Fri Nov 23, 2012 5:55am EST
Nov 23 -
Overview
-- We now see higher economic risk for banks operating in Spain following the rapid deterioration of the sovereign's creditworthiness, which has been reflected in our rating actions on Spain, including our recent two-notch downgrade.
-- In our view, Spanish banks face higher credit risk as Spain's weakening economy, public-sector cuts, austerity measures, and high unemployment will likely hamper the creditworthiness and resilience of public and private sector borrowers.
-- According to our methodology, we believe Banco Popular's solvency is negatively affected by higher credit risk in the economy. Additionally we see imbalances in its funding profile. These factors are counterbalanced in our opinion, however, by a recently announced capital increase, the potential for extraordinary government support, and funding support from the European Central Bank.
-- We are affirming our 'BB/B' ratings on Banco Popular and removing the long-term rating from CreditWatch negative.
-- We are lowering our issue ratings on Banco Popular's dated subordinated debt to 'B-' from 'B' and our issue ratings on the hybrid capital instruments to 'CCC' from 'CCC+' as a result of our view of higher pressure on the bank's stand-alone creditworthiness.
-- The negative outlook primarily reflects that on Spain. It also reflects our view that the difficult economic and operating conditions in Spain could lead to a deterioration of Popular's stand-alone credit profile.
Rating Action
On Nov. 23, 2012, Standard & Poor's Ratings Services affirmed its 'BB' long-term and 'B' short-term counterparty credit ratings on Spain-based Banco Popular Espanol S.A. and removed the long-term rating from CreditWatch, where it was placed with negative implications on Aug. 7, 2012. The outlook is negative.
At the same time, we lowered our issue ratings on Banco Popular's dated subordinated debt to 'B-' from 'B' and our issue ratings on the hybrid capital instruments to 'CCC' from 'CCC+' and removed them from CreditWatch negative.
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