Fitch follows Moody’s in Clydesdale downgrade

CLYDESDALE Bank was hit yesterday by its second credit rating downgrade in 48 hours, as the Fitch agency became the latest to air doubts about the long‑term support of the bank by its Australian parent.

Fitch downgraded Clydesdale and Yorkshire Bank to A+ from AA-, with a stable outlook, and its short term default rating to F1 from F1+. It followed a similar downgrade of the bank by Moody’s Investor Services on Wednesday.

Justifying the move, Fitch said: “The downgrade … reflects Fitch’s belief that the strategic importance of Clydesdale Bank to its parent bank, National Australia Bank, may be diminishing slightly.

“This reflects the more stringent regulation and a less favourable economic environment in the UK, which may indicate that the UK banking sector has become less attractive to foreign banks.”

When Moody’s downgraded Clydesdale’s and Yorkshire banks’ ratings, it also cast doubts on National Australia Bank’s longer-term commitment to its UK subisidiary.

The downgrades follow recent remarks by Mark Joiner, executive director for finance at the parent bank, that although there would be no early fire sale of Clydesdale an eventual divestment or flotation was possible. Joiner also appeared to question greater investment by National Australia Bank in Britain given the possibility of the country facing a “lost” economic decade.

City analysts said it was Joiner’s comments that had led the ratings agencies to question NAB’s commitment to the UK arm. NAB is understood to have rejected two recent takeover approaches for Clydesdale and Yorkshire, from NBNK Investments and financial investment firm Sun Capital. Both NBNK and Sun Capital are both seen as wanting NAB’s established branch network to act as a stepping stone for their bids for the 600-plus Lloyds branches that are being auctioned.

David Thorburn, chief executive of NAB UK, said yesterday: “As ever, we remain fully committed to maintaining our strong capital, funding and liquidity positions.”