S&P has downgraded Spanish banks:
-- We lowered our sovereign ratings on Spain to 'BBB-/A-3' from
'BBB+/A-2' and assigned a negative outlook to the long-term rating on Oct. 10,
2012.
-- 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 in the form of uplift over the banks' stand-alone credit profiles
(SACPs).
-- The sovereign downgrade and its drivers could have potentially
negative implications for our view of the economic and/or industry risks
affecting the Spanish banking industry and for our analysis of specific rating
factors that drive our SACP assessments on Spanish banks.
-- We are lowering our long-term ratings on 11 banks and the short-term
ratings on four. In addition, we are also placing on CreditWatch negative the
long- and short-term ratings on three banks, and only the long-term ratings on
another three banks. We are keeping the long-term ratings on four banks on
CreditWatch negative. We assigned negative outlooks to the long-term ratings
on Santander, BBVA, and BBSA.
-- As part of our resolution of the CreditWatch, we expect to conclude
our review of the wider implications of the sovereign downgrade on our view of
the economic and/or industry risks faced by the Spanish banking sector and the
banks we rate in November 2012.
MADRID (Standard & Poor's) Oct. 16, 2012--Standard & Poor's Ratings Services
today said it took the following rating actions on Spanish financial
institutions:
-- We lowered our long-term counterparty credit ratings on 11 banks and
our short-term counterparty credit ratings on four.
-- We placed our long-term and short-term ratings on three banks on
CreditWatch with negative implications.
-- We placed our long-term ratings on three banks on CreditWatch with
negative implications.
-- We maintained the long-term ratings on four banks and the short-term
ratings on one bank on CreditWatch negative. We also placed the short-term
ratings on one bank on CreditWatch negative.
-- We assigned negative outlooks to the long-term ratings on three banks,
namely Banco Santander S.A. (Santander), Banco Bilbao Vizcaya Argentaria S.A.
(BBVA), and Barclays Bank S.A. (BBSA).
RATIONALE
Today's rating actions follow our downgrade of Spain on Oct. 10, 2012 (see
"Spain Ratings Lowered To 'BBB-/A-3' On Mounting Economic And Political Risks;
Outlook Negative," published on RatingsDirect on the Global Credit Portal).
The downgrade has direct negative rating implications for the 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 in the form of
uplift over the banks' stand-alone credit profiles (SACPs).
We lowered the ratings on BBVA, CaixaBank S.A. (CaixaBank), and its parent
company Caja de Ahorros y Pensiones de Barcelona (la Caixa) because we seldom
rate financial institutions above the foreign currency long-term rating on the
country where the institutions are domiciled. We lowered the ratings on
Santander (and as a result its core subsidiary Banco Espanol de Credito S.A.
(Banesto), and its highly strategic subsidiary Santander Consumer Finance S.A.
(SCF)), because, for the rare cases when we rate banks above the foreign
currency long-term rating on the country where they are domiciled, the
notching differential between the sovereign and bank rating is generally
limited to one notch due to the strong connection we typically see between
banks' creditworthiness and that of their country of domicile. We also lowered
our issue ratings on the nondeferrable subordinated and hybrid instruments on
all the abovementioned banks. We have affirmed the 'BB/B' ratings on
Santander's Portuguese subsidiary, Banco Santander Totta S.A., because we
limit the ratings on this subsidiary at the level of the ratings on the
Republic of Portugal (BB/Negative/B), although we believe it is a highly
strategically important subsidiary for the group.
In addition, we removed the one notch of uplift for extraordinary government
support that we previously incorporated into our ratings on Banco de Sabadell
S.A. (Sabadell), Banco Popular Espanol S.A. (Popular), Bankia S.A. (Bankia),
and Banco Financiero y de Ahorros S.A. (BFA), which led us to lower our
long-term ratings on these entities by one notch. The number of notches of
extraordinary government support that we incorporate into our bank ratings
depends on our view of the banks' systemic importance, SACPs, and the
sovereign rating. The lowering of our long-term rating on Spain led us to
remove the notch of extraordinary government support for these banks. We have
not changed our assessments of these banks' systemic importance and we have
not yet reviewed the wider implications of the sovereign action on the banks'
SACPs. We did not lower our issue ratings on these banks' subordinated debt
and hybrid instruments, because we base these issue ratings on the banks'
SACPs rather than on their issuer credit ratings. The ratings on Popular,
Bankia, and BFA continue to incorporate short-term government support. Our
assessment of this has not been affected by the sovereign downgrade, but we
will review this again after the banks have finalized their recapitalization
plans.
