UK-based lender NatWest Group’s senior unsecured bond ratings were upgraded to A3 from Baa1 with a stable outlook by Moody’s. The rating agency expects NatWest Group’s profitability to improve in the next two years from a low base, with higher revenues despite marginally higher costs, and loan loss provisions on the lower side. Revenue will improve in next 12-18 months as the group reprices its assets in a higher interest rate environment providing further benefit to net interest income while its operating costs will marginally increase. Inflationary pressures will be partially offset by cost-cutting measures, they noted. As per Moody’s, profitability will be benefitted from NatWest’s phased withdrawal from Ireland, to be finalized over the next 12-18 months, and also from restructuring of the capital markets business, which dragged the group’s profitability in recent years. Moody’s believes that around 90% of its Irish subsidiary Ulster Bank Ireland DAC (UBI DAC) will be transferred to other banks by Q2 next year, and customer deposits of UBI will significantly drop in the next 12-18 months.
Natwest’s dollar bonds were trading lower with long duration IG bonds getting hit globally yesterday. Its 4.6% Perp was down over 0.91 points to 70.36, yielding 7.69%.