Moody's junks senior debt at Anglo, INBS
SENIOR debt at Anglo Irish Bank and Irish Nationwide has been cut to junk status by ratings agency Moody's, despite the Government's insistence that senior bondholders won't be forced to take losses.
The cut came as Moody's reduced the overall ratings of five state-supported Irish banks by five notches and slashed the credit ratings of a raft of their securities.
The flurry of cuts had a relatively muted effect on bank share prices, which actually recovered marginally after the Moody's note came out.
Bank of Ireland was down as much as 15pc in morning trading and closed the day down just 1pc, while AIB shed 14pc in early trading before closing down just 9pc.
Irish Life & Permanent, which hasn't taken any state aid but is supported through the government guarantee scheme, lost 8pc in the morning before closing down 5pc.
"Everyone expected the downgrades because Moody's downgraded the Irish sovereign by five notches last week so in that sense it wasn't much of a surprise," said one analyst. "There's an awful lot of volatility in the market generally."
The detail of Moody's note blamed yesterday's debt downgrades on the "reduced ability of the Government to support the senior debt in the future" in view of the Government's own financial troubles.
The senior debt of Bank of Ireland was downgraded by two notches, while the senior debt Irish Life & Permanent, AIB and EBS was cut by three.
Crucially, while the ratings remain on "negative outlook", all four banks retained investment grade status for their senior debt reflecting their status as "systemically important".
Anglo and Irish Nationwide's debt was downgraded to the junk Baa3 rating reflecting the "reduced systemic importance of these banks as implied by plans to wind them down".
On a broader level, the standalone financial strength ratings of Bank of Ireland, AIB, EBS, Irish Nationwide and Irish Life & Permanent were all downgraded yesterday.
Moody's referenced the €10bn banking bailout as well as the €25bn contingent fund as supportive factors, but lead analysts Ross Abercromby stressed that the extra cash "only partially offset" the challenges facing the system.