Anglo rating downgraded


Moody's has downgraded its senior debt rating for Anglo Irish Bank and warned that it may move to downgrade AIB, Bank of Ireland, Irish Life & Permananent and ICS Building Society in the near future.

The ratings agency said it had reduced Anglo's rating from A2-to A3- because of concerns over challenges faced by the bank. The move follows the release of Anglo's half-year results which showed the bank during which the bank incurred a pretax loss of €4.1 billion in the six months to March as the value of land and development assets plummeted.

"Moody's believes that significant restructuring will be necessary for the bank to develop a viable business model again," the agency said in a statement released last night.

The ratings agency said it had taken into consideration the announcement that the Government is to provide up to €4 billion of capital to Anglo and the fact that the bank will participate in the National Asset Management Agency, or NAMA and is expected to transfer a substantial amount of assets. However, it said it expects the capitalisation of the bank is likely to remain very weak without further ongoing support from the Government, due to continued losses as a result of the bank's "very high and concentrated " exposure to the commercial property market.

Moody's said that it believed Anglo will require ongoing support from the Government to absorb any remaining risks in the balance sheet and also continuing support to give the bank sufficient flexibility to restructure and establish a viable business model again.

"The negative outlook on the A3 long-term bank deposit and senior debt ratings reflects the uncertainties in Moody's view around the yet to be implemented new business plan and its viability, which will still need to be demonstrated," it said in a statement.

The ratings agency said that in addition to downgrading Anglo's rating, it has placed the long-term bank deposit and senior debt ratings of AIB, Bank of Ireland, Irish Life & Permanentand ICS Building Society on review for possible downgrade.

It has also downgraded or placed on review for downgrade various junior debt securities of Allied Irish Bank, Anglo Irish Bank, Bank of Ireland, EBS and Irish Life & Permanent.

Moody's said the review of the debt and deposit ratings of AIB, BoI, ICS and IL&P will look at the extent to which Ireland's ability to provide support to its banking system may be affected by the weakening of the government's own debt capacity.

Ross Abercromby, vice president and lead analyst at Moody's for the Irish banks, said the review is not expected to lead to more than a one, possibly two, notch change in the debt and deposit ratings of the institutions under review.