Moody's gives First Active thumbs up

Ratings agency Moody's has awarded a C financial strength rating to First Active, citing the building society's "solid domestic market share in mortgages".

Moody's said the outlook for the rating was stable, pointing to "the strong growth momentum within the Irish economy at present".

The agency also noted, however, that First Active, which is owned by Royal Bank of Scotland has a "susceptibility" to further erosion of its interest margins because of its reliance on interest income as an earnings source.

"Additionally, the institution's significant exposure to the [ Republic of Ireland] property market could leave it particularly vulnerable in the event of an economic downturn," Moody's said.

The agency also expects banking competition in the Republic to intensify and will monitor this in respect of First Active's ratings.

First Active is focused on the provision of mortgages and savings and investment products, distributing these through a network of 59 outlets and a number of intermediaries. Moody's estimates that it has a market share of about 10 per cent in retail mortgages and 1 per cent in savings deposits.

Moody's noted First Active's "sound" credit quality, its low level of arrears and the "secured nature" of its loan book. "Ongoing profitability also provides the basis for satisfactory internal capital generation," the agency said.