Tuesday 21 November 2017

S&P downgrades BoI rating from stable to negative

The revision puts Bank of Ireland's outlook on par with peers AIB and Irish Life & Permanent, even though Bank of Ireland (BoI) has already recapitalised to the tune of more than €3bn. Photo: Bloomberg News
The revision puts Bank of Ireland's outlook on par with peers AIB and Irish Life & Permanent, even though Bank of Ireland (BoI) has already recapitalised to the tune of more than €3bn. Photo: Bloomberg News
Laura Noonan

Laura Noonan

RATINGS agency Standard & Poor's yesterday downgraded Bank of Ireland's outlook from "stable" to "negative", citing fears the bank's recovery will be dragged down by the wider economy's woes.

The revision puts Bank of Ireland's outlook on par with peers AIB and Irish Life & Permanent, even though Bank of Ireland (BoI) has already recapitalised to the tune of more than €3bn.

In a statement, Standard & Poor's (S&P) stressed that it was keeping BoI's key short-term and long-term counterparty credit ratings at A-/A-2, in recognition of the "good progress" made, particularly in the arena of capital raisings.

The negative outlook reflected the fact that BoI faced "consider challenges" in improving its credit ratings in the "foreseeable future", S&P credit analyst Giles Edwards said.

Those challenges include the prospect of the Irish economy recovering "quite slowly" and the "consequent challenge that BoI faces to restore profitability".

S&P's analysis also points out that BoI faces a "tricky task" in weaning itself off the government guarantee scheme without compromising efforts to improve the bank's funding profile.

Revision

"The revision in rating is unfortunate for BoI, especially considering its successful recapit- alisation and the efforts undertaken to rehabilitate itself," said NCB's financial analyst Ciaran Callaghan.

"Following the sovereign's recent downgrade, it doesn't come as a major surprise and is another example of how the group is still being dragged down by problems in the Irish banking sector."

Shares in BoI closed down 4pc last night, though market sources pointed out that financials across Europe were off following sector-wide gains on Monday. In its statement, S&P said BoI's outlook could be returned to stable in the event of "further progress" in the bank's restructuring plan or "evidence of materially reduced reliance on the Irish Government's guarantee for new funding".

BoI chief executive Richie Boucher has already committed the institution to "disengaging" from the guarantee as quickly as possible.

"This (the S&P comments on the guarantee) may potentially act to further incentivise the group to go down the unguaranteed road, and reduce what it covers under the extended guarantee," NCB's Mr Callaghan said.

A spokesman for BoI declined to comment on the S&P note, which comes less than a week after the bank was celebrating the first ratings agency upgrade secured by an Irish bank in two years.

The upgrade, from fellow ratings agency Moody's, elevated BoI's key financial strength rating from D+ to D, citing a "substantial improvement in the creditworthiness of the bank".

Irish Independent

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