FINANCIAL INSTITUTIONSISSUER COMMENT 17 JUNE 2015ROYAL BANK OF SCOTLAND GROUP PLC (RBS)Moodys Senior Unsecured Rating Ba1Moodys Outlook STABond-Implied Rating Baa3CDS-Implied Rating Baa2EDF-Implied Rating Ba2As of 6/15/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewRoyal Bank of Scotland Group Plc: Two Market-Implied Ratings Fall, One Improves Recently the CDS- and bond-implied ratings for Royal Bank of Scotland Group fell while the EDF'-implied rating advanced. Despite the declines, both the CDS- and bond-implied ratings gaps remain positive. Overall the market signals for Royal Bank of Scotland Group are strong.FIGURE 1. ROYAL BANK OF SCOTLAND GROUP: MOODYS AND MARKET-IMPLIED RATINGS, LAST 90 DAYS (DAILY DATA)Over the last three months, RBSs bond-implied rating worsened by two notches from Baa1 to Baa3 (Figure 1). The banks CDS-implied rating declined by one notch to Baa2. The EDF-MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 17 JUNE 2015 MARKET SIGNALS REVIEW : ROYAL BANK OF SCOTLAND GROUP PLC: TWO MARKET-IMPLIED RATINGS FALL, ONE IMPROVESimplied rating rose from Ba3 to Ba2. The progress reflects a change in the one-year EDF measure from 0.79% three months ago to 0.59%. Please see discussion below.According to our ratings gap-conditioned transition matrices, companies rated Ba1 with a bond-implied rating of Baa3 outperformed the broad market 28% of the time over the following 12 months, matched the markets performance 30% of the time, and underperformed the broad market 40% of the time.Royal Bank of Scotlands market-implied ratings gaps reflect the one-notch downgrade of its Moodys senior debt rating from Baa2 to Ba1 on May 28, 2015. The bond-implied ratings gap is +1 notch, matching the lev...
