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Investing.com -- Moody’s Ratings has upgraded AIB Group (UK) plc’s long-term deposit ratings to A1 from A2 and changed the outlook to stable from positive, the rating agency announced Monday.
The upgrade also included AIB UK’s long-term local and foreign currency Counterparty Risk Rating to Aa3 from A1 and long-term Counterparty Risk Assessment to Aa3(cr) from A1(cr), along with its Adjusted Baseline Credit Assessment to a3 from baa1.
Moody’s affirmed the bank’s short-term deposit ratings and Counterparty Risk Rating at P-1, its short-term Counterparty Risk Assessment at P-1(cr), and its Baseline Credit Assessment of baa2.
The rating agency explained that AIB UK’s baa2 Baseline Credit Assessment reflects its moderate asset risk, which is constrained by relatively high single name concentrations from its corporate book and high exposure to the property and construction sector.
The assessment is supported by the bank’s very strong capitalization and improving profitability. Moody’s also cited the bank’s low wholesale market funding reliance and high levels of liquid assets as key considerations.
The upgrade of AIB UK’s Adjusted Baseline Credit Assessment was driven by an upgrade of its parent Allied Irish Banks, p.l.c.’s BCA to a3 from baa1. This reflects Moody’s view of a very high probability of support from AIB if needed, given AIB UK’s strategic importance to its parent, resulting in a one-notch uplift.
The long-term deposit ratings upgrade reflects Moody’s unchanged view that these deposits are likely to face low loss-given-failure, which supports two notches of uplift from the Adjusted BCA.
The stable outlook on AIB UK’s long-term deposit ratings mirrors the stable outlook on its parent AIB’s long-term deposit ratings.
Moody’s indicated that AIB UK’s deposit ratings could be upgraded following an upgrade of its parent’s BCA, a significant increase in the bank’s bail-in-able debt, or an upgrade in AIB UK’s own BCA. The bank’s BCA could improve with significant enhancement in asset risk and core profitability.
Conversely, the ratings could face downward pressure from debt issuance significantly below expectations or a downgrade of either AIB UK’s or its parent’s BCA due to material weakening in solvency or liquidity profiles.
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