(The following statement was released by the rating agency)
Oct 10 - Standard & Poor's Ratings Services today said its ratings andoutlook on H&R Block Inc. (BBB/Negative/A-2) remain unchanged followingthe company's disclosure that it may cease to be a savings and loan holdingcompany (SLHC) because of Federal Reserve capital requirements. Given thisdevelopment, it is unclear how and if the company will continue the financialservices products it currently offers through its H&R Block Bank subsidiary overthe long term and what effect this will have on its business volumes andprofitability. We believe these products, such as the "Emerald Advance" line ofcredit, not only contribute revenues, but also help attract customers to thecompany's core tax business. Any major change to H&R Block Bank or theorigination of the company's financial services products could also entailoperational risks that could affect the rating. At this point, we are expandingthe scope of our negative outlook on H&R Block to include these risks. Oncemanagement decides on any strategic changes to its business or products, we willassess the impact on the rating.
The Dodd-Frank Act requires the Federal Reserve to essentially hold SLHCs tothe same capital requirements as bank holding companies. The Federal Reservepublished "a notice of proposed rulemaking" in June, partially on this topic,with a comment period ending on Oct. 22, 2012. Absent a change in theproposal, H&R Block likely would not currently comply with the capitalrequirements and could have to raise equity to remain in good standing as aSLHC.
(Caryn Trokie, New York Ratings Unit)