Moody’s eyes Barclays for upgrade

Moody’s Investors Service said it placed on review for upgrade Barclays plc's Baa2 senior unsecured and subordinate debt ratings, the group's baa2 notional baseline credit assessment, and Barclays Bank plc's (Barclays Bank) baa3 BCA and baa2 Adjusted BCA. Moody's also affirmed the A1 long-term senior unsecured debt ratings of Barclays Bank, maintaining a negative outlook.

“Moody's said that the review for upgrade of Barclays' Baa2 senior unsecured and subordinate debt ratings reflects the review for upgrade of the group's baa2 notional BCA, as well as the rating agency's unchanged assumption of moderate loss-given-failure under Moody's loss given failure (LGF) analysis and low probability of support from the government of the United Kingdom (Aa3 negative), which continue to not result in any uplift above the notional BCA for these instruments' ratings,” the agency said in a press release.

The agency noted that Barclays’ improved earnings were driven by repositioning and investments in the capital markets and U.S. credit cards businesses, higher net interest income following rate hikes in the U.K., U.S. and E.U., and low cost of risk.

“The review will focus on the sustainability of these improvements in profitability over the medium term to levels commensurate with a higher BCA, in light of Moody's expectation of a normalization of capital markets revenues, pressure on operating expenses, and at least a moderate increase in the cost of risk in the retail and commercial business given weaker macroeconomic conditions,” the agency said.

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