LONDON (Alliance News) - Decreasing credit risk in the UK economy has led Standard & Poor's to reaffirm its ratings on eight UK-based banking groups, with the ratings agency citing a more manageable private credit to gross domestic product ratio and an expectation that losses from loans will remain low for the next two years.
In a statement issued on Thursday, Standard & Poor's affirmed the ratings and maintained the stable outlooks on Barclays Bank PLC, FCE Bank PLC, HSBC Bank PLC, Lloyds Bank PLC, Nationwide Building Society, and Royal Bank of Scotland PLC.
It affirmed the ratings and maintained the negative outlook on AIB Group (UK) PLC and Santander UK PLC, while maintaining the ratings on Clydesdale Bank on CreditWatch with negative implications as it prepares to demerge from Australian parent National Australia Bank.
"Household and corporate debt relative to GDP is reducing towards what we consider to be a more manageable level for the UK banking system," Standard & Poor's said in a statement.
"We expect UK bank loan losses across domestic asset classes to remain low this year and next," the statement continued.
The ratings agency said it has revised its trend for economic risk to positive from stable, citing decreasing credit risk in the UK economy.
"While each case is different, we believe that a positive economic risk trend is insufficient to warrant an outlook revision, at this time, for any of these institutions," Standard & Poor's said.
The ratings agency maintained its stable trend for industry risk, saying it is still concerned about high conduct and litigation charges.
It estimates that the payment protection insurance scandal, in which customers were mis-sold insurance products they didn't need, has cost UK banks about GBP27 billion to date.
"Reported industry-wide PPI customer payouts in the first four months of 2015 (GBP1.8 billion) are actually higher than in the same period in 2014, which in our view indicates that provisioning requirements will linger for many banks," the ratings agency said.
Standard & Poor's warned of economic risks relating to the UK's "history of volatile house prices", with another potential risk to UK banks coming from the newly elected Conservative Government's plans to hold a referendum on EU membership by 2017.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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Barclays (BARC)
Lloyds (LLOY)
HSBC Holdings (HSBA)