Ratings firm moves on all three main Irish banks as Covid-19 hits their financial outlook

Ratings firm moves on all three main Irish banks as Covid-19 hits their financial outlook

Ratings firm DBRS Morningstar has put all three main Irish lenders -- of AIB, Bank of Ireland, and Permanent TSB, - on a negative trend for their long-term ratings, as the Covid-19 economic fallout hits the financial health of the lenders. 

It also said that there was a risk that a proportion of loans that were currently performing could become non-performing should the period of economic stress be prolonged.  

"The rating actions reflect an increasingly challenging operating environment in Ireland due to the economic shutdown and market disruption caused by Covid-19, which is adding pressure to the banks' profitability, asset quality and capital," the ratings firm said, adding, however, that the Irish lenders were in better shape than going into the  financial crisis over a decade ago.  

Nonetheless, "as the economic crisis deepens we expect asset quality to deteriorate, reflecting the reduction in economic activity and the significantly higher levels of unemployment," the ratings firm said.  

"Whilst these are exposures that continue to perform to date, they face a higher risk of becoming non-performing as the crisis unfolds. Stage 2 loans represented around 7% of total gross loans at BoI, 8% at AIB and 26% at PTSB," DBRS said.

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