FINANCIAL INSTITUTIONSISSUER COMMENT 18 JUNE 2015LLOYDS BANKING GROUP PLC (LLOY)Moodys Senior Unsecured Rating Baa1Moodys Outlook POSBond-Implied Rating Baa2CDS-Implied Rating Baa1EDF-Implied Rating A1As of 6/16/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewLloyds Banking Group Plc's Market-Implied Ratings Take Different Directions Recently the bond-implied rating for Lloyds Banking Group fell, the CDS-implied rating dipped and recovered, and the EDF'-implied rating advanced. But the market signals for Lloyds Banking Group Bank remain strong.FIGURE 1. LLOYDS BANKING GROUP PLC: MOODYS AND MARKET-IMPLIED RATINGS, LAST 90 DAYS (DAILY DATA)The EDF-implied rating rose over the last three months from A2 to A1 (Figure 1). Its shift up preceded the June 5 downgrade of the senior debt rating from A2 to Baa1 by several weeks.MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 18 JUNE 2015 MARKET SIGNALS REVIEW : LLOYDS BANKING GROUP PLC'S MARKET-IMPLIED RATINGS TAKE DIFFERENT DIRECTIONSThe Groups bond-implied rating worsened by three notches from A2 to Baa1 . The timing of the drop matched the Moodys downgrade on June 5.The current CDS-implied rating for Lloyds Banking Group is the same Baa1 level observed on March 16, but varied from Baa1 to Baa2 in the interim.According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of Baa2 outperformed the broad market 48% of the time over the following 12 months, matched the markets performance 25% of the time, and underperformed the broad market 25% of the time.Lloyds Banking Group Plcs market-implied ratings gaps reflect the two-notch downgrade of its Moodys rating to Baa3 on June 5, 2015. The bond-implied ratings ga...
