Clydesdale hit by fourth ratings cut in six months

CLYDESDALE Bank suffered its fourth credit rating reduction in six months yesterday as Fitch pointed to a weakening outlook for the UK economy.

The move came as the agency also cut the rating on parent group National Australia Bank (NAB) as part of a wider review of Australia’s four main banks which saw three of them suffer one-notch cuts due to their partial reliance on wholesale funding markets.

Fitch said it was downgrading the long-term rating for Clydesdale from A+ to A and for NAB from AA to AA-.

Its short-term ratings on the banks remain unchanged although both of Clydesdale’s ratings are on “negative watch” pending the outcome of a strategic review announced earlier this month.

Fitch said that although NAB’s UK operations have “historically offered diversity in a well-regulated market and exposure is modest at about 10 per cent of group assets” earnings were likely to be subdued given a weakening outlook for the UK economy.

Despite the cuts, Fitch said the Australian banks remained among the strongest which it provides ratings for and highlighted “robust risk management” and “solid profitability”.

A spokesman for Clydesdale said the cut in Fitch’s rating for NAB brought it more in line with that of Standard & Poor’s. NAB has given itself until May to complete a strategic review of its UK operations that will position the business for a slow economic recovery.