Moody's downgrades RBC Bank (USA)

Moody's Investors Service said it downgraded RBC Bank (USA)'s issuer rating, OSO senior unsecured debt rating, senior unsecured deposit notes rating and senior unsecured deposit rating to A1 from Aa3 and its subordinated debt to A2 from A1. The C- financial strength rating was confirmed, and the Prime-1 short-term rating was affirmed.

This concludes the review for possible downgrade that began on Feb. 8, and the outlook is stable.

The agency said the downgrade reflects ongoing weak profitability and internal capital formation at RBC Bank (USA). The bank has reported a net loss for each of the past three years, and Moody's does not expect it to return to profitability in the near to intermediate term.

According to Moody's, the losses have been driven by poor pre-provision income, elevated loan loss provisioning and significant goodwill impairment, a reflection of previous missteps in RBC Bank (USA)'s expansion strategy.

Nonetheless, the bank's capital position remains strong, a result of multiple large equity infusions from ultimate parent Royal Bank of Canada, the agency said.

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