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Kensington book drags down Investec rating

Investec has been downgraded by Moody’s due to its exposure to Kensington’s self cert and sub prime mortgage book.

The agency warns that there is a risk hanging over the refinancing of Kensington’s warehouse lines worth approximately £1.5bn.

Moody’s says the current economic environment has put “significant pressure on the financial fundamentals of the group”.

Moody’s says: “In the case of Investec plc, IBUK’s parent company, we note that there is a significant degree of exposure to its specialist lender Kensington in
the total amount of £519m (including warehousing lines and the
securitised book) and the potential for asset quality deterioration is
higher.

“Although currently Kensington remains a profit-making subsidiary,
in case of dissolution, it will lead to a likely negative impact of goodwill impairment.

“We also note that there is a medium-term risk of refinancing external warehousing lines extended to Kensington in the amount of approximately £1.5bn.”

The ratings agency has downgraded the long-term deposit rating of Investec Bank to Baa3 from Baa1, and the bank financial strength rating to D+ from C-, with a negative outlook.

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