The credit ratings agency Standard & Poor’s & has upgraded its outlook on Bank of Ireland, reaffirmed its negative outlook on AIB and Permanent TSB, and downgraded its outlook from stable to negative for Ulster Bank.
The agency also upgraded the outlook from stable to positive for KBC Ireland and Barclays Bank Ireland.
On Friday, S&P upgraded the outlook for Ireland from stable to positive. However, it is taking a less favourable view of the banks because most remain loss-making and struggling with elevated arrears and non-performing loans.
“We currently consider positive rating action on Irish banks, and improvements in the banks’ standalone credit profiles, as a remote near-term prospect until we see an improvement in the banks’ asset quality and capitalisation and consider that the banks have returned to profitability,” it said.
Of the domestic Irish banks, Bank of Ireland is seen as having the best prospects of returning to profitability “because it is better placed to adjust its deposit pricing and generate new lending”.
Moreover, the quality of BoI’s mortgage book is better than its peers, which will help it absorb the accelerated pace of write-offs expected following the introduction of the personal insolvency legislation, S&P said.
The revision of Ulster Bank’s outlook from stable to negative reflects the uncertain status of its position within its parent company, Royal Bank of Scotland.
S&P estimated that both AIB and PTSB face a one-in-three possibility that their ratings will be lowered over the next 12 months.
Some 71% of PTSB’s net loan book is domestic residential mortgages, which continue to perform poorly. “This, combined with PTSB’s subdued pre-provision earnings prospects and possible deleveraging, may constrain its capitalisation,” said S&P.
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