Fitch Revises Outlooks on UK Subsidiaries of Irish Banks to Negative; Affirms at 'BBB'

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March 27 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has revised Bank of Ireland (Berlin: BIR.BE - news) (UK) Plc's (BOI UK) and AIB Group (UK) Plc's (AIB UK) Outlooks to Negative from Stable and affirmed their Long-term Issuer Default Ratings (IDRs) at 'BBB', Short-term IDRs at 'F2' and Support Ratings at '2'.

The rating actions follow the revision of their parents' Outlooks (see "Fitch Revises Outlooks on 18 EU Commercial Banks to Negative on Weakening Support", dated 26 March 2014 at www.fitchratings.com).

KEY RATING DRIVERS - Long-term and Short-term IDRs

AIB UK is fully owned by Allied Irish Banks (Irish: AIB.IR - news) plc (BBB/Negative/F2/b-) and BOI UK is fully owned by Bank of Ireland Plc (BBB/Negative/F2/b+). Fitch considers both subsidiaries to be core to their parent banks' operations due to high levels of integration between the entities. Consequently, AIB UK's and BOI UK's IDRs are equalised with their parents'.

RATING SENSITIVITIES - Long-term and Short-term IDRs

AIB UK and BOI UK's IDRs are broadly sensitive to the same factors that might drive a change in their parents' ratings or Fitch's assessment of the relative importance of these subsidiaries. The Negative Outlooks on the Long-term IDRs of their respective parents indicate a likely downward revision of their Support Rating Floors (SRFs) by the end of a typical Outlook horizon. At this stage, this is likely to be later in 2014 or in 1H15, but this could change. The revision of the SRFs would likely cause downgrades of the parents' Long-term IDRs to the levels of their Viability Ratings (VR) at the time, unless mitigating factors arise.

These could include the existence of large buffers of junior debt or corporate actions. Furthermore, while our base case is that the subsidiaries' IDRs would be downgraded in line with their parents' IDRs, Fitch will explore the possibility of assigning VRs to AIB UK and BOI UK if appropriate in our next review of the Irish banks, which could result in a review of these sensitivities.

KEY RATING DRIVERS AND SENSITIVITIES - SUPPORT RATINGS

The Support Ratings (SRs) of '2' are driven by the high probability of support that AIB UK and BOI UK would enjoy from their respective parents.

If the parent banks' IDRs were downgraded to their current VRs, the reduced ability to support would result in our assessment of support being reduced and the corresponding SR would be downgraded. At the current VRs, this would result in a SR of '4' for both institutions.

The rating actions are as follows:

AIB UK

Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable

Short-term IDR: affirmed at 'F2'

Support Rating: affirmed at '2'

BOI UK

Long-term IDR: affirmed at 'BBB'; Outlook revised to Negative from Stable

Short-term IDR: affirmed at 'F2'

Support Rating: affirmed at '2'