NEWLY-independent Clydesdale Bank has received a boost after a leading international agency said it is no longer considering cutting the lender’s credit rating.

Standard and Poor’s said it had taken Glasgow-based Clydesdale and its sister Yorkshire Bank off negative credit watch and affirmed the investment grade rating assigned to the combined business.

The agency had put the business on CreditWatch with negative implications in May pending the banks being spun off by former owner National Australia Bank.

Clydesdale gained its independence from National Australia last week when it was demerged from the Australian group along with Yorkshire Bank as CYBG.

The group floated on the stock market after 25 per cent of the shares were sold to institutions in an offering that valued the business at £1.6 billion.

Standard & Poor’s said the Clydesdale and Yorkshire business would enjoy lasting benefits from the work NAB completed to prepare them for the demerger.

The Australian bank put in place an indemnity of up to £1.7bn to cover potential misconduct liabilities in respect of issues such as the mis-selling of Payment Protection Insurance by Clydesdale.

“In our view, this indemnity package with NAB significantly reduces downside risks to the bank's capital position arising from future legacy conduct charges, which had previously been a key rating concern,” said Standard & Poor’s.

The agency noted Clydesdale’s financial and risk profiles will continue to be underpinned by post-transaction support agreements with NAB.

However, the Fitch agency downgraded Clydesdale Bank’s long term rating a notch to reflect the fact it will not be able to draw on extraordinary support from NAB. It assigned a grading to Clydesdale applied to businesses considered to be of good credit quality.

Standard & Poor’s said the outlook for the Clydesdale and Yorkshire business was stable in terms of credit risk.

The ratings assigned to Clydesdale Bank by Standard & Poor’s and Fitch suggest experts feel the business is in robust financial shape.

Led by chief executive David Duffy, Clydesdale aims to win lending and current account business from rivals. These include much bigger operations, such as Royal Bank of Scotland.

However, Fitch noted:”The bank's underlying profitability is modest and will be impinged further for the next two years by investment and restructuring costs.”

Last week another agency, Moody’s, said Clydesdale faced headwinds in improving its cost structure and restoring profitability to a solid footing.

Mr Duffy has said the group is in good shape to face life as an independent following the demerger and ensuing flotation.

National Australia Bank accepted a cut in the valuation of CYBG before completing last week’s share sale.

Announcing plans for the sale last month, NAB set a price range of 175p to 235p for shares in CYBG. This would have valued the business at around £1.5bn to £2bn.

The business had a book value of £2.7bn on 30 September.

Shares in CYBG closed down 9p at 194p. They listed at 180p last Wednesday.

Standard and Poor’s gave Clydesdale Bank a BBB+ long term rating and A-2 short term rating. A long term rating applies to a period of two years or longer.

A BBB- rating is investment grade.

Fitch reduced Clydesdale’s Long Term Issuer default rating to BBB+, with a stable outlook, from A.

Standard & Poor’s assigned speculative, sub investment grade ratings of BB and B respectively to two tranches of loan notes issues by CYBG, totalling £475m and £450m respectively.