NEW YORK – Fitch Ratings Ltd. has removed the negative rating watch for Citizens Financial Group Inc. and affirmed a “B/C” rating for the company and its subsidiaries.
The ratings agency maintained its previous rating because of Citizen Financial’s “solid balance sheet fundamentals and strong New England, MidAtlantic and Midwestern franchise,” Fitch said in a recent report.
The agency noted Citizens’ challenges, including a weakened asset quality and credit problems in the consumer sector, particularly in the company’s home-equity portfolio serviced by other companies.
But Fitch called the asset deterioration “controllable” with nonperforming loans at 2.3 percent of total loans as of March 31.
“While credit costs are expected to persist, Fitch believes overall levels will remain manageable, with sufficient reserve coverage in place to absorb future losses,” the agency said.
Fitch said it partially based its rating on various home-equity stress scenarios. Citizens has “sufficient liquidity and robust capital levels,” Fitch concluded.
Citizens Financial’s rating is also tied to its parent, the Royal Bank of Scotland Group plc., which has long- and short-term issuer default ratings of AA- and F1+, respectively.
Changes in the RBS rating would lead to a revision of Citizens’ ratings, Fitch warned. Citizens’ long- and short-term issue default ratings stand at A+ and F1, respectively.
The British government is now the majority owner of RBS at 84 percent after bailing out the bank with 45.5 billion pounds, or $73 billion.
“Nonetheless, Fitch considers CFG to be a valuable franchise for RBSG, even if current conditions limit its financial returns over the near term,” the agency said. “Although it has been considered a strategic holding, CFG also represents considerable potential value to RBSG if sold.”
Citizens Financial Group Inc. – a division of the Edinburgh-based Royal Bank of Scotland Group plc. (London Stock Exchange: RBS.L; NYSE: RBS) – is a commercial bank holding company founded in Providence in 1828. It has $144 billion in assets and about 22,700 employees at 1,500 Citizens Bank and Charter One branches in 12 states plus non-branch offices in about 40 states, most of which Citizens Financial operates through its RBS Citizens NA subsidiary. Additional information is available at www.CitizensBank.com or www.rbs.com.
