Tuesday, December 14, 2010

Royal Bank loses coveted Triple AAA credit rating leaving TD Bank as the only Canadian bank with a AAA rating by Moodys

Royal Bank of Canada logo
FT.com reported today that Moodys has down graded the credit rating of Royal Bank of Canada (RBC)  from the coveted AAA rating to AA1.

This leaves TD Bank as the only Canadian bank to keep the coveted triple A rating, along with only a handfull of banks worldwide.

The moves comes after RBC has struggled to gain more productivity from its recent acquisitions and operations in the U.S. domestic market while increasing its exposure to Capital Markets.Moodys said:

”the bank’s commitment to the capital markets business potentially exposes bondholders to increased earnings volatility and poses significant risk management challenges.”

This comes on the heals of recent M&A activity from RBC. On Dec 9th, RBC agreed to buy European fund
manager BlueBay Asset Management for around 963 million pounds ($1.54 billion). as it attempts to expand its footprint beyond North America.

TD Bank branch in Chinatown in Washington, D.C...
This is not a significant downgrade as Moodys points out, and RBC retains a strong credit rating, however this does (in this writers opinion) raise the profile of TD Bank as it continues to infiltrate the U.S. Market while keeping its solid AAA rating.

Disclosure:  long TD


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