Irish bank risk cut again by S&P
Standard & Poor’s downgraded its risk assessment on Ireland’s banks, saying continued economic weakness will lead to "high credit losses" for the industry.
The Banking Industry Country Risk Assessment was cut to ‘Group 4’ from ‘Group 3,’ the agency said in a statement issued in London today. Countries with similar ratings include Korea, the Czech Republic and Slovakia, it said.
S&P also today reduced its rating on Bank of Ireland to A- with a stable outlook, and cut Allied Irish Banks to A- with a negative outlook.
“The economic environment for the Republic of Ireland remains difficult for the banking sector” and is “likely to remain so into 2011,” the ratings company said in the statement. This will “continue to exert pressure on the performance of all loan classes.”
S&P raised its forecast for “potential problem loans” at Ireland's banks to between 15pc and 30pc of total loans from 10pc to 20pc previously.
It said reversing the cut in the risk assessment level to Group 4 is “unlikely for the foreseeable future.”
Another reduction would “most likely occur if the economic downturn is even deeper or more prolonged than expected, leading to persistent earnings challenges and weaker investor support for the banks,” it said.