CREDIT RATING agency Moody's Investors Service has placed its ratings for Ulster Bank on review for downgrade, in line with similar action on its parent RBS.
Moody's said downgrades were possible for "the C+ bank financial strength rating (BFSR) and Aa2 long-term senior debt and deposit ratings of Ulster Bank Ltd and Ulster Bank Ireland Ltd".
In addition, the C bank financial strength rating Aa2 long-term senior debt and deposit ratings and the Aa3 subordinated debt rating of First Active plc were also placed on review for possible downgrade.
Moody's cited "the rapid and faster than initially anticipated deterioration in the economic environment in Ireland and in the UK." The agency pointed out this "will mean that asset quality will deteriorate, especially given Ulster Bank's relatively large exposure to the property and construction sector".
The weakening in asset quality will have a substantial impact on the level of provisioning and this is the main factor that has triggered the rating review on the BFSR, said Moody's, which also noted that the ratings of the Ulster Bank entities incorporate a very high level of expected support from RBS and the ratings of RBS have recently also been placed on review for possible downgrade.
