Fitch upgrades Yorkshire, Skipton and Leeds building societies

The move should make it cheaper for the mutually-owned lenders to raise funds on capital markets. “Over the past year, they have all benefited from cheaper funding costs, from a gradual improvement in the UK operating environment, and from a recovery in the housing market,” said analyst Claudia Nelson in a note.

Ms Nelson added that the improved performance stemmed mostly from a marked reduction in customer and wholesale funding costs, driven by the Government’s Funding for Lending scheme, which has led to a widening of net interest margins across the sector despite a continued low interest rate environment.

These wider margins have been complemented by volume growth and lower loan impairment charges, due to improving confidence in the sector, falling unemployment and rising house prices, she added.

Ms Nelson said liquidity in the societies has built up following the crisis and is generally seen as a rating strength and capital ratios are sound and improving.

In its note, Fitch upgraded Yorkshire Building Society’s long and short-term issuer default ratings to A- from BBB+.

The Bradford-based lender welcomed the upgrade and said it “reflects the ability of the business to deal successfully with significant changes to its structure”.

Its recent acquisitions include Chelsea Building Society, Norwich and Peterborough Building Society and the savings and mortgage business of Egg.

Fitch upgraded Skipton Building Society’s long and short-term issuer default ratings to BBB from BBB-.

Skipton said it was delighted with the news and that its “solid track record has been recognised by a major credit rating agency”.

Fitch affirmed Leeds Building Society’s long-term issuer default ratings at A- and upgraded its short-term rating to F1 from F2, the highest level.

Leeds said the announcement was “a welcome vote of confidence in our continuing strong performance which has enabled us to maintain our position as one of a very small number of building societies who have maintained ‘A’ rated status”.

A rating of AAA represents the highest credit quality and the lowest expectation of default risk.

Fitch is joint-headquartered in London and New York and competes with Big Three rivals Standard & Poor’s and Moody’s Corporation.