According to reports, the agency raised the âstand alone creditâ rating for both financial institutions from BBB to BBB+.
S&P explained that the improvements are in recognition of the recoveries made by both banks since they were hit by the global credit crisis.
Both relied on taxpayer bailouts to stay afloat during the period of volatility in the markets.
Nigel Greenwood, a credit analyst at S&P, told the Financial Times: âAlthough we consider that Lloyds and RBS have much more to achieve and that the external environment continues to pose challenges, they have in our view laid the foundations to improve their performance and further strengthen their balance sheets.â
The agency added that the recovery for both banks has taken place much quicker than expected.
RBS, which is 83 per cent owned by the government following the credit crisis, posted a profit of Â£713 million during the first quarter of the year compared with a Â£1.3 million loss in the previous three month period.
The authorities have a 41 per cent stake in Lloyds, which also reported a return to profit in the first quarter of the year.
By Jim Ottewill