CREDIT rating agency Standard & Poor’s (S&P) yesterday downgraded its outlook on Lloyds TSB to negative from stable, citing the additional £1bn provision for payment protection insurance (PPI) mis-selling claims which the bank made at last week’s third quarter results.
S&P said the additional provision makes it likely that Lloyds will see a pre-tax loss for this year, and only a modest profit next year. S&P said this would prevent it revising its assessment on Lloyds’ capital and earnings to “adequate” from “moderate” over the next year.
Despite the outlook downgrade, S&P kept Lloyds’ credit rating at A and said the bank had “made significant progress” in repairing its balance sheet.
The negative outlook on Lloyds indicates a one-in-three chance that its rating may be lowered over the medium term (six to 24 months).
Rival banks including HSBC, Barclays and Santander are also currently on negative outlook with S&P.
S&P put Barclays on negative outlook in July citing strategic uncertainties following Bob Diamond’s departure.
“We are disappointed by this change in outlook given the excellent progress we have made in de-risking and strengthening our balance sheet. We would emphasise that S&P has affirmed Lloyds’ current ratings,” said a spokeswoman for Lloyds.