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S&P cuts ratings on RBS and Lloyds Banking Group hybrids

Standard & Poor’s has lowered its ratings on certain perpetual subordinated hybrid capital securities and instruments issued by Royal Bank of Scotland and Lloyds Banking Group.

S&P has lowered its ratings on various hybrid capital securities issued by RBS by one notch to ‘BB-‘ from ‘BB’ and hybrids issued by its main operating entity by to ‘BB’ from ‘BB+’.

It also lowered the ratings on preference shares with voting rights by two notches.

S&P also lowered its ratings on certain perpetual subordinated hybrid capital instruments issued by core banks and insurers within the Lloyds Banking Group to ‘BB’ from ‘BB+’.

It has also lowered certain other instruments issued by nonoperating holding companies to ‘BB-‘ from ‘BB’ and downgraded preference shares issued by LBG and Saphir Finance to ‘B+’ from ‘BB’.

The credit ratings on RBS and RBSG and Lloyds TSB Bank plc and Bank of Scotland remain unchanged.

It says: “The downgrade reflects our view that the instruments and preference shares face a heightened risk of nonpayment, given the combination of economic recession and consequently very weak operating conditions, which have necessitated substantial government support, including capital injections and an asset protection scheme.”


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