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Moody's Investors Service Inc.

Moody's Affirms Leeds Building Society's Credit Ratings

Strategic Insights

— 1 min read

Leeds Building Society has maintained its stable credit ratings, reflecting its strong fundamental performance, consistent asset quality, and sound capitalization. The affirmation is driven by the Society's stable funding profile, low profitability, and relatively low problem loans at 1.2% of gross loans. Moody's Investors Service has kept the long-term deposit and senior unsecured debt ratings at A3, with a stable outlook.

Key Takeaways:

  • Leeds Building Society's baa1 Baseline Credit Assessment (BCA) reflects its consistently strong fundamental performance, supported by stable asset quality and capitalization.
  • The Society's lack of business diversification and reliance on retail interest income remain concerns, but are balanced against its strong funding profile and stable profitability.
  • Problem loans have remained at 1.2% of gross loans, despite rapid interest rate increases and a high portion of buy-to-let and shared ownership loans in the lending book.
  • Leeds' A3 long-term deposit and senior unsecured debt ratings reflect its standalone BCA of baa1, low loss-given-failure, and low probability of government support.
  • The outlook on Leeds' long-term deposit and senior unsecured debt ratings remains stable, reflecting Moody's expectations that the Society's capitalization, liquidity, and funding metrics will remain in line with the standalone assessment.
  • A sustained improvement in profitability and asset quality, or a significant increase in junior bail-in-able liabilities, could lead to an upgrade of Leeds' ratings.
  • A substantial deterioration in profitability or asset quality, or a significant reduction in bail-in-able liabilities, could lead to a downgrade of Leeds' ratings.
  • The principal methodology used in these ratings was Banks published in November 2024.

Statistics:

  • Problem loans to gross loans: 1.2% (at end December 2024)
  • Capital Adequacy Ratio: 25.7% (at end December 2024)
  • Required Capital Adequacy Ratio: 15.56%
  • Advanced Loss Given Failure (LGF) analysis: low loss-given-failure
  • Probability of government support: low

Sources:

  • Moody's Investors Service
  • Moodys.com
  • Banks published in November 2024, available at https://ratings.moodys.com/rmc-documents/432741

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