Moody's may revise Clydesdale Bank, Virgin Money

Moody's Investors Service said it placed on review for downgrade the Baa1 long-term deposit ratings of Clydesdale Bank plc, while also placing on review for upgrade the bank's Baa2 standalone baseline credit assessment and Baa2 adjusted baseline credit assessment.

The agency also placed the bank's A2(cr) long-term counterparty risk assessment on review with direction uncertain and the Baa3 subordinated debt rating of holding company, CYBG plc, on review for upgrade.

Moody's also placed Virgin Money plc's Baa2 long-term local-currency deposit ratings and Baa2 long-term local- and foreign-currency issuer ratings on review for upgrade, as well as its Baa2 baseline credit assessment and adjusted baseline credit assessment.

The agency also said it placed on review for upgrade the Baa3/prime-3 long-term and short-term local- and foreign-currency issuer ratings of Virgin Money Holdings (UK) plc.

The review follows news that the banks' boards recommended an all-share offer to be made by CYBG for Virgin Money Holdings (UK) plc, Moody's explained.

The offer grants Virgin Money shareholders 38% of the enlarged bank, the agency said, and will create a scalable "challenger bank" in the United Kingdom with about 6 million customers.

The review for upgrade on both banks is driven by the substantial potential for cost savings, complementary business mixes and new revenue opportunities, Moody's said.

Moody's also said it expects that a combined entity would be better positioned to mitigate an expected sector-wide increase in funding costs following the end of the Bank of England's term funding scheme in February.

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