Investec upgraded with stable outlook by Moody’s

Ratings agency Moody's has upgraded by one notch the long-term ratings of Investec.

The bank's long-term deposit rating was upgraded to A2 from A3 with a stable rating outlook, its senior unsecured rating to (P)A2 from (P)A3, its subordinated debt rating was upgraded to Baa3 from Ba1, its standalone baseline credit assessment (BCA) to baa2 from baa3, and its counterparty risk assessment to A2(cr) from A3(cr).

In a statement, Moody’s said the rating action reflects “continued improvement in the credit fundamentals” of Investec. “The business now benefits from a substantial reduction in the bank's legacy business in the UK, in particular its commercial property lending risk.”

In total the bank's net portfolio of assets in run-off was £645m at 30 September 2015, reduced from a net £2.2bn in March 2014. The bank has also become less complex, a result of the sale of its banking businesses in Australia, intermediated mortgage businesses in the UK and Ireland as well as certain other mortgage assets, Moody’s noted.

Furthermore, Investec has diversified its revenue base with greater focus on capital light businesses. “As a result of these actions, both Investec plc and Investec Bank have improved capitalisation, while reducing potential risks from the loan book and investment portfolio,” the agency said.

Moody's also said Investec maintains strong levels of liquidity which mitigate potential funding shocks. The stable outlook reflects its expectation that the improvements in the bank's credit fundamentals will be sustained in line with its strategy.