GLASGOW-based Clydesdale Bank's credit rating is under threat after Fitch Ratings warned it is considering downgrading parent company National Australia Bank (NAB) and three other leading Australian institutions.
Debt issued by Clydesdale, headed by David Thorburn, is currently rated at A+ by Fitch after being downgraded from AA- on September 30. But it faces another downgrade after being put on "ratings watch negative" as the agency warned of the Australian banks' funding challenges.
Australian banks have some of the strongest credit ratings in the world after avoiding many of the toxic assets that brought down banks in the UK and US.
Australia also avoided recession in the wake of the global financial crisis.
But Fitch put four banks – NAB, Commonwealth Bank of Australia, Westpac, and Australia and New Zealand Banking Group – on "ratings watch negative" because their funding profile is weaker than rivals and they face an uncertain economic backdrop and changing regulation.
Fitch said: "The agency views the Australian major banks' ratings as under pressure at their current levels. Despite significant improvements, these banks continue to have a weaker funding profile than other similarly rated peers."
Fitch said downgrades are likely to be limited to one notch and that banks currently rated at "AA", including NAB, are most likely to see a downgrade.
A downgrade could make it more expensive for the banks to raise funding.
A Clydesdale spokesman said: "Our long-term rating has not changed and is only under review. We are a conservative bank with sound capital and our parent, NAB, is a highly rated and well capitalised bank which continues to strengthen its profile."
Despite speculation that NAB would prefer to sell its UK business to focus on fast-growing Asia, last week it announced it is pumping £130 million into the Clydesdale pension scheme.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article