, RY.PR.J, RY.PR.M, RY.PR.Q, RY.PR.R, RY.PR.S, RY.PR.Z

NVCC-non-compliant: (Straight) RY.PR.A, RY.PR.C, RY.PR.E, RY.PR.F, RY.PR.G

Specifically Excluded from being rated: RY.PR.W

It’s a bit odd that the Series C-1 shares were upgraded – they have been redeemed as I reported in August 2017; this was confirmed in the 2017 Annual Report:

On November 13, 2017, we redeemed all 82,050 issued and outstanding Non-cumulative Perpetual First Preferred Shares, Series C-1, for cash at a redemption price of US$1,000 per share.

The C-series preferreds were issued in connection with the takeover of City National in 2015.

This entry was posted on Tuesday, June 18th, 2019 at 6:31 pm 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.