Bank of Ireland was founded in 1783 and the former premises of the defunct Irish Parliament at College Green, Dublin, were purchased for £40,000 in 1803.

Moody's Investors Service today upgraded the bank financial strength rating (BFSR) of Bank of Ireland to D+ from D. The D+ maps to Baa3 on the long-term scale and the D mapped to Ba2. The outlook on the BFSR is stable. The other ratings of the bank, including the A1 (stable) / Prime-1 bank deposit and senior debt ratings, are affirmed.

The BFSR of ICS Building Society was also upgraded to D+ (mapping to Baa3 on the long-term scale) from D/Ba2, in line with that of its parent. The outlook on the A2 long-term bank deposit rating of the society was changed to negative. These changes conclude the review on the two institution's BFSR's initiated on March 31, 2010.

Ross Abercromby, Vice President and Senior Analyst for Bank of Ireland at Moody's, commented: "Throughout this year there has been a substantial improvement in the creditworthiness of Bank of Ireland as a result of a number of factors. These include the raising of €2.94bn of equity capital, the transfer of two tranches of loans to the National Asset Management Agency (NAMA) at an average discount of 35% - which has been the lowest among the rated Irish banks -, and the approval by the European Commission of the bank's restructuring plan".

He continued: "We assume that the the remaining assets that are to be acquired by NAMA will have a similar discount to those already transferred. This -- together with the impairment of the remaining assets -- is sufficiently covered in our base scenario by the successful capital increase. Some vulnerability remains to our stress scenario, which is reflected in the D+ BFSR." With regards to the assets that are not transferred to NAMA, Moody's also noted that early indications suggest the impairment charge on these may have peaked (€893 million in the first half of 2010, compared to €1.417bn in the second half of 2009). However Moody's still considers that the profitability of Bank of Ireland will remain pressured from elevated impairments over 2010 -- 2012 on the non-NAMA assets. The pressure is likely to come from the large residential mortgage book in Ireland as unemployment remains high, and from the business banking sector in Ireland that is likely to remain challenged as a result of the substantial fall in economic activity.

Beyond the removal of toxic real estate exposure, the NAMA process is improving the credit profile of the bank in two further ways: (i) it is helping to reduce single-name concentrations (that were already lower than Irish peers), and (ii) it helps to improve the liquidity profile as the removal of the loans reduces the bank's funding, and the transferred loans are acquired by NAMA with Irish government guaranteed bonds that are pledgeable at the ECB.

Furthermore, the rating agency said that the recent capital raising of the bank has greatly improved the quality of the capital base. The capital was raised through a variety of means including a placement to new international investors, a debt to equity swap (on certain tier 1 and upper tier 2 securities), conversion of an element of the government's preference shares and a fully underwritten rights issue. Net of costs and the buying-out of warrants that were attached to the government preference shares the bank raised €2.94bn of equity, which went beyond the required € 2.66bn required by the Irish regulator.

Following this process the Irish government now owns 36% of the bank and at end-June 2010 the core Tier 1 ratio was 10.2%, up from 8.9% at end-2009.

In addition to the ongoing burden stemming from the impairment of the non-NAMA assets, the D+ BFSR also incorporates other challenges facing the bank such as (i) the wind-down of the large portfolio of non-core assets of which the largest part is the UK intermediary distributed mortgage book (€30bn at end-June 2010) and, along with that, a reduction in the bank's relatively high utilisation of wholesale funding; (ii) the sale of businesses due to European Commission requirements in return for approval of the state aid; and (iii) the risk of a further downturn in the economies of Ireland and the UK.

"Moody's is of the opinion that the measures taken by Bank of Ireland to restructure the bank and to reduce the risk profile, mean that its standalone credit strength is well captured at the D+ standalone rating level with limited downside risks and this supports the stable outlook", said Abercromby. "At the same time, we do not expect further upward pressure on the rating until the bank has been able to progress significantly in its restructuring process, including the completion of the NAMA process; and until it has established a track record of unguaranteed debt issuance as we note that in the current market environment access to capital markets remains difficult for any Irish bank. Further evidence that impairment charges on the non-NAMA assets are falling would also be important as an indicator" Abercromby added.

Anglo Irish Bank: The Minister for Finance Brian Lenihan said today that the nationalised Anglo Irish Bank is to be spilt into a Funding Bank for deposits and an Asset Recovery Bank to recover loans.

Lenihan says Anglo Irish Bank to be spilt into a Funding Bank for deposits and an Asset Recovery Bank to recover loans

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Bond Markets: The yield - - or interest rate on bonds trading on the market - -  on 10-year Irish bonds was above 6% this afternoon at 6.08% following crossing the 6.0% threshold on Monday.

The price of insuring against a default in Irish debt also reached an all-time high and traders said the European Central Bank had been buying Irish bonds in small quantities on Monday to stall the rise in rates.

Irish bond spreads rose to 396 basis points or 3.96% above the benchmark German Bund in early trading on Wednesday. The spreads have dropped slightly to 394 basis points.

German and UK Production: Official figures today show that German industrial output rose 0.1% in July from the June level, compared with the 1% gain analysts had expected.

The Economy ministry confirmed that this measure of output had slipped by 0.6% in June.

UK manufacturing grew for the third month in a row in July maintaining its recovery from the deep plunge it suffered during the recession. The annual rate is at the highest since 1994.

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Elan: Danish shareholder Ib Sonderby today proposed four candidates for the Irish drugs company board, including Larry Fritz, the co-founder of Athena Neurosciences, which developed the multiple sclerosis drug Tysabri and was later acquired by Elan.

Fritz is the founder of several biotech companies, including Athena, where his research work led to the development of what is today Elan's core science in the areas of multiple sclerosis, Alzheimer's disease and neuromuscular disorders, Sonderby said.

Finfacts's report from earlier Wednesday: Elan's CEO attacks 'detractor' and two board members

BP: Thee UK oil giant BP today issued a long-awaited investigative report that says a complex series of failures and bad decisions -- by itself and other companies -- resulted in the deadly Deepwater Horizon disaster in the Gulf of Mexico on April 20th last.

The report, outlines eight key findings. The oil giant says tests on the drilling well were incorrectly assessed by BP and its drilling partner, Transocean, and that a key cement job on the drilling well was poorly done. These failures and others led to hydrocarbons running up the well, eventually causing the rig to explode into a massive blow torch.

The finding also says targets Transocean workers, who BP said “failed to recognize and act on the influx of hydrocarbons into the well.”

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US Markets

In New York Wednesday, the Dow rose 80 points or 0.78% to 10,421.

The S&P 500 rose 0.88% and the Nasdaq added 0.99%.