This page has been archived and commenting is disabled.

S&P Junks Nationalized Bankia, Downgrades Various Other Banks

Tyler Durden's picture




 

If according to S&P recently nationalized Bankia is junk, what does that imply about Spain?

S&P takes various rating actions on Spanish banks

Standard & Poor's Ratings Services today said it has lowered its ratings on five Spain-based financial institutions, affirmed the ratings on nine, and maintained the ratings on five on CreditWatch with negative implications (see Ratings List).     
   
We have also revised down our assessments of the stand-alone credit profiles (SACPs) of six financial institutions, with revisions ranging from one to three notches.    
   
With the exception of two financial institutions, all ratings either carry a negative outlook or remain on CreditWatch negative.    
   
The rating actions follow our review of the wider implications for economic and industry risks in the Spanish banking sector after our two-notch downgrade of the Kingdom of Spain (BBB+/Negative/A-2) on April 26, 2012. As a result of the review, we have maintained our Banking Industry Country Risk Assessment (BICRA) on Spain at group '5', but revised our economic risk score, a component of the BICRA, to '6' from '5' (see "BICRA On Spain Maintained At Group 5, Economic Risk Score Revised To '6' Following Sovereign Downgrade," published May 25, 2012, on RatingsDirect on the Global Credit Portal).   
   
We lowered our long-term counterparty credit ratings on five financial institutions--Bankia S.A., Banco Financiero y de Ahorros S.A., Banca Civica    
S.A. (Civica), Banco Popular Espanol S.A. (Popular), and Bankinter

S.A.--based on our lowering of our assessments of their SACPs. We revised the SACPs following our review of the Spanish banking industry's economic risk, owing to the impact we see on the capital positions of the first four institutions and on the business model of the fifth one. Under our criteria, we use the economic risk score to calibrate the risk weights used for our capital      calculations in several asset classes (see "Banks: Rating Methodology And Assumptions" for definition). As a result of our calculations, the capital positions of the institutions are immediately affected by a revision of the economic risk score.    
   
We are now for the first time incorporating into the long-term ratings on two financial institutions--Popular, and Bankia, and indirectly its parent BFA--one and two notches respectively of uplift above their SACPs to reflect potential short-term extraordinary support from the Spanish government. We believe that the Spanish government would likely provide short-term support to back any potential capital shortfall at these two institutions if necessary. In addition, our long-term ratings on these two institutions and on Banco de Sabadell S.A. (Sabadell) and Civica benefit from one notch of uplift over  their SACPs for potential extraordinary government support.    
   
The outlooks on the long-term ratings on six financial institutions--Banco Santander S.A. (and its subsidiaries), Banco Bilbao Vizcaya Argentaria S.A. (BBVA), Popular, Sabadell, Kutxabank S.A., and Bankinter--are negative. They generally reflect the possibility that we could lower the ratings if we perceived increasing pressure on the banks' financial strength in the context of Spain's weakening economic conditions. For Santander (and its subsidiaries) and BBVA, the negative outlooks also reflect the negative outlook on Spain.    

One financial institution, Confederacion Espanola de Cajas de Ahorros, carries a stable outlook, which factors in our view that we are currently unlikely to change our ratings or stand-alone credit profile on CECA in the next few years, under our base-case scenario.   
    
The ratings on five financial institutions--CaixaBank S.A. and its parent Caja de Ahorros y Pensiones de Barcelona (la caixa), Ibercaja Banco S.A., and Bankia and parent BFA remain on CreditWatch negative. The CreditWatch placements of the ratings on the first three reflect our view that pending acquisitions and their integration could have a negative impact on each entity's creditworthiness. In the case of Bankia and its parent BFA, the CreditWatch listing reflects uncertainties surrounding Bankia's restructuring and recapitalization plan, as well as the implementation risks it may entail.    
   
Conversely, we kept the ratings on Civica on CreditWatch positive based on our view that its creditworthiness may potentially benefit from its integration into Caixabank, a financially stronger group.   
   
At the same time, we have also taken negative actions on various hybrid capital instruments issued by several financial institutions. These actions reflect our view of the increased vulnerability to nonpayment of dividends or coupons of the hybrid capital instruments that we see in each particular bank. Currently, we only rate preference shares issued or guaranteed by Santander and its core subsidiary Banco Espanol de Credito S.A. in investment-grade categories. We rate all the other hybrid instruments issued by other Spanish financial institutions in the noninvestment-grade categories. However, we think vulnerability to nonpayment of the dividends or coupons varies between the institutions, which is reflected in the wide range of our ratings, from our 'BB+' issue rating on BBVA and Caixabank's hybrid debt to our 'CCC-' issue rating on BFA's hybrid debt.   
   
We will publish individual research updates on the banks identified below, including a list of ratings on affiliated entities, as well as the ratings by debt type--senior, subordinated, junior subordinated, and preferred stock.   
   