Our two-notch downgrade of Spain to 'BBB-' and the factors behind it will
likely affect our view of the Spanish banking sector's economic and/or
industry risks. In turn, this could affect our assessment of the bank-specific
factors that underpin our assessments of Spanish banks' SACPs--business
position, capital and earnings, risk position, funding, and liquidity. As a
result, we have placed on CreditWatch negative most of our issuer and issue
ratings on Spanish banks that we hadn't already placed on CreditWatch, except
those on Santander (and its abovementioned subsidiaries), BBVA, and BBSA. For
those banks whose long-term ratings are on CreditWatch, and which all now
stand at the same level as their SACPs, we also placed our issue ratings on
nondeferrable subordinated debt and hybrid instruments on CreditWatch
negative.
Our CreditWatch placements on banks' long-term ratings weren't always
accompanied by CreditWatch placements on their short-term ratings. In
particular, we affirmed our short-term ratings on Sabadell, la Caixa, and
Bankinter because we think that, following the CreditWatch resolution, we
would not likely lower the long-term ratings by a number of notches sufficient
to prompt a lowering of our short-term ratings.
We assigned negative outlooks to the long-term ratings on Santander (and its
subsidiaries Banesto and SCF), BBVA, and BBSA rather than placing them on
CreditWatch negative. For Santander and BBVA, the two largest Spanish banks,
this is because we think it unlikely that we would lower their SACPs--'a-' and
'bbb+', respectively--by more than two notches to stand below the current
ratings. With regard to BBSA, we derive the ratings from those on its
U.K.-based parent Barclays Bank PLC (A+/Stable/A-1) and cap them at the level
of our long-term rating on Spain, because we view the bank as a highly
strategic subsidiary. As a result, BBSA will not be affected by our review of
the Spanish banking sector's economic and industry risks, even if we were to
lower its 'bb' SACP following our review.
The long-term ratings on the banks that we had already placed on CreditWatch
negative pending details on their recapitalization, restructuring, and/or
merging plans, and/or our analysis of the latter, remain on CreditWatch. These
banks are Popular, Bankia, BFA, and Ibercaja Banco S.A. (Ibercaja). The
short-term ratings on Ibercaja also remain on CreditWatch negative and we have
also placed our short-term ratings on BFA on CreditWatch negative. We have,
however, extended the scope of our CreditWatch to include the potential
lowering of these banks' SACPs following our review of the Spanish banking
sector's economic and industry risks.
Following Ibercaja's announcement on Oct. 9, 2012, that the planned merger
with Liberbank and Caja3 had fallen through, we excluded the potential
negative consequences of the integration from the scope of our CreditWatch
placement. We therefore believe that a negative rating action on Ibercaja
would be limited to two notches, from three previously. However, the
CreditWatch resolution still depends on our view of the actions Ibercaja will
have to take to meet the new capital requirements, and their impact on our
assessment of the bank's capital position. We will also assess the strategic
challenges posed by the failed merger in the context of an increasingly
consolidated Spanish banking system.
OUTLOOK
The negative outlooks on the long-term ratings on Santander (and consequently
Banesto and SCF), BBVA, and BBSA mirror that on the long-term rating on Spain.
We could lower our ratings on these banks following a further downgrade of
Spain.
For Santander and BBVA, we don't anticipate that we would lower our SACPs by
more than two notches following our review of the Spanish banking sector, if
at all. The possibility that our long-term ratings on these banks would be
affected is therefore remote. Under this scenario, we wouldn't lower our issue
ratings on their nondeferrable subordinated debt and hybrid instruments
because we currently base them on the issuer credit ratings rather than the
SACPs.
Equally, the negative outlook on BBSA mirrors that on Spain.
CREDITWATCH
As part of our CreditWatch resolution, we expect to conclude our review of the
wider implications of the sovereign downgrade on the economic and/or industry
risks for the Spanish banking sector and the Spanish banks we rate in
November.
While resolving our CreditWatch placements, we will review our assessments of
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