IL& P outlook downgraded by S & P

Rating agency Standard & Poor's has reduced Irish Life & Permanent's outlook to "negative" from "stable."

The revision reflects the expectation that the institution's "weak financial profile will persist for the forseeable future" the credit rating agency said today.

It added that the "strategic uncertainty over the future role of the banking operations within the group may linger."

The banking division of Irish Life and Permanent has been mooted as a majority stakeholder in a possible "third force" in Irish banking, which would include the EBS and Irish Nationwide. Irish Life & Permanent confirmed earlier this week that it is to approach the EBS within the next few weeks.

The rating agency left IL & P's long term 'BBB+' rating and 'A-2' short-term rating unchanged.

However, it said it could lower the ratings if it considers that IL & P will not return to profitability in 2012, if Irish Life's earnings performance significantly weakens, or if the bank's medium-term credit profile is no longer commensurate with a 'BBB+' rating.

"We believe that the financial profile of Irish Life and Permanent Plc remains weak and, despite demonstrating deposit growth, we expect it will continue to be reliant on government funding support for the foreseeable future," SandP credit analyst Nigel Greenwood said in the statement.

The stock was down 0.7 per cent at €1.63this afternoon after earlier rising as much as 5.6 per cent to €1.73.