Moody's lowers Glitnir

Moody's Investors Service said it downgraded Glitnir Banki hf.'s long-term foreign- and local-currency deposit ratings to A2 from Aa3. The bank's Prime-1 short-term rating was affirmed.

The outlook is stable. The actions conclude the review for downgrade that began on Jan. 30.

Moody's said the downgrade reflects concern over Glitnir's asset quality, namely its high single-name exposures and related-party lending, despite the bank's 2007 results showing good asset quality performance.

"An increased focus on corporate and investment banking in its overseas Nordic operations may raise Glitnir's overall risk profile as compared to when these operations mainly consisted of mortgage lending via BNbank in Norway," Kimmo Rama, Moody's analyst, said in a written statement.

"Moody's believes that the bank's ability to withstand a deterioration in asset quality would be impaired should it experience problems with its largest exposures, reducing its financial strength to a level more consistent with a BFSR of C-," Rama noted.

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