BOI downgraded by Moody’s

Yesterday Moody’s downgraded BOI, lowering deposits to Ba2 and senior unsecured debt to Ba3, with negative outlook.  These are the same speculative grades it applies to AIB.  The agency has PTSB lower with a B1 rating for deposits and B3 for unsecured debt.

The Moody’s report on BOI is here and gives some useful insights into the reasoning applied by Moody’s.  The rating on subordinated debt in BOI was raised from C to B2 with preference stock raised to Caa2 also from C. Senior bonds covered by the ELG remain at Ba1 with stable outlook.

This is a chart of Moody’s recent deposit ratings for BOI.

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15 thoughts on “BOI downgraded by Moody’s”

  1. As I noted Seamus, I dont see this in the newspapers. Negative news is no news it seems?

  2. you have to laugh……i found his public lobbying of Moodys all a bit oh i don’t know off or wrong…

    “He said that there was no evidence that state banks required extra capital following a recent asset quality review.
    “But we will be very cautious because we know bank credit is what we need to fuel a growing economy. Our policies are careful in approaching banking issues,” Noonan added.
    Asked to address criticism that foreign companies were using Ireland as a tax base, Noonan said: “That simply isn’t true. Google is here, they have 3,500 people working here in Dublin.”
    (Read more: Ireland’s latest austerity cut)
    Noonan said he believed the next news on Ireland from Moody’s was likely to be positive. Ireland is currently ranked as non-investment grade by Moody’s ratings agency.
    “In conversations with Moody’s, our National Treasury Management Agency, which manages the debt, is of the view that Moody’s adverse view is to do with having an adverse view on euro zone rather than particularly an adverse view of Ireland,” he said.
    “But I’ve no doubt at all that the next time we hear Moody’s talking about Ireland it will be good news rather than bad news.”
    http://www.cnbc.com/id/101270115

  3. I note that one of the reasons given by Moody’s is an old chicken come home to roost. A chicken whole bowel functions were always very suspect.

    The ‘Deferred Tax Asset’, 1.7 billion at June 30th (in BOI) will not have the same ‘asset’ quality under ECB risk assessment, per Moodys reasoning.

    How any self-respecting auditor or director allowed such a nonsense asset as a deferred tax asset onto any company balance sheet beats me.
    Roughly defined, as far as I am aware, it is the tax that will be saved on potential future profits, because of losses coming forward, to offset against these ‘future’ profits. If my aunt……

    No doubt the recording of these deferred tax assets helped boost profits and bonus payments of top bankers in years gone by.
    The years are gone, the profits are long gone and those top people are almost all gone, with the bonus from the ‘deferred tax assets’ in their pockets.

  4. @ John Gallaher,

    remember the little twit Carsten Schneider, the Sparkassen apprentice, who wanted to lord corporate tax rates over Ireland?

    Still posing as “Schneider, who is allegedly interested in succeeding Wolfgang Schaeuble as Germany’s finance minister”

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_17/12/2013_532196

    where is he on the cabinet list?

    And who would be this in the future, a SPD finance minister, some Jörg Asmussen or who

  5. Well,

    Ben can write in his resume that he ended QE. Kind of did a little step to taper it a little bit : – )

    When I look at Case/Shiller, this would be an Argument to go a little faster

  6. Irish 5 and 10 year bonds didn’t move the last 2 days

    Ba2 means 13% default probability in 5 years

    lowest order calculation:
    Irish 5 yr 2.1%
    German 5 yr 0.8%

    ((1.021 / 1.008 ) ^5 – 1 ) / (1- 0.4 standard assumed recovery) = 11 %

    a more refined calculation would bring it even closer

    Moody’s in his infinite wisdom is basically just adjusting to market consensus : – )

  7. @francis,Yellen should be confirmed today,Summers would have been more fun.Yes the start of tapering it’s been well signposted.
    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/18/this-is-how-history-should-judge-ben-bernanke/

    Is that a promotion or sideways move by Asmussen,will Draghi get along with Lautenschlaeger?

    The Moody’s downgrade is a interesting read,exiting the bailout may have been slightly over-celebrated as is the Irish tradition.When “bad” news about the banks or the probability of future public support is mooted,inevitably a high profile arrest follows.You may remember one them he’s an audiophile.

    http://www.rte.ie/news/2013/1218/493606-bankers/

  8. John,

    on a formal level, the Asmussen move could even been seen as a downgrade.

    But deputy in the labor ministry is an ideal position to sniff up with his SPD party comrades, acquire the so far missing “Stallgeruch” to become the next finance minister. I would even give it a 50% chance for before the next elections.

    of the 4 classical positions: war, police, finance, foreign affairs

    the SPD took only the least important. According to german power logics, if the SPD would have wanted finance, they should have got it. But that little Carsten was dreaming about that could be him, just shows how thin their tableau is. I would have taken bets, how fast he resigns.

    Lafontaine, a former prime minister, party leader, SPD chancellor candidate, was worn down within a record 5 months in 1999 in finance : – )

    And Steinbrück was too old and the dummy candidate for chancellor.

    Within Germany the Asmussen move makes perfect sense, in terms of long term succession planning. Now he needs to get an electoral district, Berlin-Mitte, Frankfurt ? and some party position

    Lautenschläger is a hard liner, but disciplined.

    with the RTE link, it seems that at least now some heads might be possibly rolling.

    off topic:
    The majority of stolen German cars in Tadjikistan is driven by the president and his family
    http://www.focus.de/politik/ausland/fahndungserfolg-in-tadschikistan-praesidenten-klan-faehrt-gestohlene-autos-aus-deutschland_id_3493646.html

  9. john,

    Asmussen is the classical j-curve, not a sidestep.

    Eurobonds, the e-word ?

    How dare you ! : – )

    Thats what you get for using such bad words:

    http://www.youtube.com/watch?v=ffwFXGPRDu4

    and @ DOCM too

    page 159 of the coalition treaty:

    “Das Prinzip, dass jeder Mitgliedstaat für seine Verbindlichkeiten selbst haftet, muss aber erhalten werden. Jede Form der Vergemeinschaftung von Staatsschulden wür-de die notwendige Ausrichtung der nationalen Politiken in jedem einzelnen Mitglied-staat gefährden. Nationale Budgetverantwortung und supranationale, gemeinsame Haftung sind unvereinbar. Hilfskredite aus europäischen Rettungsprogrammen dür-fen nur als Ultima Ratio gewährt werden, wenn die Stabilität der Eurozone als Gan-zes gefährdet ist. Wir wollen, dass Krisenstaaten eine starke Eigenbeteiligung an der Krisenbewältigung leisten und eigene Mittel einsetzen, bevor sie Hilfskredite erhal-ten. Diese dürfen nur im Gegenzug zu strikten Auflagen bzw. Reformen und Kon-solidierungsmaßnahmen der Empfängerländer gewährt werden. Sie setzen einen klaren Plan voraus, wie die Schuldentragfähigkeit gesichert werden kann. Darüber hinaus ist die demokratische Kontrolle aller Hilfen von herausragender Bedeutung: ESM-Mittel werden weiterhin nur nach Zustimmung des Bundestages bewilligt.”

    This door is now locked, bolted, welded and sealed.

    In remarkable constrast to flowery language in so many other sections:
    “Prinzip”, “muss”, “unvereinbar”, only with approval of the German parliament

    That I did question here and in other place (false) allegations against the Deutsche Bank, does not mean that I hold or intent to hold their stock, or go on some defense. But some negative outlook with an otherwise pretty good absolute rating compared to competitors and e.g. Ireland, my panic is somewhat limited.

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