Moody’s upgrades Ulster Bank Ireland deposit rating

Ratings agency Moody's has upgraded Ulster Bank Ireland DAC's deposit rating to "Baa2", an upgrade of one notch from "Baa3".

The ratings agency also changed its outlook on Ulster Bank Ireland’s long-term issuer rating and long-term deposit rating from “positive” to “stable”.

The overall ratings upgrade was driven by the upgrade of the bank’s adjusted baseline credit assessment (BCA), according to Moody’s.

That reflects RBS’s improved creditworthiness “and the very high likelihood that the latter would support Ulster Bank Ireland in case of need”, the ratings agency said.

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Successful deleveraging measures that restored the banks balance sheet were attributed with facilitating the upgrade of Ulster Bank Ireland’s standalone assessment to “Ba1”.

Dividends

While Moody's expects capital levels to decline with dividend payments to RBS, it notes that the bank still has very high capital levels.

The ratings agency suggests that Ulster Bank Ireland’s BCA could be upgraded if the bank continues to “strengthen its credit fundamentals”, reduce the “amount of legacy and non-performing assets on its balance sheet”, and “improves its pre-provision profitability.”

An improvement in RBS’s creditworthiness could also lead to a further upgrade, Moody’s added.

The company warned that the BCA could be downgraded if capital levels decline beyond levels already factored in; if the use of market funding increases significantly; or if the bank’s liquidity position deteriorates.