Moody’s places Clydesdale ratings on downgrade watch

MOODY’s Investors Services yesterday revealed that it had placed Clydesdale Bank’s deposit and debt ratings under review for a possible downgrade.

The review has been triggered by the announcement that Clydesdale’s parent, National Australia Bank, is to carry out a strategic review.

Clydesdale and its sister bank Yorkshire will announce the outcome in May.

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Earlier this month, Yorkshire Bank’s chief executive David Thorburn said that everything is under review as the bank strives to cope with deteriorating economic conditions, a challenging outlook and an increase in bad debts.

It is not clear yet how many jobs will be axed from Yorkshire and Clydesdale’s 8,300 employees, of whom 2,000 are employed in Yorkshire.

NAB chief executive Cameron Clyne said the review will definitely lead to changes.

“The review will assess many options and it’s still too early to determine the recommendation. We can say that retaining the existing business mix and structure will not be an outcome,” he said.

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Moody’s placed on review for downgrade the A2 long-term senior debt and bank deposit ratings and the Prime-1 short-term rating of Clydesdale Bank.

Moody’s understands that the strategic review will look to reposition the business mix and structure in a “challenging economic environment” in the UK and improve returns.

Although Moody’s does not expect the outcome of the strategic review to dramatically change Clydesdale’s credit profile, the rating review will focus on the extent to which the strategic review leads to any changes in the shape of Clydesdale and any impact that this will have on profitability and funding.

In a statement, Moody’s said: “At this stage Moody’s does not expect to change its assumptions regarding parental support to Clydesdale from NAB, however the rating agency noted that if the likelihood of a sale of the bank was to increase as a result of the strategic review then this would additionally need to be revisit- ed.

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“Currently Moody’s assumption of parental support results in ratings uplift of one notch in the senior ratings of Clydesdale.”

A Clydesdale Bank spokesman said yesterday: “Our ratings have not changed and are only under review at this stage.

“As a conservative bank, we have a long-held commitment to maintaining strong capital and funding levels.”

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