Rating companies turn to Spanish banks to cut grades
Share
Rating agencies Standard & Poor’s and Fitch Ratings have downgraded a raft of Spanish banks, including Santander and BBVA’s Spanish operations, following deterioration in the Spanish economy.
S&P downgraded 10 financial institutions including the two biggest banks, Santander and BBVA, which were dropped from AA to AA-.
Fitch downgraded the Spanish economy from AA+ to AAlast week and downgraded six Spanish banks including Santander and BBVA, which fell from AA to AAand AAto A+ respectively.
S&P says problems in Spain’s economy will continue to affect Spanish banks over the next 18 months. It says: “In our view, Spain’s economy faces dimming growth prospects in the near term, real estate market activity remains depressed and turbulence in the capital markets has heightened. We believe the correction of imbalances in Spain will continue, negatively affecting the financial profiles of Spain’s banks in the next 15 to 18 months.”
Fitch notes Santander and BBVA will weather the deterioration in the Spanish economy better than domestic banks because they operate globally.
It says: “While the purely domestic banks face more significant challenges, the two international banks Santander and BBVA benefit from their geographic diversification which gives them the capacity to make up for the muted results in Spain.”
Industry consultant Jonathan Cornell says: “Santander’s funding costs in the UK are based on their UK operations. S&P and Fitch have not touched their UK rating yet, so I do not think this will impact massively on mortgage lending and their ability to raise funds in the UK.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
