RBS hits back at Moody’s downgrade
THE Royal Bank of Scotland Group has hit back at the decision by credit ratings agency Moody’s to downgrade its position.
RBS said it disagreed with rating and it did not give the bank credit for what it had achieved since meltdown.
Moody’s downgraded 15 global banks and financial institutions due to their “exposure to the volatility and risk of outsized losses inherent to capital markets activities”.
In addition to RBS, Barclays and HSBC were also downgraded along with in the US, Bank of America and Citigroup.
The other institutions affected are: Goldman Sachs, Morgan Stanley, JP Morgan Chase, Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank and Royal Bank of Canada.
In a statement, RBS said: “The group disagrees with Moody’s ratings change which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.
“Nonetheless, the group believes the impacts of this downgrade are manageable, bearing in mind its £153bn liquidity portfolio. The amount of collateral that may have to be posted following this one notch downgrade by Moody’s is estimated to be £9bn as of May 31, 2012.
“The group continues to maintain a solid liquidity and funding position. RBS has completed its planned wholesale funding requirements for 2012.”
The group said it had made significant progress in strengthening its credit profile since 2008, which it said had been recognised by the other rating agencies. Both Standard & Poor’s and Fitch Ratings have RBS rated ‘A’ with a stable outlook, and have upgraded the standalone rating by more than one notch over the past 18 months.
RBS said the group’s loan to deposit ratio had improved to 106% from 154% at the lowest point, while its liquidity portfolio of £153bn significantly exceeded short-term wholesale funding of £80bn.
In addition, non-core funded assets have been brought down to £83bn from £258bn at inception.
It also said it had continued to invest in strengthening its core franchises, which have delivered an average return on tangible equity of 12.5% over 2009-2011 in what it described as a “challenging environment”.
“Earlier this year, the group announced and commenced implementation of a major restructuring of its Markets and International Banking businesses to be more focused, use less capital and funding, and deliver more consistent revenues. The group has also taken steps to reduce its Euro-zone exposures,” it added.
Lloyds fared better. Moody’s confirmed that the banking group’s short-term Prime-1 rating remained unchanged.
António Horta-Osório, Group Chief Executive, said: “I am pleased that Moody’s have recognised the substantial momentum we have made in de-risking our balance sheet and delivering on our strategy. I expect this momentum to be sustained as we continue to deliver on our promise of being the best bank for customers and shareholders.”
