Moody’s upgrades Clydesdale rating on back of NAB’s £1.7bn injection

The ratings agency, which many believe to be the one responsible for a last minute delay of 24 hours to Clydesdale’s scheduled Tuesday flotation, said that the provision materially reduces the tail risks associated with further, unexpected conduct charges.

Moody’s has now said that the Clydesdale Bank’s finances have improved following the launch of the IPO process at the London Stock Exchange on Wednesday.

Moody’s said it had upgraded Clydesdale’s rating on one measure to reflect the bank’s improved credit fundamentals as a result of NAB’s indemnity.

In a rating report on Clydesdale Bank issued yesterday, Moody’s noted NAB had put in place an indemnity of up to £1.7 billion to cover potential misconduct liabilities in respect of issues such as the mis-selling of Payment Protection Insurance.

The agency noted Clydesdale had received a funding injection from NAB in readiness for the demerger, which helped significantly strengthen the bank’s solvency profile.

Moody’s said: “Clydesdale still faces long-term structural challenges from its weakened franchise and past challenges in its risk management framework.” The bank faces headwinds in restoring profitability to a solid footing.

Moody’s cut Clydesdale’s long-term deposit and commercial paper ratings by one notch each.

This reflected its view some creditors faced slightly higher risk of loss in the event of Clydesdale defaulting following changes in its funding mix, but they remain low.

A spokesman for CYBG said the upgrade of its BCA rating reflected the improved credit fundamentals following the finalisation of the demerger.

CYBG does not consider the downgrade of the Long Term Deposit and Commercial Paper Rating to have any material impact on its or Clydesdale’s ability to raise funding or the overall cost of funding.

Shares in CYBG closed up three per cent, 6p, at 198 p. They listed on Wednesday at 180p.

Clydesdale floated on the London Stock Exchange on Wednesday with Yorkshire Bank as CYBG after National Australia Bank off-loaded the business to international investors.

The flotation of CYBG, led by chief executive David Duffy, was delayed by 24 hours after a credit rating agency asked for information about Clydesdale. The agency was believed to be Moody’s.