Clydesdale hit by Moody’s downgrade

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Ratings agency Moody’s has downgraded Clydesdale Bank due to uncertainty over its future ownership and strategic direction.

On 23 August, Moody’s downgraded the bank’s long-term bank deposit and senior debt rating from A2 to Baa2 and its short-term debt and deposit rating from Prime-1 to Prime-2.

Moody’s says the bank’s decision to pull out of commercial mortgage lending last year has left its franchise “materially weakened”. The losses incurred in this part of Clydesdale’s book led National Australia Bank, the parent of Clydesdale and Yorkshire Banks, to pump £5.6bn of capital into the bank.

It added: “The weakness of its franchise and uncertainty over its future strategic direction, alongside NAB’s stated intention to sell the bank over the medium term, leaves Clydesdale in an uncertain position.

“Moreover, the losses incurred on the commercial real estate portfolio highlight historical failures of risk management and governance, and the strengthening of these areas, while under way, in Moody’s view is challenging and will take several years to be fully effective.”

Earlier this month, one of Moody’s rival ratings agencies, Standard & Poor’s, downgraded Nationwide’s long-term counterparty credit rating from A+ to A over impairments on its commercial loan book.