DBRS Takes Numerous Rating Actions on City National Corp. Following RBC Acquisition

DBRS, Inc. (DBRS) has today taken a number of rating actions following the completion of the acquisition of City National Corporation (City National or the Company) by Royal Bank of Canada (RBC - rated AA with a Negative Trend), including assigning a new Issuer & Senior Debt rating of AA (low) to RBC USA Holdco Corporation (RBC USA) with a Negative trend. RBC USA has become the holding company for City National Bank (the Bank) following the transaction, while City National has ceased to exist. Consequently, DBRS upgraded City National to AA (low) with a Negative trend and subsequently withdrew the rating. Concurrently, the Bank’s Deposits & Senior Debt rating was upgraded to AA (low) with a Negative trend, while the Bank’s Short-Term Instruments Rating was confirmed at R-1 (middle). The Company’s Preferred Stock rating was upgraded to BBB (high) with a Stable trend, then subsequently withdrawn, as the securities are being exchanged for preferred shares issued by RBC. For a complete list of ratings actions, please refer to the ratings table in this press release. These actions remove the ratings from Under Review with Positive Implications where they were placed on January 22, 2015.

The ratings for RBC USA and City National Bank reflect their important role in RBC’s North American strategy to be a preferred provider to corporate, institutional, commercial and high-net worth clients and their businesses. As a result, DBRS has assigned a SA1 designation to RBC USA and the Bank, which implies strong and predictable support from RBC, if needed.

The Negative trend reflects DBRS’s view that anticipated changes in Canadian legislation and regulation mean that the potential for timely support for systemically important institutions like RBC is declining and is likely to eventually result in a change in DBRS’s support assessment from SA2 to SA3 for the large Canadian banks including RBC. Currently, the final rating for RBC benefits from an uplift of one notch above their intrinsic assessment (IA) due to the SA2 support assessment. As a supported rating with a SA1 designation, the ratings for the Company will move in tandem with RBC’s rating.

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 2015). 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).

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: Michael Driscoll
Rating Committee Chair: Roger Lister
Initial Rating Date: 6 April 2005
Most Recent Rating Update: 22 January 2015

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