Rating agency cuts RBC Bank, says 'outlook negative'

Posted May 12, 2011 2:39 p.m. EDT

— Standard & Poor’s Ratings Services has cut its rating on RBC Bank, saying it now views the Raleigh financial institution as “outlook negative.”

Citing their belief that RBC’s parent Royal Bank of Canada views it as “non-strategically important,” S&P lowered RBC’s rating to “BBB” from “A-.”

“The outlook is negative,” S&P said.

Royal Bank of Canada is rumored to be looking for a buyer of RBC.

“The downgrade is based on our belief that RBC Bank's parent, Royal Bank of
Canada, has altered its long-term strategic plans for the company.," the analysts wrote.

“Although we believe RBC remains fully committed to, and focused on, stabilizing and improving credit quality and profitability, and thus returning the bank to a profitable status, we do not believe the bank will be a key holding in the long term.”

The report was written by credit analyst Foster Cheng.

“This is primarily due to the very competitive U.S. banking landscape and RBC Bank's small regional presence,” Cheng added. “As such, we are revising our group status view of the bank to ‘non-strategically important,’ from ‘strategically important.’”

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