Credit rating agency Fitch has today downgraded Anglo Irish Bank to BBB+ and also put the bank on negative watch, meaning it could face a further downgrade.
The agency said this followed the Finance Minister's announcement earlier this month regarding the new restructuring proposal for Anglo. This would see the bank split into two separate entities: the Asset Recovery Bank and the Funding Bank.
Fitch said the downgrade reflects its view on the level of future Government support that will be available to Anglo's Asset Recovery Bank.
It said that, despite being Government owned, the Asset Recovery Bank, as a wind-down institution not engaging in new lending and decoupled from Anglo's deposit base, would be less systemically important than the current Anglo.
'While Fitch expects the ARB to continue to benefit from a high level of Government support, the scope of the long-term support for this entity may be less than what would otherwise be available to Anglo as a fully functioning deposit taking bank,' it added.
Meanwhile, rival agency Standard & Poor's has published a note on AIB and Bank of Ireland after it yesterday moved Bank of Ireland to a negative outlook, meaning it could lower its credit rating.
S&P said its ratings and outlook on both banks were now the same. It said both banks had made progress in their restructuring, though this had been slower at AIB. S&P said it expected both to keep their dominant market positions in Ireland, and that they were likely to face reduced competition.
But it warned that an economic recovery would take place only slowly, making it more difficult for AIB and Bank of Ireland to return to profit. It added that it did not expect both banks to recover their pre-crisis credit ratings within the next two years.
