(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has today affirmed Barclays Bank plc's (BarclaysBank) Long-term Issuer Default Rating (IDR) at 'A' with a Stable Outlook andShort-term IDR at 'F1'. At the same time, the agency has affirmed the bank's 'a'Viability Rating (VR), '1' Support Rating and 'A' Support Rating Floor (SRF).The agency has also affirmed the ratings of Barclays Bank's parent, Barclays plc
and all issue ratings. A full list of rating actions is at the end ofthis rating action commentary.
The rating actions have been taken in conjunction with Fitch's Global Tradingand Universal Bank (GTUB) periodic review. Fitch's outlook for the sector isstable. Positive rating drivers include improved liquidity, funding,capitalisation and more streamlined businesses, all partly driven by regulation.Offsetting these positive drivers are substantial earnings pressure, regulatoryuncertainty and heightened legal and operational risks.
The affirmation of Barclays Bank's VR and IDRs reflect these themes, as well asthe stable risk profile of its large and core UK retail banking and Barclaycardoperations.
RATING DRIVERS AND SENSITIVITIES - VR, IDRS AND SENIOR DEBTBarclays Bank's IDRs are driven by its VR, which is based on the bank's strongfranchises across diversified businesses, its generally good track record inmanaging credit and market risk effectively, strong liquidity management andFitch's expectation that the bank will maintain sound capital ratios that are inline with its global peers. The VR also reflects market risk exposure throughits investment banking operations and the exposure to material litigation risk.Reputation risk is currently considered high and a clear near-term priority forthe bank's new management team.
Fitch expects Barclays to continue to operate as a global universal bank withmaterial investment banking operations. The bank's newly appointed CEO launcheda full review of the bank's businesses, and Fitch expects this review to resultin the downscaling of some business areas, including for pure reputational riskreasons. However, at the same time, the new CEO has already stated that he doesnot expect a breakup of the bank or an exit from whole business lines. BarclaysBank's performance in H112 remained solid, despite a difficult operatingenvironment, and the bank benefits from good cost efficiency, including in itsinvestment banking business, compared to many peers.
Barclays Bank's VR reflects Fitch's view that the bank has generally managedcredit and market risks effectively, especially in its retail operations, andthat it tightly controls risk exposure. The VR is sensitive to material changesin risk appetite and would come under pressure if the bank materially increasedmarket risk exposure in its investment banking operations, which Fitch currentlydoes not expect. As one of the largest global investment banks, Barclays hasstrong market shares in several key segments in fixed income and equities, whichpotentially expose the bank to material market risk. The performance of thebank's investment banking activities inevitably oscillates, but has remainedmore stable than at many peers.
Barclays Bank's VR would also come under pressure if the bank's asset quality,which has suffered particularly in its European lending operations and is alsostarting to suffer in Africa, deteriorates very significantly. Fitch believesthat the bank's good credit risk control has resulted in a loan book compositionthat is more resilient to an economic downturn than at some of its domestic andinternational peers.
Barclays Bank's exposure to GIIPS countries (the largest exposures areresidential mortgages in Italy and Spain) has declined as the bank has activelyreduced exposure and the funding gaps of local operations in Spain, Portugal andItaly. Nevertheless, at end-June 2012 the aggregate funding mismatch in Spain('BBB'/Negative), Portugal ('BB+'/Negative) and Italy ('A-'/Negative) wasmaterial at GBP18bn, of which GBP11.9bn related to Italy. This gives rise topotential redenomination risk in a very extreme scenario, but Fitch expects thefunding mismatch to be reduced further.
Fitch considers Barclays Bank's liquidity profile to be a relative strength. Itslarge end-June 2012 liquidity pool of GBP170bn, of which GBP124bn was held incash and deposits with central banks, is of high quality and amply coversGBP101bn of short-term unsecured wholesale funding due within one year. BarclaysBank's VR is sensitive to a deterioration of the bank's funding and liquidity,which Fitch currently does not expect.
Barclays Bank's VR reflects Fitch's expectation that it will maintain soundcapitalisation in the face of regulatory pressure. The bank has estimated a'look-through' Basel III core Tier 1 (CT1) ratio at the Barclays plc level ofaround 8.6% for January 2013, which would be in line with estimates for itspeers, and Fitch expects Barclays Bank to continue to strengthen its capitalratios over the coming years.
