Bank of Ireland UK rating affirmed at A+ as Fitch cites parental support

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Bank of Ireland UK rating affirmed

Highlights

Fitch affirms Bank of Ireland (UK) plc's Long-Term Issuer Default Rating at 'A+' with Stable Outlook and Viability Rating at 'bbb', citing strong parental support and capital/funding resilience.
Fitch anticipates BOI UK's asset quality to remain robust with impaired loans below 2% of total loans in 2026 and 2027, despite increased exposure to vulnerable sectors and buy-to-let lending.
Operating profit is expected to remain at 2.5%–3% of risk-weighted assets, but limited revenue diversification and margin tightening from lower interest rates in 2027 pose future profitability risks.

Rating rationale and business positioning

As reported by Fitch Ratings, Bank of Ireland (UK) plc's Long-Term Issuer Default Rating is affirmed at 'A+' with a Stable Outlook, while its Viability Rating is affirmed at 'bbb'. The agency says the long-term rating is equalised with that of parent Bank of Ireland because it sees a very high probability of support from the group and also considers protection for senior creditors from the group's resolution debt buffer.

Fitch says its support assessment is based on BOI UK's strong integration with the wider group, high capital and funding fungibility, and the significant reputational risk the parent would face if the UK unit were to default. It adds that BOI UK still plays an important strategic role by giving Bank of Ireland Group a presence in the UK, a market that contributes nearly 15% of the group's gross revenue in 2025.

The agency says the bank has reduced its balance sheet in recent years while shifting its focus toward niche lending areas such as bespoke mortgages and motor finance. Fitch expects the lender to return to growth after completing that strategic review, although it notes that the franchise remains modest in the UK and concentrated largely on mortgage lending.

Financial profile and UK market implications

Fitch says BOI UK's asset quality is adequate by UK standards, with residential mortgages accounting for about 75% of total loans. It notes above-average exposure to segments seen as more vulnerable in a downturn, including buy-to-let lending, but expects impaired loans to remain below 2% of total loans in 2026 and 2027 despite rising from low levels.

The ratings agency expects the bank's push into higher-margin lending to keep operating profitability at a satisfactory level, with operating profit staying at 2.5% to 3% of risk-weighted assets. It also flags some pressure from margin tightening as interest rates decline in 2027 and says the lender's limited revenue diversification leaves it more sensitive to the rate cycle.

On capital and funding, Fitch describes the bank's capitalisation as sound, with a common equity Tier 1 ratio consistently well above regulatory minimum requirements. It says BOI UK is likely to upstream excess capital to its parent but should retain an adequate buffer, while customer funding remains largely deposit-based through its Northern Irish franchise and the Post Office, supported by limited wholesale funding and contingent liquidity from the Bank of England.

Our earlier coverage of Lloyd’s of London’s ratings affirmation explained that the marketplace’s assessment was underpinned by its global specialty insurance and reinsurance franchise, strong capitalization and liquidity, and robust policyholder protection mechanisms. We also noted that the profile remains constrained by exposure to catastrophe, geopolitical and systemic risks, alongside execution pressures linked to its modernization strategy and operational resilience improvements.

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