Moody’s downgrades 26 Italian banks

Ratings agency Moody’s Investors Service has cut the long-term debt and deposit ratings for 26 Italian banks, as the crisis in Europe clouds their prospects.

Moody’s cut ratings by between one to four notches, highlighting the tough environments in Italy and Europe.

The cuts have left Italian banks among the lowest rated in advanced European countries, Moody’s said. The downgrades reflect a combination of adverse conditions, asset quality deterioration and restricted access to market funding.

Banks impacted include UniCredit and Intesa Sanpaolo, Italy’s two largest banks.  Both were given deposit ratings of A3 (down from A2) and a standalone bank financial strength rating of C-.

UniCredit’s credit assessment was baa2, while that of Intesa Sanpaolo was baa1.

Although the recent LTRO is meant to be supplying liquidity across Europe, with the country’s economy back in recession, and austerity hurting demand, bad loans are once again on the rise.

Johannes Wassenberg, Moody’s managing director for European banks, said: “If this limited access to funding persists, the pressure on banks to reduce assets may increase, posing risks to their franchises and earnings.”

The downgrade followed a previous cut on February 13, when the agency lowered the rating of Italy and five other countries, including Spain. At that time, Italy was lowered to A3, and now stands four steps above junk.

Amid Moody’s downgrades, markets across Europe are in the doldrums, hitting fresh multi-month lows yesterday as bond yields across peripheral Europe continue to climb.


This article was first published on Investment Week

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