London, 13 July 2021 -- Moody's Investors Service ("Moody's") has today
upgraded the senior unsecured debt ratings of AIB Group plc (AIBG) and
Bank of Ireland Group plc (BOIG), the holding companies of Allied
Irish Banks, p.l.c.(AIB) and Bank of Ireland
(BOI) respectively, to Baa1 from Baa2. At the same time the
agency affirmed the (P)A2 senior unsecured programme rating of AIB and
the Baa3 subordinated debt ratings of AIB and AIBG. Furthermore,
Moody's has affirmed the Baa1/P-2 deposit ratings of Bank
of Ireland (UK) plc (BOI UK) while at the same time downgrading its Baseline
Credit Assessment (BCA) and Adjusted BCA to baa2 from baa1. The
outlook on the long-term deposit and senior unsecured debt ratings
of AIBG, BOIG and BOI UK -- where applicable - remains
stable.
The rating actions were driven by revisions to Moody's Advanced
Loss Given Failure (Advanced LGF) framework, which is applied to
banks operating in jurisdictions with Operational Resolution Regimes,
following the publication of Moody's updated Banks Methodology on 9 July
2021. This methodology is available at this link: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
In Moody's updated Banks Methodology, the key changes were
the following: (i) the application of revised notching guidance
thresholds at lower levels of subordination and volume in the liability
structure; (ii) Moody's view that group-wide resolutions coordinated
in a unified manner will be more common following the requirement to issue
internal loss absorbing capital (ILAC), leading to a likely transfer
of losses from subsidiaries to parents at the point of failure and (iii)
the consideration of all Additional Tier 1 (AT1) securities in Moody's
Advanced LGF framework, eliminating the previous analytical distinction
between those high trigger instruments that were deemed to provide equity-like
absorption of losses before the point of failure and other AT1 securities.
A full list of affected ratings and assessments can be found at the end
of this Press Release.
All other ratings and assessments of these banks were unaffected by today's
rating action and the update of the bank's methodology.
RATINGS RATIONALE
- Allied Irish Banks, p.l.c. (AIB),
AIB Group plc (AIBG); EBS d.a.c. (EBS):
The upgrade of the senior unsecured debt ratings of AIBG, reflects
the reduction in the loss-given failure to a low from moderate
level, providing one notch uplift from the baa2 Adjusted BCA of
AIB, instead of zero previously.
Furthermore, the affirmation of the senior unsecured programme rating
of AIB reflects the reduction in the loss-given failure to an extremely
low from very low level, providing three notches of uplift from
the baa2 Adjusted BCAof AIB, instead of two notches previously.
The additional notch offsets the similar magnitude of uplift from the
Government of Ireland (A2 stable) that was previously incorporated in
the rating.
In addition, the affirmation of the subordinated debt ratings of
AIB and AIBG, reflects the uncertainty in the bank's balance
sheet evolution which elevates the sensitivity to the narrow margin they
have to the threshold to benefit from any additional ratings uplift,
despite the reduction in their loss-given failure.
Moody's also said that the ratings and BCA of EBS continue to be
aligned to those of AIB. According to the rating agency,
there is a high level of operational integration between EBS and AIB,
and funding and liquidity of the two banks are managed as a whole.
For these reasons, Moody's classified EBS as a Highly Integrated
Entity (HIE) of AIB; Moody's believes that, in case of
failure, EBS and AIB would be resolved together; the rating
agency therefore maintains the same loss-given-failure and
government support assumptions for the depositors and bondholders of both,
leading to ratings that are aligned for the two banks.
- Bank of Ireland Group plc (BOIG)
The upgrade of BOIG's senior unsecured debt ratings reflects the
reduction in the loss-given failure to a low from moderate level,
leading the ratings to be positioned one notch above, instead of
previously in line with the baa2 Adjusted BCA of BOI.
