Clydesdale hits rating concern

Published on Thursday 29 January 2009 20:23

CLYDESDALE Bank became the latest prominent Scottish financial institution to be ensnared in financial market jitters yesterday when a leading credit rating agency placed it on "negative watch".

Fitch Ratings said it was concerned about Clydesdale's exposure to the difficult commercial property market.

Fitch said in a note: "Commercial lending at end-September 2008 represented a large portion of Clydesdale's total loan book (around 23 per cent] and includes some lending to developers.

"In (our] view, falling prices and a worsening economic outlook increase the size of potential losses in commercial property lending."

Fitch said it expected to resolve the negative rating watch – which regards Clydesdale as a standalone bank – over the next six months as it reviewed any negative impact on the bank from the deterioration of the commercial property market in the period to March 2009.

The agency said its long-term issuer default ratings for Clydesdale remained the same at AAminus, reflecting "the extremely high probability of support from the parent, National Australia Bank, if necessary".

Fitch also said Clydesdale's asset quality ratios as of end-September 2008 "remained sound", and said its retail loan portfolio was "dominated by residential mortgages of good quality with little high loan-to-value lending".

Clydesdale said: "Despite being one of the first banks to have their ratings reviewed this year, our long-term and individual ratings compare strongly against our peers who were evaluated at an earlier stage in the economic cycle."