UniCredit SpA, Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA were among 34 Italian financial firms downgraded by Standard & Poor’s (S&P), after the credit-ratings company reduced the nation’s grade last month.
UniCredit, Italy’s biggest bank, and No. 2 Intesa had their long-term ratings lowered to “BBB+” from “A,” S&P said on Friday in a statement.
Monte dei Paschi, the No. 3 bank, was reduced to “BBB” from “BBB+.” All three have a negative outlook, S&P said.
Italy’s credit rating was cut two levels to “BBB+” from “A” on Jan. 13 as S&P said European leaders’ struggle to contain the region’s debt crisis would complicate the country’s efforts to finance borrowings. S&P on Friday revised its banking industry country risk assessment, known as Bicra, for Italy to group 4 from group 3, citing mounting risks.
“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 separate statement on the country’s financial industry. “We anticipate persistently weak profitability for Italian banks in the next few years.”
“Banks in highly indebted countries have a greater potential vulnerability than in others,” Italian Prime Minister Mario Monti said on Friday in a CNBC interview. “By and large, Italian banks have been less hit by the financial crisis than the banks in many other European countries.”
The extra yield investors demand to hold bonds of UniCredit and for Intesa rather than government debt was 508 basis points on Thursday, or 5.08 percentage points, compared with an average 306 basis points in the Bank of America Merrill Lynch Euro Corporates, Banking Index. European “BBB” ranked bonds are at 381 basis points and “BB” debt at 664, Bank of America Merrill Lynch index data show.
Fitch Ratings downgraded Intesa to “A-” from “A,” and Monte dei Paschi to “BBB” from “BBB+” in a statement on Monday.
The credit-ratings company affirmed its “A-” rating on UniCredit.
S&P downgrades linked to Europe’s debt crisis haven’t necessarily led to shifts in bond prices, as investors anticipated declines in creditworthiness.
UniCredit said on Friday in a press release on its Web site that S&P had aligned the bank with Italy’s credit rating and had maintained the lender’s stand-alone credit profile at “A-.”
Intesa’s long and short-term ratings are capped at the same level as Italy’s and the bank’s stand-alone credit profile is “A-,” Intesa said on Friday in a statement on its Web site.