Moody’s downgrades 16 Spanish banks

Santander UK PLC
Santander UK and 16 Spanish banks downgraded

Research and ratings agency Moody’s has downgraded 16 Spanish banks, along with Santander UK PLC. The new ratings carry negative outlooks or remain on review for downgrade. You can read the press release below.

Moody’s downgrades Spanish banks; ratings carry negative outlooks or remain on review for downgrade

Moody’s Investors Service has today downgraded by one to three notches the long-term debt and deposit ratings for 16 Spanish banks and Santander UK PLC, a UK-domiciled subsidiary of Banco Santander (Spain) SA. The rating downgrades primarily reflect the concurrent downgrades of most of these banks’ standalone credit assessments, and in five cases also Moody’s assessment that the Spanish government’s ability to provide support to the banks has reduced.

The debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.

The outlooks on the debt and deposit ratings for ten of the 17 banks downgraded today are now negative. For the remaining seven banks affected by today’s actions, their ratings remain on review for further downgrade, for reasons specific to each bank (as discussed separately below).

Today’s actions reflect, to various extents across banks, four main drivers:

1. Adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment.

2. Reduced creditworthiness of the Spanish sovereign, which weighs on banks’ standalone profiles and affects the ability of the government to support banks.

3. Rapid asset-quality deterioration, with non-performing loans to real-estate companies rising rapidly, and Moody’s expecting other loan categories to deteriorate.

4. Restricted market funding access, with the ongoing euro area debt crisis contributing to persistent investor concerns about Spanish banks and the sovereign.

Moody’s recognises several positive trends that have limited the extent and scope of today’s rating actions. These mitigants include (i) the strengthening risk-absorption capacity of banks, underpinned by stricter capital and provisioning requirements; (ii) liquidity support from the European Central Bank (ECB) and (iii) actual and prospective support from the Spanish government, within the constraints of the sovereign’s own reduced creditworthiness. However, Moody’s believes these positive factors are overwhelmed by mounting asset-quality challenges that weaken the earnings and threaten to erode the capital positions of many banks.

Moody’s debt and deposit ratings for publicly-rated Spanish banks now range between A3 and Ba3, with an (unweighted) average between Baa2 and Baa3. This average is below most Western European banking systems, reflecting the severe impact of both the difficult domestic environment and the ongoing euro area debt crisis on Spanish banks.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_142024 for the list of Affected Credit Ratings. This list is an integral part of this press release and identifies each affected issuer. For additional information on bank ratings, please refer to the webpage containing Moody’s related announcements: http://www.moodys.com/bankratings2012.

Moody’s has also published today a special comment titled “Key Drivers of Spanish Bank Rating Actions” (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_141658) with more detail on the rationale for today’s actions.

You can read the full press release at Moody’s: Moody’s – Spanish bank downgrade

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2 thoughts on “Moody’s downgrades 16 Spanish banks

  1. Chris McCarthy

    And this would be the same Moody’s along with all the other ratings agencies that had Lehman Brothers as a triple AAA * star rating hours before the financial crash.

    Nobody is interested in their view right now.

  2. Hahaha… did they? I wasn’t interested in the subject back then so wasn’t aware of that. How funny and how embarrassing for them!

    I too am sceptical of ratings agencies, especially when you read the small print on their website pointing out that everything on their site is their opinion only and not to be construed as financial advice or recommendation.

    Some people are however very interested in what these people have to say so sorry Chris, I will continue to post their press releases.

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