Fitch has downgraded N&P’s issuer default rating to BBB+ and individual rating to C, while affirming several of its other ratings.
Fitch says the downgrade reflects pressure on the society’s net interest revenue, which is its main source of earnings, especially given its fairly high cost base.
Fitch says this is likely to impact earnings over the short- to medium-term and it is concerned that this impact reduces the building society’s ability to absorb credit costs, or extend its franchise.
But Fitch says: “Credit risk is well managed and that credit costs are likely to be small relative to N&P’s equity base.
“The concentration in the society’s commercial loan book is small and the arrears performance of all major asset classes, including commercial lending, has been good to date.”
Fitch also said N&P’s liquidity is good, although balance sheet growth has been hindered by lack of wholesale funding.