DBRS Ltd. Monday confirmed its ratings on Royal Bank of Canada, citing its strong domestic banking business.

DBRS confirmed the ratings of the bank and its related entities, and its related entities, including RBC’s Deposits & Senior Debt at AA and Short-Term Instruments at R-1 (high). All trends are Stable.

The credit rating agency says that RBC’s debt ratings are underpinned by its superior domestic franchise, “which provides the bank with stable earnings and credit and financial risk profiles”. It notes that RBC continues to invest to defend and strengthen its Canadian franchise, and that this strong domestic business supports the bank’s international growth initiatives.

Longer term, RBC’s ability to successfully build competitive US businesses will be a contributing factor to improving profitability, DBRS suggests, adding that the bank currently generates approximately two-thirds of its earnings in Canada and one-third internationally. So far, the level of profitability from the U.S. and international operations has been very low, it notes.

The rating agency also says that RBC’s capital ratios remain reasonable and provide a further cushion should future impairments and losses occur.

IE