Ulster Bank Ireland Limited not affected by today's rating action
London, 04 January 2016 -- Moody's Investors Service (Moody's) has today affirmed the
long-term deposit and issuer ratings of Ulster Bank Limited (UBL)
at A3 and changed the outlook on the ratings to positive from stable.
Moody's also affirmed UBL's adjusted baseline credit assessment
(BCA) at ba1. All the other ratings are not affected by today's
rating action.
The action follows the change of outlook on the bank's parent,
The Royal Bank of Scotland plc's (RBS, A3/A3, positive,
ba1), deposit and senior unsecured ratings to positive from stable.
The positive outlook reflects Moody's expectation that UBL's
long term deposit and issuer ratings could move up in line with the BCA
of its parent.
Today's rating action did not affect RBS' Irish subsidiary,
Ulster Bank Ireland Limited (UBIL, Baa3/(P)Ba1, stable,
b2), because an eventual notch upgrade of RBS' BCA would not
have any impact on UBIL's adjusted BCA of ba1. According
to Moody's banks' methodology, UBIL currently benefits
from four notches of affiliate support coming from its parent.
An eventual upgrade of RBS' BCA, the anchor point the agency
uses to assess the creditworthiness of the support provider, by
one notch only would not increase the number of notches available to UBIL
for affiliate support. Consequently, UBIL's ratings
were not affected by the change of outlook on its parent's ratings.
RATINGS RATIONALE
AFFIRMATION OF THE BANK'S ADJUSTED BCA
Moody's affirmation of UBL's adjusted BCA at ba1, in
line with the BCA of RBS, reflects the high level of support and
integration between the subsidiary and is parent. Between 2009
and 2013, UBL has received a cumulative GBP14.5 billion of
capital contribution from RBS. Moreover, the agency notes
that, in contrast to its Irish subsidiary, UBL does not manage
its liquidity on a standalone basis, as it is included in RBS' UK
Defined Liquidity Group. Given the substantial support provided
in the past, the agency assumes that RBS will continue to support
UBL's compliance with minimum regulatory capital and liquidity requirements.
Furthermore, the UK bank has reiterated its commitment to continue
doing business in Northern Ireland, where UBL is domiciled,
and to position UBIL as a challenger bank to the domestic pillar banks
in the Republic of Ireland.
AFFIRMATION OF DEPOSIT AND ISSUER RATINGS
The A3 long-term deposit and issuer ratings incorporate the results
of Moody's Advanced Loss Given Failure (LGF) analysis and government
support analysis. The LGF analysis is forward looking and is based
on the RBS group's pro-forma balance sheet at-failure,
given that both banks are domiciled in UK and are part of the same resolution
perimeter.
RBS and UBL long term ratings benefit from a notch of government support,
incorporating the agency's expectation of a moderate probability of government
support in case of need.
RATIONALE FOR THE POSITIVE OUTLOOK
The positive outlook on UBL's long-term and issuer ratings
is aligned with the outlook on RBS' ratings and reflects Moody's
expectation that UBL's ratings could move up in line with the BCA
of its parent.
WHAT COULD CHANGE THE RATING UP / DOWN
UBL's BCA could be upgraded if the bank continues to strengthen its credit
fundamentals and reduce the amount of legacy and nonperforming assets
on its balance sheet as well as its reliance on RBS. An upgrade
of the parent resulting in a positive change in UBL's adjusted BCA would
likely affect all instrument ratings. The bank's deposit ratings
could also be upgraded if its parent bank or the Group's holding company
were to issue significant amounts of senior and/or subordinated long-term
debt.
UBL's BCA could be downgraded should the bank be loss-making in
2015 or experience a deterioration in asset quality metrics. A
downgrade of RBS standalone rating with implications for UBL affiliate
support assumptions would result in downgrades to all UBL's instrument
ratings.
LIST OF AFFECTED RATINGS
..Issuer: Ulster Bank Limited
Affirmations:
....Long-Term Issuer Rating,
affirmed A3, outlook changed to positive from stable
....Long-Term Deposit Ratings,
affirmed A3, outlook changed to positive from stable
....Adjusted Baseline Credit Assessment,
affirmed ba1
Outlook Actions:
....Outlook, changed to positive from
stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Dany Castiglione
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Nicholas Hill
Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's changes the outlook on Ulster Bank Limited's deposit and issuer ratings to positive