DBRS Downgrades Citizens Financial Group to BBB (high) After RBS Divesture, Bank Ratings Unaffected

DBRS, Inc. (DBRS) has today downgraded the Issuer & Senior Debt rating of Citizens Financial Group, Inc. (Citizens or the Company) to BBB (high) from A (low). Concurrently, DBRS has lowered the Short-Term Instruments rating of Citizens to R-2 (high) from R-1 (low). The trend on all ratings is now Stable. DBRS notes that the A (low) Deposits & Senior Debt ratings of both Citizens Financial Group’s banking subsidiaries, Citizens Bank of Pennsylvania and Citizens Bank, N.A., are unaffected by today’s rating action.

The rating action follows the sale by The Royal Bank of Scotland plc (RBS) of additional shares of Citizens, resulting in RBS’s ownership of Citizens being reduced to 45.6% from 70.3%. DBRS notes that should the underwriters exercise their overallotment option, RBS’s ownership could potentially be reduced further to 41.9%. As a result, DBRS has lowered the short and long-term ratings of the holding company, Citizens Financial Group, Inc., one notch below that of the operating banking subsidiaries consistent with DBRS’s standard policy for stand-alone bank holding companies.

Concurrently, with RBS’s ownership stake falling below 50%, DBRS sees potential support from RBS, if necessary, as less predictable, as well as the timeliness of such support being less certain. Consequently, DBRS has changed its Support Assessment (SA) for Citizens Financial Group, Inc., and its banking subsidiaries, to SA3 from SA1. The SA3 assessment reflects DBRS’s opinion that timely systemic support is not expected for Citizens, which is consistent with DBRS’s support assessment for other independent U.S. banking organizations.

DBRS notes that Citizens’ 2015 capital plan received a non-objection from the U.S. Federal Reserve as part of its 2015 CCAR review. Indeed, Citizens’ projected capital ratios were in the top quartile of CCAR banks under the Fed’s Supervisory Severely Adverse Stress scenario. Moreover, Citizens has demonstrated an ability to access the markets on a stand-alone basis issuing $1.5 billion of senior notes in December 2014 through its Citizens Bank, N.A. subsidiary.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2014). Other applicable methodologies include the DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2015). These can be found at: http://www.dbrs.com/about/methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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

Lead Analyst: David Laterza
Rating Committee Chair: Roger Lister
Initial Rating Date: 11 October 2005
Most Recent Rating Update: 6 March 2014

For additional information on this rating, please refer to the linking document under Related Research.