Coventry’s rating was also upgraded one notch and Newcastle and Nottingham Building Societies have been revised up to stable from negative.
“The upgrade of four building societies reflects their performance since the crisis and our expectations regarding their future performance.
“Our assessment recognises that the UK economy is slowly recovering and that broader banking and regulatory reforms are gradually taking shape”, explained Marjan Riggi, Moody’s vice president and senior credit officer.
Moody’s said the mutuals have a more stable outlook, “combined with better underwriting standards,” which it said mitigated the downside risks over the past period.
Other reasons for the upgrade include better performance of assets “relative to their peers” and improvements in risk management controls and culture. This also recognises continued work to “deleverage” risky assets like commercial property and non-prime mortgages, it said.
Stabilising economic macro-economic factors, like moderating house price declines, stabilising unemployment and low interest rates, have also helped, said Moody’s, and reduced some of the uncertainties surrounding future asset performance.
Graeme Yorston, chief operating officer, Principality Building Society, said strong management from board level down and careful risk and credit management have played their part in the upgrade.
“We’ve carried a low-profile during the downturn but we are keen to start talking more about what we’ve achieved,” said Yorston.
“We use all channels, including intermediaries, and are delighted with our partnerships in England and Wales. Growth will very much depend on funding as we do all our lending on savers deposits, so it depends on whether we can keep attracting savers at the right price,” he added.
The upgrade to stable for Newcastle and Nottingham reflects better asset quality and core profitability, said Moody’s.
The agency added it will review ratings for eight building societies as part of its ongoing banking review after the Independent Commission on Banking report, expected to be published in mid-September.
This follows Moody’s announcement in May that it would review 18 financial institutions to see what effect withdrawal of government systemic support would have on debt ratings.
Jeremy Palmer, head of financial policy at the Building Societies Association, said: “A lot will depend on whether the ICB wants a ring-fenced heavily protected banking sector or a far less protected one. It is still far from certain how far the ICB will go.”
“However, our sector has ridden back from a very difficult place. If you look at the figures both for 2010 and 11 we are seeing a strong recovery in different ways across the sector.”
Moody’s building society standalone rating risers
Nationwide: A3 from Baa2
Yorkshire: C- from D+
Coventry: C up from C-
Principality: D+ up from D-
Newcastle: affirmed at D-
Nottingham: C-
