Bank of Ireland shed 4 per cent on the Irish Stock Exchange today after Standard & Poor's revised its outlook on the bank from "stable" to "negative".
The credit ratings agency said the bank faces "considerable challenges" in restoring its credit profile.
It said that it was revising the outlook on the bank to reflect the view that while the agency believes it is working to restore its stand-alone credit profile to the 'A-' rating level over time, it faces considerable challenges to achieving this.
The agency also affirmed the bank's 'A-/A-2' long- and short-term counterparty credit ratings due to the fact that it has made "good progress" in recent months, notably by executing on its capital raising.
S&P says it expects that, over time, the bank will be successful in restoring its current 'BB+' SACP to the 'A-' rating level as its financial profile strengthens.
However, it cautions that it does not expect the SACP to revert to 'A-' within the two-year outlook horizon.
It also points out that the ratings on the bank currently benefit from four notches of support, more than many government-supported European banks.
In addition, the agency predicts that the Irish economy is likely to recover only quite slowly, with household finances remaining stretched, asset prices unlikely to start appreciating materially for a couple of years, and credit demand remaining muted for many years.
S&P said that these factors "present a considerable challenge to BOI and a degree of uncertainty about the future path of the SACP that is better reflected in a negative outlook".
Bank of Ireland closed down 4 per cent at 69 cent in Dublin.
