Fitch cuts RBS rating on write-downs, outlook

NEW YORK, April 22 (Reuters) - Fitch Ratings on Tuesday cut Royal Bank of Scotland Group's (RBS.L: Quote, Profile, Research) long-term issuer default rating one notch to "AA," its third highest investment grade, due to expected write-downs and a weaker earnings outlook for some of group's businesses.

The challenges of managing its acquisition of parts of ABN AMRO's business in more demanding market conditions also contributed to the downgrade, the ratings agency said.

"The outlook for 2008 is less certain and several businesses seem likely to face stronger headwinds in a more challenging global environment," Gordon Scott, managing director at Fitch said in a report.

"While there remains potential for additional write-downs on credit market exposures, the conservative valuation approach taken by management reduces potential downside," he added.

The downgrade came after RBS unveiled a record $24 billion rights issue to cover increased write-downs on the value of toxic assets and help repair its stretched balance sheet. For details, click on [ID:nL22463702]

"Fitch has always viewed the group's capital targets to be weak relative to many peers' but had been comforted by the group's ability to generate capital internally," Scott said. "The announced measures to rebuild capital and maintain structurally higher ratios are viewed positively by Fitch."

The outlook is stable, indicating a ratings change is not anticipated over the next one to two years, Fitch said. (Reporting by Anastasija Johnson; Editing by Gary Crosse)