Moody's upgrade sets BoI apart from peers
Published 10/09/2010 | 05:00
RECAPITALISED Bank of Ireland (BoI) has become the first Irish bank to secure a ratings' agency upgrade in two years.
London-based Moody's this week elevated BoI's bank financial strength rating (BFSR) to D+ from D.
The BFSR rating is not the bank's headline rating, but sources said it was significant since it reversed recent trends of falling ratings for Irish banks.
Sources also pointed out that the D+ compares favourably with UK peers including Royal Bank of Scotland and Lloyds who are both just one notch higher at C-1.
Announcing the upgrade, Moody's senior analyst for BoI, Ross Abercromby, said 2010 had seen "a substantial improvement in the creditworthiness" of the bank.
Mr Abercromby went on to list BoI's successful €2.94bn capital raising and the approval of the bank's restructuring plan as factors influencing the upgrade.
The analyst also noted that the average 35pc haircut BoI had taken on its first two batches of Nama-bound loans was "the lowest among the rated Irish banks".
"We assume that the remaining assets that are to be acquired by Nama will have a similar discount to those already transferred," he added.
"This -- together with the impairment of the remaining assets -- is sufficiently covered in our base scenario by the successful capital increase."
Moody's noted, however, that while "early indications" suggested that impairments at BoI have peaked, the threat of elevated impairments over 2010 remains.
"The pressure is likely to come from the large residential mortgage book in Ireland as unemployment remains high, and from the business banking sector in Ireland that is likely to remain challenged as a result of the substantial fall in economic activity," the agency added.