Standard & Poor’s warns of worsening outlook for Spain’s banks

Rating agency Standard & Poor’s has cut today its industry assessment on Spanish banks, warning of a worsening economic backdrop, including a weaker public sector and riskier private sector hurt by recession, austerity measures and unemployment.

In line with what recently announced by Moody’s, S&P also downgraded the sovereign rating of Spain’s debt to one notch above junk.

“Economic risks for the Spanish banking sector have risen, in our view, in the context of the rapid deterioration in the creditworthiness of the sovereign,” the agency said in a note.

According to S&P, the rapidly deteriorating creditworthiness of the Spanish sovereign, as evidenced by multiple downgrades over the last 12 months, is a leading indicator of greater credit risk in lending to households, corporations, and the public sector.

S&P also cut the starting point for its ratings of Spain’s financial institutions to ‘bb+’ from ‘bbb-‘. This excluded Santander and Banco Bilbao Vizcaya Argentaria .

It lowered stand-alone credit profiles on seven banks: Confederacion Espanola de Cajas de Ahorros, Ibercaja Banco S.A., Bankinter S.A., CaixaBank S.A., Banco Popular Espanol S.A., Banco de Sabadell S.A. and Barclays Bank S.A.

“The outlook on all our ratings on Spanish banks is negative, except those on Bankia S.A. and Banco Financiero y de Ahorros S.A. which remain on creditwatch with negative implications,” the agency said.

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