The Royal Bank of Canada has joined a list of 17 global financial firms facing a ratings downgrade from Moody's Investor Services, but a recruiter says that shouldn’t stop job candidates from considering a position at RBC.
“If I was looking at RBC as a potential employer, I don't think this would have a significant or negative impact on my decision,” says Janice Detta Colli, a Boyden managing director in Toronto heading the recruiter’s financial services practice in Canada.
“For the past few years, RBC has been consistently profitable and the capital markets business has been in very good shape," Detta Colli tells eFinancialCareers.
Canada’s largest bank said on Thursday it was surprised to be included in the review, launched because of Moody’s concerns about the banks’ long-term prospects for profitability and growth.
“This action does nothing to help investors differentiate between strong banks and weak ones. RBC’s credit rating and capital base are among the strongest of all banks globally,” the bank said in a statement quoted by The Canadian Press.
It’s true that The Royal Bank of Canada had doubled the size of its investment bank over the last five years, but recently announced it was curbing hires and expansion amid volatile capital markets.
Nevertheless: “Over the past three fiscal years, our capital markets business has been consistently profitable and represents less than 25 percent of RBC’s earnings,” RBC said last week in response to the downgrade threat.
Moody’s put the 17 firms—including Goldman Sachs and Deutsche Bank—on watch for downgrade because it believes their capital markets business makes them vulnerable to economic and regulatory challenges.
Canada, however, is known for having one of the world's safer banking systems.
After Singapore, Canada is rated as having the second-best banking financial ratings in the world by Moody's.
Back in December 2010, Moody's stripped Royal Bank of its triple-A rating, dropping it to Aa1 on concern that the capital markets business could expose investors to volatility. That downgrade, the first in at least 15 years, put RBC on the same footing as J.P. Morgan Chase & Co. and Canada's Bank of Nova Scotia and two notches higher than Goldman Sachs and Deutsche Bank.
Meanwhile, recruiter Detta Colli says that “If I was talking to a prospective RBC employee, I would say that I don't feel the downgrading is warranted at this time."
She adds that capital markets is less than a quarter of RBC's overall business. "RBC's track record is quite different from some of the other banks Moody's places in the same category," Detta Colli says. “Since RBC is one of the most successful banks in the world and is now recognized globally as such, it will garner more scrutiny, warranted or not, as a result.”