Moody's brightens its outlook on Irish banks
Published 21/09/2016 | 02:30
Rating agency Moody's Investors Service has upgraded the deposit ratings of all three domestically-owned Irish bank, and left ratings of the other main lenders unchanged.
Moody's lifted deposit ratings for AIB, Bank of Ireland and Permanent tsb (Ptsb) and affirmed deposit ratings on KBC Bank Ireland and Ulster Bank.
"The main driver for the rating actions is the improvement in credit conditions in the banking system following the rapid and material deleveraging of the private sector, as well as stronger funding conditions as most banks have regained the ability to issue different debt instruments," said Laurie Mayers, an associate managing director at Moody's.
"These positive developments have been reflected in an increase in Moody's Macro Profile for Ireland," Ms Mayers added.
"The rating actions also incorporate the strengthening of the banks' credit fundamentals, especially the progress they have made in reducing non-performing assets, improving the quality of earnings and strengthening their capital metrics."
In essence Moody's says the Irish banks are operating in an improved operating environment. It increased its Macro Profile of Ireland to 'Strong' from 'Moderate+.
At the same time Moody's said banks have made progress in reducing non-performing assets, improving the quality of earnings and strengthening their capital metrics.
The rating agency believes that Irish banks will continue to maintain their access to the market at competitive prices during 2016 and will potentially increase their debt issuance.
Still, it said private sector debt remains very high compared to other European countries but is declining rapidly.
The latest Moody's assessment is good news for AIB and Bank of Ireland in particular, which have seen shares hit this year on investor fears about the impact of the UK's Brexit vote in June as well as their weak showing in the results of Europe-wide bank stress tests published in July.
The European Banking Authority stress tests found both of Ireland's biggest banks remain among the most vulnerable in Europe to a financial shock.
Moody's said Ptsb's long-term deposits and senior debt ratings reflect improvement in the bank's credit fundamentals, despite the potential decline in the capital and profitability of a planned sale of its remaining UK non-core portfolio.