TEXT-S&P summary: Allied Irish Banks PLC

Mon Nov 12, 2012 4:58am EST

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Summary analysis -- Allied Irish Banks PLC ------------------------ 12-Nov-2012

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CREDIT RATING: BB/Negative/B Country: Ireland

Primary SIC: Bank holding

companies

Mult. CUSIP6: 019228

Mult. CUSIP6: 01922Q

Mult. CUSIP6: 01923E

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Credit Rating History:

Local currency Foreign currency

02-Feb-2011 BB/B BB/B

26-Nov-2010 BBB/A-2 BBB/A-2

08-Oct-2010 BBB+/A-2 BBB+/A-2

26-Jan-2010 A-/A-2 A-/A-2

12-Feb-2009 A/A-1 A/A-1

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Ratings Score Snapshot

Issuer Credit Rating BB/Negative/B

SACP b+

Anchor bb

Business Position Adequate (0)

Capital and Earnings Weak (-1)

Risk Position Adequate (0)

Funding and Liquidity Average

and Moderate (-1)

Support +2

GRE Support 0

Group Support 0

Sovereign Support +2

Additional Factors 0

Major Rating Factors

Strengths:

-- One of the two main Irish banks, with high and resilient market shares.

-- Inflow of customer deposits and deleveraging has led to a reduction in wholesale funding reliance.

Weaknesses:

-- Asset quality is still under material stress.

-- Ongoing reliance on monetary authorities for liquidity and funding support.

-- Capitalization is likely to remain weak, by our measures.

Outlook

Standard & Poor's Ratings Services' outlook on Allied Irish Banks (AIB) is negative, reflecting our view that AIB's new management team still faces considerable challenges to return the bank to profitability in the context of subdued credit demand, high deposit competition, and a weak economic environment, including a weak housing market, in Ireland. Our ratings reflect our expectation that AIB will make progress over the coming year to improve net interest margins, control costs, and adequately manage asset quality.

We could lower the ratings if, by our measures, capital erodes by more than we expect thus leading us to revise our assessment of capital and earnings to "very weak" from "weak". The negative outlook also reflects the negative outlook on the long-term rating on the Irish sovereign because, in line with our criteria, a one-notch downgrade of the long-term rating on Ireland would lead us to reduce the number of notches of government support that we factor into the ratings on AIB to one from two.

We could revise the outlook on AIB to stable if we revised that on Ireland to stable, and if we see evidence that AIB's capitalization is stabilizing, asset quality metrics are steadily improving, and that the bank's reliance on monetary authorities is materially reducing.

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