DBRS Downgrades Anglo Irish Bank’s Non-Guaranteed Debt Rating to B (low), UR - Negative

DBRS Inc. (DBRS) has today downgraded the Non-Guaranteed Long-Term Debt and Deposits ratings of Anglo Irish Bank Corporation Limited (Anglo Irish or the Bank), including its Issuer Rating, to B (low) from B (high). Concurrently, DBRS has downgraded the Non-Guaranteed Short-Term Debt and Deposits ratings of Anglo Irish to R-5 from R-4. All non-government guaranteed ratings remain Under Review with Negative Implications, where they were placed on 10 September 2010. At the same time, DBRS has downgraded the long-term ratings of the Irish Government Guaranteed instruments issued by the Bank to “A” from A (high). Concurrently, DBRS has downgraded the ratings of Short-Term Deposits and Short-Term Debt Guaranteed by the Irish Government to R-1 (low) from R-1 (middle). The trend on the long-term guaranteed ratings is Negative, while the trend on the short-term guaranteed ratings is Stable. The rating action on the guaranteed debt reflects DBRS’s downgrade of the Republic of Ireland to “A” with a Negative trend.

The downgrade of the sovereign ratings was factored into today’s downgrade of Anglo Irish’s Non-Guaranteed Debt and Deposits ratings Given the substantial support already afforded Anglo Irish from the Government, with cumulative capital support totalling EUR 29.3 billion at year end 2010, should Anglo Irish require further significant capital support, DBRS sees the Government’s ability and appetite to provide timely support as less certain.

Also considered in the rating downgrade is DBRS’s view that, given the state of the Irish banking system and wind down mode of Anglo Irish Bank, there is an increasing likelihood of adverse actions towards senior bondholders.

Today's rating action considers the Anglo Irish’s full year 2010 results, which indicated ongoing deterioration in financial performance with an outsized loss totaling EUR 17.7 billion. This loss follows a sizeable EUR 12.7 billion loss for the 15 months to 31 December 2009. Moreover, the results indicate further deterioration in both access to liquidity and asset quality measures. At year-end, the Bank had approximately EUR 45 billion of outstanding funding from central banks and monetary authorities, of which some EUR 28 billion was from various special funding arrangements with the Central Bank of Ireland. Given the February 2011 sale of nearly all of the Bank’s deposits to Allied Irish Banks p.l.c., reliance on the special liquidity fund is likely to have increased since year end. Impaired loans at year end were 48% of the loan book, illustrating the extreme weakness in the credit profile of the post-NAMA loan portfolio.

The non-government guaranteed ratings remain Under Review with Negative Implications reflecting the lack of specific details regarding the final form of the restructuring. DBRS will complete its review when additional details become available. Additionally, any adverse changes to the Bank’s structure or additional actions by the government or the Bank suggesting burden sharing will have a significant negative impact on the ratings.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments. Both can be found on the DBRS website under Methodologies.

The sources of information used for this rating include the issuer, Minister for Finance and Central Bank of Ireland. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Steve Picarillo
Rating Committee Chair: Alan G. Reid

Initial Rating Date: 7 September 2006
Most Recent Rating Update: 25 February 2011

For additional information on this rating, please refer to the linking document below.