29th Jan 2019 12:23
LONDON (Alliance News) - Investor service Moody's on Tuesday affirmed the senior and subordinated debt ratings of Lloyds Banking Group PLC and retail subsidiary Lloyds Bank PLC, with a stable outlook.
The credit ratings agency affirmed the A3 rating for Lloyds Banking Group and the Aa3 long-term deposit and senior unsecured debt rating for Lloyds Bank.
Moody's upgraded the long-term counterparty risk assessment and counterparty risk rating of Lloyds Bank to Aa2 from Aa3. Finally, Moody's assigned a notional baseline credit assessment of a3 to Lloyds Banking Group.
The notional baseline credit assessment represents Lloyds's low asset risk, stable core earnings and strong current levels of capital, Moody's said.
Moody's warned, however, that Lloyds' capital is "more susceptible to deterioration in a stress than that of most of its peers" due to exposures to unsecured consumer loans and buy-to-let mortgages, as well as the rating agency's expectation that "problem loan" impairments will increase.
The investors service said the affirmation of Lloyds' debt rating reflects its stable standalone creditworthiness. The rating also reflects Moody's "unchanged view" of moderate loss-given-failure due to the volume and subordination of debt issued by Lloyds and its subsidiaries.
Moody's noted Lloyds's asset risk has reduced following the transfer of capital market activities, non- European economic area business, and lending to financial institutions to Lloyds Bank Corp Markets PLC. This entity was created to implement statutory ring-fencing requirements in the UK.
The new entity will manage the group's wholesale banking and trading operations, previously under Lloyds Bank.
Moody's said the stable outlook reflects its belief Lloyds will be "resilient" to expected "moderate deterioration" in the UK economy.
Shares in Lloyds were up 0.4% Tuesday at 57.23 pence each.
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