Barclays’ credit rating downgraded

by Gill Montia

Story link: Barclays’ credit rating downgraded

Barclays has had its credit rating downgraded by Moody’s.

The bank’s long-term debt has been downwardly reassessed from Aa1 to Aa3 and the group’s financial strength has been re-rated from B to C.

The move follows similar action by Fitch, which cut the lender’s rating by one notch to AA-minus, last week.

Moody’s says it is expecting Barclays to post significant further losses in relation to the credit crisis and the deepening recession in the UK.

The bank’s share price has plummeted in the past fortnight and last week, chairman Marcus Agius and group chief executive John Varley published an open letter reassuring shareholders that profit for 2008 will be in excess of £5 billion, despite writedowns estimated at £8 billion.

The letter had the desired effect and the value of the group’s stock began to recover.

The action by Moody’s will therefore be a blow to Mr Agius and Mr Varley who are also having to field reports from the weekend press that the Serious Fraud Office is investigating the bank’s conduct in connections with alleged breaches of foreign-exchange controls in South Africa.

So far Barclays has weathered the credit crisis without resorting to help from the Government’s bail out scheme, preferring instead to raise capital from existing investors in Qatar and Abu Dhabi.

However, recent reports have suggested that the bank is restricted on raising capital until July by the terms of the agreements under which it raised £5.3 billion from its Middle-Eastern investors.

The group will present its full-year results for 2008 on 9th February.