Moody’s downgrades nine Portuguese banks

Moody’s Investors Service has downgraded the senior debt and deposit ratings of nine Portuguese banks and downgraded the standalone ratings of six institutions, citing concerns about their financial strength.

“The key driver for the downgrades of most banks’ debt and deposit ratings is Moody’s assessment of the deterioration of their unsupported financial strength,” the agency said in a statement.

The standalone downgrades affect Caixa Geral de Depositos (CGD), Banco Comercial Portugues (BCP), Banco Espirito Santo (BES), Banco BPI (BPI), Banco Santander Totta (BST), and Caixa Economica Montepio Geral (Montepio).

The downgrades reflect the banks’ increased asset risks as a consequence of their Portuguese government debt holdings and the expected deterioration of domestic asset quality as a consequence of weak economic growth as the government pushes through austerity measures. The banks also face liquidity strains as they lack access to wholesale funding, the agency said.

Banco Internacional do Funchal (Banif), Banco Portugues de Negocios (BPN) and Espirito Santo Financial Group (ESFG)had their debt and deposit rating downgraded.

All of the banks’ ratings carry a negative outlook with the exception of Banco Portugues de Negocios (BPN) which has a developing outlook on all of its ratings.

The agency said the banks’ recapitalisation and deleveraging plans should, if successful, help to restore confidence in the banking system. However, it believes that “the plans face significant implementation risks.”

“Deleveraging plans would be threatened should market conditions remain fragile and any material growth in retail deposits would rely in part on an upturn in the economic environment.”


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