Abbey National and A&L credit ratings downgraded

by Gill Montia

Story link: Abbey National and A&L credit ratings downgraded

Moody’s has downgraded the credit ratings of Alliance & Leicester (A&L) and leading mortgage lender, Abbey.

The firm has reassessed the Santander-owned banks, plus a number of UK building societies, on the basis that the UK property market will see a peak-to-trough fall of 40%.

According to Moody’s, there are concerns that the lenders involved do not have the financial strength to absorb property market losses on this scale and that they will also struggle to remain profitable in today’s mortgage market.

Abbey has had its Bank Financial Strength Rating (BFSR) cut to C- from C+, while its senior debt/deposit rating of Aa3 are on review for downgrade.

A&L’s BFSR has been cut to E+ from C+ and its senior debt/deposit rating of Aa3 has also been put on hold pending a review.

In addition, Moody’s has downgraded ratings for a batch of UK building societies, including Nationwide, which has seen its rating reduced from B to C-.

Chelsea Building Society has had its BFSR amended from C to E+; West Bromwich saw its rating cut from C- to E+.

Other societies downgraded include Britannia, Coventry, Newcastle, Norwich & Peterborough, Principality, Skipton and Yorkshire.

Moody’s holds the view that the global financial crisis will lead to “significantly higher credit losses than previously anticipated”.

In this respect the ratings agency predicts that specialist loan sectors, such as buy-to-let and self-cert will come under pressure.