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(The following statement was released by the rating agency) LONDON, January 20 (Fitch) Fitch Ratings has affirmed Clydesdale Bank Plcâs (CB) Long- and Short-term Issuer Default Ratings (IDR) at âAâ and âF1â, respectively. The Outlook on the Long-term IDR is Stable. Fitch has also affirmed CB's Viability Rating (VR) at 'bbb+' and its Support Rating (SR) at '1'. KEY RATING DRIVERS - IDRS AND SR The bank's IDRs reflect Fitch's belief that there is a high probability of support from its 100% parent National Australia Bank, if required, based on demonstrated support over the past three years, most recently in 2012 when NAB acquired most of CB's under-performing commercial real estate (CRE) loan portfolio. This is despite its limited strategic importance to NAB in Fitch's view, given its fairly small size in relation to the group and own branding in a non-core geography. NAB has stated that it is likely to sell CB in the medium term. The two-notch difference between CB's and NAB's IDR reflects its low strategic importance but also Fitch's view that support will continue to be provided until a buyer is found. RATING SENSITIVITIES - IDRS AND SR The Outlook on CB's Long-term IDR reflects the Outlook on the parent. Changes in CB's IDRs and the SR would reflect changes to Fitch's view of NAB's propensity or ability to support CB and/or a change in ownership. A change in NAB's ability to support would be signalled by a change in NAB's Long-term IDR. KEY RATING DRIVERS - VR CBâs âbbb+â VR is driven by the bankâs sound asset quality and adequate impairment reserves, following the transfer of the underperforming CRE book to NAB in 2012, as well as its healthy funding and liquidity and acceptable capitalisation. The ratings also consider CBâs weak earnings which Fitch expects will slowly recover, hindered by low interest rates and regulatory uncertainty, especially with regard to conduct charges. Fitch expects capitalisation to remain broadly stable and in line with NABâs ratios. At end-2013, CB's Fitch core capital (FCC) ratio was 9.6%. Asset quality is sound, with a Fitch-calculated non-performing loan (NPL) ratio of 1.3% at end-2013 and loan loss reserve coverage of 79.6%. Liquidity is strong with over 20% of assets held in either cash or liquid securities. The VR is also underpinned by a high level of ordinary support from NAB, as reflected by the absence of common dividends since 2007. The VR also considers CB's low, albeit recovering, profitability and some vulnerabilities of its SME lending to the weak UK economic outlook. RATING SENSITIVITIES - VR The bank's VR is sensitive to a change in Fitch's assumptions regarding asset quality and earnings potential which could negatively affect financial performance and weaken the bank's capital. Significant asset quality deterioration in CB's SME lending leading to a sustained weakening of earnings and FCC ratios could result in a downgrade of the VR. Upside potential is limited in the medium-term given CB's constrained profitability and moderate operational risks associated with the bank's restructuring programme. Contact: Primary Analyst Denzil De Bie Director +44 20 3530 1592 Fitch Ratings Limited 30 North Colonnade London, E14 5GN Secondary Analyst Vanessa Flores Associate Director +44 20 3530 1515 Committee Chairperson James Longsdon Managing Director +44 20 3530 1076 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available onwww.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria (15 August 2012);Evaluating Corporate Governance (12 December 2012); and Rating FI Subsidiaries and Holding Companies (10 August 2012) are available atwww.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria Exposure Drafthttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714136 Evaluating Corporate Governancehttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=694649 Rating FI Subsidiaries and Holding Companieshttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209 Additional Disclosure Solicitation Statushttp://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=815692 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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Jan 20 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Clydesdale Bank Plc
KEY RATING DRIVERS - IDRS AND SR
The bank's IDRs reflect Fitch's belief that there is a high probability of support from its 100% parent National Australia Bank
RATING SENSITIVITIES - IDRS AND SR
The Outlook on CB's Long-term IDR reflects the Outlook on the parent. Changes in CB's IDRs and the SR would reflect changes to Fitch's view of NAB's propensity or ability to support CB and/or a change in ownership. A change in NAB's ability to support would be signalled by a change in NAB's Long-term IDR.
KEY RATING DRIVERS - VR
CBas abbb+a VR is driven by the bankas sound asset quality and adequate impairment reserves, following the transfer of the underperforming CRE book to NAB in 2012, as well as its healthy funding and liquidity and acceptable capitalisation. The ratings also consider CBas weak earnings which Fitch expects will slowly recover, hindered by low interest rates and regulatory uncertainty, especially with regard to conduct charges. Fitch expects capitalisation to remain broadly stable and in line with NABas ratios. At end-2013, CB's Fitch core capital (FCC) ratio was 9.6%.
Asset quality is sound, with a Fitch-calculated non-performing loan (NPL) ratio of 1.3% at end-2013 and loan loss reserve coverage of 79.6%. Liquidity is strong with over 20% of assets held in either cash or liquid securities.
The VR is also underpinned by a high level of ordinary support from NAB, as reflected by the absence of common dividends since 2007. The VR also considers CB's low, albeit recovering, profitability and some vulnerabilities of its SME lending to the weak UK economic outlook.
RATING SENSITIVITIES - VR
The bank's VR is sensitive to a change in Fitch's assumptions regarding asset quality and earnings potential which could negatively affect financial performance and weaken the bank's capital. Significant asset quality deterioration in CB's SME lending leading to a sustained weakening of earnings and FCC ratios could result in a downgrade of the VR. Upside potential is limited in the medium-term given CB's constrained profitability and moderate operational risks associated with the bank's restructuring programme.
((Bangalore Ratings Team, Hotline: +91 80 6677 2513, Bhanu.priya@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))
Keywords: Fitch Affirms Clydesdale Bank at 'A'; Outlook Stab