Moody's downgrades Irish banks

Ratings agency Moody's has downgraded the ratings of several Irish banks, following last week's decision to cut Ireland’s credit rating by five notches.

The bank deposit, senior debt, bank financial strength ratings and most junior securities of AIB, Bank of Ireland, EBS Building Society, Irish Life & Permanent and Irish Nationwide Building Society were all affected by the action.

Moody's said the senior debt guaranteed under the Government's Eligible Liabilities Scheme was also downgraded.

The senior unsecured debt ratings for Bank of Ireland and Baa3 for AIB, EBS and IL&P were cut by three to five notches to Baa2.

“The downgrade of the standalone ratings of BoI (to D), and of Allied Irish, IL&P and EBS (to D-) reflects their ongoing high reliance on external support for day-to-day funding, the uncertain evolution of their respective franchises amidst an expected far-reaching restructuring of the entire sector, and likely further pressure on asset quality as a result of the government’s austerity measures," said Ross Abercromby, vice president and lead analyst for Irish banks at Moody’s Investors Service.

"These challenges are only partially offset by the significant recapitalisation of these banks, which in itself is a clear credit positive."

The deposit ratings and BFSRs of subsidiaries of ICS Building Society (ICS) and Bank of Ireland (UK) were also cut, as were the senior debt and bank deposit ratings of Anglo Irish Bank.

Also announced today was a downgrade of Bord Gais Éireann to Baa1 from A2 with a negative outlook. This affects €550 million of long-term debt securities.

"BGE's ratings are sensitive to changes in the credit quality of the Government of Ireland and also Moody's assumptions for the company's dependence on the sovereign and the likelihood of it providing support," the agency said.

"The outlook for the rating is negative reflecting the potential consequences for BGE of the decline in the government’s financial strength and uncertainty arising from the ongoing review of state assets in Ireland."