Fitch downgrades seven UK building societies

by Gill Montia

Story link: Fitch downgrades seven UK building societies

Fitch has downgraded the credit ratings of seven UK building societies.

Britannia, Chelsea, Newcastle, Principality, Skipton, West Bromwich and Yorkshire have all been downgraded, reflecting the credit rating agency’s assessment of their exposures to specialist mortgages, such as sub-prime and buy-to-let, and high loan to value (LTV) ratios.

The move also takes account of the mutuals’ involvement in the commercial mortgage sector and their recent growth patterns in lending.

The decision acknowledges the worsening outlook for the UK economy, which Fitch expects to result in larger impairment charges for all UK building societies, as unemployment rises and house prices decline.

With regard to Britannia, which is the UK’s second-largest building society and was last month reported to be interested in a merger with Co-operative Financial Services, Fitch has doubts about its Platform lending arm, which once specialised in high LTVs.

However, the agency describes the capitalisation of the lenders included in its review as reasonably strong and not a cause of concern.

Coventry and Leeds buildings societies have emerged from scrutiny unscathed; according to Fitch the former should post an end of year profit, while the latter has a solid capital base.