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The Globe and Mail

S&P slashes ratings on five Spanish banks

Spain's Bankia bank headquarters building is seen in Madrid May 18, 2012. Spanish banks' bad loans rose in March to their highest in 18 years, underscoring the problems facing the government as it drafts in independent auditors in an attempt to reassure investors it can clean up the sector.


Ratings agency Standard & Poor's cut the ratings on five Spanish banks on Friday, another blow to the country's ailing banking sector as the nation's deteriorating finances rattle global investors.

But S&P left unchanged its ratings on the country's two biggest banks, Santander and Banco Bilbao Vizcaya Argentaria.

The Standard & Poor's ratings actions come about a week after Moody's Investors Service carried out a sweeping downgrade of Spain's banks, pointing to the government's weakened ability to support lenders.

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S&P lowered its rating on Banco Popular, Bankinter and Bankia to 'BB-plus' from 'BBB-minus' and cut the ratings of two other banks, Banca Civica and Banco Financiero de Ahorros. BFA is Bankia's parent company.

The cuts to BB-plus take those banks into junk territory, underscoring risks to the country's financial sector.

Last month S&P cut its credit rating on Spain by two notches, citing expectations the government finances will worsen even more than previously thought.

Spain's banks, awash in bad loans after a real estate boom went bust, are at the heart of the euro zone debt crisis because markets fear a state bailout would put a severe strain on the country's already stretched public finances.

Spain relapsed into an economic recession in the first quarter and likely faces a prolonged slump as the government tries to shrink its budget deficit by slashing spending.

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