Moody's Investors Service cut its bank financial-strength ratings on the U.S. banking operations of Royal Bank of Scotland Group PLC as the segment's profitability is suffering.

The operating units of Citizens Financial Group Inc. saw their financial-strength ratings cut one notch to B and its long-term deposit ratings lowered to A1, or four steps from Aaa.

The negative ratings outlook was changed to on watch for further downgrade.

Moody's said Tuesday the bank's falling profits have "reduced its capacity to absorb losses at a time when the company is expected to continue to incur elevated credit costs."

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