FNNI has typically generated relatively strong earnings compared to similarly rated peers over recent years due to its solid credit card franchise, which generates high margins and good levels of fee income.
Adjusting for a one-off gain in 3Q16, pre-provision net revenue is up 16% year-to-date in 2017, driven by FNNI's 34 basis points (bps) of NIM expansion and slightly lower expenses.
FNNI's asset quality, excluding its credit card portfolio, remains roughly in line with the peer group average.
Fitch notes that the normalization of credit performance in FNNI's portfolio has been similar to that of other rated issuers.
In 3Q17, FNNI completed a $155 million share repurchase transaction with a large, private shareholder.
FNNI's liquidity and funding profile remains solid and supportive of today's rating action.
FNNI's VR is equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S.
FNNI has a Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF'.
Fitch believes FNNI's ratings are at the high end of their potential range following today's action and further upside is unlikely given the company's sizable credit card exposure.
The ratings for FNNI and its operating companies' subordinated debt are sensitive to any change to the VR.
The long- and short-term deposit ratings are sensitive to any change to FNNI's Long- and Short-term IDR.