Standard & Poor's cuts Irish banks' ratings

Ratings agency Standard & Poor's has reviewed downwards its counterparty credit ratings on the four main Irish banks. This is a measure of the banks' ability to pay back their loans.

Standard & Poor's has also put Anglo Irish Bank and Irish Life and Permanent on 'CreditWatch' as it says these two institutions are facing the most acute pressures to re-shape their businesses .

S&P said that it has revised its outlooks on AIB and Bank of Ireland to negative from stable. At the same time, the bank's A+/A1 counterparty credit ratings were affirmed.

It also said that it has lowered its long-term counterparty credit ratings on Irish Life and Permanent and Anglo Irish Bank to A- from A. It has also placed their counterparty credit ratings on CreditWatch with negative implications.

It said the lowering of its long-term ratings on Anglo and IL&P reflects the backdrop of a deteriorating economic environment, and more specifically, the clear challenges facing these banks business models in their current forms.

While banks taking part in the Government's bank guarantee scheme are subject to the same degree of oversight and direction by the regulator, S&P said that Anglo and IL&P are facing the most acute pressures to re-shape their businesses in the coming two years. All of the banks in the scheme are required to submit two year business plans to the regulator this month.

S&P also says that the challenging operating environment will lead to pressure spreading from Irish property development lending to most segments of AIB and Bank of Ireland's loan books.

It said that overall it continues to believe that the banks' business and financial profiles will leave them sufficiently well placed to ride out the downturn.

However, it added that the economic outlook presents further potential risks to asset quality and earnings, and there is no immediate capital support forthcoming from the guarantee scheme.