Keydata drags on N&P in Fitch downgrade

Norwich & Peterborough Building Society (N&PBS) has had its outlook downgraded from 'stable' to 'negative' by ratings agency Fitch, due in part to its exposure to Keydata.

Fitch says the rating action mainly reflects the challenges the society faces in generating reasonable levels of earnings in the short to medium term.

But it also highlights "uncertainty" over the size of a one-off cost related to Keydata Investment Services investment products sold by N&PBS's financial advisers.

Fitch says the building society's net interest income is under significant pressure in the low interest rate environment. It believes N&PBS will report minimal operating profit in the short to medium term.

The ratings agency affirmed N&PBS at BBB+.

N&P's CEO Matthew Bullock has admitted the company faces compensation costs of up to £50m because of claims it mis-sold Keydata products.

A group of about 300 N&P customers are preparing a class action against the building society through the Financial Ombudsman Service (FOS). They claim its advisers failed to explain the risks involved with the Keydata investments, and overexposed customers to the products.