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Barclays' (BCS) Ratings Affirmed by Moody's, Outlook Stable

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All the ratings as well as rating assessments of Barclays PLC (BCS - Free Report) and its banking subsidiary, Barclays Bank PLC, have been affirmed by Moody's Investors Service. The rating outlook for the company remained unchanged at stable.

Barclays’ long-term senior unsecured debt ratings stand at Baa2, while its Baseline Credit Assessment (“BCA”) stands at baa2. For Barclays Bank, the BCA stands at baa3, while its long-term deposit and senior unsecured debt ratings are A1.

Reasons Behind Ratings Affirmation

The affirmation of Barclays’ ratings reflects its sound liquidity position along with diversified funding sources. Moreover, per Moody’s, the company’s regulatory capitalization is higher than its peers, which is an advantage.

These positives are expected to lower credit-quality pressures that might arise on Barclays’ loan portfolio. Notably, the company’s not-so-strong profitability during the year, its significant involvement in capital markets activities and the coronavirus outbreak-induced global economic slowdown have been exerting downward pressures on Barclays’ credit profile.

Unlike traditional banking activities, capital markets activities expose firms to greater earnings volatility because of their uncertain nature. And, Barclays’ substantial involvement in such activities might put pressure on its credit profile.

However, the company’s strong capitalization and good liquidity position lessen such credit risk pressures, per Moody’s, which is why the rating agency affirmed all of its ratings.

Another reason behind the ratings affirmation is Moody's unchanged Loss Given Failure (“LGF”) analysis in assessing Barclays’ existing bail-in-able debt cushion and resulting loss severity for its different debt classes.

Reasons Behind Stable Outlook

Moody's maintained a stable outlook on Barclays because it believes that while the virus-induced slowdown has been continuously putting pressure on the company’s asset quality as well as profitability, it will result in only a moderate deterioration in its capital, funding and liquidity profile.

What Could Trigger a Change in Ratings?

An upward rating pressure could emerge if there is a sustained improvement in Barclays’ asset risk, profitability and funding profiles, which translates into an upgrade of its BCA or an improvement of the standalone credit profile of its main subsidiary. Additionally, Barclays’ ratings could be upgraded if it issues a substantially higher amount of bail-in-able liabilities or maintains excess financial resources at the level of the holding company, giving greater protection to its creditors.

However, ratings could be downgraded if there is deterioration in the standalone credit profiles of Barclays’ two main subsidiaries, Barclays Bank and Barclays Bank UK, beyond Moody's current expectation. Also, if Moody's assesses a lower degree of protection from the stock of bail-in-able liabilities, Barclays’ ratings could be downgraded.

Price Performance & Zacks Rank

Over the past six months, Barclays' shares have rallied 45.3%, outperforming 35.6% growth recorded by the industry it belongs to.


Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Rating Actions on U.S. Banks

Amid the pandemic and the resultant uncertainties, Moody’s affirmed the ratings for many banks in the United States as well. Over the past few months, the rating agency affirmed ratings for PNC Financial (PNC - Free Report) , U.S. Bancorp (USB - Free Report) and Bank of America (BAC - Free Report) .

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