DBRS Confirms RBC at AA and R-1 (high), Trends Stable

DBRS has today confirmed the ratings of Royal Bank of Canada (RBC or the Bank) and its related entities, including the Bank’s Deposits & Senior Debt at AA and Short-Term Instruments at R-1 (high). All trends are Stable. DBRS has also discontinued the rating for the Bank’s Reset Subordinated Debentures (Subordinated Indebtedness) and the rating on RBC Subordinated Notes Trust due to repayment of the securities. Also, DBRS has discontinued its rating of the Bank’s Cumulative Preferred Shares because there are none outstanding. The Bank’s ratings are underpinned by its highly diversified business model, strong Canadian retail franchise and well-positioned capital markets business.

RBC is Canada’s largest financial institution as measured by revenue and market capitalization. Its highly diversified business model and solid performance, even in difficult market situations, is reflected in its strong return on common equity over an extended period. RBC continues to dominate the banking landscape in Canada and is gradually increasing its global footprint, most notably in wealth management and capital markets.

Given the Bank’s significant market share positions, the mature Canadian banking industry and the competitive landscape, its continued long-term domestic growth within Canada may be a challenge. RBC and its large competitors have little room to grow domestically beyond market growth rates. The quality of RBC’s lending portfolio remains strong.

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

The Bank’s Deposits & Senior Debt rating of AA is composed of an intrinsic assessment of AA (low) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 support assessment results in a one-notch benefit to the Issuer Rating and the Deposits & Senior Debt and Subordinated Debt ratings.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (June 2014), Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (December, 2013) and Criteria: Support Assessment for Banks and Banking Organisations (January 2014), which can be found on the DBRS website under Methodologies.

DBRS ratings for Royal Bank Mortgage Corporation and Royal Trust Corporation of Canada & Royal Trust Company (no guarantee) are based on the ratings for Royal Bank of Canada.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.