RBS welcomes Moody’s upgrade to investment grade

RBS chief executive Ross McEwan

Credit rating agency Moody’s has upgraded its rating on Royal Bank of Scotland Group to investment grade, saying the move reflected the group’s “stronger standalone financial profile.”

Moody’s raised its rating on the RBS group’s long-term debt to Baa3, the lowest investment-grade level.

RBS chief financial officer Ewen Stevenson said: “Becoming investment grade rated for our long term ratings across all three credit rating agencies has been an important goal for us.

“It is further external validation that our turnaround is now well progressed.”

Moody’s said: “Moody’s Investors Service has today upgraded the Royal Bank of Scotland Group plc’s (RBSG, the holding company) long-term senior unsecured debt ratings to Baa3 and the long-term deposit ratings of operating companies The Royal Bank of Scotland plc (RBS plc) and National Westminster Bank PLC (NatWest Bank plc) to A2.

“The short-term ratings of RBSG were upgraded to Prime-3 and the short-term deposit ratings of RBS plc and NatWest Bank plc were upgraded to Prime-1.

“The senior unsecured debt ratings of RBS plc and NatWest Bank plc’s issuer rating were affirmed at A3 and RBS plc’s corresponding short-term debt ratings was affirmed at Prime-2.

“The upgrade to RBSG’s senior debt ratings and the deposit ratings of RBS plc and NatWest Bank plc reflects the stronger standalone financial profile of the group and expectation for more stable performance in the medium term resulting from the group’s multi-year restructuring, leading to a baseline credit assessment (BCA) of baa3 for RBS plc and NatWest Bank plc.

“The rating action reflects the group’s (1) strong capital and litigation reserves levels which should allow the bank to absorb the resolution of pending RMBS litigations without detriment to the bank’s overall solvency, (2) sustainable earnings from core retail and corporate businesses, which mitigate downward credit pressures arising from Brexit and provide substantial shock absorbers relative to the remaining capital markets business, (3) substantially reduced non-core assets and reduced exposure to more volatile and complex capital markets risks and earnings and (4) improved risk framework and governance.”