Royal Bank of Canada loses top credit rat­ing

The Pak Banker - - Front Page -

TORONTO: Royal Bank of Canada lost its Moody's triple A credit rat­ing, leav­ing its smaller ri­val Toron­toDo­min­ion as the only Cana­dian bank, and one of less than half a dozen world­wide, that still en­joys the blue-rib­bon rank­ing.

In low­er­ing the rat­ing to Aa1 on Mon­day, Moody's said the move had been prompted by the bank's grow­ing in­ter­na­tional cap­i­tal mar­kets busi­ness "which po­ten­tially ex­poses bond­hold­ers to in­creased earn­ings volatil­ity and poses sig­nif­i­cant risk chal­lenges".

Nev­er­the­less, "even af­ter the down­grade, Royal Bank en­joys one of the high­est rat­ings glob­ally among banks with sub­stan­tial cap­i­tal mar­kets op­er­a­tions," said Peter Nerby, a Moody's se­nior vicepres­i­dent. Mr Nerby pointed to the strength and di­ver­sity of RBC's busi­ness in Canada, where it is the largest fi­nan­cial in­sti­tu­tion.

Canada's six biggest banks have come through the fi­nan­cial cri­sis in far bet­ter shape than many of their US and Euro­pean coun­ter­parts thanks to a more con­ser­va­tive lend­ing cul­ture, a re­silient hous­ing mar­ket and ro­bust reg­u­la­tion.

Na­tional Bank of Canada, the small­est of the six, re­cently be­came the first to raise its div­i­dend since the on­set of the fi­nan­cial cri­sis. The other five, in­clud­ing RBC, are widely ex­pected to fol­low suit next year. How­ever, RBC dis­ap­pointed in­vestors ear­lier this month with a 9 per cent drop in fourth-quar­ter net earn­ings from a year ear­lier. Be­sides the grow­ing volatil­ity of its cap­i­tal mar­kets busi­ness, the bank has strug­gled to im­prove the per­for­mance of its US re­tail op­er­a­tions, based in the south-east. Moody's noted that RBC has been able to ex­ploit the dis­ar­ray at many of its in­vest­ment bank­ing com­peti­tors to ex­pand its bank­ing, sales and trad­ing ca­pa­bil­i­ties out­side Canada. -PB News

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