Due to its strong, stable profitability and record of strategic execution, Royal Bank of Canada (RBC) is under review for possible upgrade by Moody’s Investors Service.
The rating agency said that it has placed the long-term ratings for RBC and its subsidiaries, including RBC Capital Markets, on review.
“RBC’s diversified business mix, which also includes a major commitment to capital markets, and wealth and asset management businesses, has extended the bank’s competitive advantage over many of its peers,” Moody’s said in a release.
The bank’s diversification has also provided the bank “a sturdy buffer against the greater volatility of RBC’s capital markets activity through various economic cycles,” it added.
Moody’s will assess the resilience of “the bank’s earnings and capital base under various stress scenarios in order to evaluate if its business line diversification is sufficiently robust to offset the higher earnings volatility, opacity and complexity inherent in its capital markets business, which would warrant a higher rating,” the agency said.
If the review indicates that the bank will continue to deliver resilient operating performance relative to many of its rivals, while maintaining a strong capital position, the bank’s ratings will be in line for a boost.
Conversely, if the review doesn’t reveal the expected level of resilience under stress scenarios, the ratings will be affirmed at their current levels.
Downgrades are unlikely over the next 12 to 18 months, Moody’s noted.