Fitch cuts Royal Bank of Scotland hybrids to BB

Fitch Ratings said it affirmed the long-term issuer default ratings at AA- and short-term issuer default ratings at F1+ of the Royal Bank of Scotland Group plc and its main operating subsidiaries, the Royal Bank of Scotland plc and National Westminster Bank plc.

Fitch also said it downgraded the group's and Royal Bank of Scotland plc's tier 1 preference shares to BB- from A+ and upper tier 2 hybrid capital instruments issued by group companies to BB from A+ and placed all of these securities on rating watch negative.

The outlook remains stable, reflecting an expectation of continued strong government support.

The action follows the company's attributable loss of between £7 billion and £8 billion for 2008, Fitch said. The company said it has reached an agreement to replace £5 billion of preference shares held by the U.K. government with new ordinary shares, the agency added.

The economic outlook for the group's main operating markets is negative over the short- to medium-term, Fitch said, and there remains significant uncertainty over the depth and length of the current recession.

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