S&P Cuts Credit Rating of 7 Spanish Banks

Standard & Poor (S&P)’s International rating agency cut the credit ratings of 7 Spanish banks in the wake of the sovereign rating downgrade to ‘BBB-‘. The banks that have suffered in the downgrade late on Tuesday were Banesto, Banco Popular, Banco Sabadell, Bankia-BFA, CaixaBank as well as BBVA and Santander – the two largest banks in Spain. Santander and Banesto were downgraded by 2 notches and lost their ‘A-’ rating into now ‘BBB’. Meanwhile BBVA was reviewed down from ‘BBB’+ to ‘BBB-‘. As a result, all three banks were given a negative outlook, meaning they could be downgraded in the medium term. Bankia –BFA sliced from ‘B+’ to ‘B’ and CaixaBank from ‘BBB’ to ‘BBB-‘. A one notch downgrade from ‘BB+’ to ‘BB’ has been applied to Banco Sadabell, and Banco Popular.

Moody’s Investor Service, a competitor agency has similar ratings on the Spanish debt and is expected to release a report this month revealing whether it will cut the rating again, appraising Spanish bonds as junk.

“ The sovereign downgrade has direct negative rating implications on those banks that we rated higher than the BBB- long-term rating on Spain, and on all banks where we factored extraordinary government support into the ratings,” S&P said.

Such a move could render spiked borrowing rates in Spain and quickly force the country to seek a sovereign bailout.