RATINGS LIST   
The ratings below are counterparty credit ratings.   
   
Downgraded; CreditWatch Action    
                               To                   From   
Banco Popular Espanol S.A.     BB+/Negative/B       BBB-/Watch Neg/A-3   
   
Bankinter S.A.                 BB+/Negative/B       BBB-/Watch Neg/A-3   
   
Downgraded; Remain On CreditWatch   
                               To                   From   
Banca Civica S.A.                 
 Long-Term Counterparty Credit Rating   
                               BB/Watch Pos         BB+/Watch Pos   
   
Bankia S.A.                    BB+/Watch Neg/B      BBB-/Watch Neg/A-3   
   
Banco Financiero y de Ahorros S.A.                    
 Long-Term Counterparty Credit Rating   
   
                               B+/Watch Neg         BB-/Watch Neg   
   
Affirmed; CreditWatch/Outlook Action   
                               To                   From   
Banco Financiero y de Ahorros S.A.                    
 Short-Term Counterparty Credit Rating   
                               B                    B/Watch Neg   
   
Banco de Sabadell S.A.         BB+/Negative/B       BB+/Watch Neg/B   
   
CaixaBank S.A.    
 Short-Term Counterparty Credit Rating   
                               A-2                  A-2/Watch Neg   
   
Confederacion Espanola de Cajas de Ahorros                                        
          
                               BBB-/Stable/A-3      BBB-/Watch Neg/A-3   
   
Kutxabank S.A.                 BBB-/Negative/A-3    BBB-/Watch Neg/A-3   
   
Affirmed   
                               To                   From   
Banco Santander S.A.           A-/Negative/A-2      A-/Negative/A-2   
   
  Banco Espanol de Credito S.A.   
                               A-/Negative/A-2      A-/Negative/A-2   
   
  Santander Consumer Finance, S.A.                          
                               BBB+/Negative/A-2    BBB+/Negative/A-2   
   
Banco Bilbao Vizcaya Argentaria S.A.    
                               BBB+/Negative/A-2    BBB+/Negative/A-2   
   
Remain On CreditWatch   
                               To                   From   
Banca Civica S.A.                 
 Short-Term Counterparty Credit Rating   
                               B/Watch Pos          B/Watch Pos   
   
CaixaBank S.A.    
 Long-Term Counterparty Credit Rating   
                               BBB+/Watch Neg       BBB+/Watch Neg   
   
Caja de Ahorros y Pensiones de Barcelona                           
                               BBB-/Watch Neg/A-3   BBB-/Watch Neg/A-3   
   
Ibercaja Banco S.A.            BBB-/Watch Neg/A-3   BBB-/Watch Neg/A-3   
   
NB. This list does not include all ratings affected.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 05/25/2012 - 13:18 | 2462972 SheepDog-One
SheepDog-One's picture

Obviously it implies all is WELL! Cuz we get 'QE3-4.2TheBigOne' comin aaaaaany minute now.

Fri, 05/25/2012 - 13:31 | 2463027 THX 1178
THX 1178's picture

Bad day for Spain... Taking bets on the after-hours bad news shocker... any ideas????

Fri, 05/25/2012 - 13:37 | 2463051 malikai
malikai's picture

Isn't it just about time for the kind folks at the WB/BIS/IMF to do the o'l late friday rumor + pump?

Fri, 05/25/2012 - 13:40 | 2463059 valley chick
valley chick's picture

2:30 pm

Fri, 05/25/2012 - 20:56 | 2464187 Buck Johnson
Buck Johnson's picture

Something is going to happen this long weekend and it won't be pretty.

Fri, 05/25/2012 - 15:13 | 2463406 masterinchancery
masterinchancery's picture

Junk, all junk.

Sat, 05/26/2012 - 02:01 | 2464659 PersonalRespons...
PersonalResponsibility's picture

More USA QE means more pain in the EU to keep things even; it'll flat-line over the long run until it doesn't.  When will someone call the time of death?

Fri, 05/25/2012 - 13:19 | 2462976 LULZBank
LULZBank's picture

NOO!! Really?

Fri, 05/25/2012 - 13:19 | 2462980 valley chick
valley chick's picture

Contagion has spread.  Now what is the US exposure in Spain?

Fri, 05/25/2012 - 13:21 | 2462985 azusgm
azusgm's picture

Whatever is the US exposure to the euro.

Fri, 05/25/2012 - 13:22 | 2462991 mayhem_korner
mayhem_korner's picture

 

 

Easterly.  With a large body of water in between.

