Moody's Places TSB Banking Group's Ratings on Review for Upgrade

Moody's Investors Service has taken a decisive step in reassessing the creditworthiness of TSB Banking Group plc (TSB Group) in light of the impending acquisition by Banco Santander, S.A. The review for upgrade reflects Moody's anticipation of a seamless integration of TSB Group and TSB into Santander's existing UK subsidiary, Santander UK plc. This strategic move has significant implications for TSB's long-term issuer rating and deposit ratings.

TSB's Baa2 long-term issuer rating, as well as the Baa1/P-2 deposit ratings, Baa1 long-term issuer rating, baa2 Baseline Credit Assessment (BCA) and Adjusted BCA, A2 long-term Counterparty Risk Ratings, and A2(cr) Counterparty Risk Assessment, are all under review for upgrade. Moody's affirmation of TSB's P-1 short-term Counterparty Risk Ratings and P-1(cr) Counterparty Risk Assessment underscores the confidence in the bank's short-term stability. The ratings were previously under a stable outlook, but the new development has prompted Moody's to shift its focus towards a potential upgrade.

The principal factor driving the review for upgrade is the expected integration into Santander UK, which could lead to improved credit metrics and risk management for TSB Group. If the acquisition is completed, Moody's anticipates that TSB Group and TSB will benefit from Santander UK's stronger risk profile, potentially leading to an upgrade of their long-term issuer rating and deposit rating.

Key Takeaways:

• Moody's has placed TSB Banking Group's Baa2 long-term issuer rating on review for upgrade.
• The review for upgrade reflects Moody's expectation of a seamless integration of TSB Group and TSB into Santander UK.
• The ratings could be upgraded following the completion of the acquisition and integration into Santander UK.
• TSB's BCA of baa2 is three notches lower than the scorecard-indicated outcome of a2 due to high loan growth and weak leverage.
• The review for upgrade could confirm if the transaction is not completed.

Statistics:

• Moody's has reviewed TSB Banking Group's long-term issuer rating for upgrade.
• The acquisition by Santander is expected to improve TSB's credit metrics and risk management.
• TSB's BCA of baa2 is three notches lower than the scorecard-indicated outcome of a2.
• The review for upgrade follows Moody's affirmation of TSB's P-1 short-term Counterparty Risk Ratings and P-1(cr) Counterparty Risk Assessment.
• Santander UK's strong risk profile could lead to an upgrade of TSB Group's long-term issuer rating and deposit rating.

Sources:

• Moody's Investors Service. (2024). Moody's Ratings. [Source]
• TSB Banking Group plc. (2024). Press Release: Acquisition by Banco Santander, S.A. [Source]
• Banco de Sabadell, S.A. (2024). Press Release: Board Approves Sale of TSB to Banco Santander, S.A. [Source]
• Banco Santander, S.A. (2024). Press Release: Acquisition of TSB Banking Group plc. [Source]