Hi °C | Lo °C CREDIT ratings agency Moodys has downgraded state-owned Permanent TSB, citing the "uncertainty and risks" associated with the bank's far-reaching restructuring.
It downgraded the bank from B1 to B3, while the long-term bank deposit rating fell from B1 to Ba2. In addition, the unguaranteed senior unsecured debt rating has been downgraded from Ba3 to B3.
Moodys said the downgrade reflected the challenges the bank faces in returning to profitability; the "still significant short-term funding pressure" that the bank is under; the level of mortgage arrears on its books; and falls in the value of property. Its outlook for the bank remains negative.
Permanent TSB noted the announcement but said: "The bank is making very good progress on a very ambitious restructuring plan, which is being implemented with the support of the troika and the Irish Government.
Capital
"Our over-riding focus is on ensuring the successful implementation of that plan and the restoration of the bank to a strong competitive position within the banking sector."
The downgrade comes just a day after the State sold Irish Life for €1.3bn to the Canadian firm Great-West Lifeco. In 2011, Permanent TSB moved to sell Irish Life as part of its restructuring.
Last year, the Government paid €1.3bn for the life and pensions company as part of the bank's bailout.
Moodys said the issues that the bank faces were "mitigated to a certain degree" by the bank's relatively high level of capital, as evidenced by the 18.1pc core tier 1 ratio.
The credit ratings agency added: "However, it will be crucial for the bank to demonstrate its ability to improve its underlying profitability (primarily driven by the net interest margin) over the next several quarters to begin to absorb additional costs involved with the cleaning-up of its loan portfolio."
Irish Independent
