MOODY'S PLACES ON REVIEW FOR POSSIBLE UPGRADE ALLIANCE & LEICESTER PLC'S LONG-TERM DEBT AND DEPOSIT RATINGS (SENIOR AT A1) AND CONFIRMS ITS FINANCIAL STRENGTH RATING AT B; MOODY'S ALSO CONFIRMS Aa3/Prime-1/B RATINGS OF BANK OF IRELAND AND PLACES ON REVIEW
Moody's Investors Service placed on review for possible upgrade the long-term senior debt and deposit ratings of Alliance & Leicester Plc (assigned at A1) following the bank's announcement that it is in merger talks with Bank of Ireland. The bank's financial strength rating (FSR) was confirmed at B. Moody's also confirmed the Aa3 long-term senior debt and deposit ratings assigned to Bank of Ireland and its FSR of B. Also put on review for upgrade were the A1 long-term debt and deposit ratings and C FSR of Bristol & West Plc, a mortgage bank acquired by Bank of Ireland in 1997.
Moody's said that in addition to providing scope for cost cutting, primarily in the UK operations, the proposed merger would give Alliance & Leicester the opportunity to distribute Bank of Ireland's financial products, such as insurance, through its own network. The merger would also diminish Bank of Ireland's group exposure to the Irish housing market, which shows signs of some overheating. Alliance & Leicester and Bristol & West would together command a little over 6% of the UK mortgage market, making it one of the biggest mortgage lenders in Britain.
Moody's said that its review will focus not only on the financial aspects of the proposed merger -- such as the extent of likely cost savings and the potential for increased earnings -- but also on the broader strategic issues of this cross-border merger and on how strategic planning will be co-ordinated between the two groups. The banks are proposing to implement the merger through a dual listed company with management functions in both Dublin and London.
Alliance & Leicester is headquartered in London and had assets of £27.6bn at the end of 1998. Bank of Ireland is headquartered in Dublin and had assets of I£40bn (£48bn) at the end of March 1999. Bristol & West is headquartered in Bristol and had assets of £11.6bn at the end of March 1998.
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