RBS Rating May Be Cut by Moody’s on Weakening Capital Position

Feb 12, 2014 12:09 pm ET

Feb. 12 (Bloomberg) -- Royal Bank of Scotland Group Plc’s credit rating may be downgraded by Moody’s Investors Service after the bank said last month that full-year results would be hurt by provisions and conduct-related costs.

“As a result, the bank will report a weaker than previously anticipated regulatory capital position at end- December 2013, weakening its standalone credit profile,” Moody’s said in a statement today.

Moody’s cited the cut in the bank’s forecast for its core Tier 1 capital ratio, a measure of financial strength. RBS said last month it expects the ratio will be about 11 percent at the end of 2013, or as much as 8.5 percent under the latest rules set by the Basel Committee on Banking Supervision. That’s down from the company’s estimate of 11.6 percent and 9.1 percent in November.

RBS set aside 3.1 billion pounds ($5.1 billion) more for legal and compensation claims on Jan. 27, including 1.9 billion pounds for lawsuits and fines tied mostly to the sale of $91 billion of mortgage-backed securities. Chief Executive Officer Ross McEwan said in November the bank would log a “substantial” full-year loss after 4.5 billion pounds of writedowns.

RBS rose 0.9 percent to 346.20 pence in London trading today. Shares of Britain’s largest state-owned bank have gained 2.4 percent this year.

--Editors: Keith Campbell, Jon Menon