Jump to content
House Price Crash Forum
Sign in to follow this  

Moody's Downgrades Financial Strength Of Lloyds Tsb

Recommended Posts

Moody's downgrades financial strength of Lloyds TSB

Moody’s Investors Service has downgraded the financial strength rating of Lloyds TSB by one notch from C+ to C and has placed the bank on a negative outlook.

Unsecured ratings for parent company Lloyds Banking Group as well as subsidiaries HBOS and Bank of Scotland have been affirmed.

Moody’s says Lloyds TSB’s financial strength has been downgraded as a result of the potential impact of the bank’s integration with HBOS, and the risk exposure to assets not protected by the government’s Asset Protection Scheme.

But Elisabeth Rudman, vice president, senior credit officer at Moody’s and lead analyst for Lloyds, says: “With the bank financial strength rating at C we recognize these challenges, but also take into account the underlying strength of the business model of Lloyds TSB.

“Together with the risk shield provided by the APS this should allow the group to emerge out of this integration process in a solid position as one of the UK's most important high street lenders.â€

Other pressures that could bear down on Lloyds TSB include having to set aside higher provisions to cover losses from the recession and the higher cost of deposit and market funding.

The ratings agency says that the APS will offer government protection to around £260bn of assets and that the added government capital should boost the overall strength of Lloyds Banking Group.

Moody’s says the financial strength rating of Lloyds Banking Group hinges on the APS because of the risk on the group’s books particularly from HBOS’ commercial loans.

Around 83% of assets placed in the APS by Lloyds Banking Group will come from HBOS.

This means that Bank of Scotland will have the insurance cover offered by the APS for nearly half its customer loan book.

Yes, I know...Moodys Schmoodys...but still, not good news for the black horse.

Share this post

Link to post
Share on other sites

Without government money APS/ Asset Protection Scheme they would be much worse off.

The C BFSR with a negative outlook reflects the ongoing challenges facing Lloyds Banking Group in the integration of HBOS, the high provisions resulting from the recession in the UK as well as the pressure on underlying profitability due to the higher cost of deposit and market funding, whilst also recognizing the benefit of the insurance cover of the APS for the riskier assets and the additional government capital (GBP15.6bn of B shares issued as payment for participation in the APS).

Moody's believes that the APS (which is expected to be finalized in the next few months and will cover around GBP260bn of assets) and the accompanying government capital should provide a significant underpinning to the financial strength of Lloyds Banking Group. Indeed the availability and expected full implementation of the APS is a critical requirement for the BFSR at the current level, given the risks within the group's books, particularly the HBOS commercial property exposures and higher-risk mortgage exposures.

Is £260Bn a good risk for the taxpayer to be carrying ?

Edited by Tom Peters

Share this post

Link to post
Share on other sites

I guess LLOY have stopped paying their subs to moody's.

Seriously, there is no stronger wbank than LLOY (apart from RBS). How many banks do you know with 60 million workers?

Share this post

Link to post
Share on other sites

ahhh good old ratings agencies.... the ones that said " with a smidgeon of AAA , a dollop of AA and a generous helping of sub-prime.... we can mark it off as .....AAA"

package it up and sell it on....

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 404 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.