As a retail and globally operating investment bank, Barclays Bank is exposed tomaterial litigation, regulatory and operational risk, and charges for customerredress and regulatory fines in 2011 and H112 were significant. Fitch expectsthat these risks will remain higher than in the past, but that the related costswill be absorbable through operating profit. Barclays Bank's VR would come underpressure if the probability of material losses related to these risks increased.
Upward momentum for Barclays Bank's VR and IDR would either require a materialscaling back of its investment banking ambition, which Fitch considers unlikely,or could arise as a consequence of continuing further reduction in risk appetiteand exposure, combined with improvements in the group's operating environmentand profitability and further progress in strengthening capitalisation.
As Barclays Bank's VR and SRF are at the same level, a downgrade of the VR wouldonly result in a downgrade of its Long-term IDR if the SRF was also lowered.
RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOORBarclays Bank's Support Rating and SRF reflect Fitch's expectation that the UKauthorities' propensity to provide support for the large and systemicallyimportant banks will remain high in the medium term. Fitch expects support forbanks in the UK and other European countries to decline over time, which wouldresult in lower Support Ratings and SRFs. Barclays Bank's Support Rating and SRFare also sensitive to a weakening of the UK authorities' ability to providesupport and therefore to the UK's creditworthiness.
GOVERNMENT GUARANTEED DEBT, SUBORDINATED DEBT AND OTHER HYBRID SECURITIESThe 'AAA'/'F1+' debt and programme rating assigned to debt guaranteed by the UKgovernment is based on the UK's sovereign rating and reflects Fitch's view thatthe UK government would ensure timely payment on the liabilities guaranteed bythe government. The ratings are sensitive to any change in the UK's sovereignrating.
Subordinated debt and other hybrid capital issued by Barclays are all notcheddown from the VR of Barclays in accordance with Fitch's assessment of eachinstrument's respective non-performance and relative loss severity riskprofiles, which vary considerably. Their ratings are primarily sensitive to anychange in the VR of Barclays Bank.
HOLDING COMPANY RATING DRIVERS AND SENSITIVITIESBarclays plc's VR and IDRs are equalised with those of Barclays Bank and reflectthe absence of any double leverage at the holding company level. Barclays plc'sVR and Long-term IDR is sensitive to any change in Barclay Bank's VR. Barclaysplc's Support Rating and SRF reflect Fitch's view that support from the UKsovereign for the holding company is possible, but cannot be relied on.
The rating actions are as follows:
Barclays BankLong-term IDR: affirmed at 'A'; Outlook StableShort-term IDR and short-term debt: affirmed at 'F1'Viability Rating: affirmed at 'a'Support Rating: affirmed at '1'Support Rating Floor: affirmed at 'A'Senior unsecured debt: affirmed at 'A'Market linked securities: affirmed at 'Aemr'Government guaranteed senior long-term debt and programme: affirmed at 'AAA'Guaranteed senior short-term debt and programme: affirmed at 'F1+'Lower Tier 2 debt: affirmed at 'A-'Upper Tier 2 debt: affirmed at 'BBB'Preference shares with no constraints on coupon omission: affirmed at 'BB+'Other hybrids: affirmed at 'BBB-'The rating actions have no impact on the ratings of the outstanding coveredbonds issued by Barclays BankBarclays plc (Barclays's holding company parent)Long-term IDR: affirmed at 'A'; Outlook StableShort-term IDR: affirmed at 'F1'Viability Rating: affirmed at 'a'Support Rating: affirmed at '5'Support Rating Floor: affirmed at 'No Floor'Barclays US CCP Funding LLCUS Repo Notes Programme: affirmed at 'F1'Contact:Primary AnalystChristian ScarafiaSenior Director+39 02 87 90 87 212Fitch Italia SpAV.lo S Maria alla Porta 120123 MilanSecondary AnalystJames LongsdonManaging Director+44 20 3530 1076Committee ChairpersonGordon ScottManaging Director+44 20 3530 1075
Additional information is available on
. The ratings abovewere solicited by, or on behalf of, the issuer, and therefore, Fitch has beencompensated for the provision of the ratings.
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15August 2012, 'Rating Bank Regulatory Capital and Similar Securities', dated 15December 2011, and 'Rating FI Subsidiaries and Holding Companies', dated 10August 2012, are available at
.Applicable Criteria and Related Research:Global Financial Institutions Rating CriteriaRating Bank Regulatory Capital and Similar SecuritiesRating FI Subsidiaries and Holding Companies