Rating agency Standard & Poor’s downgraded 34 Italian banks on Friday, including heavyweights UniCredit and Intesa Sanpaolo, citing a reduced ability to roll over their wholesale debt and expected weak profitability.
The move follows S&P’s downgrade of Italy’s sovereign rating last month to BBB+, part of a mass downgrade of nine euro zone countries.
In a statement, S&P said its so-called Banking Industry Country Risk Assessment had worsened to group 4 from group 3 — out of 10 groups — reflecting its more negative view on Italy’s banking system.
“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,” it said.
“We anticipate persistently weak profitability for Italian banks in the next few years, and a risk-adjusted return on core banking products that may not be sufficient for banks to meet their cost of capital. We believe this may be negative for the Italian banking industry’s stability.”
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Afternoon Updates:
12:30 pm EST, February 11th, 2012 — Warner: UK economy still has ‘seven more hard years to go’
12:36 pm EST, February 11th, 2012 — High-rate pensions tax relief faces axe
12:38 pm EST, February 11th, 2012 — Armitstead: Merkel has herself to blame if Greece defaults
12:43 pm EST, February 11th, 2012 — Gold pulls back after EU rejects Greek debt plan
12:46 pm EST, February 11th, 2012 — Hubbard: Climax nears in Greek drama
12:49 pm EST, February 11th, 2012 — Italy doesn’t need firewalls, Europe does: Monti
12:54 pm EST, February 11th, 2012 — Glover: Greek Debt Crisis Exposes Green Subsidies Scam
1:03 pm EST, February 11th, 2012 — Canada’s Future Is In The West
Expansive renewable energy subsidization may be politic in the ideological world in Brussels (or Ontario) , but in the real world of accountable democracies the Greek debt is exposing it as an increasingly hot political issue.
