Royal Bank of Canada, that country's largest bank by assets, lost its coveted triple-A credit rating status Monday after Moody's Investors Services Inc. dropped it to Aa1 amid concern that the bank's growing capital markets business might increase earnings volatility.
The rating outlook is stable, reflecting the bank's dominant Canadian franchises, Moody's said. Royal Bank's "commitment to its sizeable and growing" capital markets business "potentially exposes bondholders to increased earnings volatility and poses significant risk management challenges," the New York debt rating agency said.
The downgrade, the first in at least 15 years, puts Royal Bank, of Toronto, on the same footing as JPMorgan Chase & Co. and Canadian peer Bank of Nova Scotia, and two notches higher than Goldman Sachs Group Inc. and Deutsche Bank AG.
"We view this as a minor rating change that has minimal impact to our overall business dealings," said Royal Bank spokeswoman Gillian McArdle. "We have strengthened our balance sheet significantly over the past two years and continue to manage it conservatively."