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Five societies downgraded by Fitch

Fitch has downgraded Chelsea, West Bromwich, Yorkshire, Principality and Newcastle building societies.

The move follows a downgrade of the same societies by Moody’s last month, along with Britannia, Coventry, Norwich & Peterborough and Skipton.

Fitch financial institutions team senior director Matthew Taylor says: “Fitch’s concerns are concentrated on higher-risk lending by societies, which includes specialised mortgages, purchased loans and commercial mortgages.

“The weakening economic environment has increased the credit risk of the societies as unemployment has risen and continues to rise and house prices have fallen.”

Fitch warns that the books of the downgraded societies will take a long time to deleverage and as a result it expects bigger loan impairment charges to erode earnings, making the societies more vulnerable to further deter- ioration in loan quality.

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