Toronto, December 02, 2020 -- Moody's Investors Service, ("Moody's") has
today affirmed the short-term and long term debt and deposit ratings,
the Counterparty Risk Ratings, the Counterparty Risk Assessments
and standalone baseline credit assessment (BCA) of City National Bank
(City National). The outlook on the relevant ratings remains stable.
For a list of all affected ratings, please refer to the end of this
press release.
RATINGS RATIONALE
The ratings affirmation reflects Moody's unchanged assessment of City
National's standalone credit profile, parental support and structural
analysis. City National's asset quality metrics are excellent with
a low level of nonperforming assets, but rapid expansion of its
commercial loan portfolio increases the risk of future credit losses.
Recent digital initiatives and the realization of expense synergies with
its parent Royal Bank of Canada (RBC, LT deposits Aa2 Stable,
Baseline Credit Assessment a3) had begun to support an improvement in
profitability, a relative weakness in the past. However,
the economic impacts of coronavirus have put pressure on profitability,
which will persist in coming quarters. City National's capitalization
has been below peer average, but in our view, ongoing support
from RBC would be forthcoming as required.
The bank is core deposit funded and continues to maintain a strong combined
liquidity and funding profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure would emerge if bank meaningfully improved its
profitability metrics while maintaining its strong asset quality record
through the cycle. Should the relative thinness of the bank's debt
structure expand, this could also lead to an upgrade of deposit
ratings, although we expect a stable funding structure to persist.
The Adjusted BCA could go up either through improved fundamentals (profitability
or capital) or if the parent's BCA were to be upgraded.
Downward rating pressure could emerge if the bank's strategic actions
as part of RBC were inconsistent with its historically conservative business
risk profile. Should the bank's debt outstandings decline,
this could also lead to a downgrade of deposit ratings, although
we expect a stable funding structure to persist. The Adjusted BCA
could go down, either through weakened fundamentals (asset quality
or capital) or if the parent's BCA were to be downgraded.
Affirmations:
..Issuer: City National Bank
.... Adjusted Baseline Credit Assessment,
Affirmed a2
.... Baseline Credit Assessment, Affirmed
a2
.... LT Counterparty Risk Assessment,
Affirmed A1(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... LT Counterparty Risk Rating (Foreign
Currency and Local Currency), Affirmed A2
.... ST Counterparty Risk Rating (Foreign
Currency and Local Currency), Affirmed P-1
.... Issuer Rating, Affirmed A3,
Stable
....Subordinate Regular Bond/Debenture,
Affirmed A3
....LT Senior Unsecured Deposit Rating,
Affirmed Aa3, Stable
.... ST Deposit Rating, Affirmed P-1
Outlook Actions:
..Issuer: City National Bank
....Outlook, Remains Stable
The principal methodology used in these ratings was Bank Methodology published
in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for
Designating and Assigning Unsolicited Credit Ratings available on its
website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed by
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
David Beattie
Senior Vice President
Financial Institutions Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653