Moody’s upgrades Bank of Ireland’s ‘stronger’ UK unit

Moody's, one of the world's top-three credit ratings firms, upgraded its rating on Bank of Ireland UK to one level above its stance on the parent company, given that the London-based unit's financial position is "stronger" than the group.

Bank of Ireland UK’s long-term deposit rating has been raised by Moody’s to Baa2, eight levels below the rating agency’s top-level Aaa rating.

Moody’s said its higher rating on the Bank of Ireland’s UK subsidiary reflected the fact that its business was “largely independent from that of the parent and is based in the UK with a stronger track record in asset quality”, particularly in the mortgage market.

Nevertheless, the UK unit’s remaining linkages with the parent limit the ratings “differential” with the group, Moody’s said. The London-based business is reliant on the Irish group for “crucial” operational and informational technology services, while both have a close strategy and brand association, it said.

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Bank of Ireland UK paid its first equity dividend, amounting to £220 million (€251.5 million), to its Irish parent in September 2016.

Moody’s said it expected “any further capital transfers between the subsidiary and the parent will require both board and regulatory approval, ensuring that the bank continues to be in compliance with regulatory capital requirements”.

Last week, Moody’s upgraded its view of the creditworthiness of both Bank of Ireland and AIB’s long-term senior unsecured debt, partly reflecting their declining levels of bad loans.