IL&P shares fall over 9% on ratings downgrade

Irish Life and Permanent is likely to face higher repayment costs on its loans after its debt ratings were downgraded today by international credit rating agency Moody’s.

The rating was cut to “A1” from “AAA”, which is the highest available. News of the downgraded sent ILP shares lower in Dublin and at 1.25pm the stock was 9.5 per cent lower at €1.31.

The bank’s subordinated debt rating was downgraded to “A2” from “A1” while its “financial strength rating” was reduced from “C+” to “C”. Moody’s said its rating on the bank’s financial strength remains under review pending a further downgrade.

Moody’s said the downgrade of Irish Life and Permanent, and particularly its financial strength rating, reflects the view that the rapid deterioration of the Irish economy is likely to negatively affect profitability in its banking and life assurance arms.

“In the banking business we expect provisioning to increase, albeit at lower levels than peers due to the make up of the loan portfolio which is overwhelmingly residential mortgage based,” Moody’s said.

“Profitability in the life assurance business is also likely to be lower, particularly on the retail side, as sales volumes are lower and management fees reduce,” it added.

It also cited the ongoing high reliance on market funding as a key factor in the downgrade of the bank’s financial strength to “C”.

Other concerns highlighted by Moody’s includes the bank’s relatively high exposure to buy-to-let lending, accounting for 36 per cent of the IL&P’s total loan portfolio.