Standalone ratings, outlooks, debt and deposit ratings of certain firms affected
London, 02 August 2011 -- Moody's Investors Service has today announced rating and outlook
changes on the standalone bank financial strength ratings of six building
societies. Four have been upgraded (Nationwide Building Society,
Yorkshire Building Society, Principality Building Society,
Coventry Building Society) with corresponding changes made to their subordinated
debt and hybrid instrument ratings, which are determined solely
by their standalone financial strength ratings. A further two have
been affirmed but with the outlook revised to stable from negative (Newcastle
and Nottingham).
Corresponding changes have been made to the long term rating of one society
and the short-term ratings of two. The long-term
debt ratings for eight societies remain under review for possible downgrade
as part of Moody's ongoing review of systemic support for UK banks,
which Moody's expects to conclude in the second half of September
once the proposals of the UK's Independent Commission on Banking
are published (see also the announcement published today: 'Moody's
extends review for selected UK financial institutions.')
Please see end of press release for a list of ratings
RATINGS RATIONALE
- CHANGES TO STANDALONE BANK FINANCIAL STRENGTH RATINGS AND OUTLOOKS
The standalone ratings of Nationwide, Yorkshire, and Principality
have been upgraded by two notches. Coventry's standalone
rating has been upgraded by one notch. "Today's upgrade
of four building societies' BFSRs reflects their performance since
the crisis and our expectations regarding their future performance.
Our assessment recognises that the UK economy is slowly recovering and
that broader banking and regulatory reforms are gradually taking shape",
explains Marjan Riggi, a Moody's Vice President and Senior
Credit Officer.
Moody's says that the performance track record shown by Nationwide,
Yorkshire, Coventry and Principality during the last two years --
and to a lesser extent by Newcastle and Nottingham as indicated by the
stabilisation of their outlook -- has shown gradual improvement combined
with better underwriting standards, which mitigated the downside
risks over the past period. In particular, the key rating
drivers for today's standalone BFSR upgrades of the four affected
societies were a combination of:
1. Better asset-quality performance relative to their peers
and to Moody's scenario assumptions. In some cases,
the improvements in asset quality were the result of better underwriting
standards and improvements in risk management controls and culture.
2. Continued deleveraging through a reduction of risky assets (especially
non-prime mortgages and commercial real estate exposures),
which has improved the relevant building societies' overall risk
positioning and the transparency of the risks those institutions face.
3. Stabilising and supportive macro-economic factors --
such as moderating house price declines, stabilising unemployment,
and low interest rates -- which have helped to maintain asset quality
and reduce some of the uncertainty regarding future asset performance.
In each case, corresponding changes have been made to the societies'
subordinated and hybrid instrument ratings (as appropriate), which
are determined solely by their standalone financial strength ratings.
The negative outlooks for Newcastle (rated Baa2/P-2/D-/Ba3)
and Nottingham (rated A3/P-2/C-/Baa2) were changed to stable,
reflecting stabilisation in their asset quality and recovery in their
core profitability.
- SENIOR DEBT AND BANK DEPOSIT RATINGS CONFIRMED FOR COVENTRY;
OTHERS REMAIN ON REVIEW FOR DOWNGRADE
The long-term debt and deposit rating of Coventry has been confirmed
at A3 with a stable outlook. In Moody's view the society
is not likely to benefit from any systemic support going forward,
and the action reflects the change to the standalone rating. All
long-term ratings of building societies affected by the on-going
review of systemic support remain on review for downgrade pending the
completion of Moody's assessment of systemic support for UK banks
(see also the announcement published today: 'Moody's
extends review for selected UK financial institutions').
- SHORT TERM DEBT AND BANK DEPOSIT RATINGS CONFIRMED FOR NATIONWIDE
AND YORKSHIRE
Following the upgrade of Nationwide's standalone rating to C/A3,
Moody's has confirmed the society's short-term debt
and deposit rating at Prime-1. The confirmation of Nationwide's
short-term rating reflects its strong retail funding base,
underpinned by some ongoing systemic support. The short term rating
of Yorkshire has been confirmed at Prime-2, fully underpinned
by the bank's C-/Baa2 standalone rating
- RATING ACTIONS
Nationwide Building Society
• Bank Financial Strength Rating has been upgraded to C from C-
with a stable outlook. The standalone rating now maps to an A3
on the long-term rating scale (previously mapping to a Baa2)
• The long-term debt and deposit ratings of Aa3 remain on
review for possible downgrade.
• The Prime-1 rating has been confirmed.
• The subordinated debt rating has been upgraded by two notches to
Baa1 from Baa3.
• The PIBS (hyb) rating of Ba2 has been upgraded by two notches to
Baa3 from Ba2.
Yorkshire Building Society
• Bank Financial Strength rating has been upgraded to C- from
D+ with a stable outlook. The standalone rating now maps to
Baa2 on the long-term rating scale (previously mapping to Ba1)
• The long-term debt and deposit ratings of Baa1 remain on
review for possible downgrade.
• The Prime-2 rating has been confirmed.
• The subordinated debt rating has been upgraded by two notches from
Ba2 to Baa3.
Coventry Building Society
• Bank Financial Strength rating has been upgraded to C from C-
with a stable outlook. The standalone rating now maps to A3 on
the long term rating scale (previously mapping to Baa1).
• The long-term debt and deposit rating of A3 has been confirmed
with a stable outlook.
• The Prime-2 rating has been unaffected by today's
rating action.
• The subordinate debt rating has been upgraded by one notch to Baa1
from Baa2.
• The PIBS (hyb) rating of Ba1 has been upgraded by one notch to
Baa3 from Ba1.
Principality Building Society
• Bank Financial Strength rating has been upgraded to D+ from
D- with a stable outlook. The standalone rating now maps
to Ba1 on the long term rating scale (previously mapping to Ba3).
• The long- and short term debt and deposit rating of Baa2/P-2
remain on review for possible downgrade
• Subordinated debt rating has been upgraded by four notches to Ba2
from B3
• PIBS (hyb) rating has been upgraded by two notches to B1 from B3
Newcastle Building Society
• Bank Financial Strength rating has been affirmed at D- with
a stable outlook. This maps to Ba3 on the long term rating scale
as it was previously.
• The long- and short term debt and deposit rating of Baa2/P-2
remain on review for possible downgrade.
Nottingham Building Society
• Bank Financial Strength rating has been affirmed at C- with
a stable outlook. This maps to Baa2 on the long term rating scale
as it was previously.
• The long-term debt and deposit rating of A3 remains on review
for possible downgrade.
• The Prime-2 rating has been unaffected by today's
rating action
PREVIOUS RATING ACTION & METHODOLOGIES USED
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The principal methodologies used in this rating were "Bank Financial
Strength Ratings: Global Methodology", published in
February 2007, and "Incorporation of Joint-Default
Analysis into Moody's Bank Ratings: A Refined Methodology",
published in March 2007.
METHODOLOGIES USED
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and
Incorporation of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007. Please see the Credit
Policy page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
ratings disclosure page on our website www.moodys.com for
further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
London
Marjan Riggi
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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 revises ratings and outlooks of several UK building societies
