Moody’s downgrades outlook on 12 UK banks following UK vote to leave the EU
Moody’s Investors Service has today changed the outlooks on the ratings of 12 UK banks and building societies. Simultaneously, the rating agency has changed the outlook on the UK banking system to negative from stable. The actions follow a referendum vote in favour of the UK leaving the European Union and the recent change in the outlook of the UK’s Aa1 government bond rating to negative from stable. For more details, please refer to Moody’s press release: Moody’s changes outlook on UK sovereign rating to negative from stable, affirms Aa1 rating.
Today’s rating actions reflect Moody’s expectations that the 23 June vote in favour of the UK leaving the European Union (EU) (Aaa, Stable) will reduce the profitability of these 12 UK banks and building societies.
“We expect lower economic growth and heightened uncertainty over the UK’s future trade relationship with the EU to lead to reduced demand for credit, higher credit losses and more volatile wholesale funding conditions for UK financial institutions. This will be negative for banks’ credit fundamentals, as reflected in today’s rating actions. Simultaneously, we have changed the outlook on the UK banking system to negative from stable,” says Laurie Mayers, an Associate Managing Director at Moody’s.
Moody’s changed the outlooks on the ratings of eight banks and building societies to negative from stable (Barclays, HSBC Bank, Santander UK, Coventry Building Society, Leeds Building Society, Nationwide Building Society, Nottingham Building Society and TSB Bank), and the outlooks on the ratings of two issuers to stable from positive (Lloyds Bank and Principality Building Society). The rating agency also changed the outlook on the UK government guaranteed senior unsecured debt instruments to negative from stable of the aforementioned issuers, Lloyds and Barclays, as well as Bradford & Bingley and NRAM (No1) Ltd.
The ratings of these twelve firms along with the ratings of four UK banks and building societies, whose outlooks were maintained (The Royal Bank of Scotland Group plc, Skipton Building Society, West Bromwich Building Society and Yorkshire Building Society), were affirmed. Moody’s believes that the potential impact of the referendum result on these institutions is outweighed by more firm-specific credit considerations.
Source: Moody’s
