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Bond Market News
Lloyds Banking Group Upgraded to A+ by Fitch
November 22, 2024
Lloyds Banking Group was upgraded to A+ from A by Fitch. The rating agency also upgraded Lloyds’ ring-fenced bank subsidiaries, Lloyds Bank plc, HBOS plc, Bank of Scotland Plc and Lloyds Bank GmbH, and its non-ring-fenced bank subsidiaries, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH, to AA- from A+. The upgrade reflects Lloyds’ consistently solid profitability through various economic and interest-rate cycles and its conservative risk profile. Its operating profit/risk-weighted assets (RWAs) ratio moderated in 9M2024 to 3.1% (3.5% in 2023), but Fitch expects it to remain strong at over 3% in 2025-2026 supported by structural hedge income, falling funding costs and contained LICs. Lloyds risk profile is conservative, with 68% of its loans in low-risk mortgage lending and its capitalization remains strong (CET1 ratio at end of 3Q24 at 14.3%), even with plans to lower its CET1 ratio by 2026. The bank has a sound funding and liquidity profile, bolstered by a large deposit base and stable loans-to-deposits ratio. It also benefits from access to wholesale funding and Bank of England facilities if needed.
Lloyds bonds traded stable with its 4.375% 2028s at 98, yielding 5.03%.
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