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Moody’s downgrades Lloyds’ in light of APS opt out plans

Moody’s has downgraded Lloyds’ bank financial strength rating from C to C- after the banking giant announced it would not be taking part in the Government asset protection scheme.

The senior unsecured debt and deposit ratings of Lloyds TSB Bank and Bank of Scotland was kept at Aa3 with a stable outlook.

But the bank financial strength rating for Bank of Scotland was downgraded to D+ from C- with the outlook on all BFSRs remaining negative.

Senior credit officer and lead analyst for Lloyds Elisabeth Rudman said: “Following Lloyds’ decision to opt out of the Government’s Asset Protection Scheme, the capital being raised should provide the group with a sufficient buffer against the remaining expected losses.

“Nevertheless, Lloyds is now more exposed towards the tail-risk of a potentially worse-than expected asset quality deterioration, which is reflected in the downgrade of the BFSR to C-. The Aa3 debt ratings of Lloyds TSB remain unaffected as we assume an unchanged likelihood of support.”

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