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S&P revises RBS outlook, upgrades units

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S&P revises RBS outlook, upgrades units

S&P Global Ratings on May 31 affirmed Royal Bank of Scotland Group PLC's BBB-/A-3 long- and short-term issuer credit ratings and revised the outlook to positive from stable.

At the same time, the rating agency upgraded the long-term issuer credit ratings of units Royal Bank of Scotland PLC, National Westminster Bank PLC and Ulster Bank Ltd. to A- from BBB+ and the same ratings of Ulster Bank Ireland DAC and Royal Bank of Scotland International Ltd. to BBB+ from BBB, with positive outlooks on the five companies. S&P affirmed the banks' short-term issuer credit ratings at A-2.

In addition, S&P affirmed the BBB+/A-2 long- and short-term issuer credit ratings of NatWest Markets PLC, U.S.-based NatWest Markets Securities Inc. and Netherlands-based NatWest Markets NV and revised the outlooks to positive from stable. NatWest Markets NV was formerly known as Royal Bank of Scotland NV.

The upgrades are the result of S&P's reassessment of RBS Group's earnings prospects and risk-adjusted solvency following the group's agreement in principle with the U.S. Department of Justice to settle a probe into the bank's alleged misselling of residential mortgage-backed securities, the agency said, noting that the settlement eliminates the largest litigation risk to the group's solvency.

S&P said the settlement and RBS Group's shift to smaller and more U.K.-centric retail and commercial banking operations will enable the group to have a stronger earnings profile over time.

Meanwhile, S&P said the positive outlook on RBS Group reflects the expected gradual improvement of its risk profile, particularly after incorporating the settlement. The agency said it may upgrade the group's ratings if it does not reveal any new material and unexpected conduct and litigation charges; if the earnings performance of its investment banking division improves and its share of group risk-weighted assets further declines; and if its gradual reprivatization will not alter its strategy of being geared toward a low risk profile.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.