Fitch: Lloyds, HBOS still on watch

Fitch Ratings said HBOS plc's long-term issuer default rating of AA and Lloyds TSB Group plc's long-term issuer default rating of AA+ remain on Rating Watch negative.

The agency said the action follows a review of the major U.K. banking groups following actions by the government to recapitalize a number of banks.

Fitch said it views as positive actions by the government to underwrite ordinary share issues by Lloyds and HBOS as well as the injection of further capital by way of preferred shares, aimed at restoring confidence to a sector that has suffered from heightened market uncertainty.

The watch on Lloyds reflects concerns over the potential implications on the group's credit profile of owning lower-rated HBOS, according to the agency.

HBOS' ratings reflect its high exposure to the deteriorating U.K. property market and relatively greater reliance on the stressed wholesale funding markets to finance its customer lending, the agency noted.

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