The ratings agency cut the national bank from A3 to Baa1 with a negative outlook after analysing the group’s plans to dispose of certain parts of the business.
Moody’s said the bank’s plans will leave it vulnerable to unexpected costs and will ‘heavily depress profitability’. It added the bank has lower capital levels than expected.
The downgrade by Moody’s – which leaves the bank only three steps away from the agency’s junk bond level – follows a disappointing update from the bank which has depressed shares.
In its latest set of results the bank confirmed an £8.2bn loss for 2013, as it struggled with splitting up the business and the burden of regulatory fines.
Moody’s said the bank’s ambitious restructuring goals mean it “will not stabilise until this plan is delivered over the next three to five years.”
“The implementation of this initiative implies that the associated large credit/disposal costs and material restructuring charges estimated to be around £5.2bn over the period of the plan, will heavily depress profitability over the next few years,” it added.
RBS responded, as quoted by the Telegraph, by saying: “The capital plan we announced in November outlined a number of concrete actions to place the bank on a sure footing . . . build our capital position and ensure that our capital targets remain unchanged.
“We are pleased Moody’s has confirmed our restructuring plan will be a positive development in the medium to long term and will deliver a more efficient, lower-risk UK-focused bank.”