Fri, 05/25/2012 - 13:25 | 2463007 Zero Govt
Zero Govt's picture

a large body of water crossed by fibre-optic cable

the shock waves should hit America in under 2 seconds, watch derivatives holders, Blankfein and Dimon, shit their nappies in micro-seconds of the Euro mushroom cloud

Fri, 05/25/2012 - 13:29 | 2463021 valley chick
valley chick's picture

thanks Zero Govt !  Been trying to clear any outstanding bills and did not know if it could wait till Tuesday as funds just landed into the account. 

Fri, 05/25/2012 - 13:20 | 2462982 nomorebuyins
nomorebuyins's picture

Looks like the calm before the huge ramp this afternoon.

Fri, 05/25/2012 - 13:21 | 2462984 mayhem_korner
mayhem_korner's picture

 

 

Always quick on the draw, that S&P.

Fri, 05/25/2012 - 13:24 | 2463000 kridkrid
kridkrid's picture

quick on the draw, thought I'd be dead, he put the gun to my head and this is what he said - pours one out.

Fri, 05/25/2012 - 13:43 | 2463067 Shock and Aweful
Shock and Aweful's picture

+ 1 for a "Licence to Ill" reference

 

 

Fri, 05/25/2012 - 13:44 | 2463072 fuu
fuu's picture

I said, "Howdy" he said, "Hi".

Fri, 05/25/2012 - 13:32 | 2463033 LongSoupLine
LongSoupLine's picture

Always quick on the draw, that S&P

 

yeah, but in context, they "draw" with crayons...

Fri, 05/25/2012 - 13:21 | 2462986 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Time line of a bank collapse

1. The Board issues a statement accusing bloggers of spreading both irresponsible and factually incorrect rumours as the bank is sound and has no need of new capital.

2. The Bank issues a statement of confidence in its management.

3. The Bank tries to raise more private capital in spite of it having no need for it.

4. If this does not work the relevant government(s) express(es) complete confidence in the bank and tell us that it has a sound management structure and business model. Indeed the bank had only recently been giving the government advice as to how to run the public-sector more efficiently.

5. The relevant government(s) tell us that they are stepping in to help the bank but the problems are both minor and short-term and are of no public concern.

6. The relevant government(s) tell us that the bank needs taxpayer support but through clever use of special purpose vehicles there will be no cost and indeed a profit is virtually certain.

7.Part-nationalisation of the bank is announced and taxpayers are told that a profit will result from this sound and wise investment.

8. Full nationalisation is announced to the sound of teeth being pulled without any anaesthetic.

9. Debt costs of the relevant sovereign nation or nations rise.

10. Consequently that nation finds that its credit rating is downgraded.

11. It is announced that due to difficult financial times public spending needs to be trimmed and taxes such as Value Added Tax need to be raised. It is also announced that nobody could possibly have forseen this and that nobody is to blame apart from some irresponsible rumour mongers who are the equivalent of terrorists. A new law is mooted to help stop such financial terrorism from ever happening again.

12. Some members of the press inform us that bank directors were both “able and skilled” and that none of the blame can possibly be put down to them as they get a new highly paid job elsewhere.

13. Former bank directors often leave the new job due to “unforseen difficulties”.

 http://www.mindfulmoney.co.uk/wp/shaun-richards/belgium-and-dexia-are-now-trapped-in-an-unholy-embrace-where-the-biggest-loser-will-be-taxpayers/

Sat, 05/26/2012 - 06:25 | 2464892 StychoKiller
StychoKiller's picture

Isn't there a ban on short-selling missing in that list?

Fri, 05/25/2012 - 13:22 | 2462987 Zero Govt
Zero Govt's picture

a week into being nationalised and S&P cries wolf

freekin awesome

someone give S&P a bullet through the skull, it'll pass right through without any opposition as there's nothing there

Fri, 05/25/2012 - 13:21 | 2462988 vast-dom
vast-dom's picture

just wait till SKYNET boots up around 3pm.....this is all algo-bullish, until it's not.....

Fri, 05/25/2012 - 13:24 | 2463002 mayhem_korner
mayhem_korner's picture

 

 

Big ramp heading into Memorial Day Weekend?  Should create a run on burgers, brats and ribs!!!

Fri, 05/25/2012 - 13:25 | 2463006 godgunsandgold
godgunsandgold's picture

.....drone on......

Fri, 05/25/2012 - 13:23 | 2462996 monopoly
monopoly's picture

I am sure this will be on the idiot channel, cnbc, any minute. They always report the news in a timely manner, no matter if it is positive or negative.

(Sarc)

Fri, 05/25/2012 - 13:24 | 2463003 LongSoupLine
LongSoupLine's picture

 

 

QUICK....get an underage Spanish girl band to sell bonds!!

Fri, 05/25/2012 - 13:26 | 2463008 mayhem_korner
mayhem_korner's picture

 

 

Hookers & bonds!

Fri, 05/25/2012 - 14:19 | 2463174 Desert Irish
Desert Irish's picture

The Secret Service were recruiting Colombian hookers to sell bonds ???

