Fitch Affirms RBS Securities Inc.'s Long- and Short-Term IDRs at 'A-/F1';
NEW YORK -- September 19, 2013
Fitch Ratings has affirmed RBS Securities Inc.'s (RBSSI)'A-' Long-term Issuer
Default Rating (IDR) and 'F1' Short-term IDR. RBSSI is a wholly owned indirect
subsidiary of The Royal Bank of Scotland Group plc (RBS Group) which is rated
by Fitch at 'A/F1' and was also affirmed today. The Rating Outlook is Stable.
Today's rating action on RBSSI was taken in conjunction with Fitch's review of
the RBS Group. A full list of ratings follows at the end of this release.
RBSSI's ratings have been affirmed in conjunction with Fitch's UK Bank peer
review and the affirmation of RBS Group's ratings (please see 'Fitch Affirms
Royal Bank of Scotland, Lloyds Banking Group & Santander; Downgrades
Nationwide', dated Sept 19, 2013 for additional details).
KEY RATING DRIVERS
RBSSI is considered by Fitch to be a strategically important business within
The Royal Bank of Scotland plc's (RBS) Markets and International Banking
(M&IB) segment and remains a significant earnings contributor to the overall
group. As such, Fitch continues to view the ratings as being closely linked.
RBSSI also relies on the parent for contingent funding, capital and liquidity
needs and without such support, the rating would be materially lower on a
stand-alone basis, though the agency recognizes that it is operated as an
integral part of RBS's M&IB segment.
RBSSI relies heavily on wholesale, short-term secured financing, which Fitch
views as a credit negative. However, the firm has continued to extend
maturities across its repo book and reduced counterparty concentrations.
Balance sheet inventory is largely comprised of high quality, liquid
securities, primarily U.S. government and Agency securities. Contingency
funding plans and liquidity stress tests have also been improved over the past
The firm's revenues are heavily concentrated in trading one asset class, which
also places further pressure on the firm's credit profile. As a result, Fitch
believes RBSSI's franchise is more limited than many of its diversified broker
dealer peers in the United States.
The current ratings incorporate RBS's continuing demonstrated support in the
form of capital infusions and credit lines. In addition, the ratings of RBSSI
rely on some level of UK government support because the ultimate parent's
viability ratings are lower than the current long- and short-term IDRs. The
'F1' short-term IDR reflects Fitch's view that any support if needed would be
forthcoming in the short term.
RBSSI has made improvements to its balance sheet leverage and risk management
infrastructure over the past several years. Fitch-adjusted leverage stood at
8.1 as of June 30, 2013, compared to 10.2 at YE12 and 28.9x at YE10. The
current level is generally consistent with the Fitch-rated broker-dealer peer
group and is expected to remain fairly consistent going forward.
RATING DRIVERS AND SENSITIVITIES - IDRs
RBSSI's Long-term IDR is notched down from RBS's IDR because the entity is a
foreign subsidiary and support may diminish over time. Fitch believes that the
UK government will continue to allow support of RBSSI, but that bank
subsidiaries may have priority in support in an extreme stress scenario.
Furthermore, over time, the UK government may push to separate investment
banking from core banking activities, which may reduce support over time and
cause Fitch to revisit the ratings.
Changes to RBSSI's ratings would move in tandem with RBS's Long- and
Short-term IDRs because RBSSI's ratings are driven by that of its parent RBS.
If RBSSI were no longer deemed to be strategically important to RBS, RBSSI's
ratings would be downgraded, potentially by multiple notches.
RBSSI is one of two principal operating companies for M&IB in North America.
Its primary business lines include mortgage and ABS Sales and Trading, Flow
Credit Sales and Trading, Treasury Markets, Prime Brokerage and Rates Sales
and Trading. In addition to being an SEC registered broker dealer, it is also
a CFTC designated Futures Commission Merchant (FCM). It is also an agent for
the Federal Reserve Term Asset-Backed Securities Loan Facility (TALF). The
firm had $114 billion in total assets as of June 30, 2013.
Fitch has affirmed the following ratings of RBS Securities Inc.:
--Long-term IDR at 'A-'; Outlook Stable
--Short-term IDR at 'F1'.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Securities Firms Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Fitch Affirms Royal Bank of Scotland, Lloyds Banking Group & Santander;
Downgrades Nationwide' (Sept. 19, 2013).
Applicable Criteria and Related Research:
Securities Firms Criteria
Rating FI Subsidiaries and Holding Companies
Global Financial Institutions Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Ilya Ivashkov, CFA, +1 212-908-0769
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Claudia Nelson, +44 20 3530 1191
Janine Dow, +44 20 3530 1464
Brian Bertsch, +1 212-908-0549
New York, Media Relations
Press spacebar to pause and continue. Press esc to stop.