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Moody’s downgrades top UK building societies

Moody’s Rating Agency has downgraded most of the top UK building societies thanks to severe credit losses in residential and commercial assets held by the mutuals.

Moody’s has downgraded Britannia to D+ from C and has been placed it on review with direction uncertain “reflecting the pressure from its weak intrinsic strength”.

Chelsea has been downgraded to E+ from C with a negative outlook, and Coventry is downgraded to C- from C+, also with a negative outlook.

Moody’s has also downgraded Nationwide to C- from B and has downgraded its subordinated debt. Newcastle has been downgraded to D- from C-, and Norwich & Peterborough has been downgraded from C to D. Principality and Skipton have been downgraded to C- and C+ respectively.

West Bromwich has been pushed down from C- to E+ and Yorkshire down to D+ from C.

Moody’s senior credit officer and lead analyst for UK mortgage lenders Marjan Riggi, says: “These rating actions include the results derived from the analysis of various stress scenarios, incorporating a peak-to-trough house price decline of 40 per cent for our base scenario, and compared this to banks’ exposure to different asset classes – prime, sub-prime, buy-to-let, self-certified and second charge.

Taking into account loan-to-value-buckets, which already reflected a double-digit house price decline. We also stressed the non-housing-association-related parts of the banks’ commercial loan portfolio – whose performance has already come under considerable pressure in this economic downturn, and which we expect to worsen significantly over the next couple of years.”


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