13th Nov 2019 09:40
(Alliance News) - Moody's Investors Service on Tuesday took rating actions on 15 UK banks and building societies, cutting the outlook on some to negative.
This follows the change in outlook by Moody's on the UK sovereign debt rating on Friday last week to negative from stable.
The ratings agency explained that the action reflects its view that the operating environment is likely to weaken, given deteriorating institutional capacity and commitment to financial discipline in the UK, together with a worsening economy.
Taking the closer look at those listed on the London Stock Exchange, the rating agency changed the outlook on Barclays Bank UK PLC, part of Barclays PLC, and Close Brothers Group PLC long-term deposit ratings to negative from stable.
Lloyds Banking Group PLC senior unsecured debt rating was also cut to negative from stable.
In contrast, Moody's maintained a positive outlook on Royal Bank of Scotland Group PLC's long-term senior unsecured debt ratings, saying that the bank continues to make progress in restructuring, which is likely to be largely completed by the end of 2020.
Moody's affirmed a3 baseline credit assessment of Barclays Bank UK, reflecting robust capitalisation, stable earnings from its retail and small & medium-sized enterprises businesses, moderate asset risk, and limited exposure to wholesale funding.
Moody's affirmed a2 baseline credit assessment of Close Brothers, reflecting a solid track record over economic cycles, strong capital and leverage, strong profitability and short duration of assets.
The ratings agency also affirmed the a3 baseline credit assessment of Lloyds, reflecting low asset risk, stable core earnings and strong current levels of capital. However, Moody's noted that these are likely to deterioration in a "stress scenario" than that of most of its peers because of Lloyds' exposures to unsecured consumer loans and buy-to-let mortgages.
Moody's affirmed baa2 baseline credit assessment of RBS, reflecting its high levels of capitalisation, solid retail and commercial bank earnings despite net interest margin and conduct cost pressures.
Looking ahead, Moody's said upgrades to the banks' ratings are "unlikely", but a deterioration of the banks' operating environment in the UK could lead to a downgrade.
Barclays shares were trading 2.0% lower in London on Wednesday morning at 169.38 pence each, while Lloyds shares were down 1.5% at 58.71p. Close Brothers was 1.8% lower at 1,395.00p, while RBS shares slid by 1.7% to 218.50p each.
By Evelina Grecenko; [email protected]
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