Wednesday 13 December 2017

Standard and Poor's improves forecast for some of our banks, but downgrades Ulster

Ulster Bank head offices on George’s Quay, Dublin
Ulster Bank head offices on George’s Quay, Dublin
Sarah McCabe

Sarah McCabe

Standard and Poor's has improved its forecasts for several of the country's biggest banks, but cast further doubt on the prospects of Ulster Bank.

The ratings agency has upped the outlook for Bank of Ireland and KBC Bank from negative to stable, but downgraded Ulster Bank from stable to negative.

These decisions follow S&P's announcement on Friday that it had improved its long-term rating for Ireland as a sovereign.

But its view of Irish banks is not as favourable, because "most Irish banks remain loss-making, have severe negative equity and elevated arrears, and no Irish bank has meaningfully re-established access to wholesale funding".

The decision to downgrade Ulster Bank's outlook was taken because S&P thinks there is "a meaningful risk" that its position within parent Royal Bank of Scotland could become "less certain that it currently is". It currently rates Ulster Bank as a 'BBB+' institution, an investment grade rating.

Bank of Ireland's outlook was improved because S&P believes the bank will return to profitability ahead of its peers, since it is better positioned to improve deposit rates and generate new lending. It called weaknesses in the bank's loan books "less substantial".

It maintained Bank of Ireland's 'A-/A-2' investment grade rating.

The ratings agency was particularly damning when it came to the regulation of financial services.

"The weak regulatory track record continues to weigh heavily on our view of the Irish institutional framework, not least because we believe that the authorities are not being sufficiently proactive with regard to capitalisation, stress testing, or the timeliness and frequency of bank reporting," it said.

It also maintained its negative outlooks for AIB and PTSB. "In both cases, we still see at least a one-in-three probability that we will lower their ratings over the next 12 months," it said.

"For AIB, this is based on our view that the bank still faces considerable challenges to return to profitability."

It said capital reserves at PTSB were stronger, but predicted that its domestic mortgage book, 71pc of all its loans, would continue to perform poorly.

Irish Independent

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