Fri, 05/25/2012 - 13:24 | 2463004 SheepDog-One
SheepDog-One's picture

ZH ad for CitBank 'overachiever CD' with 1.1% APR? You cant make this shit up!

Fri, 05/25/2012 - 13:26 | 2463009 Dr. Engali
Dr. Engali's picture

I'm glad to see they are ahead of the curve.

Fri, 05/25/2012 - 13:28 | 2463017 FLUSA.com
FLUSA.com's picture

During a bank holiday do the debt collectors stop calling?

Fri, 05/25/2012 - 13:28 | 2463020 Dick Darlington
Dick Darlington's picture

And next on the line will be the covered bond ratings... Lots of that crap is pledged to ECB as collateral...

Fri, 05/25/2012 - 13:30 | 2463025 slaughterer
slaughterer's picture

And they are still begging Draghi for more money!

Fri, 05/25/2012 - 13:33 | 2463037 ciscokid
ciscokid's picture

Estamos jodidos!!!!!!!

Fri, 05/25/2012 - 13:33 | 2463042 gatorengineer
gatorengineer's picture

I think this is old news... I cant believe S&P would have drop a steamer while the markets are open....

Fri, 05/25/2012 - 13:35 | 2463048 SheepDog-One
SheepDog-One's picture

No problem, markets ramp .5% on the news of course.

Fri, 05/25/2012 - 13:43 | 2463070 Snakeeyes
Snakeeyes's picture

Look at Spanish house prices, non performing loans and slow GDP growth. AND the failure of ECB/IMF policies to stop the pain.

http://confoundedinterest.wordpress.com/2012/05/25/spanish-banks-bankia-banco-popular-bankinter-cut-to-junk-housing-blues-continues-to-inflict-damage-on-spain/

Fri, 05/25/2012 - 13:44 | 2463075 junkyardjack
junkyardjack's picture

TL; DR.  S&P could save us all some time and sum it up quickly

http://www.youtube.com/watch?v=HZHwxIL9oYo

Fri, 05/25/2012 - 13:56 | 2463114 americanspirit
americanspirit's picture

And do we know where Spain's gold is being stored? NYC? London? Almost certainly not Madrid. Pendejos.

Fri, 05/25/2012 - 21:49 | 2464298 Piranha
Piranha's picture

reminds me of bagdad bob

Fri, 05/25/2012 - 14:44 | 2463265 newengland
newengland's picture

Hiya Tyler,

For a colourful Spanish response to this latest bank run, see the video posted on the Daily Telegraph site underneath the Bankia update/debt story.

Flash dancing!

In traditional song and flamenco, it's a protest. I wish it had sub-titles. Brilliant.

DT use the modern phrase 'flash mob', but flash dancing, it is. More protests needed!

Fri, 05/25/2012 - 14:55 | 2463338 edzorino
edzorino's picture

Bankia's online banking platform is having technical issues. This could be due to the sheer number of people trying to remove funds, or perhaps something put in place to try and temporarily stem capital flight.

Fri, 05/25/2012 - 19:45 | 2464033 newengland
newengland's picture

Put in place to stem the outflow of depositer cash. The fictional reserve bank system deserves to die. Beware of the extended June 2-5 bank holiday on the pretext of the Queen's Jubilee in Britain.

Keep your friends close, and your enemies closer (Machiavelli).

The ordinary person is voting with their own cash: taking it out of the hubristic Trilateral Commission's social experiment EUSSR's banks.

Fri, 05/25/2012 - 15:15 | 2463411 Sandmann
Sandmann's picture

If according to S&P recently nationalized Bankia is junk, what does that imply about Spain?

As I stated a few days ago. If they were stupid enough to use CoCos to prop up this bank they should expect their sovereign rating to crash the moment they nationalised it. CoCos are a Death Loop. Spain is going into free-fall and Europe will be sucked into the Vortex unless Germany + Netherland + Austria cut the Club Med States adrift and let themselves be revalued.

There is no hope of escape from the Black Hole which will swallow Germany - which even now is going into downturn


Fri, 05/25/2012 - 19:31 | 2464015 SILVERGEDDON
SILVERGEDDON's picture

NO NO NO NO - You got it all wrong. Just wave the red ink dyed fiat flag in front of the Spanish, bull, and he charges the flag. You do not get gored, and all is right with the world. Bet all of your money on Spanish banks, the Euro, and Faceplant stock. All will be right with the world. 

Full blown Mexican retail SARC running strong ................. 

Fri, 05/25/2012 - 19:44 | 2464038 SILVERGEDDON
SILVERGEDDON's picture

 " Obi Wan - the SARC is strong with this one "  

" SARC this one is full of, yes, we have seen it be so."

Do NOT follow this link or you will be banned from the site!