S&P takes dim view of Spain’s banks with fresh downgrades

City A.M. Reporter
STANDARD & Poor’s downgraded 10 Spanish banks yesterday, and left the threat of further rating cuts hovering over the troubled lenders.

The rating agency downgraded prominent names such as Bankia, Caixabank, Ibercaja, Bankinter, Sabadell, and Popular.

S&P was applying new ratings criteria after altering its methodology last month.

Spanish banks are heavily exposed to bad, and potentially bad, loans after a prolonged housing bubble burst in 2007, and risks remain even after prolonged restructuring and recapitalisation.

However, there was better news from elsewhere yesterday as Spanish authorities saw solid demand for its bonds.

Spain paid more than two percentage points less to borrow over five years than Italy a day earlier as budget cuts helped ease concerns it could be among the next to fall in the Eurozone’s debt crisis.

“The Tesoro [was] seemingly taking advantage of the calmer market environment, auctioning bonds worth €6bn (£5bn), almost twice the maximum target,” commented Daiwa Capital in a note. Yet yields were still near euro-era highs amid doubts over leaders’ ability to find a lasting solution to the bloc’s debt crisis.