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Fitch Upgrades and Withdraws City National Corporation's Ratings at 'AA-'
November 3, 2015 / 4:11 PM / 2 years ago

Fitch Upgrades and Withdraws City National Corporation's Ratings at 'AA-'

(The following statement was released by the rating agency) NEW YORK, November 03 (Fitch) Fitch Ratings has upgraded City National Corporation's (CYN) Issuer Default Rating (IDR) to 'AA-' from 'A-'; Rating Watch Positive based on Fitch's view of potential institutional support from the new parent, Royal Bank of Canada (RY: rated 'AA'/Stable Outlook by Fitch). Subsequently, Fitch has withdrawn the ratings as the entity no longer exists. This action follows the completion of Royal Bank of Canada's (RY: rated 'AA'/Stable Outlook) acquisition of CYN for approximately $5.0 billion. A full list of rating actions follows at the end of this release. Following the completion of the acquisition, CYN's Viability Rating (VR) has also been affirmed and subsequently withdrawn at 'a-'. The holding company, CYN, will no longer exist, but the main bank operating subsidiary, City National Bank (CNB)'s Long and Short-term Issuer Default Ratings (IDRs) have been upgraded to 'AA-' and 'F1+' based on institutional support noted above and will remain outstanding. KEY RATING DRIVERS IDRs, NATIONAL RATINGS AND SENIOR DEBT Fitch believes CYN's acquisition by RY would improve CYN's overall financial profile, as RY plans to make CYN its main U.S. business operation. This will largely consist of continued growth of wealth management businesses, CYN's historical strength, as well as through growth of commercial and private banking activities. Fitch notes that RY has a strong franchise that includes personal and commercial banking throughout Canada, wealth and asset management operations globally, as well as investor/treasury services and capital markets activities primarily in North America. VR Prior to the completion of the merger noted above, CYN's stand alone ratings reflected the company's strong franchise, relatively stable credit metrics, good liquidity position, and capacity to improve earnings in a rising rate environment. These strengths were balanced against CYN's capital levels, which consistently have below peer group averages. As such, the rating has been affirmed, and subsequently withdrawn as CYN will no longer exist as an independent entity, but rather are linked to RY's ratings. SUPPORT RATING AND SUPPORT RATING FLOOR INSTITUTIONAL SUPPORT RATING Fitch has upgraded the support rating and assigned it an Institutional Support Rating of '1', reflecting the extremely high probability of support from CYN's parent (RY). Since this support is based on institutional support, no Support Floor Rating will be assigned. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES CYN's preferred stock was upgraded to 'BBB' given the upgrade of the IDR. As this issuance is being retired by RY, it has subsequently been withdrawn. CNB's subordinated debt was upgraded to 'A+' given the upgrade of the IDR noted previously. KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSIT RATINGS CNB's Long-term and Short-Term deposit ratings have been upgraded to 'AA' and 'F1+', respectively. CNB's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. RATING SENSITIVITIES IDRs, NATIONAL RATINGS AND SENIOR DEBT CNB's IDR ratings have been upgraded to 'AA-'/'F1+', one notch below the parent company given Fitch's views of institutional support and any changes to RY's VR rating, following the completion of the acquisition. These ratings are sensitive to any change in RY's ratings or change in Fitch's view of institutional support. Although RY views the U.S. as a core market, CNB's IDR's could be equalized as it becomes a key and integral part of the RY's business, successful integration of management, and branding efforts. VR The Viability Rating is no longer relevant given today's rating withdrawal. INSTITUTIONAL SUPPORT RATING The Support Rating is potentially sensitive to any change in Fitch's views regarding RY's propensity or ability to provide timely support to the bank. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES The ratings of subordinated debt and other hybrid capital issued by CNY and its subsidiary are primarily sensitive to any change in RY's VR. Fitch has upgraded and withdrawn the following ratings: City National Corporation --Long-term IDR to 'AA-' from 'A-'; Rating Watch Positive; --Short-Term IDR to 'F1+' from 'F1'; --Senior Unsecured to 'AA-' from 'A-'; --Preferred Stock to 'BBB' from 'BB'; --Support Rating to '1' from '5'. Fitch has upgraded the following ratings: City National Bank --Long-Term IDR to 'AA-' from 'A-'; Rating Watch Positive; --Short-Term IDR to 'F1+' from 'F1'; --Long-Term Deposits to 'AA' from 'A'; --Short-Term Deposits to 'F1+' from 'F1'; --Subordinated debt 'A+' from 'BBB+'; --Support at '1' from '5' Fitch has withdrawn the following ratings: City National Corporation --Viability Rating 'a-'; --Support Floor at 'NF'. City National Bank --Viability Rating 'a-'; --Support Floor at 'NF'; Contact: Primary Analyst Doriana Gamboa Senior Director +1-212-908-0865 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Julie Solar Senior Director +1-312-368-5472 Committee Chairperson Meghan Neenan Senior Director +1-212-908-9121 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria Global Bank Rating Criteria (pub. 20 Mar 2015) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=993359 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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