PRODUCT PROFILE

Latest Dublin Prices

Moody's downgrades permanent tsb

Wednesday, February 20 10:15:33

Global ratings agency, Moody's, this morning downgraded permanent tsb, citing what it said was the uncertainty and the risks surrounding the far-reaching restructuring of the bank.

It said that the long-term bank deposit rating has been downgraded to B1 from Ba2, and the unguaranteed senior unsecured debt rating has been downgraded to B3 from Ba3.

In addition, the standalone assessment of the bank has been downgraded to b3 from b1. The Not-Prime short-term ratings, the (P)C subordinated debt rating and the Ba1 rating (negative outlook) on the government guaranteed debt are not affected by this action. The outlook is negative.

Moody's said it downgraded the Irish bank because of the uncertainty and the risks surrounding the far-reaching restructuring of the bank and the challenges the bank faces to return to profitability.

It also cited the still significant short-term funding pressure that the bank is under which results in a high reliance on external support and (iv) the still deteriorating asset quality in the Irish residential mortgage book.

These issues are mitigated to a certain degree, it said, by the bank's relatively high level of capital, as evidenced by the 18.1pc Core Tier 1 ratio (at end-June2012), following the completion of the recapitalisation as required by the 2011 Prudential Capital Assessment Review (PCAR).

"As a result of elevated impairment charges Moody's would expect the bank to report losses in 2013 and therefore the objective of restoring the bank to profitability from its core mortgage lending activities, so as to be able to absorb the cost of its impairment charges, is not yet in sight. The capital support received from the Irish government has provided PTSB with time to clean-up its balance sheet and adjust its activities towards a more sustainable business model. However it will be crucial for the bank to demonstrate its ability to improve its underlying profitability (primarily driven by the net interest margin) over the next several quarters to begin to absorb additional costs involved with the cleaning-up of its loan portfolio," Moody's said.