UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) were among 26 Italian banks that had their credit ratings cut one to four levels by Moody’s Investors Service, which cited weakened earnings and the country’s economic outlook.
UniCredit, Italy’s biggest bank, had its long-term debt rating lowered one step to A3, Moody’s said in a spreadsheet on its website yesterday. Milan-based Intesa, the nation’s second- largest lender, also was downgraded to A3 from A2.
“Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access,” Moody’s said in a statement. “These risks are exacerbated by investor concerns over the sustainability of the Italian government’s debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.”
The action followed Moody’s decision on Feb. 13 to cut the credit rating of Italy and five other countries, including Spain, on doubts over the euro region’s ability to deal with the debt crisis. Italy was lowered to A3, or four steps above junk, from A2 with a negative outlook. “At this stage, a downgrade on Italian banks was expected, given their correlation with the economic cycle and the country’s debt,” said Fabrizio Spagna, managing director at Axia Financial Research. “They have a huge amount of government bonds in their portfolios, which affect their financial positions.”
UniCredit, Italy’s biggest bank, had its long-term debt rating lowered one step to A3, Moody’s said in a spreadsheet on its website yesterday. Milan-based Intesa, the nation’s second- largest lender, also was downgraded to A3 from A2.
“Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access,” Moody’s said in a statement. “These risks are exacerbated by investor concerns over the sustainability of the Italian government’s debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.”
The action followed Moody’s decision on Feb. 13 to cut the credit rating of Italy and five other countries, including Spain, on doubts over the euro region’s ability to deal with the debt crisis. Italy was lowered to A3, or four steps above junk, from A2 with a negative outlook. “At this stage, a downgrade on Italian banks was expected, given their correlation with the economic cycle and the country’s debt,” said Fabrizio Spagna, managing director at Axia Financial Research. “They have a huge amount of government bonds in their portfolios, which affect their financial positions.”
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