S&P raise main credit rating for Permanent TSB in nearly a decade

Privatising Permanent TSB will likely take several years given its “weak profitability”, ratings agency S&P said today as it raised the bank’s credit rating to investment grade.

Earlier, rival agency Moody’s upgraded ratings for PTSB, Bank of Ireland and AIB.

The upgrades helped lift Irish bank shares. Permanent TSB rose by 8.1pc to €1.04 a share, AIB by 2.45pc to €3.18, and Bank of Ireland by 1.85pc to €4.73.

S&P raised its main credit rating for Permanent TSB one notch to BBB-, above so-called ‘junk’ status for the first time in nearly a decade.

Moody’s raised its key PTSB rating two notches to Ba1, at the top end of ‘junk’ levels.

Moody’s noted that PTSB had sharply reduced its non-performing loans following September’s sale of nearly 2,000 loans to Start Mortgages. a unit of US fund Loan Star.

S&P said PTSB “is building a substantial buffer of loss-absorbing instruments to protect the senior creditors”, including via September’s issuance of €300m of bonds that can be converted into equity should the bank face new finance pressures.

But S&P said it was unlikely to raise PTSB’s main grade higher due to a “lack of business diversity and weak profitability prospects”.

“We consider the Government unlikely to reduce its stake in the near term. The process of returning the bank to full private ownership will probably take several years,” S&P said. “That said, capital distribution could be discussed in one or two years.”

Moody’s upgraded Bank of Ireland’s baseline rating one notch to Baa2, again citing progress in reducing bad loans. Moody’s expects Bank of Ireland’s bad loans to be 3.5pc of total lending by the end of the year. But, it said the bank’s profitability “remains structurally weaker, due to a higher share of tracker mortgages, lower share of SMEs and higher operational costs”.

Moody’s raised AIB’s baseline score one notch to Baa2 citing its “strong core profitability” and its progress in reducing non-performing loans to 7.3pc by mid-2019.

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