February 23, 2024

DealBook: Chief of British Lender Quits

LONDON – Barry Tootell, the chief executive of the British lender Co-Operative Banking Group, resigned on Friday, less than a month after the firm failed to acquire part of the branch network of a local rival, Lloyds Banking Group.

Mr. Tootell’s resignation also comes as the credit rating agency Moody’s Investors Service cut Co-Operative Bank’s rating to junk status on fears that the British bank may suffer future losses from a growing level of delinquent loans.

The ratings agency said that Co-Operative Bank’s core Tier 1 ratio, a measure of a bank’s ability to weather financial shocks, was significantly lower than its British competitors, and the bank also remained exposed to faltering real estate loans.

“We are disappointed by the ratings downgrade announced by Moody’s,” Co-Operative Bank said in a statement on Friday. “We have a strong funding profile and high levels of liquidity, which are significantly above the regulatory requirements.”

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The bank, however, acknowledged that it needed to raise more capital. British regulators announced this year that the country’s largest financial institutions needed to increase their cash reserves by a combined £25 billion, or $38 billion, by the end of the year.

The Co-Operative Bank has been on the back foot since it announced last month that it would not buy about 630 branches from Lloyds in a potential deal, which had dragged on for more than a year.

The British lender said it had walked away from the acquisition because of weakness in the local economy that would make it difficult to generate suitable returns, according to Peter Marks, the outgoing chief executive of the bank’s parent, the Co-operative Group, which operates a range of businesses including supermarkets and funeral homes.

Mr. Tootell, the head of Co-Operative’s banking unit, will be replaced by Rod Bulmer, who joined the bank six years ago after holding a senior position at the British division of the Spanish bank Santander.

Article source: http://dealbook.nytimes.com/2013/05/10/chief-of-british-lender-quits/?partner=rss&emc=rss

Fitch Downgrades Ratings of Italy and Other Countries

In a statement, the ratings agency said that the affected countries were vulnerable in the near term to monetary and financial shocks.

“Consequently, these sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve currency status,” it said.

Fitch cut Italy’s rating to A-minus from A-plus; Spain to A from AA-minus; Belgium to AA from AA-plus; Slovenia to A from AA-minus, and Cyprus to BBB-minus from BBB, leaving it just one notch above junk status.

Ireland’s rating of BBB-plus was affirmed.

All of the ratings were given negative outlooks.

Fitch said it had weighed a worsening economic outlook in much of the euro zone against the European Central Bank’s December move to flood the banking sector with cheap three-year money and austerity efforts by governments to curb their debts.

Two weeks ago, Standard Poor’s downgraded the credit ratings of nine euro zone countries, stripping France and Austria of their coveted AAA statuses, and pushing a struggling Portugal into junk territory. Germany kept its AAA status.

Italy is widely seen as the tipping point for the euro zone. If it slid toward default, the whole currency project would be threatened.

Fitch said of Italy: “A more severe rating action was forestalled by the strong commitment of the Italian government to reducing the budget deficit and to implementing structural reform.”

Article source: http://feeds.nytimes.com/click.phdo?i=4d9d95e22ed98e3f7a3fc91c7a0c9960

Fitch Joins Others in Cutting Hungary Debt to Junk Status

BUDAPEST — Hungary lost the investment grade on its foreign-currency debt at Fitch Ratings on Friday, the third such downgrade in six weeks, increasing pressure on Prime Minister Viktor Orban to obtain an International Monetary Fund backstop.

The foreign-currency bond ratings were cut one step to BB+ from BBB-, Fitch said in a statement. Fitch, which awarded Hungary its investment grade in 1996, assigned a negative outlook. The country is rated Ba1, at Moody’s Investors Service and BB+ at Standard Poor’s, the highest non-investment rating at both companies.

The International Monetary Fund and the European Union broke off talks last month on Hungary’s bid for a bailout after the government refused to withdraw a new central bank regulation that the institutions said may undermine monetary-policy independence. The forint fell to a record against the euro Thursday as investors speculated a loan deal may be delayed.

“The downgrade of Hungary’s ratings reflects further deterioration in the country’s fiscal and external financing environment and growth outlook, caused in part by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new” agreement with the I.M.F. and the E.U., Matteo Napolitano, a director in Fitch’s sovereign group, said in a statement.

Earlier Friday, Mr. Orban retreated in his confrontation with the central bank chief Andras Simor, seeking to revive talks on an international bailout after a market rout this week, boosting stocks, bonds and the currency.

The forint held on to its gains after the downgrade. Hungary’s 10-year government bond yielded 10.115 percent, down 0.29 percentage points. The benchmark BUX stock index rose 0.4 percent, snapping a three-day decline.

The country will have the highest debt level and lowest economic-growth rate among the E.U.’s eastern members next year, according to a European Commission forecast. An I.M.F. agreement would probably reduce pressure on Hungary’s debt rating, Fitch said in November.

“The main risk is if the government fails to agree with the” I.M.F. and the E.U. “on the legal changes, but Fitch’s comments look like something that has been in the pipeline and should have been released earlier this week,” Simon Quijano-Evans, a London based economist at ING Bank, said Friday. “We see the move as neutral.”

Investors are shunning riskier assets and demanding higher yields as European leaders grapple with a debt crisis that started in Greece more than two years ago and is threatening to infect weaker economies.

The central bank raised the benchmark interest rate to 7 percent on Dec. 20 from 6.5 percent, which was already the E.U.’s highest. Policy makers said they may boost borrowing costs further if risk perception and the inflation outlook deteriorate “substantially.”

Mr. Orban has relied on one-time measures, including the effective nationalization of $13 billion of mandatory private pension-fund assets and extraordinary industry taxes to control the budget. The deficit had already reached 182 percent of the Cabinet’s full-year target at the end of November.

The government is also cutting spending and raising taxes to save as much as $4 billion a year by 2013.

Mr. Orban wants to cut debt from 81 percent of economic output last year and aims to keep the budget deficit within 2.5 percent of gross domestic product in 2012.

Article source: http://feeds.nytimes.com/click.phdo?i=55301a69ce8da37a60f6ed37a441e0a5