S&P’s ratings agency just cut the long-term issuer ratings of five Spanish banks and left nine unchanged.Among the downgrades were Bankia and Banco Popular, which were both cut to junk.
The latter is a subsidiary of BFA, the financial company which is meeting today to ask for even more money from the Spanish government after receiving a first bailout earlier this month.
Banco Financiero y de Ahorros S.A., Banca Civica S.A., and Bankinter also saw their ratings cut, though they remain investment-grade issuers.
The move follows S&P’s two-notch downgrade of Spain on April 26 and continuing concerns about the fragile health of the Spanish financial sector.
Here’s the full statement:
MADRID (Standard & Poor’s) May 25, 2012–Standard & Poor’s Ratings Services today said it has lowered its ratings on five Spain-based financial institutions, affirmed the ratings on nine, and maintained the ratings on five on CreditWatch with negative implications (see Ratings List).
We have also revised down our assessments of the stand-alone credit profiles (SACPs) of six financial institutions, with revisions ranging from one to three notches.
With the exception of two financial institutions, all ratings either carry a negative outlook or remain on CreditWatch negative.
The rating actions follow our review of the wider implications for economic and industry risks in the Spanish banking sector after our two-notch downgrade of the Kingdom of Spain (BBB+/Negative/A-2) on April 26, 2012. As a result of the review, we have maintained our Banking Industry Country Risk Assessment (BICRA) on Spain at group ‘5’, but revised our economic risk score, a component of the BICRA, to ‘6’ from ‘5’ (see “BICRA On Spain Maintained At Group 5, Economic Risk Score Revised To ‘6’ Following Sovereign Downgrade,” published May 25, 2012, on RatingsDirect on the Global Credit Portal).
We lowered our long-term counterparty credit ratings on five financial institutions–Bankia S.A., Banco Financiero y de Ahorros S.A., Banca Civica S.A. (Civica), Banco Popular Espanol S.A. (Popular), and Bankinter S.A.–based on our lowering of our assessments of their SACPs. We revised the SACPs following our review of the Spanish banking industry’s economic risk, owing to the impact we see on the capital positions of the first four institutions and on the business model of the fifth one. Under our criteria, we use the economic risk score to calibrate the risk weights used for our capital calculations in several asset classes (see “Banks: Rating Methodology And Assumptions” for definition). As a result of our calculations, the capital positions of the institutions are immediately affected by a revision of the economic risk score.
We are now for the first time incorporating into the long-term ratings on two financial institutions–Popular, and Bankia, and indirectly its parent BFA–one and two notches respectively of uplift above their SACPs to reflect potential short-term extraordinary support from the Spanish government. We believe that the Spanish government would likely provide short-term support to back any potential capital shortfall at these two institutions if necessary. In addition, our long-term ratings on these two institutions and on Banco de Sabadell S.A. (Sabadell) and Cívica benefit from one notch of uplift over their SACPs for potential extraordinary government support.
The outlooks on the long-term ratings on six financial institutions–Banco Santander S.A. (and its subsidiaries), Banco Bilbao Vizcaya Argentaria S.A. (BBVA), Popular, Sabadell, Kutxabank S.A., and Bankinter–are negative. They generally reflect the possibility that we could lower the ratings if we perceived increasing pressure on the banks’ financial strength in the context of Spain’s weakening economic conditions. For Santander (and its subsidiaries) and BBVA, the negative outlooks also reflect the negative outlook on Spain. One financial institution, Confederacion Espanola de Cajas de Ahorros, carries a stable outlook, which factors in our view that we are currently unlikely to change our ratings or stand-alone credit profile on CECA in the next few years, under our base-case scenario.
The ratings on five financial institutions–CaixaBank S.A. and its parent Caja de Ahorros y Pensiones de Barcelona (la caixa), Ibercaja Banco S.A., and Bankia and parent BFA remain on CreditWatch negative. The CreditWatch placements of the ratings on the first three reflect our view that pending acquisitions and their integration could have a negative impact on each entity’s creditworthiness. In the case of Bankia and its parent BFA, the CreditWatch listing reflects uncertainties surrounding Bankia’s restructuring and recapitalization plan, as well as the implementation risks it may entail.
