The Adobe Flash Player is required to view this multimedia interactive. Get it here.

S&P lowers rating on 34 Italian banks

Asphalt can only be sealed; only concrete is resurfaced
10:43 a.m.
Dollar stores get wider range of customers
10:32 a.m.
Honda gets a double-shot of good consumer news
10:30 a.m.
Anthem puts emphasis on quality
10:29 a.m.
UD researcher uses know-how to photograph local eagles
5/25/12
> More headlines

The Associated Press Updated 6:16 PM Friday, February 10, 2012

NEW YORK — Standard & Poor's Ratings Services on Friday lowered its ratings on 34 Italian banks, citing concerns over Italy's financial vulnerability and expectations for weak profits at the banks.

Among the banks downgraded were some of Italy's largest, including UniCredit SpA, Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA.

The banking-sector downgrades came after S&P downgraded its credit rating on Italy's government debt by two notches last month.

"In our view, Italy's vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks' significantly diminished ability to roll over their wholesale debt," S&P said in a statement.

The agency also lowered its Banking Industry Country Risk Assessment for Italy to "4'' from "3." The so-called BICRA rating is on a 1-to-10 scale, with "1'' representing countries with the lowest-risk banking systems.

"We anticipate persistently weak profitability for Italian banks in the next few years," S&P said.

S&P downgraded the credit ratings of a nine countries that use the euro in January, including bumping Italy's credit rating down two notches. Debt ratings can play a significant role in determining countries' borrowing costs by forcing them to pay higher interest rates to compensate borrowers for taking on added risk.

Italy has been a focus of much of the worry over the European debt crisis, given its high debt levels and intense borrowing needs. The country passed austerity measures and is on a structural reform course that government leaders claim should bring down Italy's high bond yields.

The S&P downgrade last month did not have the immediate disastrous effect in Europe that was anticipated, due in part to growing investor confidence in those countries' economic policies and the impact of the European Central Bank's decision to loan hundreds of billions of euros to banks at very low rates.

However, Fitch Ratings followed suit in two weeks with a special warning for Italy that it could face permanently higher borrowing costs that would make it harder to keep its debt under control. It resisted stronger ratings action because of the "strong commitment" of the new Italian government to balance the country's budget and make Italy a better place to do business.

___

February 10, 2012 11:10 PM EST

Share this article