S&P lowers ratings of 34 Italian banks

AP and AFP

NEW YORK–Standard & Poor’s Ratings Services on Friday lowered its ratings on 34 Italian banks, citing concerns over Italy’s financial vulnerability and expectations for weak profits at the banks. Among the banks downgraded were some of Italy’s largest, including UniCredit SpA, Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA. The banking-sector downgrades came after S&P downgraded its credit rating on Italy’s government debt by two notches last month.

“In our view, 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 statement.

The agency also lowered its Banking Industry Country Risk Assessment for Italy to “4” from “3.” The so-called BICRA rating is on a 1-to-10 scale, with “1” representing countries with the lowest-risk banking systems.

“We anticipate persistently weak profitability for Italian banks in the next few years,” S&P said.

Italian Prime Minister Mario Monti dismissed news that Standard & Poor’s had downgraded the credit ratings of 34 Italian banks on Friday as “mechanical.” “These decisions by the rating agencies are largely the mechanical effects of previous decisions,” Monti told CNBC hours after the announcement was made. Monti said that the banks were in reasonable health. “By and large, Italian banks have been less hit by the financial crisis than the banks in many other European countries. And have also recently, many of them, recapitalized themselves.”