July 16 -
Summary analysis -- Clydesdale Bank PLC --------------------------- 16-Jul-2012
CREDIT RATING: BBB+/Positive/A-2 Country: United Kingdom
Primary SIC: Commercial banks,
Credit Rating History:
Local currency Foreign currency
01-Dec-2011 BBB+/A-2 BBB+/A-2
27-Jul-2009 A+/A-1 A+/A-1
Ratings Score Snapshot
Issuer Credit Rating BBB+/Positive/A-2
Business Position Moderate (-1)
Capital and Earnings Adequate (0)
Risk Position Adequate (0)
Funding and Liquidity Average
and Adequate (0)
GRE Support 0
Group Support +1
Sovereign Support 0
Additional Factors 0
Major Rating Factors
-- Ownership by, and integration with, National Australia Bank Ltd. (NAB).
-- Lower risk profile than historically following planned transfer of commercial real estate (CRE) loans to parent and broader restructuring.
-- Balanced funding strategy and satisfactory capitalization.
-- Relative business and loan portfolio concentration in economically weaker regions of the U.K.
-- Modest franchise relative to larger national competitors.
Standard & Poor's Ratings Services' outlook on Clydesdale Bank PLC is positive. This reflects our view that Clydesdale could maintain a risk-adjusted capital (RAC) ratio, Standard & Poor's measure of capital, before diversification adjustments above 10% on a sustainable basis following the loan transfer to its parent, NAB. It also incorporates our view that the broader de-risking and simplification of the franchise and adequate funding and liquidity will support Clydesdale's overall creditworthiness. We also expect that the issuer credit rating (ICR) on Clydesdale will continue to benefit from a one-notch uplift due to either its moderate strategic importance to its parent or its moderate systemic importance in the U.K.
We could revise the outlook to stable if we perceive that NAB is not committed to maintaining capitalization that we consider to be consistent with a 10% RAC ratio or if Clydesdale's longer-term earnings capacity is not supportive of a RAC ratio above 10% on an ongoing basis.
We could lower the ratings if higher-than-expected credit losses lead us to revise our assessment of the bank's risk position downward. We could also lower the ratings if the scaling back of Clydesdale's business leads to a long-term erosion of the franchise.