MOODY'S CONFIRMS Aa1/P-1/A RATINGS OF HALIFAX PLC FOLLOWING THE ANNOUNCEMENT OF ITS PROPOSED ACQUISITION OF BIRMINGHAM MIDSHIRES BUILDING SOCIETY
London, 03-12-98 -- Moody's Investors Service confirmed the Aa1/Prime-1 deposit ratings and the A financial strength rating of Halifax plc. This rating action follows the announcement that Halifax have made a formal offer to acquire Birmingham Midshires Building Society (BMBS) -- whose A3/P-2/C ratings are currently on review for possible upgrade -- as part of its strategic goal to expand its position in the UK residential mortgage market. Moody's said that BMBS is already considering a take-over bid by the Royal Bank of Scotland plc (RBS), rated Aa3/P-1/B, and that any outcome will be decided by its members' vote, followed by the satisfactory completion of due diligence and regulatory approval. The BMBS acquisition by either bank is expected to be completed during the second half of 1998.
Moody's said that the potential acquisition of BMBS is consistent with Halifax's ongoing efforts to enhance its franchise in UK mortgage lending. The agency noted also that the size and cost to Halifax is small in relation to the overall size of the bank, and should therefore not negatively impact financial fundamentals. The announcement follows Halifax's recent decision to undertake a share buy-back which, while reducing absolute capitalisation levels, should not result in a material weakening of its very strong capital base, owing to the bank's healthy capital generation capability.
Moody's commented that it views this transaction as another step in the broader process of demutualisation of the UK building society sector, sectoral concentration, and of sharp price competition among mortgage lenders. This environment, added the rating agency, is likely to contribute to earning-power and franchise-strength erosion for many UK mortgage lenders.
The following ratings are confirmed:
Halifax plc -- long-term deposit rating at Aa1; short-term deposits and commercial paper rating at Prime-1; senior debt rating at Aa1; subordinated debt and junior subordinated debt rating at Aa2; counterparty rating at Aa1; financial strength rating at A.
The following ratings remain on review for possible upgrade:
Birmingham Midshires Building Society -- long-term deposit ratings at A3; short-term deposit ratings at Prime-2; subordinated debt rating at Baa1; junior subordinated debt rating at Ba1; financial strength rating at D.
Halifax plc, headquartered in Halifax, England, is the United Kingdom's sixth largest bank, with consolidated assets at December 31, 1997, of GBP 131 billion (approximately US$ 210 billion).
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