Fitch Ratings has assigned a 'BBB+' rating to
Key Rating Drivers
On
The subordinated debt is notched one level below RJF's Viability Rating (VR) for loss severity. In accordance with Fitch's Bank Rating Criteria, this reflects alternative notching from the base case of two notches due to Fitch's view of
The rating on the preferred stock reflects standard notching based on Fitch's Bank Rating Criteria. The preferred stock is rated four notches below the VR, reflecting two notches for nonperformance and two notches for loss severity. Dividends on the preferred stock are non-mandatory and non-cumulative. The preferred stock, which qualify as Tier 1 capital, have been assigned 100% equity credit.
Fitch believes the acquisition of
The Stable Rating Outlook reflects Fitch's expectations that RJF's cash flow leverage will remain near current levels, the Tier 1 leverage ratio will remain above the publicly articulated target of 10% and parent company liquidity will remain above
RATING SENSITIVITIES
The ratings of the subordinated debt and preferred stock are sensitive to any change to the VR and are expected to move in tandem.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Material trading or operational losses;
Adverse regulatory actions or litigation, or reputational damage that leads to impairment of the firm's franchise or funding profile;
An adverse alteration of the firm's underwriting standards or risk appetite, including a more aggressive M&A strategy, leading to substantial integration or financial risk;
An inability to successfully integrate acquired businesses, resulting in litigation losses, revenue attrition or an uncontrolled increase in costs;
Material deterioration in capitalization, such that tier 1 leverage decreases below 10%, and/or cash flow leverage increases above 1.5x for the firm on a sustained basis;
A reduction in parent company liquidity below the publicly communicated target;
Outsized credit losses or impairments in the loan or securities portfolio at the bank;
A sustained decline in interest coverage.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Continued growth of the wealth management platform and diversification of revenue streams;
Sustained EBITDA margin expansion towards 30% or above;
Cash flow leverage sustained below 1.0x while maintaining conservative cushion above regulatory capital and leverage ratios;
A demonstrated track record of minimal operational losses and regulatory fines.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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