RBS Cut by Moody’s, Outlook Negative on Risks of Restructuring

Royal Bank of Scotland Group Plc’s credit rating was downgraded by Moody’s Investors Service after the lender reported its biggest full-year loss since its bailout in 2008.

RBS was cut to Baa2, the second-lowest investment grade, from Baa1, and the outlook is negative, Moody’s said in a statement today. The bank’s credit rating had been on review since Feb. 12.

RBS Chief Executive Officer Ross McEwan outlined plans to return the bank to profit when it posted full-year results on Feb. 27. The Edinburgh-based lender will reduce risk-weighted assets in its international banking and securities unit by about a third by 2020.

The downgrade “better reflects the risk the restructuring poses to bondholders, together with the bank’s constrained financial flexibility during the restructuring period,” Moody’s said today.

RBS fell 1.8 percent to 300.6 pence in London trading today. Shares of Britain’s largest state-owned bank have dropped 11 percent this year.

“Over a longer-term horizon, RBS’s restructuring plan should be beneficial for creditors if executed according to plan,” Moody’s vice-president Andrea Usai said in the statement. “However, the plan is large and complex.”

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