- Bank of Ireland (UK) plc (BOI UK)
Moody's downgraded the BCA and Adjusted BCA of BOI UK to baa2 from baa1,
the Counterparty Risk (CR) Ratings to A3/P-2 from A2/P-1,
and the long-term CR Assessment to A2(cr) from A1(cr). As
part of this rating action, Moody's affirmed BOI UK's
deposit ratings of Baa1/P-2 and its short-term CR Assessment
of P-1(cr).
The downgrade of the BCA reflects Moody's revised view of the capital
instruments likely to provide the bank with equity-like loss absorption
before the point of non-viability. The removal of equity
credit for high trigger AT1 instruments from the bank's going concern
capital means that the bank has a reduced capacity to absorb unexpected
losses before the point of failure, resulting in a weaker solvency
position.
BOI UK's deposit ratings were affirmed, despite the downgrade
of its Adjusted BCA. This reflects the inclusion of the high trigger
AT1 in Moody's Advanced LGF analysis, which results in a reduction
in the loss-given failure to a moderate from high level for the
deposit ratings, leading to the ratings being positioned one notch
above, instead of previously in line with the Adjusted BCA,
offsetting the downgrade of the Adjusted BCA of the bank by a similar
magnitude. However, the CR Ratings and long-term CR
Assessment were downgraded due to the downgrade of the Adjusted BCA as
the inclusion of AT1 in Moody's Advanced LGF analysis resulted in
unchanged two and three (maximum allowed) notches respectively of uplift
from the bank's Adjusted BCA.
OUTLOOK
The outlooks on the senior unsecured debt and long-term deposit
ratings of AIBG, BOIG and BOI(UK) -- where applicable --
remain stable. The rating outlooks on the other issuers remain
unchanged at stable. The stable outlooks reflect Moody's
view that the banks' combined solvency and liquidity metrics will
on a forward looking basis remain in line with their current standalone
assessments as the banks' asset quality and profitability stabilizes
following the pandemic-induced deterioration in 2020.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The affected ratings could be upgraded as a result of an upgrade in the
banks' standalone creditworthiness or a significant increase in
the bank's bail-in-able debt.
Conversely, the affected ratings could be downgraded following a
downgrade in the standalone creditworthiness of the banks or following
a significant reduction in the stock of bail-in-able liabilities.
LIST OF AFFECTED RATINGS
Issuer: AIB Group plc
..Upgrades:
....Senior Unsecured Regular Bond/Debenture,
upgraded to Baa1 from Baa2, outlook remains Stable
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Baa1 from (P)Baa2
..Affirmations:
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
..Outlook Action:
....Outlook remains Stable
Issuer: Allied Irish Banks, p.l.c.
Affirmations:
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A2
....Subordinate Regular Bond/Debenture,
affirmed Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Baa3
Issuer: Bank of Ireland Group plc
..Upgrades:
....Long-term Issuer Ratings,
upgraded to Baa1 from Baa2, outlook remains Stable
....Senior Unsecured Regular Bond/Debenture,
upgraded to Baa1 from Baa2, outlook remains Stable
....Senior Unsecured Medium-Term Note
Program, upgraded to (P)Baa1 from (P)Baa2
..Outlook Action:
....Outlook remains Stable
Issuer: Bank of Ireland (UK) plc
..Downgrades:
....Long-term Counterparty Risk Ratings,
downgraded to A3 from A2
....Short-term Counterparty Risk Ratings,
downgraded to P-2 from P-1
....Long-term Counterparty Risk Assessment,
downgraded to A2(cr) from A1(cr)
....Baseline Credit Assessment, downgraded
to baa2 from baa1
....Adjusted Baseline Credit Assessment,
downgraded to baa2 from baa1
..Affirmations:
....Long-Term Bank Deposits,
affirmed Baa1, outlook remain Stable
....Short-term Bank Deposits,
affirmed P-2
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
..Outlook Action:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Arif Bekiroglu
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Laurie Mayers
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
