MOODY'S RAISES LONG-TERM RATINGS OF LLOYDS TSB GROUP AND ITS SUBSIDIARIES
London, 05-21-97 -- Moody's Investors Service raised to Aa1 from Aa2 the long-term deposit and the senior long-term debt ratings of Lloyds Bank plc and of TSB Bank plc. The bank financial strength ratings of the two banks were also raised, to A from B+. The senior debt rating of Lloyds TSB Group plc, the ultimate holding company of the two banks, was raised to Aa2 from Aa3. These rating actions concluded the rating review initiated on 29 January 1997. Moody's said that these upgrades are based on the Lloyds TSB Group's strategic emphasis on retail financial services, its position as one of the UK's leading retail banking groups, and its improved risk profile, as reflected in its strong earnings and capital generation capacity.
Moody's said that Lloyds TSB is continuing successfully to rebalance its business mix towards personal financial services and away from less profitable and more volatile corporate and capital markets activities. At the same time, the Group has refocused its business on the UK market, where the majority of its earnings are generated. This shift in emphasis has been achieved both by a disciplined approach to the internal allocation of resources and by an active programme of acquisitions and disposals. The rating agency added that it expects the group's growth strategy to continue to develop in this way.
Moody's said that as a result of the shift in emphasis, the structure of the Group has been transformed in recent years, and now more closely reflects management's preferred mix of activities. Lloyds TSB now has strong franchises in its three principal domestic financial services businesses, and has leading market shares in retail banking, residential mortgage lending and insurance. The rating agency added that the Group has made significant progress at reducing its cost base, and that there remained further scope for cost reduction.
In Moody's opinion, Lloyds TSB's risk profile has decreased in recent years, both in terms of the quality of its assets, and its improved earnings and capital generation capacity. In these respects it compares favourably with its banking peers, both domestically and abroad. While this partly reflects currently favourable cyclical market conditions, Moody's also believes that Lloyds TSB's structural risk profile has been lowered as a result of the significant changes in the business mix the group. The group's focused strategy and reduced earnings volatility should leave it well placed to deal with the increasingly competitive UK banking environment, and future cyclical deterioration in market conditions.
The long-term deposit and debt ratings of Cheltenham and Gloucester plc were raised to Aa2 from Aa3, and its bank financial strength rating confirmed at B, reflecting its position as the group's specialist mortgage provider.
The following ratings were raised:
Lloyds TSB Group plc -- senior debt rating from Aa3 to Aa2, subordinated debt rating from A1 to Aa3.
Lloyds Bank plc -- long-term bank deposit rating from Aa2 to Aa1, long-term subordinated debt rating from Aa3 to Aa2, and bank financial strength rating from B+ to A.
TSB Bank plc -- long-term bank deposit rating from Aa2 to Aa1, and bank financial strength rating from B+ to A.
Cheltenham & Gloucester plc -- long-term bank deposit, senior debt and counterparty ratings from Aa3 to Aa2, subordinated debt rating from A1 to Aa3.
The following ratings were confirmed:
Cheltenham & Gloucester plc -- bank financial strength rating of B, Prime-1 rating for short-term deposits and commercial paper.
Lloyds Bank plc -- Prime-1 rating for short-term deposits and commercial paper.
Lloyds Bank plc (Brazil) -- long-term bank deposit rating of B2, long-term senior debt rating of B1.
TSB Bank plc -- Prime-1 rating for short-term deposits.
Lloyds TSB Group Plc, headquartered in London, reported total assets of œ129 billion (approximately US$215 billion) at 31 December 1996.
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