TEXT-Fitch affirms RBS Citizens Financial Group's ratings

(The following statement was released by the rating agency)

Oct 10 - Fitch Ratings has affirmed RBS Citizen's FinancialGroup's (CFG) ratings. A complete list of rating actions follows at the end ofthis release.

Today's rating action on CFG was taken in conjunction with Fitch's GlobalTrading and Universal Bank (GTUB) review. As part of this review, Fitch affirmedthe Royal Bank of Scotland Group plc's

(RBSG) IDRs at 'A/F1'. (Seeseparate press release dated Oct. 10, 2012 for additional details.)


As a wholly owned subsidiary of RBSG, CFG's long- and short-term IDRs are linkedto those of its parent company. Fitch continues to regard CFG as strategicallyimportant to RBSG. This is reflected in CFG's Support Rating of '1', whicharticulates Fitch's belief that there is an extremely high probability that RBSGwould support CFG if necessary. Therefore, any change in RBSG's IDRs couldresult in a change of CFG's ratings.

Fitch has also affirmed CFG's viability rating at 'bbb+', which embodies thestandalone assessment of CFG. The affirmation reflects CFG solid capitalstrength at its current rating coupled with strong liquidity. These strengthsare tempered by CFG's below peer profitability and relatively high home equityexposure.

Fitch considers CFG's capital levels to be solid and managed conservatively onboth a consolidated level and at the respective banks. CFG's tangible commonequity ratio totaled 10.5% at the end of second quarter, up 25bps on a linkedquarter basis. Liquidity levels are also solid as CFG is primarily depositfunded with minimal reliance on wholesale borrowings or RBSG.

CFG's earnings improved on a linked quarter basis due to a one-time legalexpense recognized in the first quarter. However, year-to-date return on averageassets still remains low at 0.52%. Fitch expects that earnings performance willcontinue to perform below levels experienced pre-crisis as loan growth issluggish and net interest margins are pressured by low rates.

Fitch also has general industry concerns surrounding home equity loans asarticulated in the Fitch special report 'U.S. Housing and Bank Balance Sheets'dated Feb. 27, 2012. Given CFG's relatively higher level of home equity loans at25% of total loans, Fitch believes CFG would be more affected if home equityloans were to underperform. Fitch recognizes that CFG's core home equity bookperforms adequately, and that it a disproportionate amount of losses hasoccurred in a portfolio of acquired home equity loans that is in run-off.


As previously mentioned, CFG's IDRs are linked to those of its parent. As such,CFG's IDRs will likely be affected by any changes to the ratings of RBSG itself.In addition, although not anticipated, any changes to CFG's ownership would alsoprompt a review its ratings.

Fitch considers CFG's VR's to be solidly situated at their current levels.Nonetheless, positive rating momentum could occur should CFG improve itsprofitability levels commensurate to those of higher rated regional banks whilereducing its home equity exposure. Conversely, factors that could lead tonegative pressures on the VR include a reversal of improving credit trendsand/or relatively high growth in commercial lending.


Subordinated debt issued by CFG is notched down from its VR in accordance withFitch's assessment of each instrument's respective nonperformance and relativeloss severity risk profiles. Ratings are all primarily sensitive to any changesin the VRs of CFG.


CFG's IDRs and VR are equalized with those of its operating companies and banksreflecting its role as the bank holding company, which is mandated in the U.S.to act as a source of strength for its bank subsidiaries.

Fitch has affirmed the following ratings:

RBS Citizens Financial Group, Inc.

--Long-term IDR at 'A-'; Outlook Stable;

--Short-term IDR at 'F1';--Viability rating at 'bbb+';--Subordinated debt at 'BBB';--Support rating at '1'.RBS Citizens, NA

--Long-term IDR at 'A-'; Outlook Stable;

--Short-term IDR at 'F1';

--Viability rating at 'bbb+';

--Support rating at '1';

--Long-term deposits at 'A';

--Senior Unsecured at 'A-';

--Short-term deposits at 'F1'.

Citizens Bank of Pennsylvania

--Long-term IDR at 'A-'; Outlook Stable;

--Short-term IDR at 'F1';

--Viability rating at 'bbb+';

--Support rating at '1';

--Long-term deposits at 'A';

--Short-term deposits at 'F1'.

Additional information is available at '

'. The ratings abovewere solicited by, or on behalf of, the issuer, and therefore, Fitch has beencompensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'U.S. Housing and Bank Balance Sheets' (Feb. 27, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

U.S. Housing and Bank Balance Sheets

Rating FI Subsidiaries and Holding Companies

(New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging:pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))

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