IRISH NATIONWIDE has said it "fundamentally disagreed" with cuts in its credit rating by two ratings agencies over its exposure to the deteriorating property markets in Ireland and the UK.

Fitch Ratings downgraded the rating on the building society yesterday, saying commercial and residential property lending in Ireland and the UK has "deteriorated further and faster than was previously anticipated in early 2008".

Another agency, Moody's, cut its rating on Irish Nationwide last week, blaming the society's increased exposure to commercial property and development, and the rapid deterioration in property values in Ireland and the UK.

Fitch downgraded the building society's long-term issuer default rating from A- to BBB+, which is third from bottom on a scale of 10 investment grade ratings or three places above "junk" status.

In a statement, Irish Nationwide said the downgrades didn't affect the underlying financial strength of the society and that it had significantly increased its liquidity and capital base during 2008.

"It is important to emphasise that the society is and continues to be a strong, profitable financial institution and that profit budgeting projections are on target for the first half of 2008," it said.

Fitch said 80 per cent of the building society's loans is on commercial property, while 45 per cent of its loan book is on UK property, mostly in London.

The agency said it had expressed concerns about the concentration of commercial loans among a small group of developers and the large proportion of high loan-to-value in its commercial book. Fitch said that although the society's level of bad debts was "fairly low", it was concerned that asset quality could deteriorate significantly if the outlook for this sector continues to worsen.

Fitch noted the funding that the society must raise to refinance the large proportion of long-term borrowing which matures in several tranches over the next 15 months.

"The increasing cost of funding, together with reduced revenue from lower volumes of business, has begun to impact profitability although currently performance ratios remain strong."

BBB ratings reflect low credit risk where an institution's ability to pay financial commitments is considered adequate but where adverse circumstances are "more likely to impair this capacity".

Fitch cut the society's individual rating to C, described as adequate but which has "one or more troublesome aspects". However, it said Irish Nationwide continued to benefit from strong cost efficiency, a liquid balance sheet, large and historically stable retail deposits and a satisfactory level of capital.

The agency said the society had taken steps to strengthen its corporate governance, saying it had appointed a non-executive director, while another appointment was imminent.