RBS Credit Rating Downgraded by S&P on Bad Bank UnitGavin Finch
Royal Bank of Scotland Group Plc’s credit rating was cut by Standard & Poor’s, saying the government decision to set up an internal bad bank will undermine efforts to return the lender to profit.
“The changes amount to a material extension of RBS’s long-running restructuring, further delaying the bank’s return to profitability,” the ratings company said in a statement today. “In addition, considerable uncertainties remain regarding RBS’ exposure to future litigation and conduct risk.”
S&P downgraded RBS’s long-term debt rating by one step to BBB+ from A-. RBS said last week the bad bank unit would include 38 billion pounds ($61 billion) in toxic assets including 14.8 billion pounds being transferred from the core unit and 23.5 billion pounds from its non-core division.
It also cut the long-term rating of the bank’s Royal Bank of Scotland Plc unit by one step to A-, four levels above junk, and maintained a negative outlook.
RBS fell 1.9 percent to 321.80 pence in London. Britain’s largest state-owned bank has dropped 0.8 percent this year, while Lloyds Banking Group Plc is up 54 percent.