Ratings agency Fitch has downgraded Ulster Bank Ireland's (UBI) Long-Term Issuer Default Rating and Support Rating.
It said the cuts follow the announcement last month by the bank's parent NatWest Group (NWG) that it intends to withdraw from the Republic of Ireland.
"This reflects its conclusion that UBI is not in a position to sustainably achieve acceptable returns over the group's planning horizon," the agency said.
"The downgrade reflects UBI's diminished role in the broader group and our opinion that it is no longer a strategically important subsidiary."
The bank’s Long-Term Issuer Default Rating has been downgraded to 'BBB+' from 'A-' while its Support Rating cut to '2' from '1'.
It also said the outlook is negative.
The agency said that while it views the overall propensity of support for Ulster Bank from NatWest as having reduced following the decision to withdraw from Ireland, the Long-Term Issuer Default and Support Ratings continue to reflect its expectation of a high probability of support from NatWest if required.
"NWG has provided support to UBI in the past, which is reflected in the subsidiary's high regulatory capital ratios," it said.
It said the Long-Term Issuer Default Rating is two notches below NatWest’s because the subsidiary no longer operates in a strategic jurisdiction and has limited synergies with the parent.
"The two-notch difference also reflects our belief that the withdrawal from Ireland will not materially affect NWG's overall franchise," it said.
Fitch has also affirmed Ulster Bank’s Viability Rating at 'bb' and has at the same time withdrawn it.
This is because under its criteria, Fitch does not assign Viability Ratings to subsidiary banks that do not have a meaningful standalone franchise, or the prospects of one.
Fitch added that it considers the phased withdrawal equivalent to the business being in "run-off".
