Clydesdale Bank hit by ratings downgrade

CLYDESDALE Bank was last night hit by a downgrade by one of the three big credit ratings agencies.

Moody’s cut its rating for the bank from A2 to Baa2 just days after the Clydesdale’s owner, National Australia Bank (NAB), delivered a rise in third-quarter profits.

NAB’s chief executive Cameron Clyne described the downgrade, which could lead to the bank paying higher wholesale borrowing costs, as “disappointing”.

Moody’s noted: “As a result of NAB’s intervention, the bank is well-capitalised and has substantial liquid assets, and we see no immediate threat to creditors from its near-term challenges.

“However, the weakness of its franchise and uncertainty over its future strategic direction, alongside NAB’s stated intention to sell the bank over the medium term, leaves Clydesdale in an uncertain position.”

Clyne added: “Clydesdale has a smaller and stronger balance sheet following the transfer of the vast majority of its commercial real estate portfolio to NAB in October 2012, materially improving Clydesdale Bank’s risk profile.”

He also said there had been a significant improvement in the “funding, liquidity and capital position of the business”.

Clyne said: “Progress on simplification of the UK banking business has been pleasing, with the bank successfully refocusing on its core retail and SME business lending in northern England and Scotland.”

Clydesdale boss David Thorburn is overseeing a shake-up that will see 1,400 roles axed by September 2015, and the lender has closed 29 business banking centres.