Conversely, we kept the ratings on Cívica on CreditWatch positive based on our view that its creditworthiness may potentially benefit from its integration into Caixabank, a financially stronger group.
At the same time, we have also taken negative actions on various hybrid capital instruments issued by several financial institutions. These actions reflect our view of the increased vulnerability to nonpayment of dividends or coupons of the hybrid capital instruments that we see in each particular bank. Currently, we only rate preference shares issued or guaranteed by Santander and its core subsidiary Banco Espanol de Credito S.A. in investment-grade categories. We rate all the other hybrid instruments issued by other Spanish financial institutions in the noninvestment-grade categories. However, we think vulnerability to nonpayment of the dividends or coupons varies between the institutions, which is reflected in the wide range of our ratings, from our ‘BB+’ issue rating on BBVA and Caixabank’s hybrid debt to our ‘CCC-‘ issue rating on BFA’s hybrid debt.
We will publish individual research updates on the banks identified below, including a list of ratings on affiliated entities, as well as the ratings by debt type–senior, subordinated, junior subordinated, and preferred stock. RELATED CRITERIA AND RESEARCH
- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
- Group Rating Methodology And Assumptions, Nov. 9, 2011
- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
- Nonsovereign Ratings that Exceed EMU Sovereign Ratings: Methodology and Assumptions, June 14, 2011
- Analytical Approach to Assessing Nonoperating Holding Companies, March 17, 2009
- BICRA On Spain Maintained At Group 5, Economic Risk Score Revised To ‘6’ Following Sovereign Downgrade,” published May 25, 2012
- Ratings On Spain Lowered To ‘BBB+/A-2’ On Debt Concerns; Outlook Negative, April 26, 2012
RATINGS LIST The ratings below are counterparty credit ratings. Downgraded; CreditWatch Action To From Banco Popular Espanol S.A. BB+/Negative/B BBB-/Watch Neg/A-3 Bankinter S.A. BB+/Negative/B BBB-/Watch Neg/A-3 Downgraded; Remain On CreditWatch To From Banca Civica S.A. Long-Term Counterparty Credit Rating BB/Watch Pos BB+/Watch Pos Bankia S.A. BB+/Watch Neg/B BBB-/Watch Neg/A-3 Banco Financiero y de Ahorros S.A. Long-Term Counterparty Credit Rating B+/Watch Neg BB-/Watch Neg Affirmed; CreditWatch/Outlook Action To From Banco Financiero y de Ahorros S.A. Short-Term Counterparty Credit Rating B B/Watch Neg Banco de Sabadell S.A. BB+/Negative/B BB+/Watch Neg/B CaixaBank S.A. Short-Term Counterparty Credit Rating A-2 A-2/Watch Neg Confederacion Espanola de Cajas de Ahorros BBB-/Stable/A-3 BBB-/Watch Neg/A-3 Kutxabank S.A. BBB-/Negative/A-3 BBB-/Watch Neg/A-3 Affirmed To From Banco Santander S.A. A-/Negative/A-2 A-/Negative/A-2 Banco Espanol de Credito S.A. A-/Negative/A-2 A-/Negative/A-2 Santander Consumer Finance, S.A. BBB+/Negative/A-2 BBB+/Negative/A-2 Banco Bilbao Vizcaya Argentaria S.A. BBB+/Negative/A-2 BBB+/Negative/A-2 Remain On CreditWatch To From Banca Civica S.A. Short-Term Counterparty Credit Rating B/Watch Pos B/Watch Pos CaixaBank S.A. Long-Term Counterparty Credit Rating BBB+/Watch Neg BBB+/Watch Neg Caja de Ahorros y Pensiones de Barcelona BBB-/Watch Neg/A-3 BBB-/Watch Neg/A-3 Ibercaja Banco S.A. BBB-/Watch Neg/A-3 BBB-/Watch Neg/A-3 NB. This list does not include all ratings affected.
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor’s public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor’s numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
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