Loan Losses for UK Bank give S&P Sour View
Standard & Poor’s Co has further soured its view on revenues prospects and predicted credit losses for UK lenders, but it revealed the nation’s 4 largest banks are so far defended from any rating changes due to an uplift from executive support or the diversification of their companies.
If it did not factor in any regime support, a more robust parent company or methodical significance, SP related the average UK bank would carry a ranking of just BBB+ – three points below the average A+ rating before the financial crisis started in Aug 2007, and only 2 notches from being “junk” grade. Claiming it anticipated higher impairment charges in the United Kingdom bank system over the next 3 years, SP cut Clydesdale Bank PLC’s long term rating by one nick to A+ from AA-, and Yorkshire Building Society’s by one nick to A- from A. Clydesdale’s rating continues to reflect its strategic significance to parent company Countrywide Australia Bank Ltd ( NABZY ), SP related.
Across the nation Building Society’s junior debt rating was also cut one nick, to BBB, but its long term A+ rating was kept intact to account for its “high wide spread significance and the likely availability of regime support, if required.”. But Barclays PLC ( BCS ) and HSBC Holdings PLC ( HBC ) were kept on hold, respectively at A+ and AA-, reflecting their “broad geographic and business diversification.
The ratings agency asserted Lloyds Banking Group PLC ( LYG ) and Royal Bank of Scotland Group PLC ( RBS ) – both rated “A” – benefit from their part-government possession, though SP claimed it would consider the implications on ratings of any extra info that comes to light when the 4 banks report their first-half revenues the week after next.
Dampening hopes the first-half results will show lasting indications of recovery, SP recounted “any recovery in takings prospects may turn out to be sluggish.” it revealed further capital raisings could be mandatory and that loan losses will probably be raised thru 2011. Long-term credit statuses may be cut further if the credit cycle deepens and lasts longer than expected, SP warned.
© 2009, admin. All rights reserved.