Irish Life & Permanent shares were 1.4 per cent higher this morning after a cut its credit ratings by Standard and Poor's yesterday which cited a weak outlook for its banking operations and the weakening of the group's earnings prospects.
The bancassurer, which said last month it was creating a new holding company to enable the separation of its banking arm, permanent tsb, from its insurance business, saw its long and short-term counterparty credit ratings fall to 'BBB+/A-2' from 'A-/A-1'.
Media reports have suggested IL&P may eventually spin off permanent tsb, one of the largest mortgage providers in the State, to concentrate on its relatively strong life assurance business.
“The downgrade reflects our broader view that the group's banking operations in their current format appear to have limited strategic options,” Standard & Poor's credit analyst Nigel Greenwood said in a statement.
S&P said that while the group's life assurance arm - which it also downgraded to 'BBB+' from 'A-' - was a ratings strength, its prospective separation was neutral for ratings.
The strength of Irish Life - from where the group plucked its new CEO Kevin Murphy last week - and a lack of exposure to struggling property developers has allowed the group to avoid a state bailout.
Irish Life & Permanent also does not plan to take part in the "bad bank" scheme that will see up to €90 billion worth of risky loans transferred to a new National Asset Management Agency from other banks.
However S&P said the group's overall financial profile is relatively poor, with pressure on margins due to its reliance on wholesale funding, and a weakening asset quality.
S&P said its stable outlook for both entities reflected an expectation of further support from the Government, should the need arise.
Reuters